As part of the development of its new Climate Change Strategy, the Bank has identified sustainable biofuels as a priority area. Latin America and the Caribbean (LAC) is well-suited for bioenergy production given its abundance of sun, water, and available land. Global biofuel production increased five-fold between 2000-2008, reaching 1 million barrels per day and meeting almost 3% of total fuel demand in road transport (World Energy Outlook, 2010) and can be expected to grow rapidly in the coming decade as governments continue to seek greater energy independence through renewable energy sources.

Greenhouse gas emissions

Bioenergy can be used for transport (in the form of liquid fuel) and in industries (to generate electricity). It is estimated that by 2025, a reduction of 105 MtCO2e could result from the global production of ethanol, mainly of Brazilian origin, and that a reduction of 27 MtCO2e could be realized through production of biodiesel during that same period.

Impacts of biofuel production

Biofuel programs are likely to have direct and indirect social and economic impacts on food security, land use, biodiversity, and water resources. In response to these concerns over the sustainability of biofuels, the IDB has been working to provide tools and studies for LAC countries to identify and mitigate these potential impacts and to facilitate access to international biofuel markets.

Biofuels Sustainability Scorecard

In order to identify the environmental and social risks of a project and incentivize more sustainable practices, the IDB developed the web-based Biofuels Sustainability Scorecard. It was developed according to the principles and criteria of the Roundtable for Sustainable Biofuels (RSB).

The Scorecard takes into account the biodiversity, carbon stocks in farm land, crop production practices, biofuel processing efficiency as well as social issues of labor and land rights. It is a widely recognized tool to assess the sustainability of biofuels, and it is regularly used for the screening of projects both by the IDB and non-IDB clients. Since 2008 all new IDB projects have been screened through the Scorecard. The tool is subject to periodic revision. It reflects advances in scientific knowledge and evolution of relevant mandatory (EU and US) and voluntary standards and indicators (RSB, Global Bioenergy Partnership).

In November 2009, the RSB approved Version One of their certification system with participation from the IDB (as a member of the Steering Board). In order to get feedback on the operability and robustness of the system and to improve future versions of the standard, the RSB certification system will be tested in a real-world setting. The IDB is a partner in this testing process and helps to develop the final version of RSB’s certification scheme. Additionally, the companies that are being audited will benefit from participating early in the implementation of the system by facilitated access to the use of the RSB certification.

Background: legislation on biofuels and biofuel markets

Recently, the EU adopted the Renewable Energy Directive (RED) which includes a 10% target for the use of renewable energy in road transport fuels by 2020. Under the 2007 Energy Independence and Security Act, the US set a target of 36 billion gallons of renewable fuels for road transportation by 2022. The renewable fuel standards are accompanied by environmental sustainability criteria. Renewable fuels in the US will be required to reduce GHG emissions by at least 20% with 58% of all renewable energy coming from cellulosic ethanol and other advanced biofuels by 2022. For the EU, the provisions are to reduce GHG emissions by 35% by December 2010 and by 50% from 2017, accompanied by restrictions on land where production of biofuel feedstock crops can be established. The US and EU biofuel mandates will change the size and structure of global biofuel markets and its associated sectors, and will affect consumers and producers in developed and developing countries

IDB has partnered with IFPRI to investigate the potential impacts of EU and US biofuels mandates on world markets. The study also analyzes the impacts of limited consumption of Brazilian ethanol on the US and EU markets, including GHG emission reduction commitments and biofuels consumption targets. The study attempts to estimate the economic and environmental impacts of the European Union and the United States biofuels mandates on the US, EU and Brazil.