Global biofuel trends and insights

With the increasingly severe threat posed by climate change to human society, biofuels have gradually developed into a part of the global energy supply system. In the future, the carbon peak and carbon neutrality targets of major economies around the world are gradually approaching, and the trend of green energy transformation is becoming stronger. It is expected that the biofuel industry will still have significant growth potential for a long time. The biofuel industry is also a key target of various trade protection measures implemented by European and American countries; At present, China has established a certain scale of biodiesel and sustainable aviation fuel production capacity mainly for export to the EU market. In the event that the EU is likely to impose anti-dumping duties on the export of Chinese biodiesel, sustainable aviation fuel and other products, the future development of China's biodiesel and sustainable aviation fuel industry faces significant risks and uncertainties. Studying the development characteristics and current situation of the biofuel industry at home and abroad, and seeking a more suitable policy path for the independent development of China's biofuel industry, not only provides certain reference significance for the development of China's biofuel industry, but also better responds to future trade protection measures such as anti-dumping against China's biofuel industry by Europe and the United States.

1 Definition of biofuels and their carbon reduction characteristics
1.1 Definition and Types of Biofuels Biofuels refer to liquid or gaseous fuels produced from biomass (including organic matter obtained from plants and animals), which can be used for transportation, power generation, heating, and other industrial purposes, and can replace fossil fuels such as gasoline, diesel, kerosene, and natural gas. Biofuels mainly include Bio ethanol, Biodiesel, Sustainable Aviation Fuel (SAF), Bio Bunker, and Bio methane.
Bioethanol is produced by fermenting sugars in plants, often using starchy plants as raw materials. In the United States, corn is commonly used as a raw material; In Brazil, sugarcane is used as the raw material; Cassava and sweet potatoes are also commonly used as raw materials for bioethanol. Fiber ethanol is a fuel ethanol produced from fibers such as straw, crop hulls and stems, leaves, fallen leaves, forestry scraps, and urban and rural organic waste. It belongs to advanced bioethanol.
Biodiesel is a fatty acid methyl ester (FAME) formed by esterification of vegetable oil (such as rapeseed oil, soybean oil, palm oil, etc.), animal oil, waste oil (such as waste edible oil, gutter oil, etc.), or microbial oil with methanol or ethanol, Fatty Acid Methyl Esters， I.e. first generation biodiesel or second-generation biodiesel formed by hydroprocessing (HVO, Hydrogenated Vegetable Oil， Hydrogenated vegetable oil. The main component of hydrogenated vegetable oil is alkanes, which have properties identical to diesel and can be added to fossil diesel in any proportion.
Sustainable aviation fuel is mainly produced as aviation fuel through the HEFA (Hydroprocessed Esters&Fatty Acids) process, which involves the hydrogenation of esters and fatty acids. Its raw materials and processes are similar to those of hydrogenated vegetable oil. Sustainable aviation fuel can be added in any proportion with fossil aviation coal. Bioship fuel refers to marine biofuels, currently mainly composed of fatty acid methyl esters, such as waste cooking oil methyl ester (UCOME), UsedCookingOilMethylEster）。 Biomethane, also known as purified biogas, is produced by fermentation of agricultural waste and can be used to replace some fossil natural gas.
1.2 Characteristics of biofuels in promoting carbon reduction
The use of biofuels can effectively reduce carbon emissions. Replacing some fossil fuels with biofuels directly reduces the consumption of fossil fuels and avoids the carbon emissions generated during their combustion; At the same time, reducing the extraction of fossil fuels to a certain extent allows more carbon in the form of fossil fuels to be retained in the Earth's crust. Although the combustion of biofuels also generates carbon emissions, the combustion of biofuels generates heat and carbon dioxide, which is then recovered from the atmosphere through crop and animal growth, thus achieving the recycling of carbon in nature and reducing carbon emissions.
