World production of biofuels rose some 20 percent to an estimated 54 billion liters in 2007. These gains meant biofuels accounted for 1.5 percent of the global supply of liquid fuels, up 0.25 percent from the previous year. Global production of fuel ethanol, derived primarily from sugar or starch crops, increased 18 percent to 46 billion liters in 2007, marking the sixth consecutive year of double-digit growth. Production of biodiesel--made from feedstock such as soy, rape and mustard seed, and palm and waste vegetable oils--rose an estimated 33 percent, to 8 billion liters.
The United States, which produces ethanol primarily from corn, and Brazil, which primarily uses sugarcane, account for 95 percent of the world's ethanol production. Brazil increased its ethanol production by 21 percent in 2007, to 19 billion liters. The United States remained the world's leading producer, boosting output 33 percent to 24.5 billion liters in 2007, and now accounts for a little more than half of the world's ethanol production.
Germany maintained its lead in biodiesel by increasing production capacity 60 percent in 2007, although new government taxes on biodiesel in 2006 and 2008 have weakened the German biodiesel market. These taxes and soaring feedstock prices have eliminated biodiesel's price advantage and several large producers have announced production cuts. Biodiesel production continued to grow rapidly in Southeast Asia, especially in Malaysia and Indonesia, driven mainly by blending mandates, tax subsidies, and strong support from agricultural interests.
Worldwide investment in biofuel production capacity continued to expand in 2007. The value of biofuel production plants announced or under construction exceeds US$4 billion in the United States, $4 billion in Brazil, and $2...