Experiences absorbed by China’s biomass energy policy

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China’s biofuel industry started relatively late. While learning from the experience of other countries, combined with the actual situation of the country, a sustainable industrial policy was formulated to develop the biofuel industry.

1. Be wary of food security and price volatility

At present, the world mainly produces the first-generation fuel ethanol with corn as the main raw material, the 1.5-generation fuel ethanol with cassava as the raw material, and the second-generation fuel ethanol with agricultural waste as the raw material.

In 2012, at the G20 Rapid Response Forum (RRF) in response to soaring global food prices, the United Nations used the meeting to promote a global discussion on biofuel policy, asking the United States, European countries to scrap biofuel production targets set by the government. Food and Agriculture Organization of the United Nations (FAO) Director-General da Silva has issued a warning that corn production has been “hugely damaged” under the influence of the drought, but 40% of corn production is still used for ethanol production due to a directive issued by the US Congress. According to data from the United Nations Food and Agriculture Organization, from 2005 to the beginning of 2008, the world’s food price surge swept the world, and the increase was the highest after World War II. The total number of people facing famine now exceeds 1 billion, of which about 15 million die each year due to food shortages, and about 100 million new poor people need food assistance each year, in the next few years. This number will continue to rise.

In July 2008, World Bank expert Don Mitchell released a research report on the rise in global food prices. He believes that the pursuit of biofuels in the United States and the European Union will have the greatest impact on food availability and prices, a figure that is also much larger than previously estimated. Biofuel production distorts the grain market in three ways: First, it uses grain as fuel, more than a third of corn in the US is used to produce ethanol, and about half of vegetables in the EU are used to produce biodiesel; second, farmers are encouraged to set aside land to produce biofuel crops; and third, it stimulates financial speculation in food, causing food prices to rise even higher. All in all, the development of biofuels in the United States has pushed up food prices.

China is a big energy consumer and has an urgent need for energy. The development of bioenergy and the promotion of energy supply diversification are important measures to ensure national energy security. The long-term and stable development of biofuels in China must be based on food security. Therefore, in the process of bioenergy development, China should strictly follow the basic principle of “not competing with the people for grain and land with grain”, actively develop and utilize marginal land, and develop the production of biomass energy from non-grain raw materials, such as sugar crops represented by cassava, sweet sorghum, etc., and various lignocellulosic biomass represented by crop straw as raw materials for bioethanol production. At present, it is urgent to explore the selection and cultivation of non-grain raw materials, and accelerate the research and development progress of the transformation technology of non-grain raw materials, so as to achieve industrial upgrading and long-term development.

2. Strengthen international dialogue and cooperation

The biofuel industry is developing globally. As a fast-growing producer and a consumer with huge potential, China should actively join in international biofuel cooperation: on the one hand, it is necessary to carry out international economic and technological cooperation, and strive to learn the science and technology of the United States, Brazil and the European Union, combined with the characteristics of domestic biological resources, develop biomass energy raw materials suitable for large-scale production in China, and develop a biofuel industry with Chinese characteristics; on the other hand, it is necessary to actively participate in international dialogues, policy consultations and negotiations on bio-liquid fuels, and actively participate in the evaluation of the social and environmental effects of international bio-fuels.

What is the current status of bioenergy development in the EU and the current status of bioenergy development in the US?

3. Improve regulations and standards, with certain financial support

China should establish and improve an industrial support and market supervision policy system that conforms to the characteristics of non-food biofuels, carry out pilot demonstrations in an orderly manner, and steadily expand the biofuel market. In terms of raw materials, farmers do not have high willingness to plant raw materials, and certain subsidies should be given to pilot raw material producers to increase farmers’ willingness to plant. In the processing link, the technology is immature, the government and relevant institutions should increase research and development efforts, reduce the cost of conversion, and formulate corresponding production standards to standardize production, so as to realize the expansion of production through breakthrough scientific and technological progress as soon as possible. In terms of the market, the market demand for biofuel products is increased through mandatory mandatory blending or differentiated tax policies, and the market risk of non-food biofuels is eliminated to a certain extent.

4. Implement mandatory quota system and green certificate system

The so-called compulsory quota system means that energy enterprises must produce or sell a certain percentage of renewable energy according to regulations while producing or selling conventional electricity; the so-called green certificate system refers to the government’s issuance of green transaction certificates for renewable energy of enterprises. Green trading certificates can be bought and sold between energy companies, and the price is determined by the market. The government has clarified the development goals of renewable energy through the quota system, and decomposed the goals to the relevant responsible parties. At the same time, the market-oriented green certificate trading mechanism and severe punishment measures are used as guarantees to ensure the realization of the established development goals. Cultivate a reasonable biomass energy consumption market by introducing mandatory market share policies such as a tradable quota system.

Drawing on the international development experience of biomass energy, the introduction of quota system policy is very important in the initial stage of the development of biomass energy industry. By stipulating the supply ratio of green energy, the motivation of enterprises to develop clean electricity will be improved. At the same time, the funds needed to develop clean electricity can be raised through the transaction of green certificates. For example, in 1997 the U.S. government stipulated that electricity suppliers should provide a certain percentage of electricity generated from renewable energy sources each year. Similar regulations exist in the UK, which was one of the first countries to implement a renewable energy quota system on a large scale. Before 2000, when the non-fossil fuel convention was implemented, the development of renewable energy in the UK was slow due to the lack of corresponding penalties and mandatory. After the UK implemented the quota system, the installed capacity of renewable energy in the UK increased significantly. The Brazilian government has forced the use of ethanol gasoline through legislative means, stipulating that a certain percentage of ethanol gasoline must be added to gasoline sold in all regions of the country. China’s “Renewable Energy Law” only stipulates the electricity price of renewable energy power generation and the amount of subsidies for renewable energy power generation at a macro level, there is no mandatory power generation quota for power grid companies to acquire renewable energy companies, and there is no rigid provision on the proportion of total biomass power generation, which is not conducive to the promotion of biomass power generation.

The good news is that in 2014, the National Development and Reform Commission Executive Committee passed the quota assessment method in principle, and the quota assessment method may be implemented soon after being approved by the State Council. According to the stage target of China’s non-petrochemical energy accounting for 15% of total energy consumption in 2020, China’s energy department will determine the proportion of renewable energy power in each province (autonomous region, municipality directly under the Central Government) in the total electricity consumption of the whole society based on factors such as renewable energy resources, power consumption, and economic development level in each region. The implementation of China’s renewable energy quota assessment is imminent, which is a great benefit for the development of clean energy. At the same time, the full guaranteed purchase system stipulated in the “Renewable Energy Law” is also expected to be implemented through the quota system.