The countries of the Greater Mekong Subregion (GMS), like many other countries in the world, have made plans or are planning to develop strong national biofuel programs. The level of biofuels development varies greatly among countries, but by 2007 every country had set out a biofuel development plan.

However, the ability to develop and sustain the rapid expansion of biofuel production is hindered by a lack of information and understanding of the economics of its market. It has been observed in the GMS and elsewhere that no country has been able to launch a domestic biofuels industry without government support beyond the normal regulatory role.

Biofuel development in the GMS must therefore take into account the full spectrum of market and social values, such as foregone food production and other agricultural outputs, environmental impact, and improvements in the welfare of the rural poor. Economic analysis is needed to evaluate the social costs and benefits of biofuels and to decide when, where, and how to embark on a biofuel program. Economic analysis can also help reshape planned or existing programs to maximize their efficiency and their net benefits to society.

This study is one of the first steps to try to improve understanding of the global and regional impacts of biofuel development on agriculture and on the rest of the economy, with specific focus on the GMS. The analysis aims to provide preliminary answers to the following questions:

(i) How will the rise in demand for biofuels affect global food prices?

(ii) How will global and GMS biofuel development programs affect national and regional agricultural production and trade?

(iii) What are the implications on household food security, poverty, and the use of land and water resources in the GMS?

Answers to these questions could feed into policy recommendations to help ensure the development of economically and socially sound biofuels programs in the countries of the GMS.

This report is part of the Greater Mekong Subregion: Status and Potential for the Development of Biofuels and Rural Renewable Energy series.