Advanced BioFuels USA

by Kong Lingyu (China Dialog/Transport Energy Strategies) Prices for China’s biodiesel exports have been rising significantly, from less than 7,000 yuan (US$1,050) a tonne in January last year to a record high of over 12,000 yuan (US$1,723) in July this year. The average price in the first seven months of this year also exceeded 11,000 yuan. Biodiesel stocks have also done well on China’s own markets.

The main reasons for this are the global trend towards low-carbon development and the Russo–Ukrainian war pushing oil prices higher. Yet biodiesel has long been linked with cutting carbon and with energy security. Malaysia started researching palm-based biodiesel in the 1980s to reduce reliance on imported crude oil. Today, the country mandates that fuel for its transport sector must have a 15% biodiesel component. This is set to increase to 20% at the end of the year. Indonesia, meanwhile, is already at 30%, far more than any other country.

Countries worldwide are taking different approaches to biodiesel, depending on their motivations and available resources. Brazil and the US produce it from soy because they grow so much. In the EU, the main feedstock is locally grown rapeseed. In order to meet targets on transport emissions, the bloc also imports palm oil, soybean oil and used cooking oil as feedstocks, as well as biodiesel that has already been made from those oils. The EU is currently the world’s biggest importer and user of biodiesel.

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In China, used cooking oil is often called “gutter oil”. From the late 1990s onwards, China saw a number of scandals where such oil was crudely recycled and returned to diners’ tables. In 2010, the State Council ordered better management of used cooking oil and for routes to commercial resource recovery to be explored. In 2017, the General Office of the State Council identified the management of used cooking oil as a key part of food safety work for the 13th Five Year Plan (FYP) period (2016–2020). Firms making use of the resource were to be encouraged to expand operations, with tax breaks where appropriate to support research into technology and roll-out of systems for utilisation.

In 2002, China’s first 200,000-tonne biodiesel plant was included in national innovation plans, marking the start of its biodiesel sector. But in the 20 years since, no domestic market for biodiesel has appeared. Efforts by some local governments and companies to break into the vehicle fuel market have largely failed, and most of the biodiesel produced in China is exported to the EU.

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Industrial policy documents have been full of positive words about biodiesel. The plan for bioenergy during the 13th FYP called for a system of biodiesel standards and speeding up use of the fuel in transportation. There was to be a 70% reduction in consumer taxes for biodiesel that met standards, as well as an instant rebate on value-added taxes. China has had standards for B5 and B100 fuel (diesel with 5% and with 100% biodiesel added) for over a decade. But there is still no large-scale use of biodiesel in China’s fuel sector.

Put simply, the high costs of transportation and processing mean that biodiesel made from used cooking oil costs more than standard diesel. If the government does not subsidise it, there is no incentive for fuel makers to buy it. That’s why apart from some limited applications as a fuel or feedstock in industry, most of China’s biodiesel is exported to the EU.

The exception is Shanghai. Since 2013, the city has been experimenting with using biodiesel in public buses and street-cleaning vehicles. By the end of 2020, B5 biodiesel was available in all of the city’s 243 filling stations.

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Also, cash from the city’s climate change budget was used to subsidise firms producing and selling B5 biodiesel. 

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Will China too come to encourage the domestic use of used cooking oil? Government documents have started to talk more positively and specifically about biodiesel since China announced its dual carbon targets, of peaking carbon emissions before 2030 and reaching net zero before 2060.

In February, for example, the National Development and Reform Commission (NDCR) and the National Energy Administration published policy guidelines on the green and low-carbon transition in the energy sector, offering “support for clean fuels such as bioethanol, biodiesel and biogas entering the oil and gas network.” In May, the NDRC and the Ministry of Housing and Urban–Rural Development published plans for urban waste sorting and processing, calling for expansion of the use of kitchen waste and where suitable using it for making biodiesel and other products. That same month, the NDRC published plans for the “bioeconomy” during the 14th Five Year Plan period (2021–2025), saying biodiesel trial projects would run where suitable, as well as pilots for using biofuel in aviation.

But the availability of feedstocks is hampering China’s biodiesel industry.

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Meanwhile, biodiesel insiders says biodiesel from used cooking oil could play a huge role during the transition to electric transport. If B5 biodiesel was adopted nationwide, rather than only in Shanghai, there would be demand for between 7 and 8 million tonnes of biodiesel (calculated according to 2021’s apparent consumption of diesel, which is domestic production + net imports, of 147 million tonnes). That is far more than the 1 million tonnes produced annually at the moment. READ MORE