Our country imposes strict controls on projects for converting rapeseed into biodiesel

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The executive meeting of the State Council held on September 19 called for strict control over projects for converting rapeseed into biodiesel. This means that China has begun to control the rise in prices of rapeseed and vegetable oils by curbing demand, thereby safeguarding food security. 　　It was quite unusual for the executive meeting of the State Council held on September 19 to focus specifically on the issue of rapeseed. In addition to calling for strict control over projects related to the conversion of rapeseed into biodiesel, the meeting also proposed policy measures to support oilseed production, including establishing and improving reserve systems for soybeans (4177,14,0.34%) and edible vegetable oils, developing futures markets for oils and oilseeds, and setting up early warning systems for production and sales. In light of the spirit of this meeting, industry experts believe that relevant measures and regulations to implement its outcomes are likely to be introduced soon. 　　This decision made by the State Council’s executive meeting aims to stabilize current vegetable oil prices from the perspective of demand control, in order to safeguard **food security**. 　　UnionPay Research Analysis: Traditionally, rapeseed in China has been mainly used for human consumption or as protein feed for animals. The rise in crude oil prices has changed the culinary use of rapeseed oil, with its energy role receiving increasing attention. On August 3, 2005, Wang Hanzhong, director of the Oil Crops Research Institute at the Chinese Academy of Agricultural Sciences, said that Chinese experts had found through years of research that rapeseed is an ideal raw material for developing biodiesel in China. Some developed countries have already put biodiesel into use in the market. 　　In June 2005, experts such as Wang Hanzhong submitted a proposal titled \"Plan for the Development of Rapeseed Biodiesel\" to the central government. The recommendations offer a highly optimistic assessment of the prospects for converting rapeseed oil into biodiesel, advocating for the vigorous development of biodiesel in the country. 　　I. Reasons for Converting Rapeseed into Biodiesel The continuous rise in international crude oil prices is the fundamental reason why countries are researching alternative products to petroleum. On September 15, 2006, the international crude oil price (Brent spot) was 60.23 dollars per barrel; by September 14, 2007, the Brent spot price had risen to 77.47 dollars per barrel, representing a cumulative increase of 28.62%. 　　Since the fatty acid carbon chain composition of canola oil is similar to that of diesel molecules, and canola oil can be used to produce biodiesel, it serves as an ideal alternative to mineral diesel; therefore, using canola oil to manufacture diesel has become a key focus in the development of various **strategic energy sources in recent years. 　　 　　Data source: Longzhong Petrochemical Business Network II. Current status of biodiesel development at home and abroad (I) Current status of biodiesel development abroad At present, the use of rapeseed for biodiesel production has become widespread abroad. European countries such as Germany have established regulations requiring a certain percentage of biodiesel to be added to diesel, in order to reduce exhaust pollution from vehicles. In 2004, the EU produced approximately 1.6 million tons of biodiesel made from rapeseed oil with low erucic acid content, which accounted for 80% of the total biodiesel production in the EU during that period, thereby helping to alleviate the shortage of diesel. By 2010, the EU **was expected to produce over 3.4 million tons of biodiesel from rapeseed with low erucic acid content. The United States has been putting biodiesel into commercial use since the early 1990s, and it has reached a significant scale in the past two years. Countries such as Canada, Brazil, Japan, Australia, and India are also actively developing this industry. 　　(II) Current Status of Biodiesel Development in China 　　1. Successful Development of High-Oil-Carrying Rapeseed 　　In 2005, the Chinese Academy of Agricultural Sciences successfully developed a rapeseed variety with high oil content — Zhongyou 036. CNPC 036 has an oil content as high as 51.97%, whereas ordinary rapeseed typically has an oil content of around 41%. The success of oil-rich rapeseed varieties helps to increase the biodiesel conversion rate and reduce conversion costs. 　　Since 2006, many places such as Wuhan and Jiangsu have been planning to launch projects for producing biodiesel from rapeseed. At present, China Cereals, Oils & Food Holdings Co., Ltd. plans to redirect the funds raised for the planned investment in fuel ethanol projects toward its \"seed oil processing business\". 　　2. High profits attract multinational companies to enter the market. To cope with high oil prices, Europe has made extensive use of rapeseed to produce biodiesel in recent years, and it also implements subsidy policies for biodiesel. Seeing profit potential, some foreign companies have invested in China to obtain biodiesel raw materials, which are then exported to Europe to receive subsidies. 　　To more easily access rapeseed resources, international energy companies have begun setting up factories in our country to produce rapeseed biodiesel. In 2006, the Austrian company Bühler built a biodiesel processing plant in Nantong, Jiangsu, with the intention of producing 265,000 tons of diesel. In addition, Biru Company also plans to build 10 biodiesel plants in China, with each plant having an annual production capacity of 100,000 tons. . 　　III. The impact of the biodiesel program on the national economy The direct consequence of converting rapeseed into biodiesel is an increase in the prices of various domestic oil crops and vegetable oil products. The data show that soybean oil, which accounts for the largest share of vegetable oils in China (8556,78,0.92%), saw an increase of between 43% and 63% from the end of October 2006 to August 2007; thereafter it declined slightly, but by only 1% to 7%. 　　The rapeseed-based biodiesel conversion program will also affect the composition of domestic food production. The profit-seeking nature of capital will inevitably lead to the shift in agricultural production toward products with higher profitability. The increasing demand for rapeseed and its related products has led to a rise in rapeseed production. With the available area for agricultural production in the country remaining fixed, it is necessary to sacrifice those crops that yield lower profits in order to meet the demands of rapeseed production. Over time, this will pose a threat to **food security**, and the awkward situation of using corn (1645,-15,-0.90%) to produce fuel ethanol will repeat itself. 　　IV. Policy Risk Analysis 　If the State Council’s policy of \"strictly controlling projects for converting rapeseed into biodiesel\" is implemented, many planned projects will be affected. The prospects for China Cereals, Oils & Food Holdings Co., Ltd.’s \"seed oil processing business\" are uncertain, and the project planned by Austrian company Bühler in China may also face the risk of being aborted. 　　At present, research on rapeseed-based biodiesel production projects in our country is still at the laboratory stage, and no real economic benefits have been achieved. Developing biodiesel is a systematic project that requires the improvement of various aspects such as genetic modification, processing, chemical engineering, machinery, economics, policies, and markets. At the same time, comprehensive consideration must also be given to environmental pollution during the processing process and to the quality of biodiesel. At present, China must proceed with caution in developing biodiesel.