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40 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
Development of Biofuels in China:
Progress, Government Policies
and Future Prospects
ZHANG HONGZHOU
Abstract
China is the largest energy consumer in the world, but has limited energy
resources. Energy security is thus a primary concern for China. Over reliance
on the consumption of fossil energy has resulted in severe environmental pol-
lution, which puts pressure on the government to adjust its energy mix. To
strengthen its energy supply and prevent further environmental degradation,
China has been committed to developing renewable energies, such as biofuels.
This article provides a comprehensive assessment of the development of bio-
fuels, rural household biogas, and bioethanol, in particular. It also examines
related government policies and the future prospects of the biofuel sector. The
analysis shows that remarkable achievements have been made in the devel-
opment of biogas in rural areas and in bioethanol at the industrial level. This
progress is largely credited to government's strong support for the biofuel
sectors. Nonetheless, although ongoing energy insecurity and environmental
pollution continues to motivate the central government to support the develop-
ment of biofuels, widening domestic food supply and demand gap, changes in
rural life and agricultural industrialization constrain the further expansion of
rural household biogas and cereal-based bioethanol. This article suggests that
while China urgently needs to find alternative feedstock for the existing rural
household biogas digesters and bioethanol plants, centralized biogas and non-
cereal-based bioethanol projects should be prioritized for future development.
Keywords: Biofuels, Energy Security, Food Security, Environmental Pollution, Three
Rural Issues
Introduction
China's phenomenal economic development over the past three decades
has been fuelled by intensive utilization of fossil energy resources such
as coal, oil and gas. In 2012, China consumed 3.62 billion tons of stand-
ard coal equivalents, making it the largest energy user in the world.
Although coal has been the major source of energy to fuel China's growth
_________________________________________________________________________41
_____________________________________________Development of Biofuels in China
at roughly 70 percent of national energy consumption between 1978 and
2012, oil and gas accounted for nearly 24 percent of energy consump-
tion during the same period (China Bureau of Statistics 2013: 81). While
China's coal demand can be largely met by domestic coal production,
the domestic production of oil and gas falls well short of rising demand.
In 2012, China's oil and gas self-sufficiency rates were only 44 percent
and 76.5 percent, respectively. In that year, China imported 271.02 mil-
lion metric tons of crude oil, or about 5.43 million barrels per day,1 and
natural gas imports amounted to 42.8 billion cubic metres.2 News from
the US energy Information Administration on 24 March 2014 suggested
that China had already overtaken the United States as the world's largest
net importer of petroleum and liquid fuels.3
Overreliance on the consumption of fossil fuels has resulted in severe
environmental pollution. Air pollution in China has reached intolerable
levels and thus become a huge public concern; it poses a direct threat
to the country's economic development and social stability. Confronted
with the double challenge of increasing energy shortages and environ-
mental pollution, China has made huge efforts to promote the devel-
opment of alternative and cleaner energies, such as solar, hydropower,
wind power and biofuels.
A domestic biofuel industry is considered an attractive option for
China and the country has invested billions of dollars to promote the de-
velopment of biofuels. Biofuels include liquid and gaseous fuels that are
derived from biomass (organic materials). In China, the two main types
of biofuel produced are biogas and bioethanol.4 China is now the world's
leading producer of biogas. By the end of 2012, biogas was used in nearly
42.4 million households, including 40.8 million rural households with
domestic biogas digesters (Ministry of Agriculture 2013: 450-461). Biogas
households accounted for nearly a quarter of all the rural households
in China. In the same year, China produced 15.7 billion cubic meters of
biogas, equivalent to replacing over 24 million tons of standard coal, or
12.6 percent of the country's total natural gas consumption. In terms of
bioethanol, China's annual production in 2012 was 1.66 million tons, mak-
ing it the third largest national producer after the United States and Brazil
(Renewable Energy Policy Network for the 21st Century 2013: 7-31).
While the development in both biogas and bioethanol sectors has been
quite impressive over the past decade, both are facing significant chal-
lenges. Domestic biogas development in China is now at a crossroads,
and government investment is likely to decline. With the rapid rise of the
commercial animal husbandry sector, fewer animals are kept as livestock
42 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
in rural households, which results in less animal manure5 to feed into the
biogas digesters. Massive outflow of the rural labour force, particularly
of the young and educated rural population, results in less human waste,
kitchen residue and available labour to operate and maintain the biogas
plant. These combined factors have led to a large number of biogas di-
gesters either functioning below their full potential or falling entirely out
of use. Similarly, the development of bioethanol is constrained by the
country's overwhelming concern about food security. After supplies of
stale grain quickly ran out, most of China's bioethanol plants had to rely
on fresh grains, mostly maize. Yet, with the outbreak of the global food
crisis in 2007/2008, the Chinese government issued strict policies to halt
the development of the deep maize processing industry,6 including cereal-
based biofuel production. The targets for annual bioethanol production
were scaled down. With growing pressure on China to produce enough
food to feed its population of nearly 1.4 billion, food security will remain
a primary concern for the government. This focus does not bode well for
the future prospects of the development of bioethanol in China.
This article aims to provide an up-to-date assessment of the develop-
ment of biogas and bioethanol in China, review the government's support-
ing policies, examine the emerging opportunities and challenges facing
these two sectors, and consider how these challenges can be addressed in
the future. Towards this end, the rest of the article is organized as follows:
Section 2 outlines the current status of the development of biogas and
bioethanol in China. Section 3 discusses government policies, which are
vital to the development of biofuels in China. Section 4 presents the future
prospects of biofuels in China through an examination of the implications
of several key trends in the sector. The last section concludes the paper
with some suggestions on the future development of biofuels in China.
Development of Biofuels in China
Driven by growing concerns over energy security, environmental pol-
lution, and rural population issues, China has made substantial efforts
to develop its biofuels sectors: primarily biogas in rural areas and
bioethanol at the industrial level.
