Report Highlights:

China is a major producer of biofuels and production continues to increase. However, it is unclear how the government will meet its ambitious targets for continued expansion given its decision to limit grain-based biofuel production and the limited availability of alternative feedstocks. 2016 fuel ethanol production is forecast at 3.15 billion liters (2.49 million metric tons), up 2.6 percent from 2015 in response to increased fuel consumption in provinces with blend mandates. Biodiesel production is forecast to stay flat in 2016 at 1.14 billion liters (1 million metric tons). 2016 ethanol imports are forecast to reach 90 million liters on higher consumption and competitive prices. Imports jumped to 56.9 million liters in the first half of 2015, compared to less than 14 million liters during the same period the year before. The prospect for further import growth remains uncertain given tight government controls over the sale of ethanol for fuel use.

Executive Summary:

Bioenergy is part of China's long run strategic energy plan. The 12th Five Year plan, which ends this year, set a goal of producing four million tons of fuel ethanol and one million tons of biodiesel by 2015. The government reached its goal for biodiesel, but fuel ethanol production in 2015 is only expected to reach 2.43 million tons. China's 2016 fuel ethanol production is forecast at 3.15 billion liters (2.49 million metric tons), up 2.6 percent from 2015 in response to increased fuel consumption in provinces with blend mandates, but still far short of the 2015 target. The government began to withdraw policy support for grain-based ethanol in 2010 following increasing domestic grain prices and imports triggered alarm within government. All subsidies for grain-based ethanol have now been removed and production volumes are tightly controlled.

2016 ethanol imports are forecast to reach 90 million liters on higher consumption and competitive prices. 2015 ethanol imports are forecast at 70 million liters, up from only 14 million liters in 2014, based on import trends. China imported 56.9 million liters of ethanol in the first six months of 2015 alone. Imports of denatured ethanol are only allowed to be used in the chemical processing sector. The government tightly controls fuel distribution and only designated ethanol producers and distributors to sell fuel ethanol for use in transportation.

Biodiesel production is forecast to stay flat in 2015 and 2016 at 1.14 billion liters (1 million metric tons). Biodiesel production almost doubled between 2010 and 2015 due in part to a government crackdown on the illegal use of recycled cooking oil for human consumption. However, a lack of sales channels, feedstock, and government support has restricted growth. Many biodiesel producers are closing plants or exiting production completely. The state-owned oil company CNOOC decided to halt its biodiesel pilot project in Hainan province and the Gushan Group also retreated from the biodiesel market in China after experiencing several years of heavy financial losses.

While the 13th Five Year Plan (2016-2020) is still in the early planning stage, the biofuel industry and some officials are already discussing new objectives for increasing biomass and biofuel production, including how to promote cellulosic and algae based biofuels. The government has set an ambitious target of producing 300 million tons of cellulosic and non-grain based ethanol combined by 2020, although industry experts doubt that this can be achieved due to challenges in collecting and transporting feedstock from China's small-scale farms and the lack of commercially viable cellulosic ethanol production to date.

Policy and Programs

China implemented a fuel ethanol programs starting in the early 2000's in response to abundant grain supplies. The government switched course in 2010 when increasing domestic grain prices triggered concerns over possible shortages and caused China to become a net corn importer. Since then government policy has dictated that biofuel development not compete with crops intended for human or animal consumption. Government subsidy policies have also switched to only supporting non-grain based biofuels.

At the same time, China has built up enormous of reserves of corn, wheat, and rice that combined exceeds 200 million tons. Industry estimates that 15 to 20 million tons of these reserves are sufficiently moldy so that they are no longer suitable for human consumption or feed use. The biofuel industry and some provincial officials are lobbying the government to subsidize the use of moldy grain for biofuel production. However, China Ministry of Finance is reportedly reluctant to increase expenditures on subsides.

