Biofuels for transport in developing countries: socioeconomic considerations

The manufacture of biofuels for use in transportation can be commercially viable in developing countries. However, the conditions under which this can occur without long-term government support are likely to be limited. In the near term, ethanol production from sugarcane offers the best chance of commercial viability, with Brazil demonstrating that it can produce ethanol competitively with gasoline. This article discusses some of the underlying conditions needed for other developing countries to benefit from the Brazilian experience and move down the ethanol production cost curve. Where a domestic biofuel program requires sustained government support, the article considers possible justifications for government interventions in biofuel manufacture, including rural development, externalities, and energy source diversification. © 2006 International Energy Initiative, Inc.