America is finally coming to grips with the need to minimize its dependence on imported oil. Faced with a host of geopolitical risks and the looming threat of climate change, policymakers are taking a hard look at ways to diversify the nation’s energy portfolio.

In the last few years, biofuels—that is, energy-dense liquid fuels made from plants and other organic matter—have enjoyed a significant momentum, both at home and abroad. Today, most cars and SUVs in the United States are capable of running on gasoline blended with 10 percent ethanol, and multiple airlines have conducted successful tests of bio-jet-fuel blends.1 Major oil companies have announced multi-million-dollar plans to invest in biofuel ventures and research. Global revenue of ethanol and biodiesel production reached $34.8 billion in 2008 and is expected to triple by 2018.2 A bit of comparison will put this growth in perspective, however: This 2008 figure represents just 2 percent of the $1.76 trillion in revenues generated by the top five oil companies in the world.

How can we facilitate the flow of private capital into the production of biofuels? To answer that question, a Financial Innovations Lab, jointly developed and funded by the Milken Institute and the Office of Energy Policy and New Uses at the U.S. Department of Agriculture, was convened in Washington, D.C. This event gathered leading scientists and technologists, biofuel producers, rural stakeholders, banks, institutional investors, venture capitalists, public officials, and representatives from think tanks and clean-tech industry associations. Together they identified practical solutions that can encourage investment and help this fledgling industry grow to maturity, building a greener economy in the process.