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They will include a risk fund system which will subsidize projects when oil prices are low, subsidy on land-use rights for raw material extraction, bailouts for pilot projects and preferential taxation policies.

These new measures, of which details were not released, were announced late on Friday by the Ministry of Finance, the National Development and Reform Commission, the Ministry of Agriculture, the State Administration of Taxation and the State Forestry Administration.

Vice Minister of Finance Zhu Zhigang said besides being environment-friendly and able to ensure energy security, bio-energies can help boost income for farmers as bio-diesel and ethanol use crops as feedstock.

But Zhu also warned the sector should only be developed if national food security is safe. The government said in April it wouldn't expand production of ethanol gasoline made from grains like wheat in near future due to a tight foodstuff supply.

"We should tightly control the production of bio-energy that use grains as feedstock," Zhu said. "The industry should grow in a healthy way step by step and we don't favor a mass action."

Zhu said the government will select companies to grant subsidies to based on factors such as their efficiency and technological know-how.

Some companies, it seems, are keen on the idea. China National Offshore Oil Corp has been studying the feasibility of building bio-diesel plants on Hainan Island and in Sichuan Province. Last month, Austria's Biolux started building a US$150 million bio-diesel plant in Nantong, Jiangsu Province.

According to an earlier announced target, China wants a tenth of its energy to come from renewable resources, which include hydro, solar, wind and bio-energy by 2010 and 16 percent by 2020. The share is around seven percent now.