Enter a typical Chinese restaurant, and it's not hard to notice the chef's generous use of cooking oil. Famous for their fried, stirred, and boiled offerings, China's kitchens also generate millions of tons of cooked oil residue each year.

Historically, this waste has had two destinations: either it is discharged into local sewage systems (and thus often referred to as "ditch oil"), or it is covertly reused in substandard kitchens, contributing to frequent food-poisoning incidents. In recent years, however, the oil has found a third incarnation: as fuel for the nation's rapidly growing automobile fleet.

Biodiesel is a non-toxic, biodegradable fuel that can be made from a range of organic feedstock, including new or waste vegetable oils, animal fats, and oilseed plants like palm. Used in its pure form in diesel-engine vehicles, or blended with gasoline to boost car performance, biodiesel has significantly lower emissions than petroleum-based diesel when burned. According to a 1998 report by the
U.S. National Renewable Energy Laboratory, it results in carbon monoxide reductions of approximately 50 percent over regular diesel, and carbon dioxide reductions of 78 percent, on a net lifecycle basis.

China's biodiesel production began in 2001, initiated by a group of businessmen in the chemical industry who knew that the fatty acid residues from salad oil production could be processed into automotive fuel. At the time, the oil wastes cost 1,700 yuan (US $212) per ton, while the price of petroleum-based diesel was 2,800 yuan (US $350) per ton. With little research or information available, the group began to design simple equipments and to experiment with fuel production, relying on their own business savvy and expertise in chemical production.

After achieving success with the salad oil wastes, the group expanded its feedstock to other inexpensive supplies, such as used oils, waste animal fats, and wild oilseed plants. Unlike their U.S. or European counterparts, who have relied mainly on fresh vegetable oil or soybeans to process biodiesel fuel, China's entrepreneurs have had to focus on waste oil sources from the very beginning, constrained by the shortage of new vegetable oil in the world's most populous country. With their flexibility and ingenuity, however, they managed to make a profit without any government subsidies.

As world petroleum prices rise, and as China becomes increasingly reliant on imported fuels (diesel demand continues to outpace supply by some 50 million tons annually), the government has since stepped in to boost the fledgling biodiesel industry. In 2004, the Ministry of Science launched its biofuel technology development project; the following year, the government initiated a special agricultural and forestry biomass development program, setting a nationwide target for annual biodiesel production of 2 million tons by 2010 and 12 million tons by 2020.

China has also intensified its research and development in biodiesel technology with a series of government-led research programs and a special fund dedicated to this endeavor. Researchers have achieved several technological breakthroughs, enabling producers to diversify their feedstock and cut costs.

By 2005, the feedstock cost for biodiesel production in China had decreased to less than 2,000 yuan (US $250) per ton, less than half of the 5,000 yuan (US $625) per-ton cost that resulted from the use of U.S. or European technologies. Even though China's biodiesel is sold at a cheaper price than petroleum-based diesel, producers still earn a profit of roughly 1,500 yuan ($187) per ton.

Market incentives and increased government support have enabled biodiesel production projects to mushroom nationwide since late 2005. Before 2004, only three companies (in Hainan, Sichuan, and Fujian provinces) engaged in the fuel's production, with a combined annual capacity of 40,000 tons.

Today, however, China boasts more than 100 biodiesel production facilities, attracting not only the private sector, but also state-owned enterprises and foreign investors. Unlike the trial projects of previous years, which averaged an annual output of only 10,000 tons, many facilities now under construction are projected to produce more than 200,000 tons a year. In 2005, China manufactured 110,000-120,000 tons of biodiesel fuel; in 2006, production is expected to reach 1 million tons.

The frenzy in biodiesel expansion has brought environmental concerns, however. Although the main feedstock used in China is still old cooking oil, grease, and animal fats, the industry is eyeing the establishment of vegetable oil and oil-tree plantations out of a fear of resource constraints. Some manufacturers are already processing biodiesel from rapeseed, soybeans, and cottonseed, while a handful of others are establishing or planning to establish plantations of oilseed crops such as Jatropha curcas and Chinese pistachio (Pistacia chinensis) in the country's forest-rich southwest and ecologically sensitive central region. Blind expansion of oil-producing crops, however, has the potential to encroach on arable lands for food production or lead to deforestation and ecological degradation.

So far, China's feedstock constraints are not pressing. With annual consumption of edible oils approaching 22 million tons, the country generates more than 4.5 million tons of used oil and grease each year, roughly half of which could be collected through the establishment of an integrated collection and recycling system. Those 2 million tons of "ditch oil" alone would guarantee the smooth operation of all current biodiesel production lines. In the longer term, however, it would be appropriate to use only marginal lands for establishing oil-tree plantations, to minimize biodiesel's looming threat to the environment.