Raw Material Shortage Fetters China's Ethanol Ambition

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As the Chinese government seeks to include even more cities in its ambitious push to embrace ethanol fuel, these projects now face a major setback due to rising grain shortages. Ethanol, blended with gasoline, produces an environmentally friendly vehicle fuel. It is produced from crops such as sugar cane, grain, and cassava, and its use can substantially cut oil demand and reduce greenhouse gas emissions.

China initiated its ethanol push in 2001, outlining trial production in the Tenth Five-Year Plan (2001-2005). Since 2002, the country has promoted ethanol blends on a pilot basis in five cities in the central and northeastern regions: Zhengzhou, Luoyang and Nanyang (in Henan province) and Harbin and Zhaodong (in Heilongjiang province). The trial was further extended to nine provinces in 2004, with gas stations in the pilot areas required to switch fully to the cleaner-burning mixture by the end of 2005.

These efforts have made China the third largest ethanol producer after Brazil and the United States, generating 3.7 billion liters in 2004. But the country's heavy reliance on grains—particularly corn and wheat—for ethanol production has severely affected the future of the fuel in China. According to a recent report by Xinhua News Agency, the country's ambitious ethanol plans have begun to jeopardize food security in this populous country of 1.3 billion.

Ironically, the need to use up stale grain and to add value to agriculture commodities was a major driver behind China's ethanol endeavor initially. Just five years ago, the country's wheat and corn surplus was growing steadily, with annual grain production reaching 500 million tons. In 2002, the grain stockpile in Henan province totaled 35 million tons, reflecting an annual wheat surplus of 4–5 million tons. In Jilin province, warehouses bulged with stocks after several years of good corn crops, leading prices to plunge to 25-year lows.

Today, the situation is different. After years of ethanol expansion, most stockpiled stale grain has been used up, reports Shenzhen Special Zone Daily. Chinese grain imports have been increasing steadily. In August, the Jilin Tianhe Ethanol Distillery, the world's largest, began purchasing new corn from granaries to meet its ethanol production needs. And Tianguan Distillery in Henan has reportedly set up a 32,000-acre cassava production base in Laos, reports Xinhua.

A search for alternatives does not turn up promising results. China's production of sugar cane, the ideal ethanol feedstock, is limited to 2-3 southwestern provinces, and there is little additional land suitable for its growth. Rising sugar consumption, prompted by China's rapidly growing food-processing industry, has also made sugar cane-based ethanol commercially unviable. Meanwhile, technologies utilizing cellulose materials such as straw and corn stalks, which may not raise concerns about food safety and land requirements, could take several years to mature. "Many seem to think that we'll see the first commercial production facilities for 'next generation biofuels'—including cellulosic ethanol and designer diesel fuels—in about five years time," notes Worldwatch Institute's biofuels project manager Suzanne Hunt.

If China continues to rely on corn and wheat as the primary ethanol feedstock, the country will be forced to slow down or even halt its ambitious ethanol projects. Any breakthrough in finding materials that do not exert a burden on China's already stressed land resources and food supply, meanwhile, would jolt these efforts into full speed. But this is unlikely to happen on a large scale anytime soon.