'Hundreds of millions' of farmers to benefit as China aims to triple ethanol output by 2010

China earlier announced an ambitious biofuels and bioenergy policy to be included in its forthcoming Five Year Plans. The rising superpower now says it will more than treble its fuel ethanol output by 2010 to reduce the country's dependence on imported oil and to "boost the income of hundreds of millions of farmers", a government official said on Thursday. This is yet another indication that biofuels production in the (rapidly) developing world is becoming the main job and income generator for the rural masses in the South (earlier Brazil said its biofuel targets will create 3.6 million jobs, Indonesia projects 2.5 million jobs, and Nigeria thinks green energy might generate 3 million jobs - all before 2010).

China has the advantage of having a tradition of strong top-down planning resulting in the classic Five Year Plans first introduced by Chairman Mao. These dirigist plans can move the entire country more or less into a single given direction, en masse. In the case of implementing biofuels targets or fighting climate change, this tradition certainly offers advantages over free market mechanisms. Moreover, for a country like China, where rural-urban migration and the growing inequality between urban and rural citizens is becoming a major problem, resulting in some 87,000 (violent) social conflicts per year [*.pdf], reviving the agricultural sector is absolutely crucial. China itself has always recognized this: the future of the country's social fabric depends on helping the hundreds of millions of farmers that do not share in the economic benefits of the country's rapid growth. The biofuels strategy is a way to contribute to this goal.

Liu Qun from the National Development and Reform Commission (NDRC), the country's top planning body preparing the Eleventh Five Year Plan of the People's Republic, told a biofuel conference that annual fuel ethanol output should top 3 million tonnes by 2010, up from 1 million tonnes last year. 3 million tonnes per year of ethanol roughly equals an output of 40,000 barrels of oil equivalent per day. Some industry officials have said China was already producing about 5 million tonnes of ethanol, including fuel ethanol, this year, as record-high crude oil prices and a US deficit in the biofuel have triggered an investment boom in the sector. Unofficially, China may thus be producing 8 million tonnes of ethanol by 2010 (roughly 120,000 barrels of oil equivalent).

Officially, fuel ethanol should make up more than 5 percent of the country's gasoline consumption, compared with less then 2 percent now, the division chief from NDRC said at the conference organised by BBI International from the United States. Liu said the government would continue providing financial support for the industry, such as tax breaks or subsidies.

China now has four government-sponsored fuel ethanol plants with total annual capacity of 1.02 million tonnes. Beijing provides subsidies of about 1,300 yuan (€115 / US$163) per tonne of ethanol to the four plants this year. They are also exempted from a 5.0 percent consumption tax and 17 percent value-added tax.

The plants use corn or wheat as feedstocks for fuel ethanol, blended into gasoline in nine provinces, such as Jilin, Henan, Anhui and Heilongjiang. Liu said Beijing would expand the ethanol-blending areas to the central and western parts of the country.

Liu said in future Beijing would encourage the use of non-food raw materials, such as cassava, sweet sorghum and agriculture residues, as feedstocks:
ethanol :: biodiesel :: biofuels :: sustainability :: cassava :: sorghum :: social justice :: jobs :: rural development :: China ::

"The government will continue to support the industry. But it should not take away the land from grains production," he said.

"We will only support converting part of our grains into ethanol as long as it does not threaten the grain supply."

Liu said the southern region of Guangxi, the country's largest cassava grower, would build fuel ethanol facilities for 1.0 million tonnes in the coming five years.

NDRC will permit state-owned grain trader COFCO to build a 200,000 tonnes per year (tpy) cassava ethanol plant in the region, Liu said.

COFCO's Vice President Yu Xubo told the conference it was seeking opportunities to set up non-grain ethanol plants in five provinces, including the one in Guangxi.

"The biofuel industry will boost the sales of farm products and increase incomes of farmers, which make up 80 percent of the country's population," Yu said.

Tianguan Group, one of the four government-sponsored fuel ethanol producers, said it would start building one of its five new ethanol plants this year. The 100,000-tpy plant in central Hubei province will use early rice as feedstock.