Land use is also a major factor in evaluating the benefits of biofuels. The use of regular feedstock, such as corn and soybeans, as a primary component of first-generation biofuels sparked the “food versus fuel” debate. In diverting arable land and feedstock from the human food chain, biofuel production can affect the economics of food price and availability. In addition, energy crops grown for biofuel can compete for the world’s natural habitats. For example, emphasis on ethanol derived from corn is shifting grasslands and brushlands to corn monocultures, and emphasis on biodiesel is bringing down ancient tropical forests to make way for oil palm plantations. Loss of natural habitat can change the hydrology, increase erosion, and generally reduce biodiversity of wildlife areas. The clearing of land can also result in the sudden release of a large amount of carbon dioxide as the plant matter that it contains is burned or allowed to decay.

Some of the disadvantages of biofuels apply mainly to low-diversity biofuel sources—corn, soybeans, sugarcane, oil palms—which are traditional agricultural crops. One alternative involves the use of highly diverse mixtures of species, with the North American tallgrass prairie as a specific example. Converting degraded agricultural land that is out of production to such high-diversity biofuel sources could increase wildlife area, reduce erosion, cleanse waterborne pollutants, store carbon dioxide from the air as carbon compounds in the soil, and ultimately restore fertility to degraded lands. Such biofuels could be burned directly to generate electricity or converted to liquid fuels as technologies develop.
The proper way to grow biofuels to serve all needs simultaneously will continue to be a matter of much experimentation and debate, but the fast growth in biofuel production will likely continue. In the United States the Energy Independence and Security Act of 2007 mandated the use of 136 billion litres (36 billion gallons) of biofuels annually by 2022, more than a sixfold increase over 2006 production levels. The legislation also requires, with certain stipulations, that 79 billion litres (21 billion gallons) of the total amount be biofuels other than corn-derived ethanol, and it continued certain government subsidies and tax incentives for biofuel production.

One distinctive promise of biofuels is that, in combination with an emerging technology called carbon capture and storage, the process of producing and using biofuels may be capable of perpetually removing carbon dioxide from the atmosphere. Under this vision, biofuel crops would remove carbon dioxide from the air as they grow, and energy facilities would capture the carbon dioxide given off as biofuels are burned to generate power. Captured carbon dioxide could be sequestered (stored) in long-term repositories such as geologic formations beneath the land, in sediments of the deep ocean, or conceivably as solids such as carbonates.