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Beijing - A shortage of farmland and a government priority to grow food crops for China, the most populous country, could hamper plans by the country's oil companies to produce biofuels on a large scale.
Rules that China published this week are aimed at preventing "a mad rush of companies jumping on the bandwagon" of making fuels from plants and animals, said Li Baoshan, who heads the materials division at the Science and Technology Ministry.
China National Petroleum Corp. is among companies planting Barbados nuts, yams and other crops that can be turned into fuels for cars. Such projects will be supported only as long as there is an adequate supply of grain, the Finance Ministry said last month, to avoid having to import food for the 1.3 billion people in China. Corn prices on the Dalian Commodity Exchange rose to a record Friday.
"If China starts importing rice globally, the price will go up dramatically, because the volume and the number of people is so large," Khalid Malik, representative of the United Nations Development Program in China, said during an interview Wednesday in Beijing.
Biofuels include liquids like ethanol, made from crops like sugar or grains, and biodiesel, made from vegetable oils or animal fats. They are blended with gasoline and diesel to reduce pollution from vehicle engines.
China is on track to surpass Japan as the world's second-largest vehicle market after the United States this year, increasing its interest in alternative sources of fuel. Car sales rose to 3.41 million vehicles in the 11 months through November, the China Association of Automobile Manufacturers said last week.
Construction, pollution and natural disasters are decreasing the land area China has available for food crops.
The amount of land that had been set aside for the wheat crop but was not fit to be farmed this year jumped 24 percent, the Shanghai Securities News reported last week.
Some of China's renewable energy supplies will have to come from biofuels, Malik said, "but how much of it, how far to go for it and what this means for global prices, we should think very carefully."
China set rules this week requiring investors to get state approval for bioethanol projects. "Some regions are overheated with investments in this sector," the National Development and Reform Commission, the top state economic planner, said Monday.
China has become the world's third-largest bioethanol producer and consumer, after Brazil and the United States, the commission said. Beijing halted approvals for new corn-to- ethanol ventures because of "rash" investments in such projects, the official Xinhua press agency said Tuesday.
The rules are a precursor to a five-year plan to develop the Chinese biofuel industry, reducing the nation's dependence on oil and supporting the country's 800 million farmers. A first draft of the plan was completed in September, the planning commission said two months ago.
"The allocation of resources is the core issue the biofuel industry faces," Li of the Science and Technology Ministry said. "The technology for processing the oils into fuels is available, but farmers need to be convinced about the economic viability of growing the crops."
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