In recent years, biofuels have rapidly emerged as a major issue for agricultural development, energy policy, and natural resource management. Growing demand for biofuels is being driven by recent high oil prices, energy security concerns, and global climate change. In Africa, there is growing interest from foreign private investors in establishing biofuel projects. For Tanzania, biofuel production has the potential to provide a substitute for costly oil imports (currently US$ 1.3-1.6 billion per year, 25% of total foreign exchange earnings).
Biofuels also have the potential to provide a new source of agricultural income and economic growth in rural areas, and a source of improvements in local infrastructure and broader development. Although many biofuel
investments involve large plantations, biofuel production can also be carried out by smallholder farmers as well as through ‘outgrower’ or local contracted farmer arrangements.