Development and Current Status of Biogas
China has been pioneering biogas production since the 1930s, when a
few companies tried to commercialize biogas as an alternative fuel for
lighting (Xia Zhuzhang 2013). With the establishment of the People's
_________________________________________________________________________43
_____________________________________________Development of Biofuels in China
Republic, China launched its first official campaign to promote biogas
technology in the late 1950s, though this project failed for various rea-
sons, including a lack of construction materials such as cement. In the
1970s, a massive campaign of biogas construction was launched. From
1970 to 1980, the total number of domestic biogas digesters jumped from
6000 to over 7 million. However, these biogas digesters were not of the
best quality and had a short functional lifespan. As result, large numbers
of biogas digesters constructed during this period dropped quickly out
of service. This was followed by a slow but steady development period
from the mid-1980s to the late 1990s.
In 2000, following the establishment of the Ministry of Agriculture's
'Rural Ecological Enrichment Project', biogas construction projects were
implemented all over the country. Later, in 2003, the central govern-
ment decided to provide financial support to farmers to boost biogas.
From 2003 onwards, rural biogas entered a period of rapid expansion.
However, as shown in Figure 1, the growth rate of new biogas digesters
in rural areas has slowed since 2009.
Despite this recent slow-down, the development and spread of biogas
is remarkable. By the end of 2012, the country's total biogas users totalled
nearly 42.4 million households, providing biogas for over 150 million
rural residents. Among the biogas users, there were 40.8 million rural
households with domestic biogas digesters (Ministry of Agriculture
2013: 450). Biogas households accounted for nearly a quarter of the
rural households in China, and were used in up to NOT of 40 percent
FIGURE 1. Development of Household Biogas in China
Source: Ministry of Agriculture 2013: 450-461.
44 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
of households which are suitable for biogas digester technology.7 In the
same year, China produced 15.7 billion m3 of biogas, equivalent to replac-
ing over 24 million tons of standard coal, or 12.6 percent of the country's
total natural gas consumption (Ministry of Agriculture 2013: 164).
Apart from rural household biogas digesters, the development of
small- to large-scale centralized biogas plants has also grown over the
past decades. By the end of 2012, there were 91,952 biogas plants with
annual gas production of nearly 2 billion m3, supplying biogas to over
1.5 million households. Among these biogas plants, nearly three quarters
were small sized gas plants with daily production ranging between 5
and 150 m3 ( Ministry of Agriculture 2013: 398-404).
To provide support to the progress of rural biogas, the biogas service
sector has been developed across the nation. By the end of 2012, there
were over 90,000 service stations nationwide, and 800 at the county level,
serving over 30 million biogas users. By 2011, there were 12,000 service
companies, employing 500,000 people, with annual value added of 26
billion yuan. Strong investment from both the central and local govern-
ments, as well as financial assistance from international organisations
such as the Asian Development Bank, have played a critical role in the
dissemination of biogas technology in China's rural areas, and a variety
of biogas digester models have been developed in different regions of
the country.
The development of biogas has brought major benefits to China. It
allows rural households to convert animal manure, agricultural residue,
as well as human and other organic waste into clean cooking fuel and
organic fertiliser, providing an effective and non-polluting alternative to
fossil fuels, firewood and chemical fertilisers. According to official sta-
tistics, China's Biogas digesters and plants processes waste and manure
up to 1 billion tons annually, reducing fertilizer and pesticide usage by
more than 20 percent, and providing additional income of 48 billion yuan
to farmers. According to government estimates, it also reduces carbon
dioxide emissions by 50 million tons and produces 400 million tons of
organic fertilizers annually (Ministry of Agriculture 2013: 161).
Development and Current Status of Bioethanol
China's pilot programme for bioethanol started in 2001 and production
began in 2002. As seen in Table 1, China's annual production of bioethanol
expanded rapidly from 30,000 tons in 2002 to nearly 1.9 million in 2010,
when production levels peaked. However, after this peak, production of
bioethanol dipped slightly to 1.66 million tons in 2012.
_________________________________________________________________________45
_____________________________________________Development of Biofuels in China
TABLE 1. Production of Bioethanol in China (thousand tons)
Year Production Corn Consumption
2002 30 100
2003 70 200
2004 680 690
2005 1020 771
2006 1320 1933
2007 1450 3100
2008 1460 3403
2009 1700 4620
2010 1870 4937
2011 1770 4673
2012 1660 4382
Source: Cheng Xiaodun et al. 2013.8
At the time of writing, China has five ethanol plants: four plants use
grain (corn and wheat) and one uses tubers (cassava). For these cereal-
based bioethanol plants, corn accounts for 82 percent of feedstock, and
wheat 18 percent (Scott and Junyang 2012). All four bioethanol plants
which were authorized by the government to produce fuel ethanol
from grains are located in the major grain producing provinces: Jilin
Fuel Ethanol Co. Ltd and Heilongjiang Huarun Ethanol Co. Ltd in the
Northeast region, Anhui Fengyuan Biochemical Co. Ltd in the south, and
Henan Tianguan Group in the central region. In 2007, the government
set up bioethanol plants using cassava as the main feedstock in Guangxi
province. The bioethanol produced from these plants are consumed
locally and in nearby cities. For instance, Jilin Fuel Ethanol Co. Ltd
has an annual production capacity of 300,000 tons: 100,000 tons of the
bioethanol produced by Jilin Fuel Ethanol Co. Ltd would be consumed
in the province and the other 200,000 tons would be distributed in Liaon-
ing. Of the 300,000 tons of fuel ethanol produced by Henan Tianguan
Group, 130,000 tons would be consumed locally and the rest would be
distributed to 13 cities in Hubei and Hebei (Dong Fengxia 2007).
