In 2002, fossil fuels supplied 86 percent of the energy consumed in the United States. We also imported over half of the petroleum we used and we project that our dependency will continue to grow. Since the U.S. economy is so closely tied with petroleum products and oil imports, small changes in oil prices or disruptions in oil supplies can have an enormous impact on the American (and for that matter the entire Global) economy. We understand that we will always rely on fossil fuels. But, we also understand that value of developing technologies using renewable energy sources, including biomass, and the important role it can play in energy security, economic growth, and the environment. The central focus of the current DOE Biomass Program is an integrated approach to the simultaneous production of liquid fuels, power, and products in what we call the industrial biorefinery. This biorefinery would produce a suite of products much in the manner of an oil refinery. These biorefineries would be like the petrochemical facilities on the Gulf Coast of the US, but instead of crude oil streams, they would biofuels, particularly with larger biofuel systems, most developing countries can be expected to rely on fossil fuels rather than biofuels for meeting their largest industrial and transport fuel demands. This view is clearly a function not only of the limited, if not negative, net financial benefits for some large biofuel systems, but also to a great extent of the higher financial risks and administrative and operational complexity associated with such systems. The major exceptions are competitive biofuel systems that rely on wastes. In fact, competitive, efficient biofuel waste systems should be encouraged by national and international agencies, particularly in the rural industrial sector in which the savings to the country from the promotion of these industries are significant. Future analyses should look closely at those firms or private entrepreneurs who can and are making money on biofuel use rather than potential users with no experience in deriving profits from biofuels. Whereas at present biofuel provides limited, but important, economic potential in the industrial and transport sectors, biofuel systems are still the least-cost and primary option on a financial and economic basis in the residential cooking sector for most developing countries. In fact, the greatest global potential for biofuel programmes could be from energy conservation through improved technological innovation in this sector. As Smith hypothesizes, a modern biofuel transition is needed whereby modern efficient systems replace traditional ones. ~1 Thus, current support of such biofuel programmes needs to be strengthened. The lack of macro-level analyses of biofuel systems raises the need for greater study of employment generation, internal market stimulation, and net foreign exchange effects. Besides the oil security issues, biofuels may have other economic benefits such as taking advantage of existing indigenous resources, stimulating more efficient commodity production systems, absorbing excess rural labour, and increasing rural incomes. These factors need to be seriously compared and coupled with private market incentives. The impact on financial viability and system reliability of the seasonal nature of biofuel supplies, as contrasted with most fossil fuels whose use can be delayed or suspended for future use, is a critical research issue that has been ignored. This factor has important risk implications on long-term biofuel use. It is clear from the Philippines’ experience that if some countries choose a biofuel strategy because they place a premium on diversifying their energy base and stimulating internal markets, they must ensure adequate biofuel supplies will exist at reasonable costs to the consumer. Poor market development, or conversely competitive product markets for biofuels, are often key reasons for private and public biofuels schemes’ failures or successes. Despite the marked relative price changes for biofuels v fossil fuels at present, it is important that volatile crude oil prices do not lead to a general apathy in energy planning in areas where biofuels or other fuels such as hydro or solar are appropriate. For instance, falling crude prices have only slightly affected rural diesel oil or kerosene prices in some countries with high import duties or taxes. However, it is obvious that setting aside their economics, the organizational barriers to implementing biofuel strategies are extremely high. Historically, biofuel programmes have required more institutional coordination and cooperation at the regional, national and international agency levels than is often possible. Thus, costly fossil fuel or hydro projects have been more attractive, and in practice more feasible, to the public sector than many small or medium-scale biofuel projects. Since these recommendations are based on limited field data, both financial and economic, it is important to highlight the tentative nature of these findings. Reliable financial cost data from operational systems is limited and often quite aggregated. The macro-level impacts that might favour biofuel use, such as income generation, market development and balance of payments effects, are even more uncertain and still require serious analysis. These studies are essential since many benefits from biofuel use are not reflected in a financial analysis. Given the high profile biofuels have received over the past decade, this lack of data is troubling. Yet the limited amount of actual biofuel substitution for fossil fuels in most developing countries suggests serious economic as well as non-economic barriers must exist. At a minimum, greater evaluations of past projects by these countries and international agencies should occur to identify more definitively the full private and social comparative advantages of various fuels. While much technical progress has been made, at present the current research focus should be on appropriate systems, either fossil fuel or biofuel, with the greatest economic and social promise. The breadth of biofuel substitution certainly is less than originally envisioned. While traditional biofuel use has long been with us, the future challenge is to focus on environmentally sound, and economically justifiable, advanced biofuel systems.