Report: China to fall short of E10 by 2020 goal

By Erin Voegele | August 12, 2019

A new report filed with the USDA Foreign Agricultural Service’s Global Agricultural Information Network predicts China will miss its goal to implement E10 by 2020 by a wide margin, likely only achieving a blend rate of 3 to 3.5 percent in 2020.

The report indicates that despite public announcements from the Chinese government, the country’s ethanol policy in 2019 remains a patchwork of provincial and municipal-level policies. The report also states that China’s central and provincial authorities have not renewed subsidies for ethanol production.

“Without clear incentives and enforceable compliance measure, China’s ethanol industry will struggle to raise the level of biofuels used in transportation fuels to meet China’s E10 goal by 2020,” said the authors in the report. As a result of restrictive ethanol investment and trade policies, China is expected to achieve an ethanol blend rate of approximately 2.5 percent this year. That could increase to 3 to 3.5 percent by next year.

According to the report, the ability to implement a national ethanol fuel standard across China’s complex landscape will require significant infrastructure investments to expand capacity for ethanol storage, grown and maritime transportation, and blending into refined gasoline. To expand ethanol use, the report says China’s central planners will need to liberalize their energy and trade approach. Rigid energy policies currently restrict fuel ethanol production and investment in blending and distribution. “Without an enforceable national fuel standard for ethanol blend use, energy investors lack certainty to expand investments into ethanol storage, distribution and blending infrastructure,” the report states.

The report also notes that high tariffs on U.S. is limiting demand for larger volumes of lower-cost ethanol imports. The tariff rate for U.S. denatured ethanol increased from 5 percent in late 2016 to 70 percent in July 2018. The tariff rate on indentured ethanol reached 45 percent in August 2018.

According to the report, Chinese ethanol producers have increased capacity by about 258 million liters (68.16 million gallons) over the past year, boosting production capacity to approximately 5.258 billion liters.

The report estimates Chinese fuel ethanol production will reach approximate 4.311 billion liters this year, up from 2.914 billion liters in 2018. The number of ethanol refineries is expected to reach 14 this year, up from 12 in 2018. Nameplate capacity is expected to reach 5.257 billion liters this year, up from 5 billion liters in 2018. Capacity usage is expected to reach 82 percent in 2019, up from 58 percent in 2018.

A full copy of the report can be downloaded from the USDA FAS GAIN website.