Here's Why China is Betting Big on Methanol

Methanol, often referred to as ‘wood alcohol', is a versatile chemical with similar properties to ethanol. It can be produced from a variety of feedstocks – from fossil fuels to biomass and captured carbon – and used as a comparatively clean-burning vehicle fuel, either ‘neat' or more commonly blended with gasoline. 

A considerable quantity of methanol is already produced and consumed – there are over 90 plants worldwide with a combined annual production capacity of 110 million metric tons. Currently, methanol is mostly used to produce chemicals such as formaldehyde and rarely used as a fuel. However, a drive to popularize methanol cars in China could be changing its fortunes.

The advantages of methanol as a transport fuel are numerous: lower production costs compared with other alternative fuels; less flammable and therefore safer to use in engines than gasoline; and it's liquid at ambient temperatures, making it easy to store and distribute. And, when it's made from biomass or using captured carbon, it's considered a low-carbon fuel.

Renewable methanol fuel could become a part of our future low-emissions energy mix, cutting CO2 emissions by up to 95 percent according to the Methanol Institute, an industry trade association. 

Betting on methanol

Most of China's rapidly growing methanol supply is from domestic production and primarily derived from coal. Under these circumstances, it would be difficult to see how methanol fuel could be considered sustainable. There are signs, however, that this might be turning around.

Recently, the world's first commercial-scale CO2-to-methanol plant started production in Henan Province, which creates methanol fuel from carbon captured during lime production and hydrogen recovered from coke-ovens. The process is based on technology developed by Carbon Recycling International, which was first demonstrated in Iceland.

The construction of this plant reflects a major strand of China's energy transition: A shift away from gasoline and diesel vehicles towards more sustainable alternatives, including low-carbon methanol-powered cars. In 2019, the Chinese government issued guidelines on methanol as a vehicle fuel, encouraging its use for official cars, taxis, and short-distance buses. This prompted a rollout of methanol vehicles and infrastructure across the country– Shanxi Province, for instance, is building more than 200 methanol refuelling stations by the end of the year. China now uses methanol as a vehicle fuel in blends ranging from five percent to 100 percent (‘M5' to ‘M100'), with a view to encouraging the take-up of entirely methanol-powered vehicles.

Methanol has seen limited adoption elsewhere in the world, despite experimentation in the US in the 1980s and 1990s, which saw the successful deployment of cars and buses using 85 percent methanol. A 15 percent methanol blend in gasoline is allowed in Israel, while other countries introducing or considering introducing significant methanol blending include Egypt, India, Italy, New Zealand and Trinidad.

A future fuel?

Methanol has the potential to play a significant role as a sustainable transport fuel and a complement to electric vehicles. There is particular interest in expanding its use in shipping as an alternative to highly polluting fuels – especially because it is easy to handle and already meets operational safety and engine compatibility requirements.

To fulfil its promise as a more sustainable fuel, however, production will need to shift away from its current dependence on fossil-based feedstocks (which represent 95 percent of current methanol production).

Despite the diversity of possible alternative feedstocks, increased demand for methanol could cause problems. Those include competition for limited sustainable resources such as biomass, which its production currently relies on.

Pairing production with carbon capture, as seen in Henan, could prove a promising path forward. For several years, researchers have been investigating how to scale up CO2-to-methanol, and hope to find cost-effective approaches that meet fuel needs while making use of waste carbon. In the meantime, governments may need to consider policy interventions to incentivize the most sustainable forms of methanol production.