内容提要：由于在促进国家能源安全，降低温室气体排放以及增加农业收入等社会、环境和经济方面都具有正面效应，生物燃料已被视为一种相对理想的可再生能源。生物燃料产业处于初级阶段，因此国家政策在其发展的过程中仍起主导作用。对生物燃料政策的驱动因素及其影响的分析有助于更好的了解和认识未来政策走向及市场发展情况。在中国和澳大利亚合作日益增加的背景下，两国的生物燃料政策被选作本文综述的对象，并通过对比，分析出两国在发展生物燃料的初衷以及未来政策走向方面的异同。

关 键 词：生物燃料政策  驱动因素  影响  中国  澳大利亚

An Overview of the Drivers and Impacts of Biofuel Policy in China and Australia

Abstract

Biofuel has been put forward as one relatively ideal type of renewable energy with its higher degree of fuel security, lower greenhouse gas emissions and desirable rural sector outcomes. Since its market is still immature, government policies play an important role in biofuel production. Having a better understanding of the drivers and impacts of the policies will be helpful to address more opportunities for biofuel industry and also will be instructive for the future policy development. China and Australia were chosen to be the targets of the investigation in the context of the increasing collaboration between these two countries. The similarities and differences in the initial drivers and the future policy orientation of these two countries’ biofuel policies were concluded based on a comparison analysis.

Keywords: Biofuel Policy; Drivers; Impacts; China; Australia

Introduction

Energy underpins a nation's economic growth and social development; it is a national strategic resource and attracts close policy scrutiny. Demand for energy has grown dramatically during the 21st Century and it is expected to drive domestic and international policies not only for energy itself, but also for reconciling social, environmental and economic objectives (IEA 2012). Sharp rises in oil price have raised the concerns about energy security and oil dependence (O’Connell et al. 2007). According to some reports food prices responded strongly to energy prices increasing and put national food security under threat (Baffes & Dennis 2013; O’Connell et al. 2007). As chain effects of rising food security concerns, problems exacerbated by agricultural expansion, such as land clearing, habitat degradation, biodiversity loss and soil pollution from pesticides and fertilizer were reported to be getting worse (Pellikka et al. 2013). Some of these effects were attributed to climate change policy (Hagerman & Satterfield 2013; Jeltsch et al. 2011; McAlpine et al. 2007).

Policy efforts to reduce greenhouse gas emissions to mitigate global environmental change have been complex and complicated. Despite pressure from the recent Global Financial Crisis (Aug. 2007-Jul. 2012), governments continued to use policy and investment to investigate alternatives and innovations by which they can develop a low-carbon economy and reduce fossil fuel dependence. Pressures on international energy supplies, concerns about energy security, continued environmental degradation and climate change policy has driven investments in research worldwide to look for alternative energy sources (Manzano-Agugliaro et al. 2013). Biofuel has been put forward as one type of renewable energy to release the problems mentioned above with a higher degree of fuel security, lower greenhouse gas emissions and desirable rural sector outcomes (L.E.K.Consulting 2011; Puri et al. 2012). The International Energy Agency projects a five-fold increase in global biofuel supply to meet the 5% of global road transportation fuels consumption by 2030, up from 1.5% in 2006 (IEA 2008). There are urgent needs for appropriate, effective and efficient biofuel policies to guide this rapid expansion.

1 Justification of Governments Intervention in Biofuel

Governments' rationale for intervention in biofuel’s development process through biofuel policies and its R&D investment has been the subject of considerable discussion (Diop et al. 2013). The dependence on government support in alternative energies development is clear in its history (Steenblik 2007). There are arguments about under what circumstances governments should intervene, the nature of the intervention and how governments should act (Productivity Commission 2011). So the justification of governments’ intervention and the policy tools/remedies in different circumstances needs to be explained. Governments have a responsibility to use the resources of the people efficiently, effectively and appropriately (UNDP 2013).