According to a study by the US Department of Energy, burning 100% biodiesel (B100 diesel) in vehicles can reduce carbon emissions by over 75% compared to burning fossil diesel; Even with the use of B20 diesel, carbon emissions can be reduced by 15%. The use of biodiesel can also reduce the emissions of harmful substances such as unburned hydrocarbons, carbon monoxide, sulfur, polycyclic aromatic hydrocarbons, nitrifying polycyclic aromatic hydrocarbons, particulate matter, etc.
2. Current Status and Characteristics of Global Biofuel Industry Development
2.1 The biofuel industry is an industry that relies on policy driven growth
Enterprises using biofuels to blend with fossil fuels often require additional investments in storage and transportation facilities, such as ethanol gasoline and biodiesel, which require additional blending facilities. Moreover, the cost of some biofuels is significantly higher than that of fossil fuels. Taking second-generation biodiesel (hydrogenated vegetable oil) as an example, in February 2024, the average price of hydrogenated vegetable oil in Northwest Europe was $932/ton higher than that of 10ppm sulfur content fossil diesel, while the average price of 10ppm sulfur content fossil diesel in Northwest Europe in the same month was $870/ton. Therefore, from a purely economic perspective, there are still certain difficulties in promoting biofuels. Some countries and regions promote the use of biofuels for the purpose of reducing fuel carbon emissions, often requiring corresponding policy measures such as mandatory additives, tax deductions, and other preferential policies. This makes the biofuel industry a policy driven industry.
According to the EU Climate Act, the EU will achieve carbon neutrality by 2050 and reduce net greenhouse gas emissions by at least 55% from 1990 levels by 2030. To this end, the EU has introduced 15 pieces of legislation, including a carbon border tax, collectively known as "Fitfor55", of which 3 are directly related to the use of biofuels, including the Renewable Energy Directive (RED), Renewable Energy Directive）、 The EU Renewable Aviation Fuel Regulation (Re Fuel EU Aviation Regulation) and the EU Ship Fuel Emission Reduction Regulation (Fuel EU Maritime Regulation).
Among them, the Renewable Energy Directive II (implemented in 2018) stipulates that by 2030, the share of renewable energy in the total energy of the European Union must reach 32%, and member states must require fuel suppliers to provide at least 14% of the energy consumed by road and rail transportation in the form of renewable energy; The Renewable Energy Directive III (passed in September 2023) stipulates that by 2030, the proportion of renewable energy in the overall energy of the European Union will be increased to 42.5%, and the goal of reducing greenhouse gas emissions by 14.5% or using 29% renewable fuels will be achieved.
The Renewable Energy Directive only specifies the basic amount of renewable fuels added by EU member states. Member states can increase the amount of high-grade biofuels produced using waste oils, cellulose, and other materials based on their actual resource endowments and emission reduction targets. The EU Renewable Aviation Fuel Regulation stipulates that starting from 2025, all aviation kerosene refueled at EU airports must contain 2% sustainable aviation fuel. The amount of sustainable aviation fuel refueled is expected to increase to 6% by 2030 and 70% by 2050. The EU ship fuel emission reduction regulations require ensuring a gradual reduction in the carbon emission intensity of ship fuels used within the EU shipping sector, with a reduction of 2% by 2025 and 80% by 2050. Due to the fact that currently mature bio ship fuels mainly consist of fatty acid methyl esters, such as waste edible oil methyl esters, it is expected that this regulation will significantly increase the demand for fatty acid methyl esters as ship fuels in the future.
The United States has established the Renewable Fuel Standard Program (RFS) based on a series of laws such as the Clean Air Act (CAA), Energy Policy Act (EPA2005), and Energy Independence and Security Act (EISA 2007), Renewable Fuel Standard Program）。 The Renewable Fuel Standard Project is a national policy framework that requires the use of a specific amount of renewable energy to replace a certain amount of road transportation, heating, or aviation fuel nationwide.
