The development of biofuels has generated vigorous debate on economic and environmental grounds. This paper assesses the potential impacts of biofuels on poverty reduction. It argues that the potential is large, whether through employment, wider growth multipliers or energy price effects. However, it is also fragile and complex, pointing to the need for country-by-country analysis of potential poverty impacts.
The paper highlights many uncertainties about what will happen to global markets and prices, and the opportunities that this may offer for poverty reduction, making overall recommendations appropriate for different countries difficult. It argues that biofuels should be integrated within a broader context of investment in rural infrastructure and human capital formation. Low-income countries should assess whether the underlying conditions for a successful biofuel programme exist or could be developed in the near-term, including infrastructure and essential public services.
More specific recommendations are given for the following 3 scenarios:
biofuels production in a net energy-importing country - Malawi
biodiesel production in Indonesia for EU consumption
domestic and export ethanol production in Brazil