A KLM Boeing 777 jet being filled with mixed biofuel? Photo from KLM Royal Dutch Airlines.

Instead of causing cancer, China's gutter oil may soon be getting a chance to help save the planet.

Used cooking oil in China -- when collected from waste and refuse it is known as digou you, or literally gutter oil -- has created controversies in the past when sold illegally back to restaurants and companies to be used for human consumption.

However, recycled oils in China may soon be subject to a sophisticated multi-step refining treatment, to be turned into high-grade fuel for jet aircraft. The process emits considerably less carbon and reduces dependency on petroleum.

But it's not domestic Chinese firms that are taking this opportunity to soar from the sewers into the skies. Instead, a European aviation fuel company called SkyNRG may be making this bold step in repurposing waste into economic gains.

Western and Chinese news media initially erroneously reported on Wednesday that KLM Royal Dutch Airlines would buy some 2,000 metric tons of used cooking oil from companies in Shanghai, later to be refined into aviation fuel.

A spokesperson for KLM, part of Air France KLM (Euornext Paris: AF), said that the deal actually does not directly concern the airline. Yet to be finalized, the purchase would instead be carried out by SkyNRG, now in talks with Shanghai authorities and companies. SkyNRG was careful to state on Wednesday that it had not signed any concrete contracts yet [in China]. There is real intention for co-operation with Chinese suppliers and the Chinese government but so far talks have only been exploratory.

In the U.S. 70 percent of waste cooking oil is collected and eventually recycled into fuels and other products. Only 2 percent is collected in China, making waste oil there a hugely underutilized resource.

Lure Of New Fuel

SkyNRG originally bought some 20 tons of waste oil derived biofuel from a Chinese firm in Shandong province in November 2011, which was sent to Europe for further testing and refinement. That initial amount from Qingdao's Fresh Bio-Energy Technology Development Company Ltd. likely formed an experimental first entry into the Chinese fuel market.

SkyNRG, a Dutch company originally formed by KLM, Air France, North Sea Group, and the Spring Associates in 2009, predominantly buys pre-treated European biofuels derived from used cooking oils. It then processes the substances into aviation-grade fuel through additional refining. The end product is then sold across the planet to air industry giants like Boeing, Airbus, KLM, Air France, Australia's Qantas, Chile's LAN, and Japan's ANA.

The International Air Transport Association predicts that global air travel would continue to surge over the next two years. Air passengers would increase from 2.5 billion in 2009 to 3.3 billion in 2014, largely boosted by emerging markets like China.

KLM made the first commercial bio-diesel jet flight in the world in June 2011, from Amsterdam to Paris. A KLM spokeperson said that the company expects to increase its biofuel consumption to 1 percent of total fuel use by 2015, a modest increase, but enough to sustain a need for 120,000 metric tons a year of biofuel.

KLM's June 2012 flight to Rio, being filled with bio-fuel in June 2012. Photo from KLM Royal Dutch Airlines.

In June, KLM flew a 777-200 from Amsterdam to Rio de Janeiro on a half-and-half biofuel and fossil fuel mix, to publicize its eco-friendly model during the Rio+20 Sustainable Development Conference.

Showcasing bio-fueled flights, even if efforts to swtich to biofuels remain limited, has gained increasing popularity among major airlines over past years. Finnair followed KLM in June 2011 by scheduling tri-weekly Amsterdam-to-Helsinki biofueled flights, with 50-50 blends. Virgin Atlantic, Air New Zealand, Continental, and Japan Airlines have carried out biofuel flight trials since 2008. Lufthansa and Interjet carried out commercial flights using biofuels in 2011 as well.

Even Air China conducted its own tests in late October 2011, a 2-hour flight in Beijing on a 747-400 (only one engine was fed a 50 percent bio mix).

Rising fuel costs have pushed up incentives to look at alternative fuel sources, and airlines are increasingly interested in biofuels made from plant and recycled matter, algae, and waste oil. But in many cases, they were using new land to plant vegetation (particuarly crops such as Jatropha and Camelina) for harvesting into biofuel.

Using recycled cooking oil however, wastes no additional arable land and water resources and doubles as a form of waste disposal.

Sustainability Reluctance

For China in particular, that may be an innovative approach to dealing with the country's millions of tons of waste oil a year. China consumes about a fifth of the global total of cooking oil each year (reasonable, considering its population accounts for a fifth of the world's), about 25 million metric tons.

Much of that is eventually disposed in unregulated and unsanitary ways. Some is collected, refined and resold illegally for human consumption. An increasingly larger amount is also collected by companies to be repurposed for industrial biofuels. For the most part, the discussion of used cooking oils in China mostly revolves around public fears of food safety and quality control.

What processes Chinese biofuel suppliers would go through in order to get access to used cooking oil, and who they will source it from, remains largely unknown to foreign buyers.

China's official news agency Xinhua noted in March that Zheng Dehua, the deputy general manager of the Qingdao company which sold the first 20 tons to SkyNRG, confirmed that a portion of his company's product originally came from gutter oil -- the report did not disclose how the company acquired the gutter oil, or whether the companies it bought the oil from met quality control standards. Zheng says his company can produce some 50,000 tons of biodiesel every year.

Companies like SkyNRG say that they are approaching the China market carefully and will ensure that potential future deals on sourcing are accountable and legal.

Yet in China, experts and officials remain unenthusiastic of promoting the oil as a sustainable energy source.

Wang Qunhui, a professor at the School of Civil and Environmental Engineering in Beijing's Science and Technology University, told China Daily in late July 2011 that few scientists and scholars now want to research it [biofuels] because this kind of technology is hard to commercialize as it can barely create a profit.

Publicity for biofuel in China. An Air China 747 ran one of it's engines on biofuel in a test flight in Oct 2011. Photo from China Daily.

Wang qualified that gutter oil sells at about 5,000 yuan per ton (approximately $780). He says the cost of biofuel processing in China already is some 4,000 to 5,000 yuan per ton.

Caixin, a privately owned news media company based in Beijing that publishes in both English and Chinese, said in early July 2011 that Li Junfeng, the deputy chief of the energy research institute in China's powerful National Development and Reform Commission, had disregarded using cooking oil-derived biofuel as a viable replacement for petroleum, calling it unrealistic and expensive.

Others, if not entirely dismissive of biofuels, seem to have adopted a large scale agri-business and industrial production mindset, rather than a sustainability model.

The Vice-President of Air China, He Li, told China Daily in late October 2011 that using biofuels on commercial flights necessitated large-scale production to lower pricing.

Petro China plans to open a refinery in 2014 to produce 60,000 tons of biofuel each year, from 80,000 hectares of land in Southwestern China's Sichuan and Yunnan provinces planted with Jatropha since 2007.

The additional land use indicates a real commitment, but one wonders why the company doesn't simply tap into the millions of tons of waste oil current being produced in the country. After all, it would save some of the billions China spends today to import foreign petroleum.