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Table 1. Top Five Fuel Ethanol Producers in 2005

Brazil United States China European Union India Source: Christoph Berg

Production (million liters) 16,500 16,230 2,000 950 300

Table 2. Top Five Biodiesel Producers in 2005

Germany France United States Italy Austria Source: F. O. Licht

Production (million liters) 1,920 511 290 227 83

The recent pace of advancement in technology, policy, and investment suggest that the rapid growth of biofuel use could continue for decades to come and that these fuels have the potential to displace a significant share of the oil now consumed in many countries. A recent study found that advanced biofuel technologies could allow biofuels to substitute for 37 percent of U.S. gasoline within the next 25 years, with the figure rising to 75 percent if vehicle fuel efficiency were doubled during the same period. The biofuel potential of EU countries is in the range of 20–25 percent if strong sustainability criteria for land use and crop choice are assumed, and assuming that bioenergy use in non-transport sectors is growing in parallel.

The potential for biofuels is particularly large in tropical countries, where high crop yields and lower costs for land and labor—which dominate the cost of these fuels— provide an economic advantage that is hard for countries in temperate regions to match. When petroleum prices are above 41 ($50) per barrel, as they were for most of 2005 and early 2006, ethanol from sugar cane is significantly less expensive than gasoline, and biodiesel is also increasingly competitive with diesel. (See Figures 3 and 4, below.) It has been estimated that worldwide sugar cane production could be expanded to a level such that this crop alone could displace about 10 percent of gasoline use worldwide. This would allow scores of low-income countries to become significant producers—and potentially exporters—of a valuable new commodity.

Overall, biofuels have a large potential to substitute for petroleum fuels. Together with a host of other strategies, including the development of far more efficient vehicles, they can help the world achieve a more diversified and sustainable transportation system in the decades ahead. However, this promise will only be achieved if policies are enacted that steer biofuels in the right direction—policies that will need to be adjusted and refined as the state of knowledge advances and as the risks and opportunities of biofuel development become clearer.

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