Biofuel Governance in China Legislation as the Starting Point CAI Shouqiu; WANG Huanhuan RIEL, Wuhan University

CONTENTS Biofuel governance in China Existing biofuel law and policy Overview of Biofuel in China Biofuel legislation in the future

OVERVIEW OF BIOFUEL IN CHINA Energy security Rural development Environmental protection Biofuel Why should China develop biofuel?

OVERVIEW OF BIOFUEL IN CHINA Semi-industrialized production Experimental production for transportation Ethanol for industrial use Ethanol for military use 2001 onward 1990s 1980s 1930s

OVERVIEW OF BIOFUEL IN CHINA A historical look at China’s fuel ethanol production

OVERVIEW OF BIOFUEL IN CHINA Current fuel ethanol production, 2008 China Resources Alcohol Co./ Heilongjiang/corn and rice/ 180,000 per year Jilin Fuel Ethanol Co./ Jilin/corn / 470,000 per year Guangxi COFCO Bioenergy Co./ Guangxi/ Cassava / 120,000 per year Tian Guan Fuel- Ethanol Co./ Henan/Wheat/ 410,000 per year BBCA Biochemical Co./ Anhui/ corn/ 400,000 per year

OVERVIEW OF BIOFUEL IN CHINA Fuel ethanol distribution five cities of Henan and Heilongjiang province Whole Heilongjiang, Jilin, Liaoning, Henan and Anhui provinces and 27 cities of Hebei, Shandong, Jiangsu and Hubei Guangxi province joined in

OVERVIEW OF BIOFUEL IN CHINA  Biodiesel production In earlier stage than fuel ethanol Small scale biodiesel plants only operate a few months out of a year waste oil is main feedstock Estimated output in 250,000 this year  Biodiesel distribution No national blend initiation Chongqing has pioneered to blend biodiesel in municipal transportation this year

OVERVIEW OF BIOFUEL IN CHINA Three demonstration biodiesel plants under construction: - Nanchong Refinery Biochemistry Plant of CNPC/ 60,000 tons - Guizhou Branch Company of CPC/ 50,000 tons - Hainan Branch Company of CNOOC / 60,000 tons A stride into industrialized biodiesel production?

OVERVIEW OF BIOFUEL IN CHINA  2010  2 million tons of non-grain based fuel ethanol  0.2 million tons of biodiesel  2020  10 million tons of fuel ethanol  10 million tons of diesel  2010  Will not be achieved  Will be achieved  2020  ?

BIOFUEL GOVERNANCE IN CHINA The term ‘biofuel governance’ used here refers to the rules, behavior and dynamic process that affect the way how actors including government, industries, market and social society participate and influence the production, trade, distribution, as well as use of biofuel at all levels. others market Government industry ACTORS

BIOFUEL GOVERNANCE IN CHINA Government (central)  energy administration department National Development and Reform Commission (NDRC) Nation Energy Administration (NEA)  relevant administration department Ministry of Agriculture National Forestry Bureau Ministry of Environmental Protection Ministry of Land and Resources Ministry of Water Resources Ministry of Finance State Administration of Taxation

BIOFUEL GOVERNANCE IN CHINA  NDRC and NEA  MOA  NFB  MOEP  MOLR, MOWR  MOF, NBOT  draft or promulgate most of the policies about biofuel industry and become more deliberate in biofuel development  Over-enthusiasm to the development of biofuel  Similar to MOA  Remains slient  No action on land use and water resource management yet  Relatively functional role

BIOFUEL GOVERNANCE IN CHINA Market  Strict market access  Government-driven price  Defective upstream market

BIOFUEL GOVERNANCE IN CHINA Industry  Fuel ethanol State-owed large-scale companies  Biodiesel Private producer more difficult situation

BIOFUEL GOVERNANCE IN CHINA Others  Insufficient investments and financial assistance from international organization, foreign and other private sectors  Limited participation from NGOs, scholars and citizens

BIOFUEL GOVERNANCE IN CHINA DEFECTS 1.Unclear directions for biofuel development conversions from grain based biofuel to non-grain based biofuel first-generation to second-generation biofuel

BIOFUEL GOVERNANCE IN CHINA 2.Negative impacts to the environment are ignored biodiversity loss deforestation water shortage soil degradation increased fertilizer and pesticide usage air and water pollutions

BIOFUEL GOVERNANCE IN CHINA 3.Unilateral recognition of biofuel’s impact on agriculture Conflicts with increase of non-agricultural sectors as well as the declining resources in terms of agricultural labor, arable land and water resources in China now Land use change production structure to be converted Additional environmental degradation

BIOFUEL GOVERNANCE IN CHINA 4.Limited participation in biofuel governance For a long time, the enthusiasm of participant in biofuel government is oppressed because of lacked platform.