The Renewable Fuel Standard Project stipulates that the US Environmental Protection Agency needs to determine the mandatory biofuel addition target for the following year each year. To promote the promotion of renewable fuels, the US government has also introduced the Renewable Identification Numbers (RIN) system: after renewable fuels are produced, producers will naturally receive a renewable fuel identification number, which can be sold and circulated; Refineries with the obligation to add can fulfill their addition obligations by adding biofuels or by purchasing renewable fuel identification code values to meet their blending requirements. In addition, the United States has implemented a tax deduction policy of $1.01 per gallon for the production of second-generation biodiesel and $1.25 per gallon for the production of renewable aviation fuel.

2.2 Before 2050, there is still significant room for growth in the global biofuel industry. With the continuous promotion of low-carbon energy transformation worldwide, it is expected that the demand for biofuels will continue to grow until 2035. As mentioned earlier, the EU Renewable Energy Directive III proposes higher requirements for the addition of renewable energy; Starting from 2025, the EU Renewable Aviation Fuel Regulation and the EU Ship Fuel Emission Reduction Regulation will be implemented, which is expected to significantly increase the demand for sustainable aviation fuel and bio ship fuel. However, according to the new regulation (Regulation 2023/851) passed by the European Union on April 19, 2023, the EU will ban the sale of new internal combustion engine cars and light trucks after 2035, and aim to achieve a 55% carbon reduction in cars and a 50% reduction in light trucks compared to 2021 levels by 2030. Under this requirement, it is expected that the implementation of this plan after 2035 will not only reduce the demand for fossil fuels on roads, but also for biofuels on roads. Due to the stronger emission reduction requirements for internal combustion locomotives under this bill before 2035, the demand for road biofuels will continue to grow at least until 2035. It is expected that after 2035, the increase in demand for sustainable aviation fuel and bio ship fuel will compensate for the decrease in demand for road biofuels. The sustainable aviation fuel industry is currently in its early stages of development and has great potential for future growth. The International Civil Aviation Organization and its member states have committed to achieving carbon neutrality in the aviation industry by 2050 and reducing carbon emissions by 5% by 2030 through the use of clean fuels, including sustainable aviation fuels. In 2023, sustainable aviation fuel will only account for 0.2% of global aviation coal consumption. The International Air Transport Association (IATA) predicts that 65% of carbon emissions reduction in the aviation industry by 2050 will need to be achieved through sustainable aviation fuels.

In July 2023, the International Maritime Organization (IMO) adopted the Strategy on Reduction of GHG Emissions from Ships, committing to achieving net zero carbon emissions from ship fuels by around 2050, significantly increasing the use of alternative fuels or zero carbon ship fuels by 2030, reducing emissions by at least 20% by 2030, and striving to reduce emissions by 30%; Reduce emissions by at least 70% by 2040 and strive for 80%. It is expected that carbon emissions reduction in the shipping industry will gradually advance, and the demand for biofuels for ships will continue to grow in the future. According to research by the International Energy Agency (IEA), it is expected that in the scenario of achieving net zero carbon emissions by 2050, the global demand for liquid biofuels used to blend gasoline, diesel, ship fuel oil, and aviation coal will increase to 238 million tons by 2030; The demand will reach a peak of 263 million tons by 2040. Due to the ban on the sale of internal combustion locomotives and the further popularization of electric vehicles in various countries, the global demand for biofuels is expected to slowly decrease after 2040, and is projected to drop to 191 million tons by 2050.

