Recently, reductions in CO2 emissions have become necessary around the world to avoid global warming. Biofuels are expected to become an alternative source of energy (mainly in automobiles) that will replace fossil fuels currently used for transportation. Biofuels possess the following benefits:1) Reductions in CO2 emissionsBiofuels are made from crops, e. g. sugar cane, corn, and rape seed, etc. They consume CO2 while growing. From this point, the use of biofuels for automobiles does not emit CO2, due to the concept of “carbon neutrality.”2) Improving energy securityThe EU is heavily dependent upon fossil fuels, oil and natural gas, from Russia and the Middle East. If EU countries use biofuels, they can reduce dependence on fossil fuels.3) Developing agricultureIt is sometimes difficult to increase the incomes of farmers involved in agriculture. Providing opportunities to produce biofuels can improve unstable financial situations for farmers.4) Creating employment and improving living standardsMany regions suffer from low living standards due to insufficient industry. Opportunities to produce biofuels may create employment in these regions.In contrast, biofuels possess the following problems:a) Biofuels compete with agricultural products for foodstuffs.b) Biofuel production costs are higher than for fossil fuels, and CO2 reducing capabilities of many biofuels are not significantly high.c) Biofuels comprise only approximately 1-2% of the total amount of fuel used for transportation.d) Overcultivation of agricultural land and transitions from food to energy cropsTo solve the above problems, the following policies seem to be necessary:i) Development of next generation technology for a) above.Biofuel production from biomass is the next generation of technology. If this technology proves to be practical, it will not compete with food production.ii) Policy support (e. g. tax exemptions, subsidies) for b) and c) above.Currently, biofuel production costs are greater than those for gasoline and diesel, and the development of next generation technology is difficult for any one company to undertake.iii) Establishing trade rules for biofuels (e. g. material collection methods, transactions, trading, etc.) for d) aboveThe lack of international rules may result in overcultivation in producing countries, such as those in south-east Asia.Biofuels are imperfect and possess problems, but they also have advantages that other fuels do not. Consequently, it is necessary to proceed with the expansion of biofuels, while considering each factor carefully and overcoming hurdles.