2 Drivers of Biofuel Policies

After a brief description of the key points for government intervention from the view of policy rationale, the economic, environmental and social drivers of biofuel supporting policies are summarized as follows. 

Energy security appears to be the key reason for most countries’ involvement in biofuel (Thomas et al. 2009), for both developed countries and developing countries. The increasing dependence on imported oil is one of the risky factors to national security, especially when most of the oil supply is expected to come from unstable regions in the Middle East and Africa, as well as Latin America (IEA 2007).

Fossil fuel emissions from the energy sector are the main source of emissions (such as carbon dioxide and carbon monoxide) driving global warming and climate change (EPA 2011; IPCC 2007; Suranovic 2013). The international political pressure based on Kyoto Protocol agreements to reduce emission is increasing (EBRD 2011). The science of climate change connected the problem of fossil fuel consumption to solutions such as biofuel.  The literature shows that biofuel is renewable and causes far lower greenhouse gas emissions than some alternatives and its development may reduce the risk of catastrophic climate change (UNCTD 2009). Biofuel science and policy advice was adopted rapidly by government policymakers (The Brazil Institute of the Woodrow Wilson Center April 2007).

There are more reasons for developing countries to promote biofuel. Firstly, conventional transport emissions have contributed in some way to global warming (Smekens & van der Zwaan 2006) and these will be increased distinctly as a consequence of economic growth in populous and increasingly energy hungry developing countries such as China, India, Brazil and Mexico (Köhler J. 2006). Therefore developing countries can adopt biofuel as an immediate source of alternative energy for transport use (Charles et al. 2007). Since the Clean Development Mechanism (CDM) under the Kyoto Protocol allows developing countries to implement the emission-reduction commitment by selling the certified emission reduction (CER) credits, developing countries can meet the goal of reducing emissions by selling their saved CER from adopting biofuel (Kojima & Johnson 2006). Secondly, biofuel development is driven by local farmers and producers who want an additional market to sell their produce. Currently, first generation biofuel, the type of which is derived from existing edible crop systems, producing technology is more mature with main agricultural products in feedstock-rich developing countries. For example, China has focused heavily on ethanol production due to its previously large surplus of inferior corn (Zhou & Thomson 2009). And Thailand has so much cassava that even after consumption and export it still has an excess of four million tons of cassava annually that could be converted into 1.8 million litres of ethanol per day (Gonsalves 2006). Thirdly, for developing countries, governments and agricultural interest groups have increasingly viewed biofuel as a means to increase employment. For example, the Malaysia Palm Oil Council states that the palm oil industry provides direct employment to over 800,000 people (Charles et al. 2007); in India, the sugarcane industry is the biggest agro-industry in the country, employing 45.5 million people (Gonsalves 2006). And it has also been observed in Brazil that biofuel production has led to a positive stimulation of rural economies and helped improve conditions for the production of other crops (UNCTD 2006).

2.1 Energy situations in China and Australia

Australia and China have both recognized the need to explore more affordable, reliable and environmentally sustainable energy to support sustainable development in the long run (Australia. Dept. of Foreign Affairs and Trade 2012).  As net importers of fuel they share concerns about supply prices and security.  They have recently formally shared high-level political intentions to collaborate and compete in the fields of agricultural and energy.

2.1.1 Energy Situation in China

China is the world’s second-largest energy producer and consumer. It has rich fossil energy resources, dominated by coal, with estimated reserves of 1034.5 billion tonnes and the verified exploitable reserves of about 13% of the world’s total. But the exploitable reserves of oil and natural gas are relatively small (The State Council Information Office of the People’s Republic of China 2007). However, due to the large population, China’s per capita energy holding is extremely low -- 50% of the world’s average level for coal; only 15% of world’s average for oil and natural gas.