2.3 The development of the biofuel industry faces bottlenecks in raw material supply, and technological progress is needed to meet future growth demands
According to a study by the International Energy Agency, the actual rate of increase in global biofuel production is currently lower than the growth rate required to meet carbon neutrality by 2050. From 2018 to 2022, the global supply of biofuels will increase by 4% annually; In the context of achieving global carbon neutrality by 2050, the annual growth rate of global biofuel supply needs to reach 13% to meet the level of increasing to 238 million tons by 2030. The main reason for slower supply growth than potential demand growth is the limitation of renewable raw material supply. According to the International Energy Agency, the global potential for sustainable bioenergy resources is approximately 100 exajoules (1 exajoule equals 1018 joules), of which only 10 exajoules are used for bioenergy production. High grade biofuel resources that comply with the EU Renewable Energy Directive, such as Used Cooking Oil (UCO), waste food, crop waste, animal fats, etc., only account for 12% of the total biofuel production.
In the future, to increase supply, it is necessary to include crops, agricultural and forestry residues, and other raw materials produced on marginal land or abandoned farmland in the category of high-grade biofuel raw materials, which will not conflict with food and feed supply. By 2030, the supply of high-grade biofuels needs to account for 40% of the total biofuel supply; By 2050, the supply of high-grade biofuels needs to account for 75% of the total biofuel supply. The International Energy Agency's research suggests that harvesting crops grown on marginal and abandoned land can meet the increased demand for biofuel raw materials. Although there is potential for an increase in the supply of biofuels in the future, further technological development is needed to improve the level of biofuel collection and productivity while maintaining low-carbon emission levels in order to achieve the supply goals required for carbon neutrality.
2.4 The development of the biofuel industry in various countries depends on their policies and resource endowments, with Europe and America being the main importing regions
Taking biodiesel as an example, according to the BP World Energy Statistical Yearbook, in 2020, the global biodiesel production was 716000 barrels per day, with palm oil, soybean oil, and rapeseed oil as the main raw materials; Only about 10% of biodiesel raw materials are waste oils and fats. Europe is the largest demand and production region for biodiesel. The main raw materials for biodiesel in Europe are rapeseed oil and waste edible oil, supplemented by some palm oil and animal fat; American biodiesel is mainly made from soybean oil, supplemented by waste edible oil, animal fat, etc. Central and South American countries use soybean oil as the main raw material for biodiesel. Indonesia and Malaysia in the Asia Pacific region are the world's first and second largest producers of palm oil, respectively, using palm oil as their main raw material. The policy of adding biodiesel in Europe and America is more stringent, and there is a supply gap, which makes the export of biodiesel raw materials and products from Asia Pacific to Europe and America a major trade flow (due to oversupply in the Asia Pacific region and supply gap in Europe and America).
2.5 European and American countries introduce relevant trade protection measures to protect their biofuel industry
Compared to fossil fuels, the biofuel industry is smaller in scale and more susceptible to supply shocks; Moreover, the biofuel industry often involves the agricultural sector, and the production process often involves government subsidies, which has made the biofuel industry a key target of trade remedy measures such as anti-dumping and anti subsidy in Europe and America. The current trade remedy measures implemented by Europe and America against the biofuel industry are as follows: In 2009, the EU imposed anti-dumping and countervailing duties of 409.2 euros/ton on biodiesel imported from the United States, mainly because domestically produced biodiesel in the United States enjoyed the US government's $1/gallon tax deduction policy; In 2021, the EU will extend this policy for another 5 years; In February 2019, the European Union once again imposed a 25% to 33.4% countervailing duty on imported biodiesel from Argentina; In August 2019, the European Union imposed a countervailing duty of 8% to 18% on biodiesel imported from Indonesia; On November 9, 2017, the US Department of Commerce announced a final affirmative ruling on the import of biodiesel from Argentina and Indonesia, extending the countervailing duty again in April 2023.
According to the appeal of the EU Biodiesel Association, on December 20, 2023, the European Commission began an anti-dumping investigation into Chinese exports of biodiesel to Europe. The investigation will be completed within 14 months and temporary anti-dumping measures may be taken within 7 months of initiation. From the third quarter of 2022 to the second quarter of 2023, the normal average price of biodiesel in the European Union is 2500-3000 euros/ton; The CIF price of biodiesel exported from China to Europe is between $1300 and $1415 per ton, and the European Biodiesel Association has determined that China's dumping margin is between 98% and 117%. Considering the decrease in production, sales, and capacity utilization of biodiesel companies within the European Union, as well as the significant increase in China's export volume, it is expected that there is a high possibility of the EU imposing anti-dumping duties on Chinese biodiesel exports to Europe.
