This report examines the historical development and current status of the biofuel industry in China, focusing on government policies to support production and consumption. The analysis forms part of a multi-country effort by the Global Subsidies Initiative (GSI) to characterize and quantify (to the extent possible) government subsidies and other support for biofuel production, distribution and consumption, including support provided for the production of key inputs. The report also assesses the environmental and social impacts of biofuel production in China.
Two biofuels for transport are produced and used, to varying degrees, in China: ethanol, mainly produced from maize, and biodiesel, mainly produced from waste cooking oil and fat residues. A 10 percent ethanol blend with gasoline (E10) is used in ten provinces in China as part of a mandated consumption program. Biodiesel is not officially distributed throughout petrol stations in China but is bought by users directly from producers. Virtually all ethanol and biodiesel produced in China is consumed domestically. With domestic demand for transport fuels skyrocketing, there are minimal exports of biofuels.
The Chinese government has been an enthusiastic promoter of biofuels, which were seen as part of the answer to China’s energy security, rural-development and pollution problems. However, with grain prices rising rapidly, the government has become concerned that promotion of biofuels, particularly ethanol, may contribute to food-price inflation and erode China’s food security. The government is now endeavouring to engineer a shift away from the use of grains a feedstock for biofuels, and is promoting feedstocks grown on agriculturally marginal land. The key question China now faces is whether there is sufficient (and adequate) marginal land on which to grow the feedstocks necessary to meet both production targets and satisfy mandated consumption demand. If not, these targets and mandate programmes may need to be drastically revised.
Chapter 2 provides a broad overview of China’s energy policies and government bodies responsible for energy policy-making. There is a brief discussion of China’s petroleum pricing policies and then a detailed outline of China’s biofuels policies and programs.
Chapter 3 provides details of China’s fuel-ethanol and biodiesel industries, including production estimates, industry structure and cost structures. The key issues of land availability for feedstock production and biofuels production outlook are discussed in this chapter.
Chapter 4 provides an overview of support to the biofuel production chain, including intermediate inputs and output-linked support. Chapters 5 and 6 look at the environmental and social impacts of biofuel production in China. Conclusions and recommendations are provided in Chapter 7.

By: Global Subsidies Initiative -International Institute for Sustainable Development

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