While the development of cereal-based bioethanol production is being
halted due to food security concerns, China's long term policy is to con-
tinue to promote the development of non-cereal-based bioethanol pro-
duction. Apart from the already operational cassava ethanol plant which
is located in Guangxi province,it was reported that the government
46 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
approved the construction of two plants in Zhejiang and Guangdong
in 2012. However, these two plants mainly rely on imported cassava for
their initial feedstock supplies due to limited domestic production (Scott
and Junyang 2013: 2). Sweet sorghum is another non-grain feedstock
that can be used for bioethanol production. China's first commercial
bioethanol plants relying on sweet sorghum as feedstock are currently
being constructed in Inner Mongolia. The production capacity of these
plants is expected to reach 100,000 tons by 2015 (Ibid.: 4).
Government Policies
The development of biogas and bioethanol is largely driven by govern-
ment policies which are determined by the three key factors, as shown
in Figure 2.
FIGURE 2. Key Factors Influencing China's Policies on Biofuel
Development
The first factor is energy security. Mounting concern over en-
ergy security has been the major impetus for China's investment in
biofuels. China considers the development of biofuels as a potential
solution to the country's energy shortage. Growing air pollution and
greenhouse gas emissions attributed to China's overreliance on fossil
energy resources further motivates China to develop cleaner energies,
_________________________________________________________________________47
_____________________________________________Development of Biofuels in China
including biofuels. In contrast to the development of other renewable
energies—such as wind, solar and hydro power—there are other major
considerations underpinning the development of biofuels, most notably
rural issues concerning agriculture, the rural environment and energy
demand, and farmers' livelihoods. On the one hand, China views the
development of biogas and biofuel as a way to support farm incomes,
facilitate adjustments to agricultural production structures and to
protect the rural environment. On the other hand, availability of feed-
stock (animal manure, agricultural residue and other organic waste
for biogas production, and cereals and other feed crops for bioethanol
production) and operational feasibility (particularly in the case of rural
biogas digesters)are also major considerations informing the country's
biofuel policies.
Government Policies Related to the Development of Biogas
Strong central government support is the key to the rapid expansion
of the biogas sector. As presented in Table 2, prior to 2003, while China
had launched several rounds of national campaigns to develop biogas
in rural areas, these efforts achieved very limited success due to lack
of financial support from government and technical drawbacks. In the
early 2000s, in recognition of biogas' potential for improving rural liv-
ing conditions and farmers' livelihoods, and facilitating agricultural
structural adjustment, the central government made the development
of biogas in rural areas one of the key national projects. In 2003, a 1
billion yuan state bond was issued to support the development of
biogas across the country. The projects covered 540 counties across 24
provinces, benefiting over 1 million rural households. Since then, with
strong central government support, the biogas sector has entered a
new phase of rapid and sustainable development. To increase energy
supply, adjust the country's energy mix and protect the environment,
China's National People's Congress passed the 'Renewable Energy Law'
in February 2005 (it came into force in 2006). The law required central
and local governments to provide financial support for the development
of biogas in rural areas. In addition, the law allowed biomass power
projects, including biogas, access to the grid so that electricity can be
sold by the generating company to the grid with a feed-in tariff. This
increased the importance of biogas utilization for electricity generation,
increasing interest in biogas power projects.
48 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
TABLE 2. Major Government Support for China's Biogas Sector
Policy documents Main points of the policies
From 1950s
to late-
1990s
Several major campaigns initiated
by Chinese government
Due to various constrains, these
efforts only achieved only limited
success
2000 Ministry of Agriculture introduced
the 'Biological Enrichment of the
Countryside Project'
Development of biogas identified as
key component of the project
2003 China issued the 'Rural Household
Biogas State Bond'
Significant increase in government
investment in the development of
rural biogas
2004 The 'Biological Enrichment of
the Countryside Project', which
centred on rural biogas was listed
as one of the major duties of the
Ministry of Agriculture
Plan to build biogas digesters for
1million rural households covering
5000 villages nationwide
2005 'Renewable Energy Law' issued Promote the development and
utilization of renewable energies,
including biogas
2006 Ministry of Agriculture issued the
2006 'Rural Energy Comprehen-
sives Construction Project Fund
Notice'
Provide further financial support to
the development of biogas in rural
areas
2007 Ministry of Agriculture issued
'National Rural Biogas Projects
Development Plan 2006-2010'
By 2010, rural household users
reach 40 million, and medium-
and large-scale biogas plants will
reach 4700
2007 'National Plan of Building Rural
Biogas Service System' issued in
2007
Provide financial support to
development biogas service system
2007 'Development Plan of China's Agri-
cultural Bioenergy Industry' issued
Development of biogas is priori-
tized
2008-2012 Number 1 Document of the State
Council
For five consecutive years, Number
1 document put out specific
requirements for the development
of rural energy, biogas in particular
2009 'National Rural Biogas Service
System Construction Plan' (Trial)
Provide financial support to build
up rural biogas service system
2010 'Renewable Energy Development
12th Five Year Plan'
Rural biogas users to reach 50
million in 2015
2011 State Council issued the 12th Five
Year plan energy conservancy and
on emission reduction
Develop rural biogas and medium
and big biogas plants
2012 Opinions on further enhancing
the construction of biogas in rural
areas
Scientific planning for the devel-
opment of biogas, widen the raw
materials used, improve quality and
enhance service system
2012 China Rural Economy
Development 12th Five Year plan
Rural household biogas users will
constitute up to 50% of the total
suitable rural households
Source: Author's compilation, based on various government documents on policies, regulations
and laws.
