The development of an economically viable biofuel industry rests on strong state subsidies for production and processing, creation of markets through government procurement, fuel-blending mandates, price controls, as well as foreign trade tariffs and quotas, and multiple interventions in agricultural, ecological, and other regulations. We use an approach grounded in agrarian political economy to critically analyze the literature on how biofuel policies interact with broader production, trade, and agro-ecological processes. We focus on policies involving the most prominent crops in the places where biofuel production has advanced the most (i.e. USA, Brazil, and the EU), but also extend analysis to their relations with broader transformations in production, commercial, and even governance practices around the world. We investigate the political and economic interests driving biofuel policies, and how these set the terms in which state interventions and policies are conceived and implemented. We find that these are not developed and implemented according to environmental or inclusive pro-poor development purposes, but according to state interests in energy security and its intersection with a tense alliance between corporate sectors, rendering many policy mechanisms ineffective or even outright counterproductive to effectively facilitate more socially and environmentally sustainable energy production and agricultural practices.