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China’s Growing Methanol Economy

China's methanol economyCould methanol be the feasible path toward replacing petroleum-based fuels?

Balancing dependence on Middle East oil against increasing fuel demand continues to challenge China in its ongoing urbanization and industrialization. In an effort to adapt to such limitations, China has increased production capacity and consumption of methanol. In less than a decade, methanol use in China’s transportation sector grew from virtually zero to replacing nearly 8% of the country’s gasoline requirement.

China’s approach may prove to be profitable and strategic. Research suggests that methanol fits within existing energy infrastructure, offers a convenient solution for efficient energy storage and most importantly, certain methanol fuel blends can be used in today’s internal-combustion engines. Demand in Asia is rising as methanol is increasingly used as more than a chemical feedstock.

“Methanol is seen as a strategic fuel by the rapidly growing nation due to its clean fuel benefits, favorable economics, the ease of adopting methanol in current fueling infrastructure and the advantage of being able to use alternative feedstocks in a nation that is lacking in domestic oil reserves,” said former Deputy Governor of Shanxi Province, Peng Zhi Gui.

In 1995, the first methanol pilot project in China was initiated by Sino-American Scientific Collaboration.  Ford Motor Co. donated a methanol engine and assisted in developing the first methanol automobile in China. Direct blending with gasoline drives the recent growth in methanol demand. In 2009, national fuel blending standards for M85 and M100 went into effect across China, and a national M15 standard is currently in the final stages of adoption. These standards, along with the domestic availability of methanol and its lower cost compared to gasoline, will increase methanol’s fuel market share. In addition, methanol-blended fuel could be 50% cheaper than regular gas for drivers at the pump, depending on blend.

Global Methanol Production

In 2010, China’s methanol production capacity reached 38.4 million tons and will increase to 50 million tons by 2015. The M15 blended fuel is already widely used in five provinces – Shanxi, Shaanxi, Zhejiang, Guizhou and Heilongjiang, with localized standards implemented by provincial governments.

Methanol is the simplest alcohol, with the lowest carbon content and highest hydrogen content of any liquid fuel. As such, it offers a substantial improvement in toxic emissions, eliminating extremely harmful aromatics like benzene and xylene, and the particulate matter present in gasoline and diesel fuel.

China also plans to invest $382 billion in innovative energy conservation and anti-pollution projects over the next four years. Methanol is biodegradable in both aerobic and anaerobic conditions posing little long-term threat to ecosystems because it is unlikely to accumulate in the environment.

China is edging ahead by actively restructuring the contours of the system, placing a focus on the real problem (oil), and diversifying the transportation fuel market.  The country has set a target of producing and selling 500,000 energy-efficient and alternative-energy vehicles a year by 2015, and five million vehicles a year by 2020. Improved methanol production capacities would provide China with a handy alternative to petroleum-based fuels and chemicals in a post-peak-oil scenario, or as an emergency reserve in a temporary oil crisis.

It is a concern that China primarily derives its methanol from coal. As a transportation fuel, coal-based methanol has a larger carbon footprint than gasoline and could trigger higher world coal prices. Natural-gas-based methanol is also an alternative to petroleum-based products. Outside of China, methanol is primarily made from natural gas. In the United States, increased supply of shale gas and other unconventional sources is expected to keep gas prices relatively low.

California promoted methanol as an automotive fuel in the 1980s and ‘90s. In fact in the early ’90s, methanol was a more accepted automotive fuel than ethanol in the U.S. and the U.S. even helped initiate methanol fuel programs in China. Very little data is available on how and why methanol policy and programs ended in the United States.

No matter one’s individual perspective — liberal or conservative — we need a concrete solution that encourages competition and innovation, ensuring Americans an affordable and stable supply of replacement fuels for our transportation needs. Methanol can be derived from many plentiful energy resources and give the oil fuels a real run for their money.

Zana Nesheiwat's picture

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Rick Engebretson's picture
Rick Engebretson on Mar 1, 2013

Outstanding heads-up.

Pure speculation here, but having attended part of China's visit to the U of MN Ag. school, perhaps we can give some little credit to ethanol being a better "blended" fuel additive than methanol. China wanted to develop ethanol, too. But whether good or evil, our crop genetics is unsurpassed and patented to the hilt. They deeply resent WTO obligations to respect patents and openly expressed an intent to leapfrog ours. They don't have the domestic ethanol capability we do. (Without long debate, yes how about Brazil.)

That being said, I believe you are right on target with future fuels increasingly using methanol. From biodiesel and synthetic fossil diesel to fuel cells, nothing from the periodic table of chemical elements comes close to methanol for reactivity, abundance, cost.

As TEC's Geoffrey Styles can point out, methanol is an industrial resource not a consumer product.