Restrictions on grain-based ethanol and challenges in producing commercially viable cellulosic biofuels have resulted in a policy of supporting so called “Generation 1.5" biofuels, which are produced by non-grain based feedstocks such sweet sorghum and cassava. Some of these crops can be grown on marginal land and require fewer inputs, but supply is insufficient to support large-scale industrial ethanol production. The government introduced a 750 RMB per ton subsidy for Generation 1.5 ethanol production in 2013. Cellulosic ethanol production receives a slightly higher subsidy of 800 RMB per ton. Direct subsidies for conventional grain-based biofuels have now been completely phased out.

Bioenergy is part of China's long run strategic energy plan. The 12th Five Year plan, which ends this year, set a goal of producing four million tons of fuel ethanol and one million tons of biodiesel by 2015. China met the government goal for biodiesel, but fuel ethanol production in 2015 is only expected to reach 2.43 million tons. While the 13th Five Year Plan (2016-2020) is still in the early planning stage, the biofuel industry and some officials are already discussing new objectives for increasing biomass and biofuel production, including how to promote cellulosic and algae based biofuels.

12th Five Year Plan Target from 2010 to 2015

Biomass Electricity

Biomass Gas Annual Utilization

Solid Biomass for Fuel Annual Utilization

Liquid Biofuels Annual Utilization

13 million kilowatts capacity

30 billion cubic meters

10 million tons

4 million tons of fuel ethanol and 1 million tons of biodiesel

In late 2014, the Chinese government approved a National Climate Change Plan (NCCP) that set out emission and clean energy targets for 2020. This plan is widely recognized and could potentially serve as a blueprint for biofuel objectives in the 13th Five Year Plan. The NCCP set a target of 130 billion cubic meters of biofuel production by 2020 (see below). The 2020 biofuel targets are massively higher than current production levels, and it is unclear how the government intends to reach these targets.

National Climate Change Plan (NCCP) 2015 to 2020

Biomass Electricity

Biomass Gas Annual Utilization

Solid Biomass for Fuel Annual Utilization

Liquid Biofuels Annual Utilization

30 million kilowatts capacity

44 billion cubic meters

50 million tons

130 billion cubic meters

(No specifics on composition)

Ethanol

China is the third largest ethanol producer after the United States and Brazil. Six provinces (Heilongjiang, Jilin, Liaoning, Henan, Anhui, and Guangxi ) have adopted an E10 blend mandate. The actual blend rate in these markets varies from 7-13 percent according to industry sources. By regulation, each of the 7 fuel ethanol plants has a designated distribution market in one or several provinces. As of 2015, the mandated blend program fully covers six provinces and covers another 27 cities in five other provinces. Regulations require state petroleum companies in these provinces to purchase and blend set amounts of fuel ethanol from designated plants. The price of ethanol is fixed by the government at 91.1 percent of the #93 gasoline ex-factory variable price.

The average blending ratio for ethanol gasoline is about 2.1 percent in China as a whole. There are no plans to increase blend rates beyond E10, so future ethanol consumption growth will depend on growth in gasoline consumption or implementing E10 standards in additional provinces. If no significant policy change, both factors will gradually drive ethanol consumption higher.

The biofuel industry and some academic researchers are encouraging the government to adopt E10 as a national standard by 2020. However, the government is not expected to significantly expand blend requirements in the near term given its opposition to expanding grain-based biofuels and shortages of alternative feedstocks. In late 2014, the Ministry of Finance removed the Value Added Tax rebate of 17 percent for grain-based ethanol production and imposed a five percent consumption tax, further discouraging production.

Biodiesel

Biodiesel is only approved for fuel use in selected cities. There continues to be no national or provincial mandate for biodiesel usage due to limited production. In 2010, China removed a five percent consumption tax to stimulate biodiesel production. However, biodiesel plants have struggled to become profitable and many small scale operations have gone out of business. The biodiesel industry is currently operating at only 27 percent capacity.