Due to the fact that China's major producers of hydrogenated vegetable oil also have the ability to produce sustainable aviation fuel, the scope of this anti-dumping duty may also include sustainable aviation fuel. According to the EU's anti-dumping policy, the EU may impose temporary anti-dumping duties on Chinese exports of biodiesel as early as June or July 2024.
3 Development of China's biofuel industry
3.1 China has made certain progress in promoting fuel ethanol
In 2006, China began to gradually popularize ethanol gasoline in Henan Province through pilot projects. In 2017, 15 ministries including the National Development and Reform Commission and the National Energy Administration issued the "Implementation Plan for Expanding the Production of Biofuel Ethanol and Promoting the Use of Ethanol Gasoline for Vehicles" (hereinafter referred to as the "Plan"). Prior to the release of this plan, 11 provinces and regions in China (including the entire regions of Heilongjiang, Henan, Jilin, Liaoning, Anhui, and Guangxi, as well as 31 cities in Hebei, Shandong, Jiangsu, Inner Mongolia, and Hubei) had piloted the promotion of ethanol gasoline, with ethanol gasoline consumption accounting for 20% of the total national gasoline consumption during the same period.
The introduction of the plan further promoted the promotion of ethanol gasoline and fuel ethanol. In 2022, China's fuel ethanol production will be approximately 2.7 million tons per year, with an output value of approximately 14.82 billion yuan per year. Fuel ethanol production will mainly rely on raw materials such as corn and wheat, supplemented by other raw materials such as cassava, sweet sorghum, and industrial exhaust. In 2022, the No. 1 central document proposed to strictly control the processing of fuel ethanol using corn as raw material. Although China's fuel ethanol industry started late, it has developed rapidly and has now become the world's third-largest producer of fuel ethanol.
3.2 Production of Biodiesel and Sustainable Aviation Fuel in China
China has established a certain production capacity for biodiesel and sustainable aviation fuel, which have the characteristics of small average scale, scattered distribution, and high compliance risks.
In recent years, with the introduction of relatively aggressive low-carbon energy transformation policies in Europe, the demand for biofuels, mainly biodiesel, has significantly increased in European countries. In addition, biodiesel has a high added value, which has led to the rapid expansion of China's biodiesel production capacity. The country has also introduced some policies to encourage the production of biodiesel, such as the "Notice of the Ministry of Finance and the State Administration of Taxation on Exempting Consumption Tax on the Production of Pure Biodiesel from Waste Animal and Vegetable Oil" (Caishui [2010] No. 118), which stipulates that pure biodiesel produced from waste animal and vegetable oil as raw materials is exempt from consumption tax; The proportion of waste animal and vegetable oil raw materials used shall not be less than 70%; In addition, subsidies will be provided to recognized biodiesel production enterprises in the form of partial tax refunds. Some second-generation biodiesel producers, such as Eco Ceres, Henan Junheng, and Haixin Energy Technology Company, also have sustainable aviation fuel production capabilities. As of October 2022, there are over 40 biodiesel production enterprises in China with a certain production scale.
An important characteristic of the biodiesel industry is that the scale of production enterprises is much smaller than that of fossil fuel production enterprises, mainly due to limitations in raw material supply. Taking Europe as an example, in 2022, there were 171 fatty acid methyl ester factories in the European Union, with a total nominal production capacity of approximately 15.46 million tons per year, and an average nominal production capacity of only about 90000 tons per year. In fact, some suppliers are just factories composed of a group of farmers, with a production capacity of only 2.3 million liters per year (about 1800 tons per year).
