December 21, 2006

China halts ethanol expansion to control price rise

Beijing, China – China has suspended further expansion of its ethanol industry in order to control rising grain prices, which officials say could trigger social unrest. Grain prices rose almost five per cent in November, prompting the National Development and Reform Commission to order local governments to stop approving new projects that process corn for industrial uses.

Instead, local governments have been asked to use non-grain vegetation for biofuel production, and to develop the industry more effectively. China currently produces 10 million tonnes of ethanol, which is added to the country’s gasoline. The country processed more than 23 million tonnes of corn for industrial use in 2005, an increase of 84 per cent from 2001, but corn production only rose by 21.9 per cent over the same period. There is also concern that expanding corn production will affect the production of wheat and rice.

Gasoline mixed with ethanol is sold in five provinces and 27 cities in China, accounting for 20 per cent of the country’s total gasoline consumption.

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