China biofuel market is expected to reach 8.34 billion liters in 2019 from the 2014 figure of 3.93 billion liters, growing at a CAGR of 16.2 percent, says a new research from Technavio Research.
The growth is primarily attributed to the government mandates supporting green fuel technologies. The mandate started in 2001 and since then the market has grown consistently posting strong growth figures.
China has now become one of the top five countries for biofuel production.
Cheaper gasoline prices, government mandates and increases in passenger vehicles have made bioethanol the preferred biofuel in the country.
The government strongly regulates bioethanol production and distribution; it is sold at less than the market price to state distribution companies like Sinopec where the difference in price is paid by the government to the production companies.
The five-year plan of the government plays a very important role in the development of the country. The12th five-year plan allowed foreign investments and encouraged production of next generation biofuels.
The government has gradually reduced the subsidies and VAT rebates given for grain based bioethanol to encourage next generation biofuels that use cassava, sweet sorghum and jatropha for biofuels production. The next generation fuels are going to drive the market during the forecast period.
The biodiesel market currently has no state or provincial mandates. Biodiesel is sold in very few provinces and cannot be legally sold to state owned distribution companies, which is a major challenge affecting the growth of biodiesel in the country.
Apart from distribution challenges, the biodiesel production industry is faced with feedstock shortages and increases in imports, which is reducing profit margins and resulting in low production quantities.
But the government has proposed new regulations, which are expected to be implemented in 2016. According to the new regulations, FDI is allowed in the production, new production standards are available to improve fuel quality, and utilization of barren land will be allowed for large-scale development of feedstock and micro algae cultivation.
Further individual state provinces are expected to look into policy implementation and ensure it is followed to reach the overall goal of green energy in China. The biodiesel market is expected to witness stronger growth as the implementation of the biodiesel development plans announced by the government increases.
The bio-jet fuel market is in its initial development stage; the segment is about to witness growth and contribute a significant portion to the overall goal of China’s 2020 biofuels target.
With the development of bio based fuel that received a certificate of airworthiness in the 2014 and the successful flying of a commercial passenger plane using a 50% bio based jet fuel blend in 2015, China became the fourth country to develop bio based jet fuel using individual technology.
After this critical success, China has set a target to the state owned airlines to become 30% less carbon intensive by 2020. Aircraft manufacturing giants like Airbus and Boeing support green fuels and this is expected to drive further development and implementation of biofuels in the aviation industry the report said.
Source:Â Technavio Research