_________________________________________________________________________49
_____________________________________________Development of Biofuels in China
In 2006, against a background of rising rural unrest, China unveiled
the plan to build a 'new socialist countryside'. The leadership has re-
garded biogas as a means to provide alternative markets for produce
from China's impoverished rural areas. The Eleventh Five-Year Plan
(2006-2010) and the policy of 'Building a New Socialist Countryside'
aim to modernize rural China while mitigating the negative impact of
intensified agriculture on the environment. Renewable energy, biogas
in particular, has the potential to support this goal. The Chinese govern-
ment also promotes biogas systems as part of campaigns and policies
like 'Three Rural Issues' (2005), 'Circular Economy Policy' (2005) and
'Ecological Garden Projects' (2000). Furthermore, with growing pres-
sure to ensure environmental protection, biogas projects—particularly
the development of medium- to large-sized biogas plants—became
an important alternative means for China to deal with animal manure
and organic sewage (Wang Fei et al. 2012). In 2007, the Ministry of
Agriculture issued the 'National Rural Biogas Projects Development
Plan 2006-2010', further boosting support for the development of me-
dium- to large-scale biogas projects. Also, during the global financial
crisis in 2008, China included rural biogas in the national package plan
which aimed to expand rural consumption and revive the national
economy.
Between 2003 and 2012, Chinese central government allocated over
31.5 billion yuan to promoting the development of rural biogas. Spurred
on by this strong commitment, local governments invested nearly 14
billion yuan, plus 46.4 billion yuan investment by the farmers. In 2011,
to balance the rising costs of building, central government subsidies to
biogas businesses increased to 1300, 1600 and 2000 yuan for the Eastern,
Central and Western regions, respectively.
However, the sector quickly encountered sustainability problems,
mainly because of the rapid pace of change in the agricultural sector,
rural livelihood issues and failings in the underdeveloped biogas serv-
ice system. To address these problems, the government published the
'National Rural Biogas Service System Construction Plan' in 2007, and it
began to focus more on the development of medium-size as well as large
biogas projects. This emphasis was highlighted in subsequent govern-
ment policies, such as the '12th Five Year Plan for Energy Conservancy
and Emission Reduction' in 2011 and the 'Opinions on further enhancing
the construction of biogas in rural areas' issued in 2012, which again
emphasised the need to broaden the source of feedstock and develop
medium- to large-scale biogas projects.
50 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
Despite the problems encountered, China is still determined to tap
the full potential of biogas in rural areas. According to the 'Renewable
Energy Development 12th Five Year Plan' and 'China Rural Economy
Development 12th Five Year Plan' both published in 2012, the country
will continue to expand biogas usage in rural areas. By 2015, the country
aims to have increased the number of rural biogas household digesters
to 50 million, 50 percent of the total suitable rural households.
Government Policies Related to the Development of
Bioethanol
China initiated its bioethanol programme in 2001, when the country had
an excess of stale grains in its national reserve. As with the development
of biogas, the Chinese government viewed the biofuels industry as a
means of addressing the Three Rural Issues by providing alternative
markets for grain and improving incomes and employment opportuni-
ties in China's impoverished rural areas. Since then, as shown in Table
3, series of government policies have been introduced to encourage the
development of bioethanol. In 2002, Chinese government announced the
'Pilot Testing Program of Bioethanol Gasoline for Automobiles' in two
major grain producing provinces, Henan and Heilongjiang. Shortly af-
terwards, the test programme was expanded to provide a direct subsidy
to bioethanol production. In the meantime, four bioethanol plants using
stale maize and wheat were approved and established in Heilongjiang,
Jilin, Anhui and Henan provinces.
TABLE 3. Major Government Support for China's Bioethanol Sector
Year Policy documents Main points of the policies
Pre-
2000
No specific government policy on
bioethanol development
China has supported liquid
biofuel development through
investment in R&D and biofuel
technologies
2001 'Special Development Plan for
Denatured Fuel Ethanol; Bioetha-
nol Gasoline for Automobiles' in
the 10th Five-Year Plan
To experiment with bioethanol
production using stale grain
stocks using supportive measures
2002 'Pilot Testing Program of Bioetha-
nol Gasoline for Automobiles'
National standards for denatured
bioethanol and E109 were formu-
lated; five cities in Henan and
Heilongjiang selected to use E10
2004 'Expanded Pilot Testing Program
of Bioethanol Gasoline for Auto-
mobiles'
Five provinces and 27 cities were
selected to participate in the sec-
ond phase of expanded testing
_________________________________________________________________________51
_____________________________________________Development of Biofuels in China
2004 'Guidance of Ministry of Finance
on Covering the Loss of Bioetha-
nol Plants from Bioethanol Pro-
ductions'
To cover the loss of plants from
bioethanol production, a direct
subsidy for bioethanol produc-
tion was set up for 2004–2008
2005 'Renewable Energy Law' of China Promote the development and
utilization of renewable energies,
including liquid biofuels
2005 'Supportive Policies of the Min-
istry of Finance on Bioethanol
Production'
A set of supportive policies for
bioethanol production and exten-
sion was released
2006 'Announcement regarding
Strengthening Management of
Bioethanol Projects and Promot-
ing Healthy Development of
Ethanol Industry'
Restrict market access of bioetha-
nol production; encourage the
development of non-cereal-based
bioethanol
2006 'Policy Provision on Financial
Support to Biofuel and Biochemi-
cal Industries'
Financial supporting policies on
biofuel production were adjusted
2006 Guidance on the Implementation
of Financial Support to Non-ce-
real-based Biofuel Development'
Central government subsidizes
the construction of non-cereal-
based biofuel plants through low
interest low and direct subsidy
2007 'Medium and Long-term De-
velopment Plan for Renewable
Energy'
Set the targets for biofuel produc-
tion in 2010 and 2020
2007 'Development Plan of China's Ag-
ricultural Bioenergy Industry'
Major feedstocks that may be
used for liquid biofuel develop-
ment listed
2007 'Temporary policy Provision on
Financial Subsidies to Production
Bases of Feedstocks for Biofuel
and Biochemical Industry'
Bioenergy trees and non-cereal
feedstocks planted on marginal
lands will be subsidized by 3000
yuan/ha, and 2700 yuan/ha,
respectively
2007 'Planning for China's Bio-forestry
Development'
A target for energy tree planta-
tion by 2020 was set
2007 'Renewable Energy Development
11th Five Year Plan'
'Biofuel must not compete with
grain over land, it must not com-
pete with food that consumers de-
mand, it must not compete with
feed for livestock and it must not
inflict harm on the environment'
2007-
2010
China's Development and Reform
Commission issues guidance
on the maize deep processing
industry10
Halt maize-based biofuel produc-
tion
52 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
As the production costs of bioethanol is still very high, the government
provides large subsidies to encourage the development of bioethanol
production. In 2009, China's subsidy for cereal-based bioethanol pro-
duction was USD 241 per ton (Scott and Junyang 2012: 3). In addition,
ethanol plants are exempt from the 5 percent consumption tax and are
able to get refunds of the value-added tax.11 In the early years, the four
plants received a stale-grain subsidy for utilizing stale grains in dena-
tured fuel ethanol production. However, due to concerns about food
security, China has significantly reduced its subsidies for cereal-based
bioethanol production. In 2012, the country's average subsidy for cereal-
based production was reduced to USD 79 per ton (Scott and Junyang
2013: 3); in 2015 the government is also stopping the value added tax
rebate and imposing a 5 percent consumption tax.12 Indeed, in 2007, it
was announced that the government would not approve the construc-
tion of new cereal-based bioethanol plants.13 In the subsequent years,
while government policy has continued to the importance of develop-
ing biofuels, the focus has been shifted to non-cereal-based production.
