Brazil has been the world leader in promoting biofuels for 25 years under its "ProAlcool" program. Policies have included blending mandates, retail distribution requirements, production subsidies, and other measures. Since 1975, Brazil has mandated that ethanol be blended with all gasoline sold. Although the required blend level is adjusted frequently, it has been in the range of 20–25 percent. All gas stations are required to sell gasohol (E25) and pure ethanol (E100). Tax preferences have been given to vehicles that run on pure ethanol. The recent introduction and soaring sales of so-called "flex-fuel" vehicles by several automakers was not driven primarily by policy, but the government did extend the preferential vehicle licensing tax to cover flexible-fuel cars, beyond the original coverage of pure ethanol cars.*1 Brazil has more recently begun to target increased use of biodiesel fuels, derived primarily from domestically produced soybean oil. A recent law in Brazil allows blending of 2-percent biodiesel in diesel fuels since January 2005. This percentage may be increased to 5 percent or more by 2013.[N33]

In addition to Brazil, mandates for blending biofuels into vehicle fuels have been appearing in several other countries in recent years. In particular, at least 20 states/provinces and two countries now have mandates for blending ethanol and/or biodiesel with all vehicle fuels sold. In India, the government mandated 10-percent ethanol blending (E10) in 9 out of 28 states and 4 out 7 federal territories (all sugar cane producing areas), starting in 2003. In China, four provinces mandate E10 blending, and five additional provinces were slated for a similar mandate in 2005.*2 In the United States, three states also mandate E10 blending: Hawaii (most gasoline by 2006),Minnesota (increasing to 20 percent by 2013), and Montana.Minnesota also mandates 2-percent blending of biodiesel (B2), a policy that other states and countries are considering. In Canada, the province of Ontario mandates E5 (average) blending by 2007. National blending mandates have appeared in Columbia (E10) and the Dominican Republic (E15 and B2 by 2015). Thailand has a target for biofuels as a share of total energy by 2011, for which it is considering E10 and B2 blending mandates. Japan is considering an E5 blending mandate based on imports from Brazil.[N33]

Tax incentives for biofuels are most prominent in the United States, where a number of policies have been enacted at the state and federal levels over the past 25 years. The Energy Security Act of 1979 created a federal ethanol tax credit of up to 60 cents per gallon, proportional to the blend percentage of the fuel (e.g., 6 cents/gallon for E10). In 2004, this tax credit was extended through 2010. A tax credit for biodiesel was also added, of about 1 cent per percentage point of biodiesel blended (i.e., 2 cents per gallon for B2). Several U.S. states also offer tax and other incentives for ethanol production and sales. Canada provides a national fuel tax exemption of 10 cents per liter, and many provinces offer similar or higher exemptions (up to 25 cents/liter). A number of European countries provide fuel or VAT tax exemptions for biofuels, including Austria (95 percent exemption for biodiesel), France, Germany (100 percent exemption for biodiesel), Hungary, Italy (100 percent exemption for biodiesel), Spain, Sweden, and the United Kingdom.

Several other European countries have been considering biofuels policies as part of efforts to achieve the EU biofuels target of 5.75 percent of transport fuels by 2010. An EC Directive in 2003 provided targets for each country to meet by 2005 (2 percent) and 2010 (5.75 percent). Although the targets are voluntary, countries have had to submit plans for meeting targets, or justifications for why they won’t. Some EU members have recently enacted biofuels promotion laws or binding targets, including Hungary, which mandates 2 percent of total energy from biofuels by 2010, and the Netherlands, with a target of 2 percent of transport fuels.