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  • BIOFUELS - AT WHAT COST ?

    Government support for ethanol and biodiesel in China

    November 2008

    Prepared by : the Global Subsidies Initiative of the International Institute for Sustainable Development

    Based on a report commissioned by the GSI from the Energy Research Institute of the National Development and Reform Commission

  • Biofuels – At What Cost?

    Government support for ethanol and biodiesel in China

    November 2008

    Prepared by the Global Subsidies Initiative (GSI)

    of the International Institute for Sustainable Development (IISD)

    Geneva, Switzerland

    Based on a report commissioned by GSI from the Energy Research Institute

    of the National Development and Reform Commission, Beijing, China

    i

    | i

  • Biofuels – At What Cost?

    Government support for ethanol and biodiesel in China

    November 2008

    Prepared by the Global Subsidies Initiative (GSI)

    of the International Institute for Sustainable Development (IISD)

    Geneva, Switzerland

    Based on a report commissioned by GSI from the Energy Research Institute

    of the National Development and Reform Commission, Beijing, China

    i

    | i

  • © 2008, International Institute for Sustainable Development The International Institute for Sustainable Development (IISD) contributes to sustainable development by advancing policy recommendations on international trade and investment, economic policy, climate change and energy, measurement and assessment, and sustainable natural resources management. Through the Internet, we report on international negotiations and share knowledge gained through collaborative projects with global partners, resulting in more rigorous research, capacity building in developing countries and better dialogue between North and South. IISD’s vision is better living for all—sustainably. Its mission is to champion innovation, enabling societies to live sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States. IISD receives core operating support from the Government of Canada, provided through the Canadian International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada; and from the Province of Manitoba. The Institute receives project funding from numerous governments inside and outside Canada, United Nations agencies, foundations and the private sector. International Institute for Sustainable Development Head Office 161 Portage Avenue East, 6th Floor Winnipeg, Manitoba Canada R3B 0Y4 Tel: +1 (204) 958-7700 Fax: +1 (204) 958-7710 Web site: www.iisd.org International Institute for Sustainable Development Global Subsidies Initiative International Environment House 2 9 chemin de Balexert 1219 Châtelaine Geneva, Switzerland Tel: +41 22 917-8373 Fax: +41 22 917-8054 Web site: www.globalsubsidies.org Biofuels – At What Cost? Government support for ethanol and biodiesel in China By the Global Subsidies Initiative November 2008 ISBN: 978-1-894784-24-5

    ii

    Acknowledgments

    This report is based on an original study commissioned by the Global Subsidies Initiative (GSI) from the Energy Research Institute (ERI) of the National Development and Reform Commission (NDRC), China. The original report can be found at www.globalsubsidies.org.

    The ERI report was substantially expanded by Emma Cole, a private consultant, based in Canberra, Australia. The GSI is grateful to Ms. Cole for her expert and meticulous development of the paper. The GSI also wishes to thank Mr. Ronald Steenblik, former GSI Director of Research, for his guidance on the project during its early stages, and his subsequent comments on various drafts. Several GSI staff also contributed to the project, including Tara Laan, Chris Charles and Charles Tsai.

    A number of individuals were generous with their time and advice in peer-reviewing an earlier version of this report. In particular, we thank:

    Bryan Lohmar (Economic Research Service, U.S. Department of Agriculture, Washington D.C.);

    Charice Wang (Independent Consultant, London);

    Huihui Zhang (International Institute for Sustainable Development, Winnipeg);

    Lew Fulton (International Energy Agency, Paris)

    Masami Kojima (The World Bank, Washington, D.C.); and

    Peishen Wang (Independent consultant on China environmental issues, Winnipeg).

    The comments and insights of these experts helped to greatly improve the final version. However, the report should not be interpreted as necessarily representing their views. And, as is always the case, any remaining errors or inaccuracies remain the responsibility of the authors.

