The agency in its annual report presented to Clean Energy Ministerial claimed that surging prices of feedstock has stalled the growth of bio-fuel production.
The production of ethanol in the US fell due to drought, while biodiesel witnessed a growth of 7%.
In addition, the investment in the bio-fuel sector in 2012 dropped by 50% from 2011, mainly owing to overcapacity in markets.
Also, the review of bio-fuel support policies in some countries and higher feedstock prices have also affected investments.
Commenting on the report, IEA Executive Director Maria van der Hoeven remarked that the thrust to clean up world’s energy resources has halted.
"Despite much talk by world leaders, and despite a boom in renewable energy over the last decade, the average unit of energy produced today is basically as dirty as it was 20 years ago," added Hoeven.
However, global advanced bio-fuel production in 2012 has increased by 33% to 4.5 billion liters, compared to the previous year.
IEA said that bio-fuel capacity should increase by two-fold by 2020 to meet the 2 degree Celsius scenario (2DC) targets.