In the 2012 'Renewable Energy Development 12th Five Year Plan', the
government set a modest goal of an annual production of 4 million
tons by 2020.
Future Prospects
Although the 'Renewable Energy Development 12th Five Year Plan'
has set quite ambitious goals for the development of both biogas and
bioethanol from 2011 to 2015, the long-term prospects of biofuels, and
the feasibility of these goals beyond 2015, remains in question. The data
on the development of biogas and bioethanol up until 2012-2015seems
2009 'Several Policy Measures to
Accelerate the Development of
Bioenergy'
Increase financial support and
explore new channels for finances
to develop bioenergy
2011 'Development Plan and Cultiva-
tion Guidance on Energy Forest'
Energy crop or forestry growing
should make use of saline land,
and waste land and hill
2012 'Bioenergy Technology Develop-
ment 12th Five Year Major Project
Planning'
Continue to provide financial and
policy support, attract private
participation and investment
2012 'Renewable Energy Development
12th Five Year Plan'
Annual production of bioethanol
to reach 3.4-4 million tons
Source: Author's compilation based on various government documents on policies, regulations
and laws; and Qiu et al. 2009.
_________________________________________________________________________53
_____________________________________________Development of Biofuels in China
to suggest a very slow start. Given the high production costs, tight
government controls, and marginal role of the market, the pace of com-
mercialization of the biogas and bioethanol sectors in has been quite
slow.14 Both the historical record and academic field surveys indicate
that the government's policies (including policies directly related to or
indirectly affecting biofuels) have been the dominant force shaping the
development of biofuels.15 It is therefore assumed that the future trajec-
tory of the development of biofuels will continue to be predominately
influenced by government policies, which in turn will be determined by
the three key factors: energy security, environmental pollution and the
'Three Rural Issues'.
Rising Energy Dependency and Environmental Pollution
Driven by steady economic growth, accelerated urbanization and the
dramatic expansion of the transportation sector, China's energy demand,
particularly demand for oil and gas, is rising rapidly. Yet, with limited
oil and gas resources, China has to increasingly rely on the international
market for oil and gas; China is emerging as the world's biggest oil and
gas importer. China's net imports of petroleum and other liquid fuels
(oil) began to exceed those of the US on a monthly basis in September
2013, making it the largest net importer of crude oil and other liquid
fuels in the world. Given that the domestic oil production capability of
the US is much bigger and faster growing than that of China, China will
remain as the largest oil importer in the future years.16
The situation is similar for natural gas. China's natural gas imports are
also expected to rise substantially over time and some studies indicate
that China will become a major importer of natural gas by 2030 (Pipeline
& Gas Journal 2012). Furthermore, the International Energy Agency
reported that global gas demand will expand by an annual average of
2.7 percent, reaching 3.9 trillion cubic metres in 2017, compared with
3.3 trillion cubic metres in 2011. China will be the biggest contributor
to that increase as it becomes one of the leading natural gas importers.
China's demand for natural gas will grow at an average of 13 percent
annually as it becomes the fastest growing market, with consumption
doubling from 130 billion cubic metres in 2011 to 273 billion cubic
metres in 2017 (Ibid.).
In the meantime, overreliance on fossil energy resources, particularly
coal, which represented over 70 percent of the country's energy consump-
tion over the past three decades, has resulted in extreme air pollution.
Air pollution has become so bad that it is posing a direct threat to the
54 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
country's economic and social stability. In 2013, the PM2.5 fine particu-
lates in many parts of China reached levels 70 times those considered
safe in the West.17 Furthermore, as China's emerges as the biggest emitter
of greenhouse gas, there are huge international pressures on the country
to use less polluting forms of energy. Combining these factors together,
China considers development of renewable energy, such as solar, hydro-
power, wind and biogas, as a key part of its energy development strategy.
The 'Renewable Energy Development 12th Five Year Plan' indicates that
China aims to increase the share of renewable energy in the country's
total energy consumption to be above 11.4 percent by 2015.
Despite the rapid expansion of biogas and bioethanol over the past
decade, the China's biogas potential is far from fully utilized. It is es-
timated that the quantity of livestock manure (the main feedstock for
biogas) produced could reach 4 billion tons by 2020. If the full collectable
amount could be used to generate biogas, the energy produced would
be equivalent to 160 million tons of standard coal(Yu Cheng et al. 2010).
