Dynamics of biofuel prices on the European market: Impact of the EU environmental policy on the resources markets

Francis Declerck (declerck@essec.fr), Jean-Pierre Indjehagopian (jeanpierre.indjehagopian@essec.edu) and Frédéric Lantz
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Francis Declerck: ESSEC Business School
Jean-Pierre Indjehagopian: ESSEC Business School
Frédéric Lantz: IFPEN - IFP Energies nouvelles

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Abstract: This paper aims at explaining the major drivers of biodiesel market prices by examining agricultural resource prices and gasoil prices for automotive fuels in the context of the EU environmental policy. The EU policy has enhanced biodiesel production since 2006. Biodiesel prices are impacted by the EU policy as well as rapeseed and oil prices which have fluctuated a lot over the last decade. An econometric analysis was performed using monthly data from November 2006 to January 2016. However, tests for structural breaks show several changes in price behavior. This leads us to estimate a regime-switching model which reveals two main regimes for the biodiesel price pattern. When oil prices are high, biodiesel, rapeseed and diesel oil prices are related, mainly driven by oil prices. When oil prices are low, biodiesel prices are mostly related to rapeseed prices according to EU regulations requiring the blending of biodiesel and gasoil.

Keywords: biofuel; oil market; structural changes; switching regime model (search for similar items in EconPapers)
Date: 2020-02-21
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
Note: View the original document on HAL open archive server: https://essec.hal.science/hal-02487491v2
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