China is planning to introduce ethanol into the nations gasoline supply by the year 2020. The details of the mandate have not yet been released. However, a document published by China’s National Energy Administration (NEA) has stated that the key issue in the transition will be pricing, as the cost of fuel ethanol is closely tied to gasoline in the country.
The ‘E10 mandate’ as it is preliminarily being called, is likely to mirror those of the United States and Brazil which requires a small amount of ethanol to be blended into fuel for its automobiles. E10, a mixture of 10% ethanol and 90% gasoline, accounts for more than 95% of the fuel consumed in the United States.
The ethanol market in China has been anticipating this news since early 2017. It comes as part of a dual pronged effort to reduce smog in China’s notoriously polluted urban centers and take advantage of huge stockpiles of corn reserves, corn being a common agent in ethanol production.
Michael Mao, an analyst with Sublime China Information, has stated that ethanol would be too expensive to survive the market without government support, adding, “This news has greatly boosted confidence inside the industry.” Indeed, companies that produce ethanol in China saw shares rise as much as 10% following the news on Wednesday.
The government is reportedly in the early stages of planning to build a large ethanol production facility in northeast China, where the majority of the nation’s corn is grown.
“Experts have proposed expanding production and consumption of ethanol to balance grain supply and demand and efficiently dispose of surplus grains,” said an unnamed official at the NEA.
China has been experimenting with ethanol-based fuels in five cities spread throughout its central and northeastern regions since 2001. As a result they have become the fourth largest ethanol producer in the world. Despite that the ethanol market has until now been hampered by a litany of strict government regulations.
“According to my sources, Beijing, Tianjin, and Hebei will start to implement the mandate by the end of the year, followed by Jiangsu, Zhejiang, and Shanghai” said a prominent Chinese trader.
After the rollout, demand in Beijing, Tianjin, and Hebei alone is expected to be between 2-3 million metric tons per year, almost as much as the current total fuel ethanol demand in the entire country.
Additionally, the report states that China is planning large-scale domestic production of cellulosic biofuels (fuels made from grasses, trees, and crop waste) by the year 2025.
Article written by HEI contributor Kevin Abbott.