Similarly, over 680 million tons of agricultural residue was produced
in 2010, of which around 290 million tons was usable as an energy re-
source for producing biogas and bioethanol. This is equivalent to over
140 million tons of standard coal. After 2030, it is forecast that 400–500
million tons of agricultural residue can be used to produce bioenergy,
equivalent to 200–300 million tons of standard coal .(Yu Cheng et al.
2010). In addition, the potential for producing biofuel using the country's
vast forestry resources are yet to be exploited.
Unlike China's policies relating to the other renewable energy sectors,
such as solar, wind and hydro power, the policy on biofuels is shaped
to address the Three Rural Issues. As discussed in the previous section,
the strong support from central government for the development of both
biogas and bioethanol has been motivated by the desire to create alterna-
tive sources of income for rural residents, improve the rural environment
and facilitate agricultural restructuring. For instance, the establishment
of the bioethanol industry was initially a response to excess grain reserve
stocks which depressed the grain sector and damaged farmers' incomes
(Dong Fengxia 2007: 4). The primary objective behind the development of
rural biogas now seems to have shifted from addressing the rural energy
shortage to protecting the rural environment (Xia Zuzhang 2013: 9).
At the practical level, the government's biofuel policy will need to
take into consideration the availability of feedstock, including animal
and human manure, agricultural residue and other organic waste, and
the maintenance and operational feasibility of the biogas digesters: all
_________________________________________________________________________55
_____________________________________________Development of Biofuels in China
considerations related to the Three Rural Issues. Therefore, looking
ahead, while concerns over energy security, environmental pollution
(particularly rural environmental degradation) and income disparity
continue to inform biofuel policies, the emerging issues of changes to
rural life, agricultural industrialization (for biogas) and food insecurity
(particularly for bioethanol) pose challenges for the future development
of biogas and bioethanol.
Changing Rural Life
China has undergone rapid urbanization over the past three decades and
this has had a huge impact on the development of rural areas. As shown
in Figure 3, China's rural population peaked in 1995, when it reached 860
million. Since then, the rural population has begun to decline and it had
FIGURE 3. Chinese Population by Urban/Rural Residence
(Number, 10,000)
Source: China's Statistical Yearbook 2013.
decreased to 642 million in 2012. The rapid outflow of rural residents
has serious implications for the development of rural household biogas.
As the construction, operation and maintenance of biogas digesters is
labour intensive, the outflow of the rural labour force—mostly young
and educated rural workers—inevitably hinders the expansion of biogas
in rural areas and results in operational and maintenance difficulties,
which in turn contribute to low utilization rates, abandonment of biogas
digesters and a low acceptance rate among rural residents towards the
biogas technology. In 2013, an official survey revealed that average age
of the farmers in Jiangsu Province is 58.6, and that younger people in
56 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
rural areas are shunning agricultural life.18 Moreover, human waste and
leftover food are important feedstock for biogas production and rapid
outflow of rural residents thus also means less available feedstock for
biogas production.
Since China's new leadership views urbanization as key to its efforts to
launch a new round of reform and considers urbanization to be the main
driver of China's economic growth in the future, the pace of urbaniza-
tion will undoubtedly accelerate in the coming years.19 The government
forecasts that China's urbanization rate will reach 60 percent in 2020.20
This acceleration in changes to rural life will inevitably create further
challenges for the development of the biogas sector.
Agricultural Industrialization
Production of biogas in rural areas is determined by the availability of
feedstock, particularly animal manure. Traditionally, large-scale back-
yard cultivation of livestock, mostly hogs, produced plentiful quanti-
ties of animal manure, which was the ideal feedstock for rural biogas
digesters. However, the structure of hog farms in China has changed
significantly in recent years. Backyard hog farming, which used to domi-
nate the market, has witnessed a sharp decline. At the time of writing,
less than 37 percent of hogs come from backyard farms, compared to
about 74 percent in 2001, as seen in Figure 4.
The rapid change in China's farming structure began in 2007, when
backyard farmers were hit harder than larger-sized farms by outbreaks
of disease caused by poor sanitation and inadequate farm management.
Backyard farmers are also especially vulnerable to the uncertainty of
input costs and market volatility. In addition, with urbanization and
migration of rural labour to cities, the opportunity cost of rural labour
increased. These factors make backyard farming less competitive when
compared to larger-sized farms. As pig manure is the main feedstock for
biogas production, the rapid structural change of China's hog industry
has huge implications for the development of the biogas sector. On
the one hand, rapid commercialization of hog production means that
expansion of medium- to large-size biogas plants becomes increasingly
feasible and attractive. On the other hand, the decline of backyard hog
production leads directly to an increase in the number of rural household
biogas digesters being underutilized or even abandoned. According to
official statistics, per household biogas annual production has decreased
from 397 cubic metres in 2007 to 377 cubic metres in 2012. Between 2007
and 2012, while the number of rural biogas users had increased by 14.6
_________________________________________________________________________57
_____________________________________________Development of Biofuels in China
FIGURE 4. China's Hog Farming Structure 2001-2015 Forecast
Source: Ministry of Agriculture and Rabobank Estimate 2011.
million, over 3.3 million biogas digesters had been discarded during the
same period (Ministry of Agriculture 2013: 226-451). Academic surveys
at the local level suggest that the underutilization and abandonment
rate have been much higher than the official numbers given (Xue Xiaofei
2013: 116-117; Zhang Ming and Lai Ming 2007: 2108-2110).
Going forward, it is expected that backyard farming will continue to
decline as it becomes less competitive. It is forecasted that by 2015 the
share of backyard hog farming in the country's total hog production will
shrink to just 27 percent. This means that even less animal manure will
be available for biogas production at the rural household level.