    Finally, this effort and the other work of the GSI could not have been undertaken without the generous support for the GSI provided by the governments of Denmark, the Netherlands, New Zealand and Sweden, and the William and Flora Hewlett Foundation. The views expressed in this study do not necessarily reflect those of the GSI’s funders, nor should they be attributed to them.

    iii

    | ii | iii

  • © 2008, International Institute for Sustainable Development The International Institute for Sustainable Development (IISD) contributes to sustainable development by advancing policy recommendations on international trade and investment, economic policy, climate change and energy, measurement and assessment, and sustainable natural resources management. Through the Internet, we report on international negotiations and share knowledge gained through collaborative projects with global partners, resulting in more rigorous research, capacity building in developing countries and better dialogue between North and South. IISD’s vision is better living for all—sustainably. Its mission is to champion innovation, enabling societies to live sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States. IISD receives core operating support from the Government of Canada, provided through the Canadian International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada; and from the Province of Manitoba. The Institute receives project funding from numerous governments inside and outside Canada, United Nations agencies, foundations and the private sector. International Institute for Sustainable Development Head Office 161 Portage Avenue East, 6th Floor Winnipeg, Manitoba Canada R3B 0Y4 Tel: +1 (204) 958-7700 Fax: +1 (204) 958-7710 Web site: www.iisd.org International Institute for Sustainable Development Global Subsidies Initiative International Environment House 2 9 chemin de Balexert 1219 Châtelaine Geneva, Switzerland Tel: +41 22 917-8373 Fax: +41 22 917-8054 Web site: www.globalsubsidies.org Biofuels – At What Cost? Government support for ethanol and biodiesel in China By the Global Subsidies Initiative November 2008 ISBN: 978-1-894784-24-5

    ii

    Acknowledgments

    This report is based on an original study commissioned by the Global Subsidies Initiative (GSI) from the Energy Research Institute (ERI) of the National Development and Reform Commission (NDRC), China. The original report can be found at www.globalsubsidies.org.

    The ERI report was substantially expanded by Emma Cole, a private consultant, based in Canberra, Australia. The GSI is grateful to Ms. Cole for her expert and meticulous development of the paper. The GSI also wishes to thank Mr. Ronald Steenblik, former GSI Director of Research, for his guidance on the project during its early stages, and his subsequent comments on various drafts. Several GSI staff also contributed to the project, including Tara Laan, Chris Charles and Charles Tsai.

    A number of individuals were generous with their time and advice in peer-reviewing an earlier version of this report. In particular, we thank:

    Bryan Lohmar (Economic Research Service, U.S. Department of Agriculture, Washington D.C.);

    Charice Wang (Independent Consultant, London);

    Huihui Zhang (International Institute for Sustainable Development, Winnipeg);

    Lew Fulton (International Energy Agency, Paris)

    Masami Kojima (The World Bank, Washington, D.C.); and

    Peishen Wang (Independent consultant on China environmental issues, Winnipeg).

    The comments and insights of these experts helped to greatly improve the final version. However, the report should not be interpreted as necessarily representing their views. And, as is always the case, any remaining errors or inaccuracies remain the responsibility of the authors.

    Finally, this effort and the other work of the GSI could not have been undertaken without the generous support for the GSI provided by the governments of Denmark, the Netherlands, New Zealand and Sweden, and the William and Flora Hewlett Foundation. The views expressed in this study do not necessarily reflect those of the GSI’s funders, nor should they be attributed to them.

    iii

    | ii | iii

  • Table of contents Acknowledgments iii  List of tables and figures vi  Currency conversion note vii  Abbreviations and acronyms vii  Executive summary 1  1  Introduction 6 

    1.1  Biofuels in China 6  1.2  Outline of the report 6  1.3  Framework of the analysis 7 

    2  China’s energy and biofuels policies 10  2.1  Energy policy 10  2.2  Petroleum prices and subsidies 1

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