Sustainable biofuel refers to biofuels produced in ways that minimise environmental and social impacts while providing a renewable alternative to fossil fuels. Unlike conventional biofuels, which may compete with food production or contribute to deforestation, sustainable biofuels are derived from feedstocks and processes designed to reduce greenhouse gas emissions, protect biodiversity, and support long-term resource availability. Examples include fuels made from non-food crops, agricultural and forestry residues, algae, and waste materials. International initiatives such as the Roundtable on Sustainable Biomaterials have developed standards and certification schemes to assess sustainability across the biofuel supply chain. The concept is closely linked to broader debates on energy security, climate change mitigation, and the transition to low-carbon economies.

In 2008, the Roundtable for Sustainable Biofuels released its proposed standards for sustainable biofuels. This includes 12 principles:

Several countries and regions have introduced policies or adopted standards to promote sustainable biofuels production and use, most prominently the European Union and the United States. The 2009 EU Renewable Energy Directive, which requires 10 percent of transportation energy from renewable energy by 2020, is the most comprehensive mandatory sustainability standard in place as of 2010.

The EU Renewable Energy Directive requires that the lifecycle greenhouse gas emissions of biofuels consumed be at least 50 percent less than the equivalent emissions from gasoline or diesel by 2017 (and 35 percent less starting in 2011). Also, the feedstocks for biofuels "should not be harvested from lands with high biodiversity value, from carbon-rich or forested land, or from wetlands".

As with the EU, the U.S. Renewable Fuel Standard (RFS) and the California Low Carbon Fuel Standard (LCFS) both require specific levels of lifecycle greenhouse gas reductions compared to equivalent fossil fuel consumption. The RFS requires that at least half of the biofuels production mandated by 2022 should reduce lifecycle emissions by 50 percent. The LCFS is a performance standard that calls for a minimum of 10 percent emissions reduction per unit of transport energy by 2020. Both the U.S. and California standards currently address only greenhouse gas emissions, but California plans to "expand its policy to address other sustainability issues associated with liquid biofuels in the future".

In 2009, Brazil also adopted new sustainability policies for sugarcane ethanol, including "zoning regulation of sugarcane expansion and social protocols".

Biofuels, in the form of liquid fuels derived from plant materials, are entering the market, driven by factors such as oil price spikes and the need for increased energy security. Many of these first-generation biofuels that are currently being supplied have been criticised for their adverse impacts on the natural environment, food security, and land use.

The challenge is to support second, third and fourth-generation biofuel development. Second-generation biofuels include new cellulosic technologies, with responsible policies and economic instruments to help ensure that biofuel commercialization is sustainable. Responsible commercialization of biofuels represents an opportunity to enhance sustainable economic prospects in Africa, Latin America and Asia.