Fuel Use Projections (Million Liters)

Calendar Year

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Gasoline Total

145,008

153,040

161,508

170,448

179,886

189,849

193,843

197,921

202,085

206,336

210,677

Diesel Total

207,914

211,014

214,173

217,380

220,637

224,832

227,361

229,921

232,513

235,136

237,791

On-road

150,246

159,261

165,281

171,528

178,012

184,741

190,745

196,944

203,345

209,954

216,777

Total Fuel Markets

352,923

364,053

375,681

387,828

400,522

414,681

421,204

427,842

434,597

441,471

448,468

China Gasoline Use Projection (Million Liters)

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Gasoline

141,930

149,885

158,292

167,170

176,544

186,444

190,347

194,332

198,400

202,553

206,794

Fuel Ethanol equivalent

3,078

3,155

3,216

3,278

3,341

3,406

3,496

3,589

3,685

3,783

3,883

Total Gasoline

145,008

153,040

161,508

170,448

179,886

189,849

193,843

197,921

202,085

206,336

210,677

China Diesel Use Projection (Million Liters)

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Diesel

206,623

209,723

212,868

216,061

219,302

222,592

225,040

227,516

230,018

232,549

235,107

Bio Diesel equivalent

1,291

1,291

1,305

1,319

1,335

1,352

1,379

1,408

1,437

1,466

1,496

HVO equivalent

0

0

0

0

0

888

941

998

1,058

1,121

1,188

Total Diesel

207,914

211,014

214,173

217,380

220,637

224,832

227,361

229,921

232,513

235,136

237,791

Notes:

  • Total 2016 gasoline and diesel use is estimated by Post. There are no available official estimates.
  • The conversion rate for gasoline is 1,388 liters per ton; the conversion rate for diesel is 1,176 liters per ton. These are the rates used by China's Customs and Taxation Bureau.
  • The conversion rate used for ethanol is 1,267 liters per ton; the conversion rate for biodiesel is 1,136 liters per ton.
  • The annual growth rate for gasoline between 2015 and 2020 is estimated at 5.66 percent while the growth rate for gasoline between 2020 and 2025 is estimated at 2.1 percent.
  • The annual growth rate for diesel between 2015 and 2020 is estimated at 1.5 percent annually while the growth rate for gasoline between 2020 and 2025 is estimated at 1.1 percent.
  • Projections are based on projected GDP growth trends and increasing energy efficiency.

Vehicle and Fuel Use

The number of civilian vehicles in China reached 145 million units in 2014, up 12.4 percent year-on-year, according to China National Statistical Yearbook data. Passenger vehicles in 2014 reached 123 million units, up 15.5 percent year-on-year. On average, China added 11 million civilian vehicles annually for the past 10 years. There are 31 cities that have over one million passenger vehicles and nine cities have over three million passenger vehicles.

Vehicle sales growth has slowed as China's economy has decelerated. The Association of Automobile Manufacturers forecasts that vehicle sales in 2015 will grow by seven percent in 2015, down from 12.4 percent growth in 2014 and 16.6 percent growth in 2013. Q1 2015 car production and sales were 8.28 million and 1.99 million respectively. Production increased 4.1 percent year over year, the lowest growth rate in the past 2 years, and Q1 sales only increased 2.8 percent. Sales of utility vehicles and buses fell sharply, contracting by 18 percent and 19 percent year over year, respectively.

Replacing potential demand for ethanol, the government encourages the purchase of electric vehicles and other “new energy" vehicles to reduce fossil fuel use and improve air quality. In July, 2014 the State Council eliminated the purchase tax for new energy vehicles. New energy vehicles were required to account for 15 percent of government vehicle purchases in 2014 in Beijing, Tianjin, Hebei, Yangtze River Delta (Shanghai region) and Pearl River Delta (Guangzhou region) as part of a campaign to tackle heavy air pollution in these regions. For all other government agencies and institutions, new energy vehicles were required to account for at least 10 percent of new vehicle purchases in 2014. These requirements increase to 20 and 30 percent, respectively, for 2015 and 2016.

Total diesel consumption in 2015 is estimated at 207.6 billion liters, while gasoline consumption is estimated at 145 billion liters. Post forecasts that gasoline consumption will expand by 5.6 percent for the next five years due to slower but still robust passenger vehicle sales growth. Diesel consumption is forecast to expand more slowly at 1.5 percent during this period. There are no official growth projections for fuel use.