China’s rapid economic growth keeps placing significant stress on the energy resources supply, especially on oil. The gap between the energy demand and supply has been widening with a strong increase in the rate of energy consumption compared with the relatively limited energy production. This situation will worsen in the next few decades – according to the report of Research Group for China Medium- and Long- Term Energy Development Strategy 2011, oil demand will increase to 750 M T by 2050, while the crude oil production will stabilize at around 200 M T by 2050 (Chang et al. 2012). As a result, the reliance on imports will also rise and  three quarters of China’s oil supply will depend on import by 2030 (IEA 2008). To meet China's future energy demand and strengthen the national energy security, developing alternative energy, including biofuel, is a potential opportunity for China (The Information Office of the State Council of The People's Republic of China 2012)

2.1.2 Energy Situation in Australia

Australia’s energy resource is the envy of the world. The energy sectors’ export development underpins Australia’s persistent economic growth, as well as large proportion of the world’s energy demand (Geoscience Australia and ABARE 2010). The abundant surplus of fossil fuels, including coal, uranium and gas, means energy exports creates almost 20% of its GDP. However, among all the kinds of fossil energy resources in Australia, crude oil resource is limited and more imports are made to meet rising transport fuel demand. With the Liquid Natural Gas projects, Australia will be the 2nd largest LNG exporter by 2020; the coal and uranium export can also grow strongly over the next 20 years (Geoscience Australia and ABARE 2010). The proven reserve of brown coal, black coal and conventional gas can last 500 years, 100 years and 60 years respectively (Carroll & Darby 2012).

Energy demand both domestically and internationally particularly, with the social and economic development of Asia, the demand has been strong and foreign capital to establish mining infrastructure has increased rapidly into a boom. The fossil energy resources are ultimately finite. Australia's current energy policy appears focused on increasing the rate of exploitation of these resources to export markets as a secure, reliable and competitively priced energy expansion of energy exports to Asia and greater domestic energy efficient and to dramatic reductions in carbon emissions.  Interestingly biofuel is a marginal comment in Australia's Energy White Paper 2012 (Department of Resources Energy and Tourism 2012).

So both finding the new non-renewable energy resources and using more renewable energy resources are not as clearly on the Australian government policy agenda as they were four years ago.  Such is the policy cycle and underlying issues that there is an inevitability that biofuel policy will return to the agenda in future.

2.2 Pressure to Reduce Carbon Emissions on both Countries

China has adopted GHG emission reduction policies that shift from heavy dependence on fossil fuel to less-emission new energy resources, such as renewable energy. Being both a developing country and the world's number one emitter of GHG, China also faces the responsibilities and pressures of taking action to tackle the GHG emissions issue (Olivier et al. 2012). To sustain rapid growth and find new energy resources, while lowering air pollution and GHG emissions, has been becoming pressing task for Chinese government (NDRC 2007).

In 2008 Garnaut Climate Change Review Interim Report, a high quality independent report undertaken by Professor Ross Garnaut, was released. It analyzed the impacts of climate change on Australia’s economy and suggested that the Emission Trade Scheme (ETS) would be one of the most efficient approaches (Talberg et al. 2013). After the ratification of Kyoto Protocol came into effect in March 2008, the efforts of the Australian Government to fulfill the emission reduction commitment started to take off with the Carbon Pollution Reduction Scheme (CPRS) released and outlined the design of how to implement the ETS (Australian Government 2012d).

From 2007 to 2009, with the GHG emission reduction target, Australian Government went through its adjusting process and by May 2009 the targets were set as 5% reduction of 2000’s levels by 2020 under any kind of condition; 15% and 25% reduction compared by 2000’s levels by 2020 conditionally with other nations’ actions with climate change (Kevin Rudd (Prime Minister) 2009). In 2011, a longer emission reduction target was adjusted into 80% below 2000 levels by 2050 recorded in the Clean Energy Act (Australian Government 2014). Australia joined the second commitment period of Kyoto Protocol which was launched by the 18th UNFCCC in December 2012 (Australian Government 2012).

3 Impacts of Biofuel Policies

Biofuel policies have both positive and negative impacts to environment, economy and society. Globally, the positive impacts include easing the energy crisis and maintaining energy security (Demirbas 2009), reducing pollution and greenhouse gas emissions (CBD 2008; Charles et al. 2007; Cuevas-Cubria 2009; Demirbas 2009), improving the role of agriculture in national economic development (Birur et al. 2008), and raising farm income and promote regional economic development (Yang et al. 2009b). The drawbacks of this enhanced biofuel industry includes its competing for limited arable land in the long run (Havlík et al. 2011; Kojima & Johnson 2006), taking a lot of water resources, increased air pollution in its life-cycle (Kojima & Johnson 2006; Zhou & Thomson 2009), threatening food security (Ajanovic 2011; Kgathi et al. 2012; Rosegrant 2008), reducing government revenues (Kojima & Johnson 2006) and increasing prices of agricultural products worldwide (Cassman et al. 2006; Elobeid et al. 2006; Wild 2011).

3.1 Models for Evaluating the Impacts of Biofuel

Clearly, biofuel policies can cause many impacts. In the evaluation framework of the impacts, there need to be ways of collating what has been learnt so that adaptations and learning can occur.  Models that can account for the feedback mechanisms between biofuel policies and the related social, economic and environmental impacts may be particularly useful ways to gather what is known, to identify knowledge needs and to make analysis of possible futures more accessible to policymakers. Some of the leading models are briefly described below.

A life cycle analysis (LCA) can assess a product’s environmental impacts through all its life stages. Sperling and Gordon (2009) found that bio-ethanol produced by corn, cellulosic and sugarcane produced lower GHG emissions than gasoline, using multiple LCA. Rajagopal et al. (2011) improved the assumption in LCA by replacing both energy-equivalent amounts of fossil fuel and total fuel consumption and reached the conclusion that IFUC (indirect fuel use change) emissions have a significant impact on the net carbon emissions associated with biofuel. Similarly, indirect land use changes cannot be ignored in the assessments of biofuels and, by implication other policies. However, ILUC (indirect land use change) is difficult to model because of the many underlying factors. Prins et al. (2010) in their policy paper, suggested the most useful models in defining ILUC factors evaluated the necessary modeling features and enabled discussion of the results. They emphasized the models should consider the link between a new biofuel production chain and the dynamic global system, physical land use worldwide, and agricultural area expansion or change in consumption. Havlík et al. (2011) analyzed the relationships between expanding biofuel acreage and the ILUC effect utilizing Global Biomass Optimization Model (an economic partial equilibrium model that includes the global agricultural and forest sectors). They found that second generation biofuel production would lead to a negative ILUC factor, while the ILUC factor of first generation biofuel's global expansion is generally positive.

The economic models used to evaluate economic impacts of biofuel production growth can be divided into two categories according to the boundaries of the evaluated targets: partial-equilibrium (PE) models for single or regional market’s efficient source allocation and general-equilibrium (GE) models for the entire market’s efficiency. Focusing on the evaluation of biofuel policies’ impacts, Zhang et al. (2013) summarized models in these two categories – OECD model, IFPRI model, FAPRI model, and WEMAC model as PE models; and LEITAP model, Prudue I model, Prudue II model and FARM II model as GE models. And the differences among all the different models when they were used to evaluate the impacts were analyzed, and the reasons why the impacts resulted in a wide range were explained as well.

The outcomes of biofuel policies include an assessment of social, environmental and economic outcomes relative to the investments and relative to the opportunity costs of the investment.  This TBL (triple bottom line) ROI (return on investment) method is one model used by Australian rural R&D corporations that evaluated the multiple objectives of public investment in agri-environmental and natural resources management research.  The approach provides reliable information about the costs and the and impacts of projects and programs (Pearson et al. 2012). Questions about effectiveness and efficiency can be answered to some extent yet decisions about appropriateness will remain, rightly, a political issue.