Chinese biodiesel producers also have similar characteristics, namely small scale and dispersed production capacity. Chinese fatty acid methyl ester producers mainly use waste edible oil as raw material, while second-generation biodiesel producers mainly use Palm Oil Mill Effluent (POME) imported from Indonesia as raw material. The production technology of fatty acid methyl esters is relatively mature both domestically and internationally, and manufacturers such as Zhuoyue New Energy and Jiaao Environmental Protection are steadily exporting to the European market; Some hydrogenated vegetable oil producers, such as Haixinneng, Yisli, Henan Junheng, etc., have achieved technological breakthroughs through independent research and development, establishing stable channels for exporting hydrogenated vegetable oil to Europe. Yisli is the second largest sustainable aviation fuel supplier in Europe in 2022.
Some Chinese producers of hydrogenated vegetable oil also introduce advanced foreign technology packages for the production of hydrogenated vegetable oil or sustainable aviation fuel. Due to the dispersed production capacity of fatty acid methyl ester producers, the product quality of some smaller producers may vary greatly; In addition, some Chinese biodiesel producers are facing compliance issues with raw materials, and there may be a few cases of using raw materials with poor carbon reduction effects (such as raw olive oil) to impersonate high-grade biodiesel raw materials (such as waste edible oil and palm oil). The issue of compliance in China's biodiesel industry has attracted the attention of the European Union, and the anti-dumping investigation launched by the EU against China's biodiesel industry at the end of 2023 also includes an investigation into such compliance issues.
3.3 China's biodiesel production capacity mainly targets the export market
Although China's national policies are gradually increasing their support for the biodiesel industry, overall, the promotion and use of biodiesel in China is still in the pilot stage. According to the sixth phase of the national "Vehicle Diesel" regulation, it is allowed to add no more than 1% BD100 (pure) biodiesel to vehicle diesel; The national standard "B5 Diesel" also requires the addition of 1% to 5% BD100 biodiesel, but currently China has not introduced a widespread biodiesel addition policy. Shanghai is the only region in China that implements mandatory addition of biodiesel, requiring the addition of 5% biodiesel (B5 diesel) to automotive diesel; At the same time, the municipal finance will allocate funds to subsidize the sales of B5 biodiesel at B5 biodiesel gas stations, water gas stations, and internal gas stations, with a maximum of 0.24 yuan/liter. From this, it can be seen that the domestic demand for biodiesel in China is limited. Therefore, the Chinese biodiesel industry is a typical export-oriented industry, with most of its production capacity aimed at export markets, especially the European market.
3.4 Anti tilt from the European Union
Sales pressure
As mentioned earlier, the sales of biodiesel in China heavily rely on the EU market. Once the EU imposes anti-dumping duties on China's exports of biodiesel and sustainable aviation fuel to Europe, it will seriously damage the export competitiveness of China's biodiesel and sustainable aviation fuel products. Chinese biodiesel enterprises will face significant market pressure, leading to difficulties in the operation of many production enterprises, reducing the industry's operating rate and profit level, and even possibly causing some production capacity to shut down.
3.5 Resource potential of Chinese kitchen waste oil as a biofuel raw material
There is great potential for the collection of kitchen waste oil in China, which can provide resource guarantees for the future development of biodiesel and sustainable aviation fuel industries.
Due to the influence of people's dietary habits, China is the most important resource country for waste edible oil. According to the National Grain and Oil Information Center, China's annual consumption of edible oil in 2021 was approximately 42.55 million tons, accounting for about 20% of global consumption and ranking first among global edible oil consuming countries. It is estimated that the amount of waste oil generated accounts for about 30% of the total consumption of edible oil, corresponding to approximately 12 million tons of waste oil generated from edible oil consumption in 2021. Since 2010, China has promoted 86 pilot projects for the resource utilization and harmless treatment of kitchen waste, with a total annual collection of approximately 2.6-2.7 million tons of waste edible oil. According to the statistics of the US Department of Agriculture, China produces the world's largest amount of waste edible oil every year, about 10.37 million tons, but only 25% to 30% of the waste edible oil is collected and used, with an annual collection of about 2.6 to 3 million tons. Therefore, there is still great potential for China to explore in the collection of waste oils and fats.