BIOFUEL GOVERNANCE IN CHINA How do the defects come out? The root of the defects underlined above is the absence of complete biofuel legal system. Biofuel have a large range of implications to agriculture, food safety, environmental protection, energy security to name a few. A large number of participants and public or private interests are involved. The backwards can not be overcome without diverse regulatory tools and strong legal liability.

EXISTING BIOFUEL LAW & POLICY Law  Renewable Energy Law of the P. R. China, 2005 Article 2: “bioenergy except utilization of straw, firewood, excrement etc. through direct burning in low-efficiency stove is regulated by the law. ” Article 16: “the state encourages clean and efficient exploitation of biofuel and the development of energy plants. Also, the State encourages production and utilization of biological liquid fuel. Petroleum sales enterprises shall, in compliance with the regulations of energy administration department under the State Council or people’s governments at the provincial level, include biological liquid fuel that conforms to State standards in their fuel-selling system. ” Article 31: liability provision

EXISTING BIOFUEL LAW & POLICY Regulation and other legal rules  Directory List for Renewable Energy Industry, 2005;  Notice concerning Taxation Policy to Fuel Ethanol Licensed Producer, 2005;  Rules for Financial Assistance on Bioenergy and Biochemistry Development, 2006;  Interim Measure for Administrating Renewable Energy Development Fund, 2006;  Interim Measure for Subsidy to Biomass Base of Bioenergy and Biochemistry, 2007;  Interim Measure for Administrating Encouragement Fund for Non-grain Bioenergy and Biofuel, 2007;  Policies for Products Generated from Comprehensive Utilization of Resources, 2008.

EXISTING BIOFUEL LAW & POLICY Policy support for biofuel in China  Subsidy to biofuel producer  Tax reduction  Specific area payment for crops used for energy plants  13 percent export VAT rebate to ethanol trade

EXISTING BIOFUEL LAW & POLICY Plan  11th Five-year Plan for National Economic and Social Development of the P. R. China, 2006;  the 11th Five-year Plan for Energy Development, 2007;  Long and Mid-term Planning for Renewable Energy, 2007;  11th Five-year Plan for Renewable Energy, 2008;  The 10th Five-year Plan Specifically for Fuel Ethanol and Ethanol Blended Gasoline for Automobiles, 2004;  11th Five-year Plan Specifically for Fuel Ethanol and Ethanol Blended Gasoline for Automobiles as well as Development Policy for Fuel Ethanol Industry, 2006  11th Plan for Bio-industry;  Plan for Agricultural Bioenergy;  Whitepaper on China’s Energy Situation and Policy;  China’s National Program on Climate Change

EXISTING BIOFUEL LAW & POLICY Deficiencies of existing biofuel law and policy  Guideline for biofuel development hasn’t been clarified  There is a lack of effective legal rules to regulate biofuel governance.  Liability provision is insufficient to ensure full implementation of law and policies.

HOW TO IMPROVE?  Legal hierarchy of new biofuel legislation  comprehensive legislation specifically on biofuel is better to be enacted by NDRC and relevant administration departments in the form of joint departmental rules and becomes the third layer of national energy legal system which is under construction.

HOW TO IMPROVE?  Guideline  energy security  sustainable development  Basic principles  principle of deliberation  principle of diversification  Enhanced policy supports  Life-cycle assessment tools

HOW TO IMPROVE?  Institutional structure  A cross-sector approach is needed in biofuel governance. A Coordination Commission or Board on Biofuel as a special branch of National Energy Commission could be established in which all concerned ministries and outside organizations, industry groups and NGOs are represented.

HOW TO IMPROVE?  Legal regime related to biofuel governance  Biofuel planning  Biofuel standards  Environmental impact assessment  Land investigation and land use change prohibition  regulated purchase, blend and retail

Thanks for your attention!