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The effect of biodiesel policies on world biodiesel and oilseed prices

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  • Drabik, Dusan
  • de Gorter, Harry
  • Timilsina, Govinda R.

Abstract

A theoretical and empirical model is developed to analyze the effect of a biodiesel mandate, a tax exemption (tax credit) and an exogenous diesel price shock on world soybean and canola markets. The jointness in crushing oil and meal from the oilseed reduces the size of the link between biodiesel and oilseed prices. A diesel price shock with a mandate results in a smaller change in oilseed prices compared with a tax exemption. Higher diesel prices increase biodiesel prices under a tax exemption but lower them with a blend mandate. When both canola and soybeans are used to produce biodiesel, an increase in the diesel price leads to higher canola prices, but the effect on soybean prices is ambiguous and depends on relative elasticities of meal demand and canola supply because canola produces more oil than soybeans.

Suggested Citation

  • Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2014. "The effect of biodiesel policies on world biodiesel and oilseed prices," Energy Economics, Elsevier, vol. 44(C), pages 80-88.
    • Handle: RePEc:eee:eneeco:v:44:y:2014:i:c:p:80-88
    DOI: 10.1016/j.eneco.2014.03.024
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    1. Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2016. "Producing biodiesel from soybeans in Zambia: An economic analysis," Food Policy, Elsevier, vol. 59(C), pages 103-109.
    2. Muhammad, Gul & Alam, Md Asraful & Mofijur, M. & Jahirul, M.I. & Lv, Yongkun & Xiong, Wenlong & Ong, Hwai Chyuan & Xu, Jingliang, 2021. "Modern developmental aspects in the field of economical harvesting and biodiesel production from microalgae biomass," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    3. Joe Parcell & Yasutomo Kojima & Alice Roach & Wayne Cain, 2018. "Global Edible Vegetable Oil Market Trends," Biomedical Journal of Scientific & Technical Research, Biomedical Research Network+, LLC, vol. 2(1), pages 2282-2291, January.
    4. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Filip, Ondrej & Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2019. "Food versus fuel: An updated and expanded evidence," Energy Economics, Elsevier, vol. 82(C), pages 152-166.
    6. Goh, Brandon Han Hoe & Ong, Hwai Chyuan & Cheah, Mei Yee & Chen, Wei-Hsin & Yu, Kai Ling & Mahlia, Teuku Meurah Indra, 2019. "Sustainability of direct biodiesel synthesis from microalgae biomass: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 107(C), pages 59-74.
    7. Karel Janda & Ladislav Krištoufek & Barbora Schererová & David Zilberman, 2021. "Price transmission in biofuel-related global agricultural networks," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(10), pages 399-408.
    8. Ondřej Filip & Karel Janda & Ladislav Krištoufek, 2018. "Ceny biopaliv a souvisejících komodit: analýza s použitím metod minimální kostry grafu a hierarchických stromů [Prices of Biofuels and Related Commodities: an Analysis Using Methods of Minimum Span," Politická ekonomie, Prague University of Economics and Business, vol. 2018(2), pages 218-239.
    9. dos Santos Alves, Camila Elisa & Belarmino, Luiz Clovis & Padula, Antonio Domingos, 2017. "Feedstock diversification for biodiesel production in Brazil: Using the Policy Analysis Matrix (PAM) to evaluate the impact of the PNPB and the economic competitiveness of alternative oilseeds," Energy Policy, Elsevier, vol. 109(C), pages 297-309.
    10. Alexandre Gohin & Fabrice Levert & Agneta Forslund, 2017. "The EU-Argentinean trade dispute on biodiesel: an economic assesment," Post-Print hal-01532702, HAL.
    11. Mišečka, Tomáš & Ciaian, Pavel & Rajčániová, Miroslava & Pokrivčák, Jan, 2019. "In search of attention in agricultural commodity markets," Economics Letters, Elsevier, vol. 184(C).
    12. Franken, Jason R.V. & Irwin, Scott H. & Garcia, Philip, 2021. "Biodiesel hedging under binding renewable fuel standard mandates," Energy Economics, Elsevier, vol. 96(C).
    13. Cui, Jingbo & Martin, Jeremy I., 2017. "Impacts of US biodiesel mandates on world vegetable oil markets," Energy Economics, Elsevier, vol. 65(C), pages 148-160.

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    More about this item

    Keywords

    Biodiesel policies; Soybean; Canola; Price of oilseed oil;
    All these keywords.

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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