According to a United Nations Conference on Trade and Development (UNCTAD) report published on 23 February, advanced and second generation biofuels have become a commercial reality in the context of advanced technologies, economic pressures and a political will to act on climate change.

The report, Second-Generation Biofuel Markets: State of Play, Trade and Developing Country Perspectives, focuses on how the second generation biofuel market can be exploited in the wake of environmental commitments made by countries around the world, and how developing countries can be assisted in acquiring required technology.

The USA has the largest installed capacity for cellulosic ethanol production, as well as the largest amount of working second-generation biofuel facilities. It is following respectively by China, Canada, the EU and Brazil. Projects and feedstocks vary significantly in all countries, the report added.

As of 2015 there were no cellulosic ethanol projects in Africa and Latin America (excluding Brazil), the report found, although there was progress in both regions in bagasse-fired electricity co-generation and biomass cook stoves.

Two main strategies were identified as having given traction to advanced biofuels in the world.

First, a market-segmentation strategy in biofuels used in the US and more recently the EU, that limits conventional biofuels and creates premium pricing.

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

The report did note that while production facilities have been scaled up in recent years, actual production is much smaller than nominal capacities.

Reasons for this discrepancy include high feedstock costs, high processing costs, incomplete regulatory frameworks, risk avoidance and limits to biofuel blending.

Finally the report said that further rules on advanced biofuels in international trade law should be well-balanced and take into account the different conditions in which biofuels are produced around the world. Rules should not create unjustifiable obstacles to international trade of biofuels.