My memory must be failing, but I thought Canada was a huge methanol producer. Shows what I know!

Thomas Garven's picture
Thomas Garven on Mar 1, 2013

Dear Zana:

Very well written piece.  I believe some further research into why the U.S. has such a limited production capability would be very interesting to many readers.  We certainly need an alternative to gasoline for at least another 20 years or so.  By then, electric vehicles will be the 'in thing' as the price of batteries fall and the public charging infrastructure gets built.  

In the end, most of us will probably be driving electric vehicles since they seem to be the only logical financial and environmental solution that makes sense.  Enjoyed reading your article.       

John Miller's picture
John Miller on Mar 1, 2013

Zana, methanol was one of many alternatives to petroleum gasoline supported by the U.S. Federal Government following the oil shocks of the 1970’s-early 1980’s.  In addition to methanol, LPG, CNG/LNG, hydrogen, electric and ethanol fuels were supported by Federal and State Governments.  Due to its local political support, methanol grew very significantly in California and at rates initially much greater than electric and hydrogen vehicle technologies.  However, the most successful alternative fuel in the U.S. initially was LPG.  This was due to a combination of factors including having existing infrastructure (heating fuels primarily) throughout most the country and the fact that ICE engines of the day did not require much modification (and cost) to operate on LPG.

Methanol’s popularity and consumption grew in the late 1980’s, peaked in 1994 and declined to insignificant levels by the early 2000’s in direct proportion to California Government financial and other support.  When California reduced and eventually cut off methanol support, the market and its use as a motor fuel disappeared.  Methanol was effectively replaced by electric vehicles since the mid 1990’s in California and within the overall U.S.

Although LPG was by far the most successful alternative motor fuel in the 1980’s – 1990’s, its consumption (equivalent gasoline basis) was exceeded by CNG in the mid 2000’s.  Even LNG surpassed methanol (and electric) in the early 2000’s.  In the future the most promising non-hydrocarbon fuel will most likely be electric as battery technology advancements continue to develop.

John Miller

Nathan Wilson's picture
Nathan Wilson on Mar 2, 2013


While in the US, we continue our addiction to oil while holding out for technology breakthroughs, China is successfully diversifying their energy supply by choosing paths that are easy.

Cellulosic ethanol, hydrogen fuel cycles, and high performance batteries are hard, which translates into high prices and poor consumer acceptance.  A future breakthrough in one of these (which is apparently considered inevitable by many) may happen in our lifetimes, or it may not (I'm pessimistic about these).  We could wait, or we could simply follow China and choose one of the easy paths (i.e. those that are proven already).

The problem is that the path of least resistance is to keep using petroleum, because it is actually the best fuel.  But there are several fuels that are good enough, which we could choose at any time, if we simply have the will.

As China is demonstrating, methanol works fine as an auto fuel (at least M-85).  It has only about half of the energy per unit volume of gasoline, so only purpose-built cars with jumbo tanks will satisfy main-stream consumers.  With CO2 emissions reductions in our future, the only way for methanol to be major part of our future fuel mix is with 100% biomass based production.  Methanol production from cellulosic biomass is old technology (it used to be called "wood alcohol"), but it cannot compete in price with methanol from coal or natural gas (and may never be able to compete with cng).  Also, growing global demand for fuel makes the land use scalability of bio-methanol very questionable (given that jet fuel will also have to be from biomass, forever since no breakthrough alternatives are physically possible for aviation).

Compressed Natural Gas (cng) is another viable gasoline replacement that is good enough (it is currently the cheapest alternative fuel).  It also requires purpose built cars with jumbo tanks, with only one third of the energy/vol of gasoline (conversions of existing body styles usually have inadequate tank size and inadequate range).  Its use provides a modest reduction in CO2 compared to gasoline, but in the long run deep CO2 reduction appear necessary.  This means that the only sustainable path for cng is biogas.  This has the same scalability (and cost) problem as other biomass solutions.  

Ammonia is the third alternative for internal combustion engines.  It is the only one that is carbon-free (it contains only hydrogen and nitrogen).  It can be made from any primary energy source: coal, natural gas, or biomass with carbon capture; it's the cheapest fuel that can be made from solar, wind, OTEC, or nuclear.  Ammonia cars require a jumbo tank size, like cng and methanol.  It is more toxic than other fuels, but safe handling is just an engineering problem that can be solved, analogous to gasoline or hydrogen safety (it's already handled safely in large quantities as a fertilizer).

The problem is that the DOE is so focused on our "stretch goals" (which we are many breakthroughs away from reaching) that they are paying little attention to ammonia as fuel.  A non-CO2 emitting energy system is easiest with a non-carbon-based fuel.  If we want success with low risk, we must choose easy.


