Green industrial policies and domestic production of biofuels: an econometric analysis of OECD countries

The purpose of this paper is to investigate the relationship between green industrial policies and domestic biofuel production among OECD countries. The analysis builds on a data set including 24 OECD countries over the time period 2000–2016. This panel is estimated using a variant of the so-called Poisson pseudo-maximum-likelihood model and includes the mix of demand-pull (biofuel blending mandates) and technology-push policies (government R&D), as well as the interaction between these two types of instruments. The results suggest a positive relationship between blending mandates and domestic biofuel production. Thus, a more stringent blending mandate does not only increase the use of biofuels, but also domestic production (as a share of total fuel use). Government R&D has not, however, induced domestic biofuel industrialization processes. The results even suggest a negative interaction effect between government R&D and blending mandates, in turn implying that these two polices target different technological fields. The blending mandates tend to primarily favor commercialized first-generation biofuels, while government support to biofuel R&D has instead been focused on advanced biofuel technology.