ISLAMABAD: Advanced biofuels made from non-food biomass, also known second-generation biofuels, have become a commercial reality, a new report by the United Nations Conference on Trade and Development (UNCTAD) concludes.

The report, ‘Second-Generation Biofuel Markets: State of Play, Trade and Developing Country Perspectives’, says that this is happening in the context of advanced technologies, economic pressures and a political will to act on climate change.

In the wake of environmental commitments countries have made with the Sustainable Development Goals (SDGs) and Paris COP21 climate change agreement, the report focuses on how the market for second-generation biofuels can be exploited, and how to make the technology avail­­able in developing countries.

With a specific focus on cellulosic ethanol, a new type of biofuel produced from wood, grass or the inedible parts of plants, the report provides a wide-ranging review as of 2015–2016 of the second-generation biofuels sector, maps selected cellulosic ethanol projects, and details recent policy developments from around the globe.

A key factor in decreasing costs for the industry has been process improvements that have allowed the market to expand, the report says.

Overall, two main strategies have given traction to advanced biofuels in the world. The first is a market-segmentation strategy in conventional/advanced cellulosic biofuels used in the US, and more recently in the EU with the adoption of limits for conventional biofuels, resulting in premium pricing.

The second is the availability of national development bank loans that have reduced risk and promoted growth in the industry, especially in China and Brazil.

Low interest rates and a venture-capital culture have also played a role in advancing the position of second-generation biofuels.

However, while production facilities have been scaled-up over the past three years, evidence suggests that actual production is much smaller than nominal capacities.

The report concludes with five suggestions for the responsible development of the second-generation biofuels industry which includes creation of regulatory frameworks for advanced bio-energy tailored to national circumstances, which do not necessarily focus on the type of supply but instead on existing local demands. Technical dialogue should continuously be promoted among different production regions of advanced fuels in order to ensure compatible standards for feedstock and promote trade in advanced biofuels.

Published in Dawn, February 24th, 2016