In 2012, the combined global production of ethanol and biodiesel fell for the first time since 2000, down 0.4 percent from 2011 numbers. Global ethanol production declined slightly for the second year in a row to 83.1 billion litres, while biodiesel output rose marginally from 22.4 billion litres to 22.5 billion litres. Biodiesel now makes up over 20 percent of global biofuel production.

Biofuels are a subset of bio-energy, which is energy derived from biomass (plant and animal matter) and which can range from manually gathered fuel wood and animal dung to industrially processed forms such as ethanol and biodiesel. Biomass can be used directly for heat, turned into biogas to produce electricity, or processed into liquid forms suitable as alternatives or supplements to fossil fuels for transport. Bio-energy is regionally or locally important in many corners of the world: traditional biomass is still used for cooking by 38 percent of people in the world, for example, while in parts of Africa and Asia, more than 90 percent of the populace relies on it. In China and elsewhere in Asia, roughly 49 million biogas plants were built as of 2012 to support rural electrification.¹

At the time of this writing, ethanol and diesel account for about 0.8 percent of global energy use in the transport sector. Eight percent of global primary energy, 3.4 percent of global and road transport fuels, and 2.5 percent of all transport fuels is derived from biomass. Ethanol mainly comes from corn and sugarcane, while biodiesel comes from fats and vegetable oils.

The top five ethanol producers in 2012 were the United States, Brazil, China, Canada, and France. The U.S. and Brazil accounted for 87 percent (61% and 26% respectively) of the global total. U.S. ethanol production totalled 50.4 billion litres, down about four percent from 2011. Production in America depends mainly on corn as a feedstock and corn prices rose in the U.S. in 2012 due to a severe summer drought in the Midwest. As a result, in the autumn the United States briefly became a net importer of ethanol after nearly three uninterrupted years of net exports.²

Also, 2012 saw Brazil's ethanol production rise three percent to 21.6 billion litres, partly because of a drop in sugar prices. China's output totalled 2.1 billion; Canada saw 1.8 billion produced; France's output was 1.0 billion; and the rest of the world, including the rest of the European Union, produced 6.2 billion litres of fuel ethanol in 2012.

In 2012, biodiesel production (in billions of litres) was:³

International trade in biofuels is significant, driven partly by supply and demand and partly by inconsistencies in trade policy. For example, the U.S. exported about 2.8 billion litres of ethanol in 2012, much less than in 2011 but still the second-highest export total ever. Nearly one-third of that total, 893 million litres went to Canada, with lesser amounts going to the United Kingdom (UK), Brazil, and the Netherlands. The same year, the U.S. imported 2.1 billion litres of ethanol, 83 percent of it from exports in 2012 of 486 million litres (56%) went to Canada, even while U.S. imports of biodiesel from Canada totalled 67 million litres. The United States also traded biodiesel imports and exports with Australia, the Netherlands, and Norway in 2012.

Biofuel demand is strongly driven by blending mandates and supported by subsidies. Seventy-six states, provinces, or countries had such mandates in the works in 2012, up from 72, the previous year. Global subsidies for liquid biofuels were estimated in 2012 to be well over $20 billion. Mandates or targets have been established in 13 countries in the Americas, 12 in the Asia-Pacific region, and eight in Africa. In Europe, the European Union (EU)-27 group of countries is subject to a Renewable Energy Directive (RED) that called for 5.75 percent biofuel content in transportation fuels in 2012.⁴ The U.S. and China have established - and Brazil has already achieved - targets between 15 and 20 percent no later than 2022. India has also mandated 20 percent ethanol by 2017.⁵

Whether or not these targets are stable will remain as open questions. India, for example, is said to have an uneven record of meeting its own mandates. The EU's RED came under strong challenge in 2012 as a result of concerns over the effects that biofuel feedstock cultivation was having on food prices and changes in land use. In response, the European Commission proposed limiting conventional biofuels (those derived from food crops) to a five percent share of all transport fuels.

In the U.S., the Environmental Protection Agency's mandate that petroleum refineries buy nearly 33 million litres of advanced cellulosic biofuels for blending in 2012 was upset by underproduction: less than 76,000 litres were produced that year. A petroleum trade group later sued in federal court, successfully, to have the rule thrown out. As with the challenge to the EU RED, the U.S. mandate - which requires biofuels made from non-food sources - reflects an attempt to reduce the non-energy impacts of biofuels policy. As the U.S. corn-based ethanol production soared by a factor of seven between 2001 and 2010, corn prices and price volatility both increased, and additional lands were brought under cultivation around the world to boost food production.

Global investment in biofuels equalled about $5 billion in 2012, down 40 percent from 2011; $3.8 billion of this was in industrial nation and $1.2 billion in developing ones. Biofuels investment within the G-20 nations has declined every year from 2007 through 2012. Despite this trend, some observers expect biofuel investments to rise. One forecast, for example, put 2013 revenues at $7.6 billion on investment on $69 billion over the decade, supported by continued blending mandates. Where that investment goes will be influenced by the policy environment. In the UK, petroleum giant BP apparently aims to steer its biofuel investments to the U.S. and South America in response to the continued uncertainty within the EU over biofuel's impacts on land use and climate change.⁶

¹ REN21, Renewables 2013 Global Status Report, Paris (2013): 83
² Gordon, M. "US Loses Ethanol Exporter Status after Midwestern Drought," Platts/McGraw Hill Financial (November 2012):
³ REN21 op. cit. note 2: 20
⁴ Lane, J. "Biofuels Mandates Around the World 2012." Biofuels Digest (November 22 2012):
⁵ Ibid.
⁶ Prugh, T. "Biofuel Production Declines." Vital Signs 21 (2014): 17