Nathan Wilson's picture
Nathan Wilson on Mar 2, 2013

"...price of batteries fall.."

Maybe or maybe not.  The price of computer power is garanteed to fall, but that's all we known for sure.

Battery technology is neither new nor immature.  We build them in billion per year quantities, and have had 25 years of intensive development thanks to cell phones and laptop computers.  We can't afford to put all of our eggs in that basket.

Thomas Garven's picture
Thomas Garven on Mar 2, 2013

Dear Nathan:

Without getting into a long discussion about battery technology you are certainly right.  Lead Acid, Nickle Metal Hydride and Lion have been around for many years.  Only recently have we learned that adding nanostructures to anodes in Lion batteries can increase battery capacity by 50% and speed recharging.  Other developments like liquid metal batteries the size of shipping containers for storing grid power are on the way and have been manufactured and tested.  

So we are making progress and every day that we continue to support our bright young college minds brings us that much closer to some solutions.  Its no different than farming, we are constantly learning how to increase crop yields.  We are also learning every day how to increase the fuel efficiently of Internal Combustion Engines.  BUT from what I read, shale oil is expensive and new finds of massive amounts of cheap and easy oil to meet our needs are not expected.  Gasoline and diesel are not getting any cheaper, at least in my area.        

As you stated It is unwise to put all of your eggs in one basket and I certainly wouldn't suggest that.  I also would really like to hear what you have in mind for say 5-15 years from now when gasoline in America could be $10/gallon like it is in Europe.  What do you propose?


Rick Engebretson's picture
Rick Engebretson on Mar 2, 2013

Nathan, please consider two additional methanol type options; the use of garbage feedstock and solar process energy.

It is indeed an old process. One problem with earlier thermochemical systems was using good fuel to make bad fuel. It had some merit to avoid landfills. But recent convulsions in the solar PV market have people looking at solar thermal.

Ammonia will kill people, and nitrous oxide emissions are a non-starter for consumer fuels.

Nathan Wilson's picture
Nathan Wilson on Mar 2, 2013

Rick, I am open minded for new methanol options (and note that methanol is always cheaper than synthetic gasoline), but all of the CO2-neutral ones I've heard about appear more expensive than ammonia.  Garbage feedstock doesn't strike me as very scalable, not to mention that burying garbage in landfills counts as a highly popular and successful form of carbon sequestration.

Lab experiments with ammonia engines have shown that emissions of nitrous oxides and other pollutants can be easily controlled with conventional catalytic converters.

Spill resistant fueling nozzles were developed during past methanol experiments.  I've even heard about a hydrogen refueling system that was completely robotic.  I have no doubt that we can conquer the safety challenges with ammonia.  All it takes is a modest price advantage to make the effort worthwhile, and for CO2 solutions, ammonia has that advantage.

John Miller's picture
John Miller on Mar 2, 2013

Nathan, ammonia is challenged by a number of safety and economic factors.  Although ammonia can be made from bio-waste or coal, I am sure you are aware that these energy production routes are much more expensive than producing ammonia from natural gas.  Yes, ammonia can be readily burned in ICE vehicles and readily comply with the most stringent tailpipe emission standards, but the safely risks of this material should not be discounted.  Ammonia is very corrosive and hazardous to humans.  OSHA standards indicate that exposure to 300 ppm is life threatening.  This makes ammonia the single most hazardous of all alternative motor fuels.

Yes, hydrogen (methane production primary feedstock), can be produced by electrolysis of water from renewable power sources, but this production route is likely more expensive than bio-mass feedstocks based on currently available technologies.  Besides the higher costs to producing ammonia, the lack of transportation & distribution and fueling station infrastructure is another major economic barrier.  An added cost will be the complex vapor recovery systems required to prevent any significant human exposure during fuel transfer-filling operations. 

Based on today’s technologies and existing infrastructures, natural gas CNG/LNG alternative motor fuels have substantial advantages over ammonia and essentially all advanced biofuels.

Nathan Wilson's picture
Nathan Wilson on Mar 3, 2013

Within 5 years, the only alternative fuel that could contribute substantially is E-85, since it has a head start; but I believe this is a dead end.

Within 10 years we could ramp up cng, because it is currently the cheapest alternative fuel.  If fracking works well and the CO2/global warming thing turns out to be a false alarm, cng could eventually grow past gasoline.  Note that this requires that car makers bring out many models that accommodate jumbo fuel tanks; this opens the door for ammonia vehicle pilot programs.

If CO2/global warming remains a concern, we'll have to put a price on carbon.  That could make ammonia price competitive with cng.  It might take 25 years, but ammonia fuel could start to grow, and eventually come to dominate.

