Researchers look at key drivers of China's bioenergy strategy

Researchers from the East-West Center, a leading research organization promoting relations and understanding among the peoples and nations of Asia, the Pacific, and the United States, analysed China's motivations for investing massively in bioenergy. Kang Wu, a senior fellow at the East-West Center, and Caleb O’Kray, an EWC degree fellow and Ph.D. candidate in agricultural and resource economics at the University of Hawaii-Manoa, looked at how Chinese officials are trying to increase the efficiency and economy of renewable energy production, especially liquid biofuels and biomass.

China has huge potential to develop renewable energy such as small hydropower, commercial biomass, biofuels, wind power, solar energy, and other sources, but the researchers say Beijing is facing big challenges. Their findings are the result of a year-long study of the situation and extensive interviews with Chinese policy makers.

China's bioenergy plan is part of the latest Five Year programme and is aimed at replacing 12 million tons of oil by liquid biofuels by 2020. When it comes to solid biofuels, no targets have been set, but co-firing with coal is being studied intensively and supported by the EU. According to first estimates, biomass from agricultural residues can replace 100 million tons of coal per annum.

According to Wu and O'Kray, the Chinese are pursuing biofuels for three main reasons:

• They want to alleviate poverty in rural areas; bioenergy production can be a driver to close the growing income gap between the urban rich and the rural poor that has led to serious social tensions
  
• They want to decrease energy dependence on imported fossil fuels and thus improve energy security
• They want to reduce carbon emissions; because China is mainly a coal-fired country, it is rapidly becoming the world's largest emissions contributor; bioenergy offers part of a cleaner solution

To a certain extent, Beijing has been successful. O’Kray in particular points out that “China has already solidified itself as a major player in biofuels, trailing only Brazil and the United States in net biofuel production and consumption.”

Oil price uncertainty
But, according to the researchers, despite the promising future China still faces tremendous challenges, the biggest among them being “uncertainty of oil prices, feedstock supply, and government policies.” Liquid biofuels like ethanol and biodiesel are married to the price of oil:
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Wu and O’Kray point out that while oil prices are high, “history suggests that they may drop at times, which (would) render some biofuel investment projects uneconomical,” slowing down development. Feedstock supply will be greatly effected by land limitations and food security issues, the researchers note. “With their unique history, Chinese desire secure food supplies,” and despite the many variables involved, “arable land availability and regional water supply issues (may) pressure officials into thinking twice before unilaterally expanding feedstock and biofuel production.”

“The biofuels industry,” O’Kray and Wu also point out, “is currently married to government subsidies and official support.” And despite a tilt toward the biofuel sector at the expense of other renewable energy sources, “government policies have delivered contradicting messages leaving many investors and developers at odds.”

Bioenergy to correct failed rural policies
The two point out that China is serious in increasing its renewable energy sources, especially biofuels, but they say other factors beyond energy may also be at play. A push toward biofuels could “help the State recover from failed agricultural planning policies by drawing down the large supplies of decaying feedstock and crops in the countryside".
And, they add, “A reduction in energy dependence on fossil fuels could also improve China’s energy supply structure, and biofuel development could help Beijing earn a needed improvement in its reputation in the international community by showing a willingness to reduce global carbon emissions.”

Whatever the reasoning behind the move into renewable energy, Wu and O’Kray foresee a bright future for China. But they caution that “while there are many budding industries and sources of biomass energy in China, in the long-term economic feasibility will be the determining factor,” and that “market and scientific uncertainty (still) enshrouds China’s biofuels future."