Ethanol

Fuel Production

China's 2016 fuel ethanol production is forecast at 3.15 billion liters, up 2.6 percent from 2015 in response to increased fuel consumption in provinces with blend mandates. 2015 fuel ethanol production is estimated at 3.08 billion liters. The mandated blend rate in designated provinces is 10 percent; in practice the blend rate for ethanol in gasoline in these markets is between 7 and 13 percent.

The 11th Five-Year Plan (2006-2010) set goals for expanding non-grain based ethanol production, targeting cassava and sweet sorghum based production. The world's first cassava ethanol plant was built in Guangxi in 2007 with an original annual production capacity of 200,000 tons. A sweet sorghum ethanol plant (50,000 tons capacity) was completed in Inner Mongolia in 2012 by ZTE. China has seven licensed industrial scale fuel ethanol plants, using corn, wheat, cassava, and sweet sorghum and corn cobs.

Total Production

Total ethanol production (potable beverage, fuel, and other industrial chemicals) is estimated at 18 billion liters in 2015. Official ethanol statistics are not broken out into beverage and industrial production, making it difficult to determine the exact mix. Based on available information, post estimates that beverages and hard liquor will account for 56 percent of total ethanol production in 2015, or roughly 10.22 billion liters. Industrial chemicals are estimated to account for 26 percent of total production (4.69 billion liters), while fuel ethanol is estimated to make up 18 percent of production (3.08 billion liters).

There are a reported total of 160 ethanol plants nationwide using a variety of feedstocks such as grains (corn and wheat), tubers (cassava and sweet potatoes), and molasses. Corn and cassava are the main feedstocks, and currently account for 70 percent and 25 percent of production respectively. Molasses (from cane or beet sugar plants) accounts for the remaining five percent.

Ethanol End Use Estimates (Million Liter)

Ethanol Prediction by End Use

2,006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Ethanol, Total

8,003

8,668

9,361

10,127

11,207

12,477

14,266

15,605

16,763

17,995

18,982

Fuel Ethanol

1,664

1,731

2,257

2,466

2,479

2,566

2,858

2,934

2,951

3,078

3,155

Ethanol – Conventional + Gen 1.5

1,653

1,713

2,235

2,397

2,383

2,479

2,724

2,735

2,721

2,835

2,906

Ethanol – Cellulosic

11

17

23

68

96

87

134

199

230

243

249

Ethanol, Other Industrial Chemicals

979

1,077

1,185

1,253

1,656

2,053

2,428

2,861

3,970

4,692

5,036

Ethanol, Beverage and Other usage

5,359

5,860

5,918

6,409

7,072

7,858

8,980

9,810

9,842

10,224

10,791

Trade

Imported ethanol is far cheaper than domestically produced ethanol due to high domestic corn prices. Imports have grown rapidly in recent years, although they remain small as a share of total consumption. In June, 2015 the price for domestic ethanol was RMB 5,541 per ton ($892), whereas the average CIF price for imported ethanol was around $570. Some market participants have interpreted growing imports as a sign of greater government acceptance of imports, although there have been no changes in regulations or official statements to this effect.

The tariff for denatured ethanol (HS: 220720) is five percent for 2015. This tariff has been lowered in recent years (it was 30 percent in 2009) to encourage additional imports of by-products and raw materials. Imports of denatured ethanol are only allowed to be used in the chemical processing sector. The government tightly controls fuel distribution and only designated ethanol producers and distributors are allowed to sell fuel ethanol for use in transportation. Designated distributors and producers do not appear to be explicitly prohibited from importing ethanol. However, sources note that registered distributers are cautious about importing significant quantities of ethanol without explicit government approval for fear of getting crosswise with government policy.