Although there is enormous potential for the supply of waste oil and fats in China, the country has not implemented extensive policies for adding biodiesel. At the same time, China's waste edible oil does not have a cost advantage compared to palm oil imported from Indonesia. This makes China's waste edible oil mainly supplied to foreign export markets, which also leads to the dependence of China's waste edible oil resources on international markets for digestion. From 2019 to 2023, the average growth rate of China's waste edible oil exports reached around 30%, making China the world's largest exporter of waste edible oil. From the perspective of the main destinations for China's waste edible oil exports in 2023, the top two export destinations are the United States and Singapore, both of which are major producers of hydrogenated vegetable oil and sustainable aviation fuel.
By the end of 2023, the global production capacity of sustainable aviation fuels (ester and fatty acid hydrogenation) and biodiesel (hydrogenated vegetable oil) will be approximately 16 million tons, with half of the capacity located in the United States. In addition, Neste, a European company, is the world's largest producer of hydrogenated vegetable oil and sustainable aviation fuel at its factory in Singapore. Its ester and fatty acid hydrogenated and hydrogenated vegetable oil production capacity is approximately 2.6 million tons per year, making Singapore one of China's main destinations for exporting waste edible oil.
4 Policy Implications
4.1 China may consider moderately expanding the mandatory addition scope of biodiesel and introducing sustainable aviation fuel addition policies
Considering that China already has a certain scale of biodiesel production capacity, and the export of biodiesel products has encountered anti-dumping resistance from the European Union, as well as China's natural resource advantages in using kitchen waste oil to produce biodiesel, the country can consider introducing corresponding policies to appropriately expand the scope of mandatory biodiesel addition, and introduce a policy of mandatory addition of sustainable aviation fuel for domestic flights departing from China, while increasing the collection of kitchen waste oil. The main driving factors of these policies are as follows.
4.1.1 Promote the achievement of China's carbon peak and carbon neutrality goals
China strives to achieve carbon peak before 2030 and carbon neutrality before 2060, which is a major strategic decision made after careful consideration. It is China's solemn commitment to the international community and an inherent requirement for promoting high-quality development. According to data from the International Energy Agency, the transportation sector will account for approximately 10.4% of China's total carbon emissions in 2022. Among them, the carbon emissions of road freight transportation account for over 60%, while the carbon emissions of heavy-duty trucks account for over 85% of road freight transportation. In the field of highway transportation, the electrification of trucks, especially heavy-duty trucks, is difficult, and diesel is still the main fuel for trucks. By promoting the use of biodiesel, carbon emissions in the field of highway transportation can be effectively reduced. The aviation industry is also one of the difficulties in reducing carbon emissions, and currently using sustainable aviation fuels is the main path for decarbonization in the aviation industry. The civil aviation industry is a global industry. Against the backdrop of major European and American countries implementing mandatory policies for the addition of sustainable aviation fuel, China has introduced a certain proportion of sustainable aviation fuel addition policies, which not only conforms to the global trend of carbon reduction, but also helps to reduce carbon emissions in the civil aviation industry. Expand the scope of mandatory addition of biodiesel and attempt to introduce a policy of mandatory addition of sustainable aviation fuel, which will directly reduce carbon emissions through the use of biofuels and promote the achievement of China's carbon peak and carbon neutrality goals.
