Analysis of Biofuel Subsidy Support in China

A country report released by the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development gives an analysis of the types and magnitude of support for biofuels production in China. Like in many countries, the promotion of large-scale biofuel production in China is backed up by some financial support (i.e. subsidies). Among the highlights of the report are: (1) China provided an equivalent of US$115 million in biofuels support for ethanol in 2006, in the form of direct output-linked subsidies paid to licensed producers, tax exemptions, low-interest loans for capital investment, and mandates for compulsory ethanol blending. (2) There is no current available subsidy for biodiesel in China, but it may likely be introduced before 2010. (3) Realizing the inherent conflict between grain-based (example, corn-based) biofuels production in China, the government responded by “halting the construction of new maize-based ethanol plants and promulgating policies to encourage the production of biofuels from non-grain feedstocks grown on marginal land."  (4) “Subsidies for growing biofuel feedstocks on marginal land are higher than subsidies for setting aside such land for environmental purposes, encouraging cultivation of conservation areas”.

The report also made recommendations for the (1) elimination of direct production-linked subsidies for fuel ethanol production with no introduction of direct subsidies for biodiesel production, and (2) government support for biofuel demonstration projects that are limited to those that do not compete with food supply, and those that encourage genuinely non-food-based feedstock (i.e. lignocellulosic biomasss). The complete report can be accessed at  the URL above.