Subsidies and Countervailing Measures in the EU Biofuel Industry: A Welfare Analysis

Patrice Bougette and Christophe Charlier

No 2020-38, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: In 2019, following several investigations, the European Union decided to impose definitive anti-subsidy (AS) duties on imports of biodiesel from Argentina and Indonesia. While AS duties protect the domestic market and R\&D, this trade defense policy may interfere with environmental preservation. We investigate this issue using an international duopoly model with an environmental externality. We discuss the economic rationale of AS measures in the biodiesel context. We show that the larger the size of the domestic market, the higher the optimal AS level. Second, trade policies are less necessary when firms become more cost-efficient. Third, the sensitivity of AS policies to environmental externalities is ambiguous. Fourth, under certain conditions, the success of the innovation is negatively correlated with the strategic levels of both subsidies and AS policies.

Keywords: Anti-subsidy; countervailing duties; biodiesel; European Union; trade; environmental impact (search for similar items in EconPapers)
JEL-codes: D43 F13 F18 Q48 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-09
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env, nep-int, nep-reg and nep-sea
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Related works:
Working Paper: Subsidies and Countervailing Measures in the EU Biofuel Industry: A Welfare Analysis (2019)
Working Paper: Subsidies and Countervailing Measures in the EU Biofuel Industry: A Welfare Analysis (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2020-38

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