4.1.2 Assist China's biodiesel and sustainable aviation fuel industries in obtaining a stable Chinese market when facing foreign trade protection policies
One of the characteristics of the biofuel industry is that it is easy to become a target of trade protection policies in developed countries in Europe and America. If the EU imposes anti-dumping duties on Chinese biodiesel products, a large number of biodiesel producers in China will quickly face the dilemma of losing their main market. At this time, China's mandatory addition policy for biodiesel and sustainable aviation fuel will undoubtedly provide a broader and more stable Chinese market for biodiesel producers.
4.1.3 It helps to achieve the full utilization of kitchen waste oil resources, turn waste into treasure, and develop a circular economy. As mentioned earlier, the waste edible oil currently produced in China is mainly supplied to the export market. According to data from Zhuochuang Information, the apparent consumption of diesel in China in 2023 is 203648100 tons; If B5 diesel (with the addition of 5% biodiesel) is promoted nationwide, it can create a domestic demand for biodiesel of about 10 million tons per year, promoting the expansion and production of Chinese biodiesel manufacturers; In the context of relatively tight supply of other biodiesel raw materials, driving the demand for Chinese waste edible oil as biodiesel raw material not only prevents kitchen waste oil from flowing back to the dining table, but also realizes the recycling of resources and turns waste into treasure. At present, the collection rate of kitchen waste oil in China is only 25% to 30%, far lower than the 80% collection level in developed countries such as the United States, and there is still great potential to be explored.
4.2 Introduce supporting policies to support the development of biodiesel and sustainable aviation fuel industries, and promote industry self-discipline and healthy development
4.2.1 On the basis of mandatory addition, promote the production of biodiesel and sustainable aviation fuel products through market-oriented mechanisms. Enterprises that use biodiesel and sustainable aviation fuel can obtain certain carbon credits and sell them in the market to offset the relatively high production costs of biodiesel and sustainable aviation fuel due to the actual reduction of carbon emissions. The Notice of the National Energy Administration on Organizing Pilot Demonstrations for the Promotion and Application of Biodiesel (National Energy Development Science and Technology [2023] No. 80) proposes to actively promote the establishment of a methodology for carbon reduction in biodiesel, promote the inclusion of biodiesel in the national voluntary emission reduction (CCER) mechanism, and accelerate the realization of the green value of biodiesel. In addition, the country can also consider increasing financial subsidies and support for biodiesel production and distribution enterprises in the early stages of industrial development, so as to quickly establish the supply chain and ultimately promote the expansion of product supply.
4.2.2 Strengthen the supervision of the biodiesel and sustainable aviation fuel industry chain to ensure the green emission reduction effect of the entire industry chain
The International Sustainability and Carbon Certificate (ISCC) is a certification launched by the industry to promote sustainable development and carbon reduction in industries. The organization is jointly established by over 250 partner institutions distributed worldwide. ISCC certification strictly implements the requirements of the EU Renewable Energy Directive, ensuring the traceability of the industry chain and the integrity of the chain of custody to ensure the low-carbon emission reduction attributes of the entire biofuel industry chain. Enterprises engaged in biofuel business and exporting to the EU must have ISCC certification. The Chinese government can take the lead in establishing industry regulatory and self regulatory organizations, strictly implement the requirements of ISCC on mass balance, traceability, and industry supervision chain, and introduce strict disciplinary measures to prevent the falsification and adulteration of raw materials and products, achieve industry compliance development, and truly play a role in reducing emissions, carbon reduction, and green development.
4.2.3 Introduce policies to encourage the development of the waste edible oil collection industry, providing sufficient raw materials for the biodiesel and sustainable aviation fuel industries
From the perspective of achieving green energy transformation, we are considering incorporating the waste edible oil collection industry into the national energy supply system, attempting to introduce a nationwide policy for paid recycling of waste edible oil, and providing certain financial and tax subsidies to waste edible oil collection enterprises to promote rapid industrial growth, fully tap into the potential of kitchen waste oil resources, and provide sufficient low-carbon raw materials for the development of China's biodiesel and sustainable aviation fuel industries.