Publication: Review of Environmental, Economic and Policy Aspects of Biofuels
Loading...
Date
2007-09
ISSN
Published
2007-09
Author(s)
Editor(s)
Abstract
The world is witnessing a sudden growth in production of biofuels, especially those suited for replacing oil like ethanol and biodiesel. This paper synthesizes what the environmental, economic, and policy literature predicts about the possible effects of these types of biofuels. Another motivation is to identify gaps in understanding and recommend areas for future work. The analysis finds three key conclusions. First, the current generation of biofuels, which is derived from food crops, is intensive in land, water, energy, and chemical inputs. Second, the environmental literature is dominated by a discussion of net carbon offset and net energy gain, while indicators relating to impact on human health, soil quality, biodiversity, water depletion, etc., have received much less attention. Third, there is a fast expanding economic and policy literature that analyzes the various effects of biofuels from both micro and macro perspectives, but there are several gaps. A bewildering array of policies - including energy, transportation, agricultural, trade, and environmental policies - is influencing the evolution of biofuels. But the policies and the level of subsidies do not reflect the marginal impact on welfare or the environment. In summary, all biofuels are not created equal. They exhibit considerable spatial and temporal heterogeneity in production. The impact of biofuels will also be heterogeneous, creating winners and losers. The findings of the paper suggest the importance of the role biomass plays in rural areas of developing countries. Furthermore, the use of biomass for producing fuel for cars can affect access to energy and fodder and not just access to food.
Link to Data Set
Citation
“Rajagopal, Deepak; Zilberman, David. 2007. Review of Environmental, Economic and Policy Aspects of Biofuels. Policy Research Working Paper; No. 4341. © World Bank. http://hdl.handle.net/10986/7337 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Advanced Biofuel Technologies : Status and Barriers(2010-09-01)Large-scale production of crop based (first generation) biofuels may not be feasible without adversely affecting global food supply or encroaching on other important land uses. Because alternatives to liquid fossil fuels are important to develop in order to address greenhouse gas mitigation and other energy policy objectives, the potential for increased use of advanced (non-crop, second generation) biofuel production technologies has significant policy relevance. This study reviews the current status of several advanced biofuel technologies. Technically, it would be possible to produce a large portion of transportation fuels using advanced biofuel technologies, specifically those that can be grown using a small portion of the world's land area (for example, microalgae), or those grown on arable lands without affecting food supply (for example, agricultural residues). However, serious technical barriers limit the near-term commercial application of advanced biofuels technologies. Key technical barriers include low conversion efficiency from biomass to fuel, limits on supply of key enzymes used in conversion, large energy requirements for operation, and dependence in many cases on commercially unproven technology. Despite a large future potential, large-scale expansion of advanced biofuels technologies is unlikely unless and until further research and development lead to lowering these barriers.Publication Biofuels : Markets, Targets and Impacts(2010-07-01)This paper reviews recent developments in biofuel markets and their economic, social and environmental impacts. Several countries have introduced mandates and targets for biofuel expansion. Production, international trade and investment have increased sharply in the past few years. However, several existing studies have blamed biofuels as one of the key factors behind the 2007-2008 global food crisis, although the magnitudes of impacts in these studies vary widely depending on the underlying assumptions and structure of the models. Existing studies also have huge disparities in the magnitude of long-term impacts of biofuels on food prices and supply; studies that model only the agricultural sector show higher impacts, whereas studies that model the entire economy show relatively lower impacts. In terms of climate change mitigation impacts, there exists a consensus that current biofuels lead to greenhouse gas mitigation only when greenhouse gas emissions related to land-use change are not counted. If conversion of carbon rich forest land to crop land is not avoided, the resulting greenhouse gas release would mean that biofuels would not reduce cumulative greenhouse gas emissions until several years had passed. Overall, results from most of the existing literature do not favor diversion of food for large-scale production of biofuels, although regulated production of biofuels in countries with surplus land and a strong biofuel industry are not ruled out. Developments in second generation biofuels offer some hope, yet they still compete with food supply through land use and are currently constrained by a number of technical and economic barriers.Publication Bioenergy Development : Issues and Impacts for Poverty and Natural Resource Management(World