High oil prices have propelled biofuels into the global mainstream. Special correspondent David Evans investigates...
Record oil prices have launched biofuels from a niche player into the multi-billion dollar commodity mainstream.
The move has caused an explosion in new ventures and investor interest that has fired up global agricultural markets.
From the sugar plantations of Brazil to the rapeseed fields of France, and the US corn belt to Malaysia's palm forests, a search for what's been dubbed the new "green gold" is under way.
Biofuels are plant-based fuels, either ethanol made from sugar or grains, which can be added to gasoline and biodiesel derived from oilseeds or palm oil and added to diesel. While governments see a way to cut their dependence on imported oil, curb greenhouse gas emissions and boost local agriculture, demand from these new technologies has sparked tensions on traditional food-based commodity markets.
Paris-based Cyclope commodity analysts said: "A victim of its own success, we've seen the first tensions appear on Brazilian and American biofuel markets as prices have risen.
"The management of these tensions will show whether ethanol has really entered a new golden age and if it can be defined as a 'strategic commodity'."
So, which regions of the world are best placed to harness biofuel's potential and which crops will ultimately win out?
Brazil has long been a bio-fuel powerhouse, using its vast sugar cane industry to make ethanol. Some industry experts say it could become a "Saudi Arabia" of biofuels.
"Under current technology, the most efficient biofuel is ethanol from sugar cane and so any countries which are natural sugar cane producers have an opportunity," Lawrence Eagles, head of oil industry and markets at the Paris-based International Energy Agency (IEA) said.
The cane-based ethanol industry in Brazil is the world's biggest, with domestic consumption running at around 13 billion litres a year and exports at more than two billion.
Some forecasts have put the growth in exports as high as ten billion litres within a few years.
Brazil's agriculture ministry has put the cane crop at 423 million tonnes this season with just over half going into sugar and the rest into ethanol.
A new ethanol distillery is built every month in Brazil.
The increasing use of bioenergy would benefit mainly the earth's tropical zones as they have the best conditions to grow crops that can be turned into biofuels, said Angelo Bressan, director of the farm ministry's cane and agroenergy department.
"It's necessary to have natural conditions to produce biomass energy and in general these areas are concentrated in parts of Latin America and Africa", he said.
Corn has been the biggest winner in the United States, the world's largest energy consumer. The country has 97 ethanol plants producing the additive and 33 more are being built.
Chicago Board of Trade corn futures recently hit ten-month highs, fuelled in part by demand from the ethanol industry. The CBOT has launched electronic trading of ethanol futures.
"Some of the limited net energy gains from producing biofuels from grain has the potential to tighten these markets," the IEA's Mr Lawrence said.
Europe has concentrated its efforts on biodiesel, mostly made from rapeseed but also sunseed and palm oil.
The EU-25 produced 3.2 million tonnes of biodiesel in 2005, up 65 per cent on 2004 and making it the biggest biodiesel maker in the world.
The European Commission has set a 5.75 per cent inclusion share for all biofuels by 2010 and EU members have the freedom to grant tax incentives to promote biofuels. Some countries, such as France, have announced their own more ambitious targets.
"For the time being, biodiesel is certainly a long-lasting profitable investment in Europe, to the extent the car pool is mainly made up of diesel engines and that the production of oils remains limited," French analyst Agritel said.
Biofuels are also hitting agricultural markets here too. French rapeseed futures have recently hit record highs as the prospect of more demand from the biofuel industry.
But Europe's biofuel push has been patchy. EU officials have recently said their targets for 2010 are unlikely to be met and are now considering making them compulsory.
And Europe does not have unlimited land to devote to biofuels, raising the prospect of cheaper imports.
Asia will increasingly see more palm oil used for biodiesel as key palm growers, such as Malaysia, ready new plants.
Industry officials say more corn will get diverted in China for ethanol, despite efforts by Beijing to curb it and prevent food and feed prices from rising. China will also look at importing more cassava from Thailand for ethanol production.
"For biofuel in Asia, it will be mainly palm oil. For ethanol, it will be crops like cassava and corn in China," said Sunny Verghese, chief executive officer of Olam International a Singapore-listed commodities supplier.
In China, the world's third-largest ethanol fuel producer, ethanol plants are being built or expanded at a rapid pace in the top corn-growing province of Jilin.
Analysts say China would also increasingly look at non-grain raw materials - such as sweet sorghum or cassava, also known as tapioca - to make ethanol.
And in Thailand, industry officials expect 13 ethanol plants to be running by the end of 2007, compared with just two now.
As a result, Thailand's demand for cassava could surge to three million tonnes next year from one million this year.
Industry officials say Australia's ethanol industry is growing rapidly and could boost the use of wheat, cutting its availability for exports. The Grains Council of Australia estimates that the country's ethanol industry would grow to consume around 1 million tonnes of grain a year as feedstock.
But there is a new technology that promises to end the battle between food and bio-fuel for the world's limited crops.
Scientists are making progress on new ways of extracting ethanol from plant waste - using the stalks to produce fuel and leaving the food component alone.
Peter Tulej, head of the renewable unit at the IEA, said the production costs for these types of biofuel could be as low as 25 US cents a litre, making them extremely competitive.
"The message is we must invest in these second generation technologies. They stand a chance of becoming competitive in the long-run with petroleum-based fuels," he said.