ENERGY-CHINA: BIOFUEL PRODUCTION EATS INTO FOOD GRAIN STOCKS.

by Antoaneta Bezlova

BEIJING, Dec. 20, 2006 (IPS/GIN) -- Applying modernized versions of ancient chemical processes to convert crops and oils into energy sources, Chinese entrepreneurs have created a profitable green biofuels business with plenty of room to grow.

But surging crop prices have caused China to clamp down on the use of corn and other edible grains for producing biofuel. While it wants to support the growth of alternative energy sources, Beijing says the issue of national food security should take precedence over the country's green agenda.

"In China the first thing is to provide food for its 1.3 billion people, and after that, we will support biofuel production," the state-run newspaper People's Daily quoted Wang Xiaobing, an official at the Agriculture Ministry 's crops cultivation department, as saying this week.

China has been encouraging the production of biofuel such as ethanol and methane from renewable resources to reduce the country's growing dependence on imported oil. Once an exporter, China now imports at least 43 percent of its oil supply.

Biofuel is also seen as more environmentally friendly than petroleum products, which emit carbon pollutants when burned. Chinese economic planners have made the development of green energies, like ethanol fuel and biodiesel, a key priority in the country's five-year economic plan. By 2020 they want green energies to account for 15 percent of all transportation fuels.

Yet surging demand for biofuel is now partly blamed for recent price hikes in the food market and for shortages in grain stocks. Wheat prices are at their highest level in a decade, due to poor harvests in key producing countries like the United States and Australia, while corn prices have surged by up to 20 percent in local markets.