The U.N. Food and Agriculture Organisation and the Organisation for Economic Cooperation and Development in a joint report said they expected ethanol and biodiesel output to reach 158 billion litres and 40 billion litres respectively by 2023.

"Biofuel production will expand substantially, with both ethanol and biodiesel production increasing by more than 50 percent through the next decade," they said.

"This represents a significant slowdown relative to the past decade, when production more than doubled through the ten year period from 2004 to 2013."

The debate has heightened over the benefits of biofuels in recent years, with opponents saying they contribute to food inflation by consuming feedstocks that could be used for food.

OECD and FAO saw that trend continuing in the years to come with 12 percent, 28 percent and 14 percent of world coarse grains, sugar cane, and vegetable oil respectively, expected to be used to make biofuels by 2023.

Growing ethanol use in Brazil would be linked to a mandatory 25 percent ethanol blending requirement in petrol, expansion of the flex-fuel industry, and import demand from the United States to fulfil the advanced biofuel mandate, they said.

BLEND WALL

U.S. ethanol use would be capped by the so-called ethanol "blend wall" proposal to cut corn ethanol blending quotas and should only grow marginally in the latter years of the projection period, leaving additional biodiesel use necessary to meet the advanced and total mandates.

OECD and FAO assumed that by 2023 only 12 percent of the U.S. cellulosic mandate, which requires increasing blending of biofuels made from sources such as grasses, trees and crop waste, would be implemented.

In the European Union, the agencies saw ethanol fuel use in petrol reach an average energy share of 6.6 percent by 2023.

That compared to 7.4 percent for biodiesel. After a decline in the bloc in 2013 (12 billion litres versus 13.4 billion in 2012), biodiesel use is seen rising to stabilise at 19 billion litres from 2020, helped by public mandates and tax cuts.

As in the United States, the debate on the use of biofuel is ongoing at EU level. The OECD and FAO said they assumed the percentage coming from biofuels expressed in energy share should reach 8.5 percent in 2020, given that each unit of non-food biofuel counts double under EU blending calculations. (Reporting by Sybille de La Hamaide, Editing by Gus Trompiz and David Evans)