October 21, 2003 -- CropChoice news-- Reuters, 10/17/03:
Jilin province, home to China's first car factory and
also its biggest corn producer, is putting corn and
cars together in a project to ease the country's exploding
pollution ahead of the 2008 Beijing Olympic Games.
Like many other agriculture giants such as Brazil,
the United States, and India, the northeast province
is using its huge farm surplus to make organic fuel
that cuts pollution, and reduces dependency on petroleum
imports at the same time.
Industry sources say, China, which is the world's fastest
growing car and energy market, could extend the use
of ethanol gasoline throughout the country by 2005 if
initial exploratory steps are successful.
An Olympics shrouded in smog is not a scene China wants
to show the world, but that is what it will look like,
unless the traffic pollution in major cities is brought
Turning grains into fuel also happens to allow the
government to continue to subsidize agriculture outside
its obligations under the World Trade Organization (WTO),
avoiding more social unrest from farmers who are now
exposed to global competition.
In Jilin, not far from the provincial capital Changchun,
one of the world's largest fuel ethanol plants is currently
gearing up for full operation.
From October 18, all car, truck and bus drivers in
the province must blend into their gasoline 10 percent
of the biofuel distilled from corn. A similar policy
nationwide would make a significant dent in regular
gasoline consumption, which totaled more than 37 million
tons last year.
Fuel ethanol cuts greenhouse gas emissions that are
held responsible for global warming. It can be produced
also from wheat, sugar, rapeseed, palm oil, cassava
or even recycled food oil, such as old frying oil collected
from fast food restaurants.
Jilin Fuel plant is one of four Chinese ethanol plants
under construction, including one in neighboring Heilongjiang,
one in the eastern province Anhui, and another in wheat-producing
"Such projects are viable only in grain-producing
areas," Liu Yi, technical department manager told
Reuters at the plant in the outskirts of Jilin city,
from where the hills of the province's vast corn fields
roll off far away and out of sight.
Jilin, which is three times the size of Austria, accounts
for more than 10 percent of China's annual corn output
of about 120 million tons, the second biggest after
the United States. It takes about three tons of corn
to produce one ton of ethanol.
Jilin Fuel will purchase corn from farmers and store
it in silos at the sprawling complex. The air here is
filled with a sweet smell, similar to a brewery, as
it conducts test runs.
The plant cost 1.94 billion yuan (about $235 million)
and is equipped with its own power generators as well
as water treatment facilities, still a rarity for China.
Along with Beijing, the local government has provided
favorable taxes and low-interest loans to the company.
It has also promised subsidies to make up for the difference
between gasoline and ethanol prices.
Liu calculated ethanol to cost about 4,000 yuan ($484)
per ton, compared with gasoline at 2,700 yuan ($327)
With car sales doubling this year to over two million,
the International Energy Agency forecast that China
would overtake Japan next year as the second largest
oil consumer after the United States.
Jilin Fuel Ethanol, a joint venture between the China
National Petroleum Corp (CNPC), China Resources Enterprises
Ltd and Jilin Grain Group (JGG), is to convert 900,000
tons of corn into 300,000 tons of fuel ethanol each
year. It plans to double its capacity to 600,000 tons
Ethanol equals happy farmers
China has recently been trying to pull back from grain
export markets because it cannot continue to pay out
the export subsidies it used to under WTO trade rules.
"To help the fuel ethanol company is to help improve
farmers income, restructure the old agriculture system
and help maintain social stability," Hong Hu, governor
of Jilin province, said. "It's a top government
Over the past decade, China accumulated massive grains
stocks as results of its policy of food security but
these are now costing a fortune in storage fees, and
are depressing prices of new crop, which hurts farmers.
Jilin alone is estimated to have over 20 million tons
of corn in stock.
"Maybe they are willing to say 'Okay this is in
the name of fuel security and environmental protection
... we'll do this'," said one source in Beijing,
who declined to be named. "And if the prices of
grains go too high, that's good for the farmers."