Table of Contents

Executive Summary 5

What are Biofuels? 6
Introduction to Biofuels 6
Background 7
History of Biofuels 8
What are the Major Biofuels? 9
Biologically Produced Alcohols 9
Biologically Produced Gases 10
Biologically Produced Oils 10
Solid Biofuels 11
Utilization of Biofuels 11
Direct Electricity Generation 11
Analysis of Ethanol 12
Analysis of Biodiesel 13
Analysis of Methanol 14
Advantages and Disadvantages of Biofuels 14
Ethanol 16
Biodiesel 17
Feedstock for Biofuels 18
Biofuel Technologies 18
What the Future Holds for Biofuels 19

First Generation Biofuels 21

Second Generation Biofuels 23

European Energy Market 25
Future Energy Market 29
Issues Concerning Energy Markets 30
Oil Shock 30
Security of Supply 31
Climate Change 32
Declining Air Quality 32
Growth in Energy Consumption 33
Lower Levels of Renewables 33
Role of Biofuels 33

European Biofuels Market 35
History of Biofuels in Europe 35
Current Biofuels Market 36
Other Biofuels 38
ETBE 38
MTBE 38
Wine Alcohol 38
Biogas 39
Current R&D 39
Future of Biofuels in Europe 40

Biofuel Production Costs 43
From Rapeseed 43
Fermentation 43
Biomass Gasification 44

Market Drivers 45
Climate Change 45
Air Pollution 45
High Oil Prices 46
Energy Security 46
Exhaustion of Fossil Fuels 47

Issues to Biofuel Development 48
Costs 48
Financing Costs 49
Transaction Costs 49
Lack of Infrastructure 49
Land Availability 50
Need for more Public Support 50

Policies and Regulations 51
EU Policy on Biofuels 52
Biofuels Use Directive 52
Energy Taxation Directive 52
Fuel Quality Directive 52
EU’s Common Agricultural Policy (CAP) 53
Incentives for Biofuel use 54
Tax Incentives 54
Carbon Credits 56
Support from Regional Policy 56
Aid for Energy Crops 56
Sugar Sector Reform 56

Analysis of the Biofuels Directive 58
Primary Objectives of the Proposed Biofuels Program 58
GHG Savings 58
Direct Impact 58
Indirect Impact 59
Emissions of Nitrous Oxide 62
Conclusion 63
Looking at Supply Security 64
Value 64
Share of Imports 65
Employment Impact 65
Looking at the Cost Impact of GHG Savings 66

Biofuels and the Impact on Agricultural Commodity Costs 70

Undertaking a Cost-Benefit Analysis 71
Direct Advantages 71
Biofuel Production Costs 71
External Advantages of Biofuel Production 71
Advantages in terms of Employment 72
Benefit of Security of Supply 72
Forecast and Uncertainty 73
Conclusion 74

Is the Biofuel Program Achievable? 76
GHG Savings 76
Supply Security 76
Creating New Jobs 76
Are the Costs Higher than the Benefits? 77
Conclusion 77

Country Reviews 79
Denmark 79
Germany 80
France 81
Poland 81
Russia 83
Spain 84
Sweden 86
UK 88

Major Players 90
Novozymes 90
Genencor 90
Abengoa Bioenergy 92
Cargill 92
Sekab 93
British Sugar 94
Ensus 95
Archer Daniel Midland 96
BP 97
D1 Oils plc 98

Case Studies 99
BEST - BioEthanol for Sustainable Transport 99
BIO-NETT 99
BioDieNet 101
PRO-BIODIESEL 101
Renewable Fuels for Europe (REFUEL) 102
BEST-Project 103
NILE-Project 104

Appendix 105

Glossary 109

List of Figures & Tables

Figures

Figure 1: Present Biofuel Transformation Processes 19
Figure 2: Primary Energy Production of 1996 & 2006 (Breakdown of Fuel) 27
Figure 3: Energy Consumption, Carbon and Energy Intensity (Till 2030) 29
Figure 4: Fuel from Wine Distillation in EU (2006) 39
Figure 5: Existing and Expected Biodiesel Capacity in Europe 41
Figure 6: Automotive Diesel Oil Prices (incl. of all taxes) 46
Figure 7: Cost of Replacing Fossil Fuel and of Reducing CO2 Emissions 68
Figure 8: Annual GHG Saved Using 1 ha Arable Land with EU-Average Wheat Yield 69
Figure 9: Spain - Projected Direct Blending with Transport Fuels 85
Figure 10: Projected Investment in Biofuel Capacity - Spain 86
Figure 11: World's Largest Producers of Ethanol 105
Figure 12: Biofuels: A Subset of Renewable Energy 106
Figure 13: Global Ethanol Production 106
Figure 14: Relative Global Production Economics for Ethanol 107

Tables

Table 1: Primary Energy Production, by Fuel 26
Table 2: Total Energy Consumptions by Source Type 30
Table 3: German Tax on Biodiesel and Pure Vegetable Oil 54
Table 4: Genencor Ethanol Products 91
Table 5: Forecasts for World Ethanol Market 2010 105
Table 6: Common Energy Units 107
Table 7: Common Conversions 108