Energy policy deals with issues related to the production, distribution, and consumption of energy. It is the manner by which a government/entity has decided to address these issues, including international treaties, legislation on commercial energy activities (trading, transport, storage, etc.), incentives to investment, guidelines for energy production, conversion and use (efficiency and emission standards), taxation and other public policy techniques, energy-related research and development, energy diversity, and avoidance of possible energy crises. Current energy policies also address environmental issues, including cleaner technologies, more efficient energy use, air pollution, greenhouse effect (mainly reducing carbon dioxide emissions), global warming, and climate change (Demirbas, 2007a, 2008a, 2008c).
For commercial biofuel operations, there is considerable uncertainty in the economic analysis, mostly associated with the costs of feedstock, rapid technological changes, and petroleum prices against which the biofuels have to compete. Because the biofuel industry is in its infancy, supportive policies are needed that can foster the initial growth for both first-generation (ethanol and diesel) and second-generation biofuels. Policy options include incentive payments or tax breaks. Due to rising prices of petroleum fuels, the competitiveness of biomass use has improved considerably over time. Biomass and bioenergy are now a key option in energy policies for several countries, mainly driven by the security of supply, reducing both petroleum import and carbon dioxide (CO2) emissions. Biofuel can provide new economic opportunities for people in rural areas of countries with biofuel potential.