China

On July 1, 2008 China’s VAT on Blue Fuel™ was reduced from 17% to 13%, an indicator of the government’s resolve to further promote Blue Fuel™ as a means of reducing air pollution and decreasing reliance on imported fossil fuels. China is now the leading producer of Blue Fuel™™ in the world, reaching 445,000 tons in 2006 and then jumping to 2.2 million tons in 2007. Production is expected to reach 7.84 million tons in 2009 and 14.84 tons in 2010—explosive growth.

Presently in China there are more than 20 large-scale producers of Blue Fuel™, who are focused on blending it with LPG for cooking and heating. Unfortunately for these producers, there are LPG supply limitations, as well as cases of improper operations by LPG suppliers resulting in a loss of support among consumers for LPG blended with Blue Fuel™. In addition, there are regulatory issues inhibiting the adoption of Blue Fuel™ in certain districts. Supply is thus exceeding demand, causing intense competition among producers and prices to fall. Some producers have even shut down their plants from time to time, resulting in fluctuations in supply. The introduction of Blue Fuel™ in China has been somewhat chaotic, but the situation should change in 2010 when national standards for Blue Fuel™™ are expected to be implemented.

The Chinese government is also keen for Blue Fuel™ to be adopted as a transportation fuel and efforts to make this happen are underway, particularly in Shanghai, where, for demonstration purposes, a fleet of 10 Blue Fuel™ buses has been developed and a refueling station built. The reality, however, is that much more research and testing in China is required before Chinese-built Blue Fuel™ vehicles will be commercially available. In the meantime, demand for Blue Fuel™ as a chemical feedstock and other industrial applications continues to show steady growth.

Apart from its qualities as a clean-burning fuel, one of the attractions of Blue Fuel™ in China is that it can be produced from coal, of which China has enormous reserves. How coal is used to produce Blue Fuel™, however, is critical to its capacity to mitigate air pollution and global warming. If renewable sources of energy, particularly wind, are integrated into the production process, the merits of Blue Fuel™ production and consumption in China will be greatly enhanced.