China Looks to Kickstart Its Domestic Biodiesel Industry

China is planning a series of pilot projects to jumpstart a domestic biodiesel industry, in which it lags behind the U.S. and the EU.

Per a Reuters report, the country’s National Energy Administration has called on regional authorities to carry out demonstration projects for biodiesel and organize financing for other initiatives in the area.

China is a large producer of biodiesel but local consumption only accounts for about 40% of it. The country has no mandates for biodiesel blending and provides no subsidies for the production of the fuel, except for Shanghai. This year, it is expected to produce 1.9 billion liters of biodiesel, which is equal to about half a million gallons.

Because of its robust production, China is a big biodiesel feedstock exporter, notably to the European Union, where blending mandates have created a healthy demand for the low-carbon fuel. In this context, Beijing’s plan to spur greater domestic consumption might eventually come to mean less used cooking oil for export, potentially pushing prices higher.

China also exports biodiesel feedstock to the United States—one of the most enthusiastic supporters of biofuel mandates. It was this enthusiasm that gave a major boost to China’s biodiesel industry, with a focus on the processing—and exports—of used cooking oil into fuel.

Over the 12 months to September, Reuters reported earlier, the Chinese biodiesel market had grown to $390 million and was set for further growth thanks to strong demand from Europe and the U.S., where the export surge was jumpstarted by the Inflation Reduction Act.

Earlier this year, the federal government also increased biofuel blending mandates for the next three years, much to the disgruntlement of the refining industry. Surprisingly, the move did not meet with enthusiasm in biofuel production circles, either. According to the industry, the mandates were not high enough and the mandates for ethanol and biodiesel in particular were lower than initially proposed by the EPA.

By Charles Kennedy for Oilprice.com

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