The UN Conference on Trade and Development (UNSTAD) reports world production of ethanol from sugar beet, sugar cane and maize doubled to 40 billion liters in five years. This represents the equivalent of around 3 percent of global use of gasoline.
Production is forecast to almost double again by 2010 and some analysts estimate bio-fuels could make up 20 percent of fuels consumed worldwide by 2020.
The figures were detailed at a UN conference on biofuels on Geneva where the analysts said alternative sources of energy could counter the rising price of fossil fuels, which is especially burdensome for developing countries.
But there are downsides to producing bio-fuels with UNCTAD saying the use of land for energy crops may be done at the expense of food crops. It also may be using scarce water resources. It said growing energy crops could reduce bio-diversity and this meant the overall environmental costs of bio-fuels have to be weighed against the environmental advantages.
A number of countries are gradually imposing fuel blending targets and providing subsidies and incentives to support nascent bio-fuel industries. UNCTAD said these developments could spur a sustained worldwide demand for and supply of biofuels.
This in turn may trigger a profound change in the world agricultural economy by providing an opportunity for developing countries to diversify agricultural production, raise rural incomes and improve quality of life. Biofuels may also slow down the process of global warming.
UNCTAD said the burgeoning biofuel demand is also raising concerns, however.
"Previously uncultivated land with high environmental value may end up being used for energy crop production, reducing biodiversity, and there are risks that the cultivation of energy crops may have overall environmental costs that outweigh the environmental advantages of biofuels," it said.
"Competing uses may mean there isn't sufficient land for all purposes. Availability of water may constrain energy crops, and if an expanding global biofuels market drives up commodity prices, the ability of poor consumers in developing countries to buy food may be imperiled. The ability of small and local farmers to participate profitably in energy crop production may be limited. And it may be difficult for developing countries to gain access to technology, especially complex technology, related to bio-energy."
UNCTAD's work on biofuels provides trade, economic and legal analysis to allow developing countries to capture the opportunities and avoid the risks emerging from biofuels production and use.