Aiming to lessen its reliance on petroleum, 50 per cent of which is imported, the mainland wants to produce 10 million tonnes of ethanol by 2020, to complement other alternative energy sources such as solar and wind power.

So far, 10 mainland regions, including Beijing, Jiangsu and Guangxi, are using ethanol in public transport.

Last year, the mainland produced 1.5 million tonnes of ethanol, which accounted for less than 1 per cent of the overall fuel supply, with 75 per cent of that produced by Cofco. The company runs four plants in Heilongjiang, Jilin, Guangxi and Anhui with corn and tapioca the main raw materials.

Brazil is the biggest user of ethanol produced by corn, which accounts for 50 per cent of all fuel used in transport there. The United States ranks second, with ethanol making up between 8 per cent and 10 per cent of transport fuel.

Cofco's path to developing biofuel has not been particularly smooth.

It first explored ethanol, an alcohol made from sugar in grains such as corn, rice, sorghum and sugar cane, hoping to produce a fuel blend designed to reduce pollution from carbon-dioxide emissions.

But Beijing recently urged the company to explore other raw materials due to concerns that using grains simply robbed the food supply to produce fuel. Alarmed by high corn prices, which drove up inflation, Beijing curbed corn-based ethanol plants.

Agricultural waste is now the focus, and Cofco has set aside 10 billion yuan (HK$11.5 billion) to develop this biofuel source using the parts of plants that animals and humans do not eat.

In May, Cofco joined Sinopec and Danish enzyme supplier Novozymes to develop a demonstration plant capable of producing 13 million litres of bioethanol by the third quarter of next year. The location of the plant has yet to be disclosed.

Cofco said its new biofuel project was in the research stage, but it hoped to benefit from its experience collecting agricultural products in getting biomass.

There is plenty of agricultural waste, with about 800 million tonnes generated each year, according to Novozymes. Every four tonnes can generate one tonne of ethanol.

'It will take Cofco two to three years to get its new biofuel plant mature,' said Michael Fredskov Christiansen, president of Novozymes (China) Investment.

Before Cofco could put its new plant on the right track, it must solve the collection problem, said William Kao, chief executive of Pro-Tek (Xiamen) Electroplating Development.

'There are just too many farmers owning plots that are too small, which means it is difficult to manage by machinery,' he said. 'If much of the collection of biomass is done by hand, there is increasing handling and labour costs.

'The solution would be collective farming,' Kao said. 'Put the lands together and form large uniform plots of over 1,000 mu, and work by machine.'

But collectivisation would not only be costly but also highly disruptive to family farmers, especially given the mainland's bitter experience with forced collectivisation during the Great Leap Forward, which resulted in mass starvation.

In addition to the difficulty of collecting agricultural waste from so many small farms, there is competition for the material.

'Agricultural waste can be used by farmers for fertilising lands through burning,' said Robert Earley, the low-carbon transport programme manager for the American non-profit organisation, Innovation Centre for Energy and Transportation. 'Besides, the raw material is often used to generate bioelectricity.'

Moreover, if Cofco's plant was located too close to bioelectricity generators, there would be direct competition for sourcing raw materials, Earley said.

Before Cofco can efficiently collect enough agricultural waste, its first task must be to unite the farmers behind its project.

The company is still seeking advice from experts for the collection problem.

According to Novozymes, there are some big biomass collectors such as Shandong's Dragon Power doing the job, and Cofco may have to co-operate with these firms to gain a steady supply.

State of the nations:

China National Cereals, Oils and Foodstuffs Corporation - a state-owned company is leader in the mainland's emerging biofuel industry

China:

2009 1.5 million tonnes of ethanol, accounting for less than 1 per cent of the overall fuel supply in the nation, with 75 per cent of output produced by COFCO

Brazil:

2009 A total of 24.9 billion litres produced, representing 37.7% of the world's total ethanol used as fuel

The world's industry leader, with 30 years of production and ethanol accounting for 50% of all fuel used in transport

US

2009 40 billion litres produced The United States ranks second, with ethanol comprising 10% of all fuel used

SOURCE: RENEWABLE FUELS ASSOCIATION, INTER-AMERICAN DEVELOPMENT BANK