The government's commitment to come out with favorable policies aimed at promoting clean energy will give a fillip to an early commercialization of cellulosic ethanol.

The moves also assume significance as ethanol makers are facing criticism for using grain stocks for fuel, especially at a time when the nation's grain yields are falling.

Cellulosic ethanol differs from conventional ethanol in that it uses the non-edible part of plants or agricultural waste to make fuel.

Leading the group of companies who are trying to commercialize the technology in China is Cofco Group, the nation's largest fuel ethanol supplier.

"Fuel ethanol made from crops is merely transitional. Its market share will fall after cellulosic ethanol is manufactured on a commercial basis," Yue Guojun, assistant president of Cofco, said in an interview with China Daily.

Yue is also the general manager of the Group's bio-chemical and bio-energy division.

At present China has five fuel ethanol companies who together produce around 1,720,000 tons of ethanol, mainly from corn, wheat and cassava. Cofco wholly or partly owns four of the five companies.

Yue said the company is now moving up the ladder of biofuel technology and cellulosic ethanol will become its core business in the long run.

Cofco expects to start selling cellulosic ethanol commercially in the next few years, said Guo Shunjie, senior manager of the bio-chemical and bio-energy division. He, however, declined to give an exact time frame for the process.

"Policymakers are designing preferential tax and subsidy policies for cellulosic ethanol. The policies will help in large-scale commercialization," Guo said.

Cofco has teamed up with China Petroleum & Chemical Corp (Sinopec) and enzymes producer Novozymes to build a demonstration plant for cellulosic ethanol.

With a planned annual production capacity of 10,000 tons, the plant is expected to start output by the third quarter of 2011, he said.

Guo declined to reveal the total investment on the demonstration project. But he indicated that the production costs would fall as the technology gets more and more developed.

The group launched a pilot project for cellulosic ethanol with an annual production capacity of 500 tons in Heilongjiang province in 2006.

"The cost of making a ton of cellulosic ethanol has declined considerably in the past four years," Guo said without revealing any figures.

The cost of producing one ton cellulosic ethanol is as high as 9,000 yuan per ton in China due to lack of key technologies, while the cost in the US is about 6,000 yuan per ton, said Li Shizhong, a professor of bioenergy at Tsinghua University.

"The ethanol industry has a great future and we expect the government to continue supporting us," Guo said.

According to Yue, cellulosic ethanol is mostly made from musty and decayed grains, which are otherwise inedible.

He said Cofco's bio-energy unit in Zhaodong, Heilongjiang province, used only 1.4 percent of the corn yield in the province between 2004 to 2009. The plant has a production capacity of around 180,000 tons of fuel ethanol.

"The yield that we used was of poor quality and in no way did we pose any threat to food safety," he said.

But experts like Li feel that it will still take some time before the technology can be commercialized successfully.

"China's fuel ethanol industry must follow a technical route which isn't based on food. The cellulosic ethanol technology is yet to mature and may take at least five years to be successfully commercialized," Li said.