Nathan Wilson's picture
Nathan Wilson on Mar 3, 2013

John, I certainly agree that CNG/LNG are the cheapest alternative fuels today, and will be easiest to ramp up.  And I advocate that the US should do so as quickly as possible.

However, I think we also need to make a big ammonia fuel development push.  If we do ever decide to make deep reductions in our CO2 emissions, I don't think that battery cars and biofuels will be enough.  The political lobbying power of the fossil fuel companies and fossil fuel dependent communities will block the elimination of fossil fuel use.  This means that Carbon Capture and Sequestration is a necessary and practical step on the way to a sustainable energy system; and ammonia is the only practical fuel that works with CC&S.

When considering the potential hazards of ammonia, it must be evaluated as part of a system (which has yet to be designed).  I believe that we can create a safe method for its use, but as a last resort, we could always resort to filling station attendants instead (they would be trained, and wear protective goggles and gloves;  problem solved).  Note that unlike carbon monoxide, it is detectable by smell at harmless exposure concentrations.

As far as economics, without a price on carbon, we simply will not make large reductions in CO2 emissions.  With a moderate price on carbon, then ammonia will be competitive with other fuels made from coal and biomass.  If today's natural gas prices continue, then none of this matters; we (in the US) won't decarbonize transportation or electricity for that matter.

However, there are many nations that lack domestic natural gas.  And for them, ammonia (from stranded natural gas) could be imported at a price that is competitive with LNG+carbon_price or coal with CC&S.

As far as ammonia from sustainable sources: we don't yet know how low the price of solar energy will fall, things could be very different 20 years from now.  We do know that with 60% efficient conversion of electricity to ammonia, we can annually get 6 times more energy per acre from wind and 50 times more from solar compared to cellulosic biofuel.  Even now, ammonia can be made from nuclear power for cheaper than what Europeans pay for gasoline (including taxes), and nuclear power is much cheaper in nations like China with low labor costs.

Zana Nesheiwat's picture
Zana Nesheiwat on Mar 4, 2013


“It has only about half of the energy per unit volume of gasoline, so only purpose-built cars with jumbo tanks will satisfy main-stream consumers.”—This is an issue of price. At $1.50 a gallon for methanol people will drive twice as often to the gas station over $4 gasoline. Besides, existing engines could utilize the higher octane of methanol/ethanol fuel to get better fuel economy than just its energy content. In our tests we got a ratio as high as 1:1.6 for gasoline vs. methanol.

“With CO2 emissions reductions in our future, the only way for methanol to be major part of our future fuel mix is with 100% biomass based production.”—Even with methanol coming from natural gas there are substantial emission improvements vs. newly found oil such as tar sands and ultra-deep sea drilling. However, let’s  not forget that the biggest issue we have with oil is the cost. The cost of oil is a bigger short/intermediate term issue than its carbon footprint.

With regard to ammonia, CNG and other fuels, we are for opening the fuel market to competition. If ammonia turns out to be the best fuel, great!


Yes, ethanol is in the run for the fuel blend of the future. We are seeing new ethanol pathways getting to market including ethanol from algae, from cellulose and perhaps as interesting, ethanol from natural gas. But we need both volume and low price to really ignite competition in the fuels market. We want many feedstocks, many fuels, and many modalities (electric, CNG/LNG, trucks to rail, etc).

Also, a new methanol update- Saudi's Sabic is getting ready to scrap its $5.3 billion #methanol project in Trinidad Good or bad?

Rick Engebretson's picture
Rick Engebretson on Mar 4, 2013

Zana, I believe there could be something more strategic about China's methanol development than you've discussed.

Reading Nikita Kruschev's memoirs, it stood out how the Russians came to fear Mao. IIRC, in 1956 Mao gave a speech to Soviet elite suggesting nuclear war was survivable. It scared the Soviets into looking West for a chance to end the Cold War.

Mao's policy was to de-centralize population and industry. Methanol is a fuel production capability that can be de-centralized.

Believe it or not, it is one of the reasons for the de-centralized internet. But the oil companies seem intent to centralize fuels. We can chat about energy density, etc. for years. But if oil is stopped at some very few points, billions of people have no option. Strategic insanity. And China knows it.

Robert Hargraves's picture
Robert Hargraves on Mar 5, 2013

China is investigating ways to synthesize methanol using heat from the liquid fluoride thorium reactor (LFTR). This task is part of the $350 million project of the Chinese Academy of Sciences to build a LFTR. There is more information in the book and Facebook story, at and


Robert Hargraves's picture
Robert Hargraves on Mar 5, 2013

China is investigating ways to synthesize methanol using heat from the liquid fluoride thorium reactor (LFTR). This task is part of the $350 million project of the Chinese Academy of Sciences to build a LFTR. There is more information in the book and Facebook story, at and


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