1. Article written by: GREENEA Team
JULY 2015 | GREENEA
Does China have a chance on the world
biodiesel market?
As the problem of pollution in China keeps growing together with the number of cars on the streets, biodiesel seems like
a golden opportunity. The government, however, in spite of claiming its commitment to improving air quality in the
People’s Republic of China, is quite reluctant to undertake further action and effectively promote the use of biodiesel.
With such an attitude of the authorities does China have a chance in the world biofuels race?
While Europe increasingly turns its
back to gasoline, replacing it with
diesel, the consumption of gasoline in
China is booming. Out of all the new
cars sold in the country each year,
only 5 to 7% run on diesel. And the
cars in China sell like hotcakes: it is
predicted that the number of vehicles
will exceed 200 million in 2020 and
reach 360 million by 2030. Currently
there are already 150 million vehicles
on the roads.
China: ethanol vs. biodiesel
Due to the general preference for
gasoline over diesel, China is currently
an ethanol-dominated market. In
2014, 2.2 million MT of ethanol were
produced in the PRC which
constituted a 6% growth from the
year before. At the same time, the
production of biodiesel reached 1
million tons while the yearly growth
rate is estimated at only 5%.
The tax incentives, however, are equal
for both non-grain ethanol and
biodiesel made from waste: both are
eligible for full VAT tax exemption.
The only difference is that in 6
provinces and 30 cities in another 5
provinces there is a 10% compulsory
mandate for ethanol blending while
there is no mandate for biodiesel
blending neither on the national nor
on the provincial level.
The reason behind the
government’s decision to promote
the non-grain ethanol and waste-
based biodiesel is the fact that they
do not directly compete with food as
the country struggles with food
supplies. Even with 500 million
farmers, China has been unable to
meet the growing demand for grains,
soy beans and other commodities.
And the situation is about to get
worse with the constantly rising
consumer spending due to changing
eating habits and increasing food
waste. In this context, food security is
a critical issue for the country. As
China faces high future demand for
food and feed, its bioenergy program
must try to strike a balance between
food and fuel. The answer to this
dilemma is biofuels made from used
cooking oil.
There are 53 biodiesel plants in China
with total installed capacity of 3.36
million tons, yet, the number of
operating plants reaches 31 and their
output accounts for 1 million MT. On
average, only 29% of the actual
installed capacity is used which is
mainly attributed to insufficient
supply of raw materials.
Company
Production capacity
(kT)
CNOOC Biolux 250
Huan Yu 200
Rong Li(Hong Kong) New Energ
y
200
Tangshan Jinlihai Group 160
Shandong Biodiesel Group 100
Longyan Zhuoyue New Energy C
o.
100
JinGu 100
Rong Guang New Biological Ene
rgy Co.
100
8 biggest plants 1210
Total nationwide 3360
Table 1: 8 biggest biodiesel producers in China by
installed capacity
It is estimated that in China only
approximately 30% of the biodiesel is
used for transportation while 50% is
used in the industrial sector and the
remaining 20% goes to agricultural
machinery and fishing boats. The low
percentage of biodiesel going to the

2. Article written by: GREENEA Team
JULY 2015 | GREENEA
transportation sector is caused by the
fact that it is only sold at small private
gas stations in small cities and in the
countryside as big fuel distributors
refuse to offer biodiesel to their
clients.
Due to limited biodiesel production in
China, the volumes exported are very
low and account for 75,000 MT per
year. Reportedly, in 2013 all the
quantity was shipped to the
Netherlands and the feedstock used
was UCO. Import is annually at the
level of 140,000 MT and comes nearly
exclusively from Indonesia. The
import tax for Biodiesel from Asia
ranges from 0-6% depending on the
origin: 6% for product from Taiwan
but 0% for biodiesel coming from
Hong Kong, Malaysia, Indonesia or
East Asian countries. The imported
PME is used for discretionary
blending.
Waste-based biodiesel: a chance
for China?
It is estimated that each year 3 - 5
million tons of UCO (including gutter
oil) are produced in China and not
more than 1.5 million MT are
collected, yet, less than 1 million tons
are used for biodiesel production. The
rest is illegally resold to the food
industry. Unfortunately, this is a
common practice in China, hindering
the development of the biodiesel
sector and, even more importantly,
putting on risk the health of millions
of Chinese people. The main reason
behind such practices is money: it is
simply more profitable to resell oil to
the food sector than to biodiesel
producers.
In 2014, in a trial for what can be
described as “one of the largest
gutter oil schemes ever recorded,’
one man was given a suspended
death sentence while his seven
collaborators were sentenced to from
5 to 15 years in prison. They were
found guilty of collecting UCO from
trash cans, drains and sewers and
then reselling it as cooking oil. Over a
few years they have earned more than
8 million dollars endangering the
health and lives of unsuspecting
consumers.
The public in China believes, however,
that the punishment was not harsh
enough and thus will not discourage
others from undertaking similar
practices as the potential financial
gain is too high. So as long as there is
no substantial financial aid from the
government to incentivize the use of
gutter oil in the fuels sector instead of
reusing it in the food industry, the
development of the biodiesel in China
will be hardly possible.
What lies in store for biodiesel
in China?
A definite advantage of biodiesel over
ethanol is the availability of UCO as
feedstock. While non-grain feedstock
for ethanol production is very limited
(mainly manioc), the potential of UCO
(including gutter oil) supplies is high
at 3 - 5 million tons. Yet, it is gasoline
and not diesel that is still preferred in
China.
Additional incentives for the
production and use of biodiesel are
crucial as tax exemption is not
enough to push the development of
the sector significantly forward.
Without introducing other incentives
or a compulsory mandate, biodiesel
can only be attractive for
discretionary blending purposes when
its price is lower than that of gasoil.
Yet, in the current market situation
where the prices of oil are record low,
without any governmental measures,
biodiesel cannot be really competitive.
The development of biodiesel
production in China could contribute
to the improvement of air quality in
the country without putting food
supplies at stake. However, if the UCO
collected in China stays in the country
the volumes imported to Europe from
Asia will decrease significantly while
European producers strongly depend
on feedstock importation in their
production. As an alternative, China
could produce UCOME locally, at a
lower price than in the EU and export
it to the old continent. This, however,
would imply paying import tax of
6.5% instead of 2% for UCO.
Moreover, the sustainability criteria in
the EU are rather strict and, in order
to increase the import volumes of
UCO to Europe, Chinese companies
will need to get ISCC certified. This

3. Article written by: GREENEA Team
JULY 2015 | GREENEA
could have another benefit of
decreasing the UCO quantities on the
black market.
If the legislation changes and more
incentives are introduced, China has a
chance to become a significant player
on the waste-based biodiesel market
improving, at the same time, the
health and life quality of the people
living there.
For further information please contact:
contact@greenea.com
FIND US AS WELL ON: