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China set for ethanol binge as Beijing pumps up renewable fuel drive

BEIJING (Reuters) – China’s bold plan to blend renewable fuels into its gasoline supply within three years will revolutionize its fledging biofuels industry, industry players said, likely spurring billions of dollars in investment in ethanol factories.

On Wednesday, state media reported Beijing plans to roll out the use of a gasoline known as ‘E10’ – containing 10 percent ethanol – across the world’s largest car market by 2020. It’s the first formal timeline in a radical push that’s part of a broader drive to clean up the environment.

The move doubles up as part of the government’s effort to boost industrial demand for corn. Beijing must find a way to work off a stockpile of 200 million tonnes – so big it could feed China’s 1.4 billion people for more than a year – after decades of buying the crop to support farmers in a country haunted by post World War II famine.

“More money will now flow in, including from private and foreign investors,” said Li Qiang, chairman of consultancy JC Intelligence Ltd, predicting boom times for ethanol. More than 10 new ethanol plants are planned in the northeastern cornbelt, according to JC Intelligence.

Most of those will go on line next year, adding 3 million tonnes of capacity, the consultancy predicts. Reuters estimates, based on industry officials’ calculations, suggest an ethanol plant of average capacity – about 300,000 tonnes per year – costs about 1 billion yuan ($153 million) to build.

While skeptics may question the feasibility of such a rapid rollout, Wednesday’s news also comes days after Beijing said it is studying when to ban production and sale of cars using fossil fuels. It adds to potential headaches for the oil industry, which could lose a sizeable portion of the 150-million-tonne gasoline market worth 26.2 billion yuan at current retail prices.

MAJOR VICTORY

The planned rollout marks a major victory for domestic ethanol producers, which have struggled to compete with cheap oil…

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