Behind the Chinese Rulings on Biodfuel Production

In our news section we noted the recent and well publicized rulings on the part of the Chinese government regulating the use of arable land for fuel crop production. Here I offer an analysis of the significance of these edicts.

China’s phenomenal industrial growth, exceeding 7% per annum for the past several years, has become much more dependent upon the growth of home markets and on an increase in the standard of living of the populace. Nowhere is that increase more evident than in the explosion of automobile ownership. Within a decade China is likely to produce more vehicles than either the United States or Japan, with much future growth potential remaining after the nation has achieved the number one position in automobile manufacturing.

In order to support such growth, China is going to have secure copious quantities of low cost liquid fuels, or, alternately, make the difficult decision to transition over to electric or hybrid electric vehicles. China has little petroleum of its own save for some disputed submarine deposits in the South China Sea which are also claimed by Vietnam and may not be readily recoverable in any case, and some questionable finds in Tibet. Therefore, China must look elsewhere to meet its transportation needs. Accordingly, the Chinese government has been supporting many pilot projects involving various types of alternative fuels, both bio-fuels and coal derived synfuels.

Much more money, in excess of ten billion dollars in fact, has already been allocated to coal-based synfuel projects, and simultaneously China has taken a leadership in the development of coal gasification technology. China is also supporting much research in the controversial area of methane hydrate recovery which could conceivably provide a very large source of methane for gas-to-liquids production.

The current allocation of resources suggests that China has already decided to meet its mid and longer term fuel needs by producing synfuels, quite possibly within facilities that also produce syngas for operating electrical generators. This would make good economic sense and would build on China’s already considerable expertise in coal gasification (China already has many times more gasifiers in operation than all of the rest of the world put together—several thousand by current estimates).

So what is one to make of China’s still extensive bio-fuel activities? China’s recent history in regard to energy has been one of hedging its bets, but, at the same time limiting investment in projects with dubious prospects of panning out. China, for instance, does not conduct a lot of research in nuclear fusion, a technology which could solve many of the world’s long term energy problems, but has proven distinctly disappointing in terms of usable results. I would also note that Chinese bio-fuel projects have not involved experimental feedstocks nor experimental production processes in spite of the fact that current ethanol and biodiesel manufacturing techniques using food crops cannot scale to meet that nation’s transportation needs. In other words, China is not doing a lot of basic R&D in biofuels. This tells me that China sees a limited role for bio-fuel and a leading role for synfuel.

Not that China lacks any stake in bio-fuels. China is already the third largest producer of ethanol and is poised to expand production. But conceivably much of that ethanol could be exported as could much of the planned biodiesel production. A growing global market exists for ethanol as a fuel extender and oxygenate, and demand for biodiesel in Europe will soon exceed local capacity and will draw increasingly upon Southeast Asian sources. China with its extensive subtropical growing regions and low cost labor is in an enviable position to serve both markets.