Developing countries are heavily affected by global biofuels policies, both as potential producers (for their own use or export) and as consumers (of crops displaced by biofuels and of energy). Because Europe is a major producer of biofuels, with an estimated 10% share of world bioethanol, its policies can have a significant effect on them. Current EU policy is to promote the use of biofuels and other renewable fuels for transport. But schemes for biofuels will not automatically mitigate climate change, since production also adds to greenhouse gases. If the production of biofuel crops requires heavy use of nitrogen fertilisers or if forests are felled to grow biofuel crops, the net effect could be negative. Similarly, the net effect on any producing country will depend on whether biofuels displace other crops (and which ones) or damage the local environment (ODI, 2007). Even when the net impact is positive there will be distributional effects favouring some producers over consumers (and possibly producers of displaced crops).  

Despite this inherent uncertainty, we identify changes to EU policy that would not only foster development, but help to cut greenhouse gas emissions. These could be incorporated into the initiatives on renewable energy sources that the Commission will be launching in 2008.