The poorest people in the world face additional hunger as the price of staple foods soar.
The growth of crops in 2012 has been badly affected by drought in the US and Russia and prices have risen 50% since June.
According to a report about the hike in food prices, from the international agency Oxfam, 40% of US corn stocks are currently being used to produce fuel.
The US Renewable Fuel Standard mandate requires that up to 15 billion gallons of domestic corn ethanol be blended into the US fuel supply by 2022.
The chairman of the world's largest food producer is highly critical of the rise in bio-diesel.
Peter Brabeck-Letmathe of Nestle says crops produced for biofuel use land and water which would otherwise be used to grow crops for human or animal consumption.
His comments have ignited discussion about the second generation of biofuels.
Another concern is the driving of the agricultural system to use larger quantities of pesticides and insecticides known to be responsible for the destruction of habitat.
"In Indonesia there has been the destruction of rainforests and in Brazil it is both rainforests and grasslands," says Dr Doug Parr of the environmental group Greenpeace.
He further maintains that any reduction in greenhouse emissions, in part because of the way the land is being used, is not as efficient as previously predicted.
Converting waste
But Lars Hansen of Novozymes in Denmark, which produces enzymes to break down the crops used for biofuels, says there are currently large amounts of bio-mass not being used.
Speaking about the second-generation of biofuels, he says: "The way forward is to convert the residue part of the crop into sugars which can then be used for fuels."
By residue, he means the part of the crop which is not eaten – the stalks and husks, and also wood chippings.
He says that technology is ready now and should be deployed to provide a solution to many problems.
"If you take just 20% of the agricultural and forest residue available in Europe, which can sustainably be taken away from the fields, you can make half of Europe's gasoline demands," he says.
"The technology is in place," he says, "what we now need is for government policies to move in the right direction."
What is needed is governments, and institutions such as the European Union, giving subsidies to new advanced technologies to combat carbon issues.
"Such a move would help the transport sector in Europe to become sustainable," he says.
"We are moving from a world with 750 million cars to double that number in only 10 years, so we need an alternative to fossil fuels," he notes.
Doug Parr of Greenpeace agrees there are opportunities in second generation biofuels, although he maintains it still does not address the issue of how land is used.
"My worry is that what we have seen with the first generation of biofuels, is that they tend to be sourced from developing countries," he says.
He does not believe there is the institutional capacity to cope with the big commercial interests.
"Quite often it is cheaper to do the unsustainable thing than to do the sustainable thing even though it is serving the policy objectives in the long run," he laments.
He says that the issue of sustainability should have been sorted out before government mandates were introduced regarding the percentage of biofuels replacing fossil fuels.
"At the moment it is the tail wagging the dog," he says.
Job opportunities
Progress is already being made on the second generation of biofuels.
"It is not a pipe-dream any more, this technology is actually being deployed," says Mr Hansen.
"There is a factory opening in northern Italy to convert agricultural waste, there are factories in China, and we are working with partners in the US and Brazil," he explains.
The technology will not only address the transport sector, but it can also replace products such as plastics which the oil and chemistry sectors have been supplying over the past 150 years.
Another positive aspect of the new technology, is that it can supply jobs and energy independence around the world.
"Biofuels created well in Africa is an excellent opportunity to create jobs in the agricultural sector, thereby creating income for smallholder African farmers," he says.
He cites a project Novozymes is running in Mozambique, where farmers make cassava starch which can either be used as food, or any excess can be sold to a small factory where it is transformed into a fuel which is then used in cooking stoves or running transport.
"We are creating economic activity in the rural areas of Africa, we improve the energy independence of the countries by helping them import less fuel," he says.
"At the same time we green their transport sector and we green the cooking stoves which cause tremendous health problems," he says.
He adds: "I see biofuels as an opportunity for agriculture more than a problem."
