August 11, 2010

China urged to stop corn ethanol project

China's private petroleum enterprises association has proposed to the National Reform and Development Committee (NRDC) to halt the corn-to-ethanol project of producing alcoholic gasoline, as it has fuelled corn price hike in the country.

"Our suggestion, now under research by the NRDC, calls for a lull in the corn-to-ethanol project and to divert the subsidy into other biofuel projects such as using cassava or wheat straw as raw materials" said Zhao Youshan, president of the Petroleum Flow Committee of China General Chamber of Commerce (PFCGCC).

Zhao said the project of using corn ethanol as a low-carbon renewable fuel has led to rising corn prices in China, turning the corn-exporting country into a corn-importer this year. Even so, the output of corn ethanol appears tiny when compared with the domestic demand for petrol.

The PFCGCC said that to enjoy the subsidy of RMB1,880 (US$277) per tonne of alcoholic gasoline for vehicles and the tax-exemption policy for the corn-to-ethanol project, some plants in China began a wave of buying corn, causing the severe shortage of corn for animal feed and the rapid increase of corn prices.

In the first half year of this year, China imported 78 million tonnes of corn, mainly due to the higher domestic corn price than overseas. In July, the average corn price in northeast China was RMB1,845 (US$272)/tonne, rising by 15.7% on-year, analysts said.

In 2004, to advocate the development of new and renewable energy, the NRDC and the Ministry of Finance issued preferential policies to promote the corn-to-ethanol project in pilot zones of northeast China. However, as a result of the decrease of stored grain, China later demanded a stop to the uncontrolled production of ethanol from corn throughout the country.