4 Biofuel policy development in China and Australia

4.1 Biofuel Policy Development in China

China’s biofuel production capacity is generally increasing year-by-year from 2003 to 2012. Except for the 2010’s -2% increasing rate, from 2003 to 2012, the production capacity kept raising, especially the year 2004’s ethanol production capacity, which increased from previous year by 1400%. Because China launched the Ethanol Promotion Program in 2002, and with supporting program expanding steadily over time, the beginning several years’ production increasing rate is extraordinarily high.  In 2012, China’s biofuel production capacity was 2433 M L (Million Litres), up on 2255 M L in 2011, increased by 8% from previous year.

The subsidy to ethanol in China is adjusted every year. Before 2006, the subsidy kept increasing annually, but in 2007, Chinese government reduced the subsidy by 10% from previous year. Then after 2008 subsidy to ethanol continuously rise, before the amount of the subsidy dropped gradually until 2012 at 153 million US dollars.

Table1. Ethanol production capacity in China from 2003 to 2012

Units: Production capacity—million litres; Subsidies—US $million; Increase from Previous Year--%

Sources:(Bean et al. 2011; GSI 2008; House et al. 2007; Meador et al. 2012; Woolsey et al. 2009)

With regard just to biodiesel, China’s capacity for biodiesel production in 2012 was 3,408 M L; actual biodiesel production was at 568 M L. No official subsidies are currently available for biodiesel. Without government subsidies for biodiesel production, producers and processing plants must operate under inconsistent profit margins and price fluctuations. So there may be quite a gap between the actual production and production capacity.

It is useful to review China’s biofuel policies development process because it shows the drivers of current and future policy.  A tabulated summary is provided (Table 4) China's biofuel policy went through three major phases.  The first phase was before 2002. It was the beginning stage of the whole country’s biofuel development, by releasing the standards for “Denatured Fuel Ethanol” and “Biofuel Gasoline for Automobiles” which established the standards for the production of E10 (E10 is gasoline mixed with 10% ethanol);

The second phase (2002-2005) was the booming period for biofuel development with supporting policies, especially for ethanol. In 2002 and 2004, respectively, two pilot program were launched, they were the Pilot Testing Program and the Expanded Pilot Testing Programs of ethanol gasoline for automobiles. As a result, the expansion of E10 reached 5 provinces and 27 cities of other 4 provinces in China. In this phase, there were 4 main plants reaching the production capacity of 1.02 M T (million tons) annually by 2006. The main feedstock was maize, which was in line with the government intention to release the stale grain in the national storage following several years’ bumper harvest. In 2005, the Renewable Energy Law of China was passed. The law set out definitions of biofuel and promoted the development and utilization of renewable energies including liquid biofuel. Under the guidelines of the Renewable Energy Law, the Ministry of Finance (MOF) formulated in 2005 the new supportive policy provisions, for example, 5% consumption tax on all ethanol; the 17% of value added tax on biofuel production was refunded at the end of the year; a fixed level of direct subsidy was offered by the central government to ensure a motivating profit for each ethanol plant (Yang et al. 2009a).

After the second phase, characterized by the wide expansion of the biofuel production, questions like food prices, water and land use problems, emerged. So in the third phase (2006 until present) the Chinese government made some adjustment to the policies. Two important announcements were made by NDRC to control the expansion of grain-based ethanol industries.  The main purpose of these adjustments were to restrain development of maize-based ethanol and support the use of non-grain based feedstock, such as cassava, sweet sorghum and cellulose materials. In 2007, the NDRC issued the Medium and Long Term Development Plan for China’s Renewable Energy, setting the targets of 2.2 M T of ethanol by 2010 and 12 M T by 2020; 0.2 M T of biodiesel by 2010 and 2 M T by 2020. In both 11^th Five Year Plan and 12^th Five Year Plan established since 2008, the renewable energy use targets were set—total biomass energy consumption would be 50  M T of coal equivalent and non-fossil fuel energy consumption would increase to 11.4% of the energy mix, comparing with 11^th Five Year Plan’s 9.6%. (Qiu et al. 2012; Yang et al. 2009a)

Table2. China’s biofuel policies (in chronological sequence)

Source: (Qiu et al. 2012; Yang et al. 2009a).