Bank, 2010)These report overviews recent developments in the consumption and production of bioenergy. It examines the main issues and possible economic implications of these developments and assesses their potential impact on land use and the environment, especially with respect to forests. The report examines both solid biomass and liquid biofuels, identifying opportunities and challenges at the regional and country levels. The development of bioenergy presents both opportunities and challenges for economic development and the environment. It is likely to have significant impacts on the forest sector, directly, through the use of wood for energy production, and indirectly, as a result of changes in land use. The impact of bioenergy on poverty alleviation in developing countries will depend on the opportunities for agricultural development, including income and employment generation, the potential to increase poor peoples' access to improved types of bioenergy; and the effects on energy and food prices. Five main messages emerge from this report: solid biomass will continue to be a principal source of energy; developments in bioenergy will have major implications for land use; tradeoffs, including those related to poverty, equity, and the environment, must be evaluated when choosing a bioenergy system; there is considerable potential for making greater use of forestry and timber waste as a bioenergy feedstock; and the climate benefits of bioenergy development are uncertain and highly location and feedstock specific.Publication Second-Generation Biofuels : Economics and Policies(2010-08-01)Recent increases in production of crop-based (or first-generation) biofuels have engendered increasing concerns over potential conflicts with food supplies and land protection, as well as disputes over greenhouse gas reductions. This has heightened a sense of urgency around the development of biofuels produced from non-food biomass (second-generation biofuels). This study reviews the economic potential and environmental implications of production of second-generation biofuels from a variety of various feedstocks. Although second-generation biofuels could significantly contribute to the future energy supply mix, cost is a major barrier to increasing commercial production in the near to medium term. Depending on various factors, the cost of second-generation (cellulosic) ethanol can be two to three times as high as the current price of gasoline on an energy equivalent basis. The cost of biodiesel produced from microalgae, a prospective feedstock, is many times higher than the current price of diesel. Policy instruments for increasing biofuels use, such as fiscal incentives, should be based on the relative merits of different types of biofuels.Publication Biofuels in Africa : Opportunities, Prospects, and Challenges(World Bank, 2011)Biofuels offer new opportunities for African countries. They can contribute to economic growth, employment, and rural incomes. They can become an important export for some countries and provide low-cost fuel for others. There is also a potentially large demand for biofuels to meet the rapidly growing need for local fuel. Abundant natural resources and low-cost labor make producing biofuel feedstock's a viable alternative to traditional crops; and the preferential access available to most African countries to protected markets in industrial countries provides unique export opportunities. Biofuels also bring challenges and risks, including potential land-use conflicts, environmental risks, and heightened concerns about food security. This book examines the potential of African countries to produce biofuels for export or domestic consumption and looks at the policy framework needed. It is part of the effort by the World Bank's Africa region to examine critical issues that affect the region and to recommend policies that effectively address these issues while providing an enabling environment for the private sector. The book is intended to inform policy makers and the larger development community of the global and domestic market opportunities facing biofuel producers, as well as the challenges of producing biofuels, in the Africa region.
Users also downloaded
Showing related downloaded files
Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.Publication Measuring Financial Inclusion : The Global Findex Database(World Bank, Washington, DC, 2012-04)This paper provides the first analysis of the Global Financial Inclusion (Global Findex) Database, a new set of indicators that measure how adults in 148 economies save, borrow, make payments, and manage risk. The data show that 50 percent of adults worldwide have an account at a formal financial institution, though account penetration varies widely across regions, income groups and individual characteristics. In addition, 22 percent of adults report having saved at a formal financial institution in the past 12 months, and 9 percent report having taken out a new loan from a bank, credit union or microfinance institution in the past year. Although half of adults around the world remain unbanked, at least 35 percent of them report barriers to account use that might be addressed by public policy. Among the most commonly reported barriers are high cost, physical distance, and lack of proper documentation, though there are significant differences across regions and individual characteristics.