World Energy Outlook 2006

and 92 Mtoe in 2030. The average annual rate of growth is 6.3%. To
meet this demand, cumulative investment in biorefineries of $160 billion
(in year-2005 dollars) over 2005-2030 is needed.
� In the Alternative Policy Scenario, production rises much faster, at 8.3%
per year, reaching 73 Mtoe in 2015 and 147 Mtoe in 2030. Cumulative
investment totals $225 billion over the Outlook period.
In both scenarios, the biggest increases in biofuels consumption occur in the
United States – already the world’s largest biofuels market – and in Europe,
which overtakes Brazil as the second-largest consuming (and producing) region
before the end of the current decade. Biofuels use outside these regions remains
modest, with the biggest increases occurring in developing Asia.
The costs of both ethanol and biodiesel production using conventional
technologies are expected to fall in both scenarios in line with incremental
efficiency improvements in the conversion processes and in agricultural
productivity. In neither scenario are second-generation biofuels technologies,
such as ligno-cellulosic ethanol or biomass gasification, assumed to penetrate
the market. This is because important breakthroughs in developing these
technologies will be necessary before they can be deployed commercially on a
large scale. It is nonetheless possible that such breakthroughs could occur in the
near future, which could pave the way for faster development of biofuels
markets. Biofuel prices are expected to be attractive to blenders and consumers
in the main growth markets, regardless of costs, as a result of fuel taxation and
subsidy policies favouring biofuels.
Biofuels meet 4% of world road-transport fuel demand by the end of the
projection period in the Reference Scenario, up from 1% today (Figure 14.4).
In the Alternative Policy Scenario, the share reaches 7%, thanks to higher
demand for biofuels but lower demand for road-transport fuels in total. The
share remains highest in Brazil, though the pace of market penetration will be
fastest in the European Union in both scenarios.
Ethanol is expected to account for most of the increase in biofuels use
worldwide, as production costs are expected to fall faster than those of
biodiesel. The share of biodiesel globally nonetheless grows in both scenarios,
mainly because biodiesel production accelerates in the United States and Brazil
(Figure 14.5). By 2030, biodiesel is expected to account for about 15% of total
biofuels use in both countries and in both scenarios. By contrast, the biodiesel
share of total biofuels consumption in the European Union is projected to drop
from well over half today to under a third in 2030, as ethanol is expected to
become a more attractive option for fuel suppliers.
The bulk of the biofuels consumed in each region will continue to be produced
indigenously, as a result of protective farm and trade policies. The volume of
biofuels traded internationally is nonetheless expected to grow significantly.
Chapter 14 - The Outlook for Biofuels
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