The import tariff for undenatured ethanol remains at 40 percent. A 17 percent value added tax and a consumption tax of five percent are applied to imports of both denatured and undenatured ethanol. In 2012 China eliminated import tariffs for ethanol (undenatured and denatured) from ten ASEAN countries, plus Chile, Singapore, Vietnam and Pakistan due to free trade agreements.

China imported 56.86 million liters of ethanol in the first half of 2015. The largest supplier by far was Pakistan, which supplied 42.93 million liters of ethanol to China during this period. The next two largest suppliers were Vietnam and the United States at 8.62 and 5.14 million liters respectively. Some of the import statistics include blends, so the pure ethanol content of imports is estimated lower. In addition, import duties are lower for fuel ethanol than for alcohol for human or industrial consumption; there are reports of some imported alcohol incorrectly being reported as fuel.

According to trade contacts, the fuel ethanol imported in 2014 was part of a trial to study the economics and trading channels for ethanol. The trial proved that imports are feasible and economically viable and the trial period for fuel ethanol has been extended to 2015. However, the government has been reluctant to change energy policy and regulations on biofuels despite the need for imported fuel and pressing air pollution challenges. Besides its policy of discouraging greater use of grain-based ethanol, the government is also worried that imports will hurt existing ethanol producers who have struggled due to high corn prices and weak demand. Government officials also cited concerns over possible price and supply volatility as a reason not to utilize imported ethanol.

Tax and tariffs on ethanol

Tariff and Taxes on Ethanol Trade

HS#

Import Tariff Rate

VAT on Import

Consumption Import Tax

VAT Rebate on Export

220710

Undenatured

40%

17%

5%

0%

220720

Denatured

5% *

17%

5%

0%

Ethanol Used as Fuel and Other Industrial Chemicals (Million Liters)

Calendar Year

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Beginning Stocks

0

0

0

0

0

0

0

0

0

0

0

Fuel Begin Stocks

0

0

0

0

0

0

0

0

0

13

82

Production

2,643

2,808

3,442

3,718

4,135

4,619

5,286

5,795

6,921

7,771

8,191

Fuel Production

1,664

1,731

2,257

2,466

2,479

2,566

2,858

2,934

2,951

3,078

3,155

Imports

8

1

0

0

4

5

15

0

14

70

90

Fuel Imports

2

1

0

0

3

5

3

0

14

70

90

Exports

1,018

130

108

108

156

43

45

40

33

33

30

Fuel Exports

47

19

8

16

12

8

7

2

1

1

1

Consumption

1,633

2,679

3,334

3,610

3,983

4,581

5,256

5,755

6,902

7,808

8,251

Fuel Consumption

1,619

1,713

2,249

2,450

2,470

2,563

2,854

2,932

2,951

3,078

3,155

Ending Stocks

0

0

0

0

0

0

0

0

0

0

0

Fuel Ending Stocks

0

0

0

0

0

0

0

0

13

82

171

Production Capacity, Fuel Ethanol (Million Liters)

Number of Refineries

4

4

4

5

5

5

6

6

7

7

7

Nameplate Capacity

1,824

1,824

2,300

2,500

2,500

2,600

3,000

3,000

3,200

3,200

3,200

Capacity Use

91%

95%

98%

99%

99%

99%

95%

98%

92%

96%

99%

Co-product Production, Fuel Ethanol (1,000 METRIC TONS)

DDGS

1,012

1,060

1,130

1,132

1,140

1,140

1,141

1,116

1,061

1,059

1,107

CORN OIL

51

55

65

65

66

69

65

67

64

63

67

WHEAT GLUTEN

45

45

45

45

45

45

45

45

45

45

45

Bagasse (Sweet Sorghum)

13

51

63

Feedstock Use, Fuel Ethanol (1,000 METRIC TONS)

CORN KERNEL

3,233

3,385

3,608

3,614

3,641

3,641

3,645

3,563

3,389

3,381

3,570

WHEAT KERNEL

1,050

1,050

1,050

1,050

1,050

1,050

1,050

1,050

1,050

1,050

45

CASSAVA (Dried Chips)