4.2 Biofuel Policy Development in Australia

Australia’s biofuel capacity and its biofuel production capacity are generally increasing year by year. In 2011, Australia’s biofuel capacity was estimated at 655 M L (Million Litres), up on 463 M L in 2007; ethanol’s capacity was increased from 140 M L to 440 M L. For biodiesel, the capacity was relatively stable, which was 323 M L in 2007 and 215 M L in 2011. But the actual production was much lower than the capacity estimation. In 2007, the production of ethanol was 83 M L, and biodiesel’s production was 77 M L. Estimated by Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), Australia’s ethanol production was 440 M L, unchanged from 2011’s production; biodiesel’s production was 115 M L, up from 80 M L in 2011.

Table3. Biofuel capacity and production in Australia from 2007 to 2012

Unit: Million litres

Sources: (Carroll & Darby 2012; Pettrie & Darby 2009; Pettrie & Darby 2010; Pettrie & Darby 2011; Quirke et al. 2008)

Australia's Federal Government adopted several policy instruments to influence its biofuel production, including production targets, excise taxes, fuel quality standards, granted programs and funded projects. Among all these instruments, government grants and funds underpin all the other measures of promoting biofuel’s development in Australia. Of the 200 million Australian dollars committed to support biofuel in Australia the measures include:

·         Setting Production Targets -- Biofuels Action Plan addressed a biofuel target of at least 350 million litres by 2010 from the base of 28 million litres in 2005;

·         Excise Taxes Rebate-- The excise tax rebate is the largest elements of assistance for biofuel in Australia (Quirke et al. 2008). Before 30 June 2011, both domestic ethanol and biodiesel and imported biodiesel (imported ethanol is not included) were exempted from the A$0.38143 per liter excise duty which was granted by the Ethanol Production Grant and the Energy Grants—Cleaner Fuels Scheme. After eliminate the Ethanol Production Grant and the Energy Grants—Cleaner Fuels Scheme, the excise duty for alternative fuels would decrease to A$0.125, and were increasing annually by 2015-16 until it reach the 50% of excise on petrol and diesel on an energy-equivalent basis (O’Connell et al. 2007);

·         Granted Program and Funded Project -- $15 million from an election commitment granted program for R&D of second generation biofuel technologies in 2007; $37.6 million for the Biofuels Capital Grants Program to support new or expanded biofuel production capacity; $7.72 million funded by the National Collaborative Research Infrastructure Strategy to construct two pilot-scale facilities for development of novel biofuel production technologies and to enhance related laboratory infrastructure at three universities; Over $7.5 million for innovative renewable fuel projects funded under the Renewable Energy Development Initiative; and $17.2 million funded to the Ethanol Distribution Program to encourage petroleum stations to install new, or convert existing pumps to advocate the using of E10 blended fuel.

Conclusion

For China, national energy security and rural sectors’ income are the major drivers of biofuel policy, based on the increasing conflicts between its fast economy development and energy limitation on national level. The environmental benefits from biofuel have been treating more and more important under the setting of carbon emission reduction target and the air pollution in major cities nowadays. However, for Australia, in the context of biofuel policy, there are some basic differences. Australia with its smaller population and relatively sufficient domestic fossil fuel supply, biofuel policy support is not as strong as what China does. For Australia, the major drivers for its biofuel industry to develop are the pressure from climate change commitment and the opportunities of potential economic benefits for the upper stream of biofuel supply chain. The most important difference between these two countries is the consistency of the policy. With the new government elected in 2013, for the biofuel policy even with the whole renewable energy, there are several new policy changes to make the supporting for biofuel industry weaker. From this point of view, China has the stronger and more positive policy instruction for biofuel industry development which will show more benefits for Chinese society and economy in the longer term view.

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