China's crop production sector is also undergoing major structural
change. As discussed in section 4.2, there has been a sustained and
massive migration of the young and middle-aged rural labour force to
cities in the past decade. As a result, rural areas have seen their farming
workforce grow older and less educated. More women are now doing
agricultural work. Thus, to eliminate the shortcomings of traditional
small-scale farming and urbanization, China has introduced policies
to promote the development of family farms21 to facilitate special-
ized, intensive and large-scale agricultural operations. By the end of
2013, the lease titles of 340 million mu (nearly 23 million hectares) of
58 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
land, which represents 26 percent of the country's total arable land,
were transferred either to their peers or to agribusiness firms. There
were over 2.8 million rural households with a farm size bigger than
50 mu (3.3 hectares) and the total number of family farms reached
870,000.22
With the decline of backyard hog farming, in many regions agri-
cultural residue has become a major feedstock for biogas production.
However, the ongoing trend of land concentration and the development
of large-scale family farms results in a growing number of rural house-
holds becoming disconnected from grain production. This means that
agricultural residue can no longer be taken for granted as feedstock for
rural biogas digesters.
Mounting Food Security Concerns
Maintaining food security has always been a major concern of the
Chinese government. For decades, influenced by the painful history of
periodic famine and out of the distrust of the international market dur-
ing the Cold War era, grain self-sufficiency has been the foundation of
China's food security. Ensuring sufficient domestic supply of grain has
been the overarching objective of China's agricultural sector.
As discussed in section 3.2, the development of bioethanol produc-
tion has been largely shaped by food security situations. The bioetha-
nol programme started when there was an excess of stale grain in the
national reserve. This excess led to huge maintenance costs and grain
loss, while simultaneously depressing the national grain market and
farmers' enthusiasm for grain production. By 2006, when national
grain production could not keep up with domestic demand and the
international food security outlook worsened, the Chinese government
quickly imposed strict restrictions on the further expansion of cereal-
based bioethanol production. In 2007, it issued explicit guidelines on
the future development of bioethanol, stating that bioethanol produc-
tion should neither directly or indirectly undermine the country's food
security. Since then, China has concentrated on the development of non-
cereal-based bioethanol production, using feedstock such as cassava,
sweet potatoes and sweet sorghum. However, using this non-cereal
feedstock could also undermine the country's food security. Cassava
and sweet potatoes, though not staples, are an important element of
the Chinese diet, particularly poorer people. Use of sweet sorghum also
poses problems because although the government has stressed that it
shown be grown on marginal land, the expansion in its production
_________________________________________________________________________59
_____________________________________________Development of Biofuels in China
will divert water and fertilizers from food crops and thus affect food
security (Yang Hailong et al. 2012).
The development of rural biogas is also indirectly affected by the
government's food security strategy. Recognizing the limitations of
small household grain farming and backyard hog farming, agricultural
industrialization is viewed as the key to solving China's food problems.
The government has therefore been very supportive of scaling up the
sizes of both grain and hog farms, which dramatically changes the
structure of feedstock for biogas production.
In the long term, China's food demand and supply gap is set to widen
further, driven by population growth, urbanization and economic de-
velopment. Fan Shenggen, the director general of the International Food
Policy Research Institute, forecasts that by 2020 China would need to
import 100 million tons of grain each year.23 Xu Xiaoqing, the head of
the rural department at the State Council's Development and Research
Centre, a government think tank, projected that China could import
20 million-30 million tons of corn per year to cover supply shortages.24
According to a joint Agricultural Outlook forecast by the UN agencies
OECD and FAO (2013), China's imports of coarse grains, used mostly
for fattening herds, are expected to double by 2022. Imports of soybeans
will grow 40 percent, while meat imports are set to soar, with beef im-
ports nearly doubling. The widening food gap means that concern over
food security will create even bigger challenges for the development
of bioethanol and biogas, as the government may toughen measures
regulating the deep grain processing sector and accelerate the process
of agricultural industrialization.
Given the factors listed above and although energy security and en-
vironmental concerns will continue to be a strong driver for the future
development of renewable energies, including biofuels, the ongoing
trend of changing rural life, agricultural industrialization and domes-
tic food insecurity unmistakably cast serious shadows over the future
prospects of biogas and bioethanol. The Chinese government is therefore
refocusing its efforts to develop the country's biofuel sectors.
Government investment for developing rural household biogas is
likely to decline and the country now focuses more on the development
of medium- to large-scale biogas plants while seeking a technological
breakthrough in utilizing agricultural residues to generate biogas. Simi-
larly, efforts to develop bioethanol are focusing on non-cereal-based
production. However, the future prospects for developing centralized
biogas plants and non-cereal-based bioethanol remains unclear, given
60 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
the current technological constraints. Although the potential for rely-
ing more on agricultural residue as feedstock is huge, the biological
pre-treatment of agricultural residue is still at the experimental stage,
presenting difficulties for large-scale application (Yu Chen et al. 2010).
Similarly for bioethanol, although non-cereal-based bioethanol pro-
duction is being prioritized, these crops have relatively low yields
and small-scale production, and are still unable to support large-scale
industrial ethanol production (Scott and Junyang 2013).
Conclusion
Driven by concerns over its energy security, environmental pollution
and the Three Rural Issues, China has invested substantially in its ef-
forts to development its biofuels sectors, primarily biogas in rural areas
and bioethanol at the industrial level. With strong government support,
the biogas and bioethanol sectors have made remarkable achievements
since the early 2000s, though both face an uncertain future. On the bright
side, rising concern over energy security will continue to be the major
impetus for China's investment in biofuels as a potential solution to the
country's energy shortage and increasing air pollution and greenhouse
gas emissions attributed to overreliance on fossil energy resources. How-
ever, the dynamics noted in the rubric of the Three Rural Issues pose
major challenges to the future development of biogas and bioethanol.