364

467

392

336

336

392

504

504

520

CORN COB

240

250

260

270

SWEET SORGHUM (Fresh whole stalk)

90

360

450

Market Penetration, Fuel Ethanol (Million Liters )

Fuel Ethanol

1,619

1,713

2,249

2,450

2,470

2,563

2,854

2,932

2,951

3,078

3,155

Gasoline

72,766

76,605

85,300

85,677

95,578

102,656

112,996

119,775

126,962

145,008

153,040

Blend Rate

2.2%

2.2%

2.6%

2.9%

2.6%

2.5%

2.5%

2.4%

2.3%

2.1%

2.1%

Note

  • The corn and wheat to ethanol conversion ratio is 3.3 to 1; the cassava (dried) to ethanol conversion ratio is 2.87 to 1.
  • Categories for production, by-products, and feedstock use refer to the 7 fuel ethanol plants.
  • For the plant that uses corn cobs for cellulosic ethanol, the conversion rate for corn cob (14 percent moisture level) to ethanol is 7.5 to 1.
  • For the sweet sorghum plant that started operation in June 2014, the conversion rate for sweet sorghum (fresh stalks) to ethanol is 18 to 1. This is the first such plant in China.

Biodiesel

Biodiesel production is estimated at 1.14 billion liters (in 2015, mostly unchanged from the year before. Production is forecast to stay flat in 2016. Nearly all biodiesel in China is made from waste cooking oil. Biodiesel production almost doubled between 2010 and 2015 due in part to a government crackdown on the illegal use of recycled cooking oil for human consumption. The crackdown helped lower the cost and increase the supply of this feedstock.

Biodiesel production capacity is estimated at 4.25 billion liters, a 6 percent increase from the previous year. The capacity utilization rate for the sector is estimated at only 27 percent due to the lack of large scale collection channels for waste cooking oil. There are currently 54 biodiesel plants, but more than half of the producers have ceased production. After five years of net losses, the state-owned oil company CNOOC decided to halt its biodiesel pilot project in Hainan province. The NYSE listed Gushan Group also retreated from the biodiesel market in China after experiencing several years of heavy financial losses.

Two key challenges biodiesel producers face in China are competition for waste oil and restricted sales channels. While the government has sought to crackdown on misuse of waste cooking oil (also known as “gutter oil"), illegal food use remains a problem due to very high profit margins of around 150 to 240 percent. This creates heavy competition for this waste stream product, making it more difficult for biodiesel facilities to obtain feedstock at an affordable price.

In addition, state owned oil companies block biodiesel from being sold to most consumers. China National Petroleum (CNPC) and SinoPec, which control over 90 percent of gas stations in China, do not sell biodiesel. This forces biodiesel producers to sell to oil brokers or sell directly to end-users. As a result, most biodiesel for road transportation is sold at private gas stations in small cities or in the countryside. About 30% of biodiesel production is used in the on-road transport sector.. An additional 50 percent is used in the industrial sector, and 20 percent is used for agricultural machinery and fishing boats.

Overall diesel use in the transportation sector is estimated at 150 billion liters for 2015, up six percent from the previous year. Diesel for transportation accounts for 71 percent of total diesel use. Total diesel total use for all sectors is estimated to have fallen two percent in 2015 due to lower diesel use for utility vehicles. Biodiesel production only accounts for 0.2 percent of total on-road diesel use. The government is unlikely to set any mandates for biodiesel use in transport fuel in the near future given the limited scale of biodiesel production at this time.

