duction patterns and inducing investments) and technolo­gies improve. Consequently, the social and economic effects have strong distributional impacts within societies, between different stakeholders and over time. Institutional arrange­ments strongly influence the distribution of these effects, e.g., between small and large producers and between men and women [Global Chapter 6].
     In addition to the direct effects of biofuel production, policies employed to promote them create their own costs and benefits. As first generation biofuels have rarely been economically competitive with petroleum fuels, production in practically all countries is promoted through a complex set of subsidies and regulations. In addition to the direct budgetary costs of such subsidies, policies in most coun­tries contain market distortions such as blending mandates, trade restrictions and tariffs that create costs through inef­ficiencies. This undermines an efficient allocation of biofuel production in the countries with the largest potential and cheapest costs and creates costs for consumers.
     Liberalizing biofuel trade through the reduction of trade restrictions and changes in the trade classification of etha-nol and biodiesel would promote a more efficient allocation of production in those countries that have a comparative advantage in feedstock production and fuel conversion, respectively. However, it is not clear how resource-poor small-scale farmers could benefit from this. Moreover, un­less environmental and social sustainability is somehow en­sured, negative effects such as deforestation, unsustainable use of marginal lands and marginalization of small-scale farmers risk being magnified. Sustainability standards and voluntary approaches are the most frequently discussed op­tions for ensuring socially and environmentally sustainable biofuel production. However, there is currently no inter­national consensus on what such schemes should encom­pass, whether they could effectively improve sustainability or even whether they should be developed at all [Global Chapter 7].
     AKST can play a role in improving the balance of so­cial, environmental and economic costs and benefits, albeit within limits. R&D on increasing biofuel yields per hectare while reducing agricultural input requirements by optimiz­ing cropping methods, breeding higher yielding crops and employing local plant varieties offers considerable potential. Both conventional breeding and genetic engineering are be­ing employed to further enhance crop characteristics such as starch, sugar, cellulose or oil content to increase fuel-producing capacity [Global Chapter 6]. A variety of crops and cropping methods in different countries are believed to hold large yield potential, each adapted to specific environ­ments, but more research is needed to develop this potential.

Next Generation Biofuels
The development of new biofuel conversion technologies, so-called next generation biofuels, has significant poten­tial. Cellulosic ethanol and biomass-to-liquids (BTL) tech­nologies, the two most prominent technologies, allow the conversion into biofuels not only of the glucose and oils retrievable today but also of cellulose, hemi-cellulose and even lignin—the main building blocks of most biomass. Thereby, more abundant and potentially cheaper feedstocks such as residues, stems and leaves of crops, straw, urban

wastes, weeds and fast growing trees could be converted into biofuels. Further in the future is the possibility of us­ing sources, such as algae or cyanobacteria intensively culti­vated in ponds or bioreactors in saline water using industrial carbon dioxide. Research is also focusing on integrating the production of next generation biofuels with the production of chemicals, materials and electricity. These so-called biore-fineries could improve production efficiency, GHG balances and process economics.
     On the one hand, the wide variety of potential feed­stocks and high conversion efficiencies of next generation biofuels could dramatically reduce land requirements per unit of energy produced, thus mitigating the food price and environmental pressures of first generation biofuels. More­over, lifecycle greenhouse gas emissions could be reduced relative to first generation biofuels. On the other hand, there are concerns about unsustainable harvesting of agricultural and forestry residues and the use of genetically engineered crops and enzymes. However, as next generation biofuels are still nascent technologies, these economic, social and environmental costs and benefits are still very uncertain [Global Chapters 6, 7; NAE Chapter 4].
     Several critical steps have to be overcome before next generation biofuels can become  an economically viable source of transport fuels. It is not yet clear when these break­throughs will occur and what degree of cost reductions they will be able to achieve in practice. Moreover, while some countries like South Africa, Brazil, China and India may have the capacity to actively engage in advanced domestic biofuels R&D efforts, high capital costs, large economies of scale, a high degree of technical sophistication and IPR is­sues make the production of next generation biofuels prob­lematic in the majority of developing countries, even if the technological and economic hurdles can be overcome in in­dustrialized countries. Arrangements are therefore needed to address these issues in developing countries and for small farmers [Global Chapters 6, 8].

Bioelectricity and Bioheat
Bioelectricity and bioheat are produced mostly from biomass wastes and residues. Use of both small-scale biomass digest­ers and larger-scale industrial applications has expanded in recent decades. Generation of electricity (44 GW-24 GW in developing countries—in 2005 or 1 % of total electricity consumption) and heat (220 GWth in 2004) from biomass is the largest non-hydro source of renewable energy, mainly produced from woods, residues and wastes.
     The major biomass conversion technologies are ther-mochemical and biological. The thermo-chemical technolo­gies include direct combustion of biomass (either alone or co-fired with fossil fuels) and gasification (to producer gas). The biological technologies include the anaerobic digestion of biomass to yield biogas (a mixture primarily of methane and carbon dioxide). Household-scale biomass digesters that operate with local organic wastes like animal manure can generate energy for cooking, heating and lighting in ru­ral homes and are widespread in China, India and Nepal, with the organic sludge and effluents returned to the fields. However their operation can sometimes pose technical, maintenance and resource challenges (e.g., water require­ments of digesters). Industrial-scale units are less prone to