Biofuels are manufactured from various types of biomass. Most biofuels are liquids, principally ethanol and biodiesel, produced to replace or supplement fossil fuels used in transportation. Used most commonly as a supplement to gasoline to reduce carbon emissions and reliance on imported petroleum, ethanol is the most common biofuel worldwide.

Depending on the original biomass source, ethanol can be manufactured in a variety of ways. Presently, most ethanol is produced by fermentation of the sugars found in corn, sugar cane and other sugar-rich vegetable products, but this process is not as energy-efficient as other potential methods. Using advanced processes currently under development, ethanol can be derived from woody cellulosic materials, such as trees, grasses, switchgrass or crop wastes. In addition, research is ongoing for a variety of other methods to produce ethanol in ways that are energy-efficient and sustainable.

There is considerable controversy over the use of ethanol produced from corn and other sugar-bearing crops. The displacement of farmland from food production for the purpose of growing sources for biofuels and the resulting increase in prices for fuel crops over similar crops grown for food can work against the benefit of countries where that food is needed. In addition, the use of fossil fuels to run the many aspects of growing, harvesting, transporting and converting biomass crops into biofuel makes the net carbon savings quite small, compared to the straightforward use of petroleum or other fossil fuels. Alternatively, cellulosic, non-food crops, can be grown on land unsuitable for agriculture or gathered as residue from forests and food crop harvests.

Biodiesel is made from the oils of fatty crops, such as soybeans or canola, or from animal fats. It is widely used in Europe and is rapidly growing as a substitute for diesel fuel produced from petroleum.