Biodiesel (Million Liters)

Calendar Year

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Beginning Stocks

0

0

0

0

0

0

0

0

0

0

0

Production

273

352

534

591

568

738

909

1,079

1,133

1,141

1,141

Imports

0

0

0

0

0

0

20

50

100

150

150

Exports

0

0

0

0

0

0

0

0

0

0

0

Consumption

273

352

534

591

568

738

929

1,129

1,233

1,291

1,291

Ending Stocks

0

0

0

0

0

0

0

0

0

0

0

Production Capacity

Number of Bio refineries

65

96

84

62

45

49

52

53

53

54

54

Nameplate Capacity

1,761

3,124

3,351

2,670

2,556

3,400

3,600

4,000

4,000

4,250

4,250

Capacity Use

15.5%

11.3%

15.9%

22.1%

22.2%

21.7%

25.3%

27.0%

28.3%

26.8%

26.8%

Feedstock Use (1,000 METRIC TONS)

Used Cooking Oil

267

344

522

578

556

722

889

1,055

1,108

1,164

1,164

Market Penetration (Million Liters)

Biodiesel, on-road use

82

106

160

177

170

221

273

324

340

357

373

Diesel, on-road use

76,996

84,489

89,956

92,810

100,179

111,546

126,150

133,718

141,742

150,246

159,261

Blend Rate

0.1%

0.1%

0.2%

0.2%

0.2%

0.2%

0.2%

0.2%

0.2%

0.2%

0.2%

Diesel, total use

139,193

146,932

159,136

161,771

172,096

183,868

199,520

211,491

211,976

207,914

211,014

Notes:

  • The conversion rate for used cooking oil to biodiesel is 1 to 0.9 with current China bio diesel technology capacity. Most of the feedstock in China is collected and processed from gutter oil.
  • The blend rate for biodiesel can reach as high as 20 percent. The relative higher the blending rate, the higher the profit for gas stations. The maximum mix rate is 30%. Hainan's trial program has a blending rate of only 2-5 percent.
  • Import/export measurement based on B100 standard

Tariff and Taxes on Biodiesel Trade

HS#

Import Tariff Rate

VAT on Import

VAT Rebate on Export

382600

Biodiesel and mixtures

6.5%

17%

0%

For biodiesel from ASEAN countries, the Tariff rate is zero since 2012

Biodiesel imports are estimated at 150 million liters in 2015, up 50 percent from the year before due to large purchases of Indonesian biodiesel by a Chinese state owned petro company. Imports of biodiesel and mixtures thereof (HTS 3826) surged in 2013 and 2014 due to the elimination of a 0.8 RMB per liter consumption tax on biodiesel imports starting in 2013. Imports of petroleum oil containing up to 30 percent biodiesel (HS code 2710.20) also surged in 2013 as a result of the elimination of the consumption tax for biodiesel, with imports jumping from 101,000 liters in 2012 to 2.5 million liters in 2013. Trade contacts reported that most imports under this tariff line had very low biodiesel content (around 1-2 percent) and that this was added in order to avoid consumption taxes. The government cracked down on this practice in 2014, and imports under this tariff line have fallen rapidly as a result. As many of the tariff lines include blends, the estimated total volume of pure (b100) biodiesel is estimated at far lower than the sum of the tariff lines below.

China Biodiesel Imports in Million liters Liters (HS code: 3826)

2012

2013

2014

World

17

140

864

Indonesia

17

138

786

Other countries

0

2

78

Commodity: 2710.20, Petroleum Oils and Preparations Containing Biodiesel Imports in Million liters

2012

2013

2014

World

101

2,529

156

Indonesia

71

327

33

Singapore

30

206

0

Malaysia

0

1,242

123

Thailand

0

754

0

Advanced Biofuels

The government has set an ambitious target of producing 300 million tons of cellulosic and non-grain based ethanol combined by 2020. However, challenges in collecting and transporting feedstock from China's small-scale farms combined with slow progressed cellulosic technology hinder Industrial process of cellulosic ethanol. Industry experts predict China could produce 10 million tons of cellulosic ethanol by the target date.

State-owned enterprises dominate the cellulosic ethanol market due to their strong access to capital and government support. Private companies are not eligible to receive government incentives or subsidies. Therefore, it is almost impossible for private company to enter this market. The state-owned enterprises currently engaged in cellulosic ethanol are China National Cereals, Oils and Food Corporation (COFCO Group), China National Petroleum Corporation (CNPC) , China Petrochemical Limited (Sinopec) and China National Offshore Oil Corporation (CNOOC).