Japan to back cellulosic fuel projects

By Risa Maeda

TOKYO (Reuters) - Japan plans to promote local projects to produce a low-emissions ethanol from non-food plant parts such as rice stems from April, a government official in charge of the country's biomass policy said on Monday.

The move looks similar to the U.S. energy bill signed into law late last year, which calls for more use of feedstocks other than corn kernels, the traditional source for the alternative auto fuel in the world's biggest ethanol producer.

Masamichi Saigo, director at the environment and biomass policy division of the Ministry of Agriculture, said the drive for non-food biofuel is worldwide, and especially makes sense in Japan, the world's No. 1 importer of farm produce.

"Naturally, the use for auto fuel is far below priority from food and feed," he said. "We've said from the very beginning that we will focus on cellulosic ethanol."

The ministry is to set aside 3.2 billion yen ($29 million) in the next fiscal year's budget to shoulder half of the costs of such projects, pending parliament approval, he said.

Japan, the world's third-biggest oil consumer, has said it would produce a hefty 6 million kilo liters (kl) of biofuels in 2030 to reduce gasoline use.

A majority of the target, or about 38 million barrels, is expected to be fulfilled by ethanol from non-food "cellulosic" sources, such as rice stems and cut branches from artificial forests, given a lack of low-cost farm produce in Japan.

Saigo said the 2030 goal remains the same, and that the ministry is sticking to its plan to help produce 50,000 kl of ethanol by March 2011.

"We won't meet the 50,000 kl target immediately," he said. "But instead, we plan to support the cellulose for ethanol projects from the next fiscal year," he said.

The participants for the projects could range from trading firms, farm cooperatives, brewery companies and auto makers to regional governments, he said.

The grants for non-food ethanol technology are far less than those of the United States, but Japan would look to Asia to co-operate in potential technologies on the total usage of rice, the staple food in the region, he said.

"We'd like Asia to share technologies over rice, mainly by exchanging know-how and networking human resources," he said.

Currently, 3 government-backed ethanol plants -- two in the northern island of Hokkaido and one in Niigata, the centre of Japan's rice farming -- are under construction, with output capacity of a total 31,000 kl a year.

They use low-quality rice and wheat and excess sugar beet, all for non-food use, as feedstocks.

Separately, Japan plans to exempt the current 3-percent content of ethanol in "green" fuel from the gasoline tax of some 53 yen a liter for five years from April 1.  Continued...