The European wood pellets for heating market - Price developments, trade and market efficiency

Fabian Schipfer, Lukas Kranzl, Olle Olsson and Patrick Lamers

Energy, 2020, vol. 212, issue C

Abstract: Competitive international markets imply adjustments towards competitive spatial equilibrium in which excess from one market is transferred to another and prices are equilibrated except for remaining differences that can be assigned to transfer costs. The European market for wood pellets used in small-scale heating systems has been expanding significantly over the past decade. Small scale pellet heating is arguably a mature technology, but whether the market is mature is another question. In this paper we analyse recent data on trade flows and price developments between Italy, Austria, Germany and France to understand the developments of wood pellet market efficiency and to draw conclusions about market function. The objective of this study is to establish a framework to test the European residential wood pellet market for competitive spatial equilibrium using modern trade theory. We find mainly inefficiently integrated markets with remaining positive marginal profits and detectable arbitrageurs’ activity. Based on a thorough discussion of these findings and the underlying data we outline possible methodology advancements and list policy recommendations to secure access and affordability of this renewable heating commodity in the long run.

Keywords: Wood pellets; Residential heating; Trade flows; Price development; Seasonal ARIMA-Model; Commoditisation (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:212:y:2020:i:c:s0360544220317448

DOI: 10.1016/j.energy.2020.118636

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