Although the development of biogas and biofuel is viewed as a way to
support farm incomes, facilitate the structural adjustment of agricul-
tural production and protect the rural environment, growing concerns
over food security will directly and indirect restrain the development
of biogas and bioethanol in China.
The expansion of rural household biogas and cereal-based bioethanol
is not sustainable. Instead, efforts need to be made to find alternative
feedstock, such as agricultural residue, for the existing rural household
biogas digesters and bioethanol plants. In terms of future development,
centralized biogas plants need to be prioritized and bioethanol plants
which utilize agricultural residues and forests resources should be pro-
moted. Technological breakthroughs and the commercialization of both
biogas and bioethanol sectors hold the key to the future development
of biofuels in China.
_________________________________________________________________________61
_____________________________________________Development of Biofuels in China
Zhang Hongzhou is Associate Research Fellow with the China programme
at S. Rajaratnam School of International Studies, Nanyang Technological
University, Singapore. He researches China's food, energy and water policies
and foreign relations. Email: ishzzhang@ntu.edu.sg
NOTES
1 Wall Street Journal 2013, 'China Crude-Oil Imports Rose 6.8% in 2012' available at
http://online.wsj.com/article/SB10001424127887324081704578232650955659718.
html. Accessed 13 April 2014.
2 People Daily, 'China's reliance on oil-gas imports growing: report' available at http://
english.peopledaily.com.cn/90778/8115126.html. Accessed 13 April 2014.
3 EIA news at http://www.eia.gov/todayinenergy/detail.cfm?id=15531. Accessed
13 April 2014.
4 Although China has made efforts to develop biodiesel, these are limited in scale.
China only produced around 0.2 billion litres of biodiesel in 2012.
5 Although commercial livestock farms also produce manure, not much of the manure
is being utilized for several reasons. For instance, as commercial livestock farms are
normally located quite far from the villages, it is costly and physically demanding
for farmers to collect the manure produced and it is not usually free.
6 The deep maize processing sector uses maize to produce sugar, alcohol, glutamic
acid, lysine, citric acid and other products.
7 Temperature is one of the most important factors affecting biogas production. Al-
though simple biogas digesters are buried in the ground, low temperatures restrict
biogas production. Thus, rural households in China's subtropical areas such as the
northeastern region are suitable for the adoption of biogas digester technologies.
8 There are data discrepancies between different sources on the annual bioethanol
production figures.
9 10% percent ethanol blended into fuel.
10 China Economic Times 2014. 'China's Bioethanol development in a conundrum: policy
shift and companies flees' at http://www.cet.com.cn/nypd/xny/1092980.shtml.
Accessed 14 April 2014.
11 China has a consumption tax on gasoline, naphtha, solvent oil and lubricating oil,
and value-added tax is charged to enterprises or individuals who sell merchandise,
provide processing, repair or assembling services, or import goods within China.
See http://www.china.org.cn/english/LivinginChina/202770.htm.
12 People.com. 2011. 'COFCO bioenergy Ltd received VAT refund 38.78 million RMB' at
http://finance.people.com.cn/GB/70846/16299074.html. Accessed 13 April 2014.
13 People.com. 2007. 'Future Development of Bioethanol will be noncereal based and
corn based bioethanol plants will be halted' and http://finance.people.com.cn/
GB/5844810.html. Accessed 14 April 2014.
14 In the case of biogas, there are a large number of private companies and research
institutes engaged in producing biogas digesters, research and technology, and
engineering projects. In large centralized biogas projects, they do play an important
role, but in the development of the vast rural household based biogas projects, their
role is marginal at best.
15 For instance, according to the large-scale survey done by Wei Qu et al (2013), the
government's biogas policy, especially the promotion policy, has had a significant
62 ____________________The Copenhagen Journal of Asian Studies 33(1)•2015
Zhang Hongzhou ___________________________________________________________
impact on the likelihood of farmers to build a biogas digester.
16 Refer to International Business Times at http://www.ibtimes.com/china-worlds-larg-
est-net-importer-crude-oil-eia-1563247. Accessed on 21 April 2014.
17 Financial Times (3 March 2014) 'Time China got serious on pollution' at http://www.
ft.com/cms/s/0/b2becca0-a2df-11e3-ba21-00144feab7de.html#axzz3JxuV8b4i. Ac-
cessed 17 March 2014.
18 See Chinanews at http://www.chinanews.com/sh/2013/03-07/4624407.shtml. Ac-
cessed 17 April 2014.
19 See Xinhuanet at http://news.xinhuanet.com/fortune/2013-05/25/c_124763505.
htm. Accessed 17 April 2014.
20 See People.com at http://politics.people.com.cn/GB/70731/17968454.html. Ac-
cessed 18 April 2014.
21 According to the Ministry of Agriculture, a 'family farm' would engage most members
of a single family in agricultural production, allowing them to make farming their
main source of income. 'Family' or 'specialized' farms centralize distinct plots of land
to form a large-scale operation. Family farming is similar to a fixed profession, such
as that seen in Western countries, according to Guan Ruijie, a supervisor from the
Ministry. See http://www.newschinamag.com/magazine/china-promotes-fam-
ily-farms. Accessed 15 April 2014.
22 See people.com.cn at http://politics.people.com.cn/n/2014/0224/c1001-24440981.
html. Accessed 12 April 2014.
23 See South China Morning Post at http://www.scmp.com/business/economy/arti-
cle/1133255/china-must-invest-abroad-food-security-forum-told. Accessed 15 April
2014; Loro Horta 'The rice paddy beyond the sea.' PacNet. Number 64. 5 August
2014.
24 See Terazono, E. Financial Times (11 September 2013) 'China sees rising appetite for
corn imports. http://www.ft.com/cms/s/0/4d738f8e-19f5-11e3-93e8-00144feab7de.
html#axzz3XqHPBLIG. Accessed 15 April 2014.
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