China: Biofuels Rise Too Quickly?

China’s biofuels industry is taking off more quickly than the government wishes, according to a report carried by the Inter Press Service (IPS) news agency.

The article states that China’s government is concerned that surging crop prices for maize and other edible grains for producing biofuel could undermine the country’s food security. While it wants to support the growth of alternative energy sources, Beijing says food security should take precedence over the country’s "green agenda."

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"In China the first thing is to provide food for its 1.3 billion people, and after that, we will support biofuel production," said Wang Xiaobing, an official at the Agriculture Ministry’s crops cultivation department in the state-run newspaper People’s Daily this week.

China has been encouraging the production of biofuel such as ethanol and methane from renewable resources to reduce the country’s growing dependence on imported oil. Once an exporter, China now imports at least 43%t of its oil supply. Chinese economic planners have made the development of green energies, like ethanol fuel and biodiesel, a key priority in the country’s five-year economic plan. By 2020, they want green energies to account for 15% of all transportation fuels in the country.

Yet surging demand for biofuel is now partly blamed for recent price hikes in the food market and for shortages in grain stocks. Beijing has reportedly begun auctioning some of its wheat reserves to halt the rise in crops prices. Despite predictions that this year would see another bumper harvest, Chinese government officials feel compelled to restrict the use of maize for producing biofuel.

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"We have a principle with biofuel: it should neither impact the people’s grain consumption, nor should it compete with grain crops for cultivated land," said Yang Jian, director of the development planning department under the Agriculture Ministry. Government officials estimate that maize contributes around three-fourths of the raw material used for making ethanol in China. Output of ethanol is projected at 1.3 million tonnes this year. Experts however, say that output from private and public producers this year may reach five million tonnes.

Biofuel Industry In Full Boom
With biofuel demand booming, producers have been ramping up production and new players have been entering the market. They made only one million tonnes of ethanol in 2005, but by 2010 China’s ethanol-fuel production may reach as high as 10 million tonnes, local press reports say. As biofuel is produced from renewable biological resources, what government officials worry is that possible overcapacity may lead to a shortage of edible grains and feedstock supplies. This has already happened with cornstalk used in ethanol production. Cornstalk prices in China have jumped 500% to US $30 per tonne since 2005.

Industrial maize processing in China consumed 23 million tonnes of maize in 2005, an annual increase of 16.5% over 2001, while maize production increased at the slower rate of 5% during the same period, according to a circular released by the National Development and Reform Commission (NDRC), China’s top economic body.

While rivalry between food and fuel producers for grains is not limited to China, the problem is particularly acute in the country because of the its low per-capita arable land to feed its vast population, the IPS article states.

The grain crop is expected to hit a record 490 million tons this year — the third straight year of bumper harvests — but Chinese planners are worried that fast-shrinking farming land could affect grain supply in the near future. Arable land is said to have shrunk by 8 million hectares (Ha) between 1999 and 2005.

Experts warn that if ethanol production continues to be maize-based, China will be forced to import the crop by 2008. Relying on crop imports is a sensitive issue as the government policy supports food self-sufficiency for the sake of national security.

"The excessive growth of maize processing has resulted in scarce feed for livestock and affected the development of animal husbandry. Some main producing areas are even considering importing corn," said the NDRC circular. It demanded that local producers step up efforts to make ethanol from non-grain sources, such as potato and sweet sorghum.

Chinese producers, however, continue to make ethanol from maize because the mass planting of non-grain feedstock such as cassava and sorghum has yet to be implemented on a large scale due to the lack of suitable farming technologies.

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