Biofuels have been recognized to be one of the key solutions for reducing the greenhouse gas emissions from the transport sector. For quite some time there have been national and international (EU-level) policies promoting biofuels and this has indeed led to significant increase in production.
Kristina Holmgren (IVL and Chalmers) has written a paper in which current policies applied for the promotion of biofuels in Sweden are described, and a discussion on problems and potential improvements is given. The report compares supply and demand side instruments, and what effects they have had (in cases where the instruments have been in place for some time) or could have. Special emphasize is given to the question whether policies should distinguish between 1st and 2nd (or 3rd) generation biofuels.
You can download the report here.