Files
Abstract
The goal of this study is to investigate the price relationship of EU biofuel market with other main markets in
both horizontal level and vertical level. We first carry out Granger causality between ethanol price of EU,
USA and Brazil. Secondly, we use vecto error cointegration Mechnism (VECM) to test the relationship
between three selected vegetable oil prices in EU to see the competive potential of EU rapeseed oil
compared with imported crude palm oil and soybean oil as the feedstock of biodiesel. Evidence shows that
there is a unidirectional Granger causation from both USA and Brazil to EU market. USA price of ethanol is
the most influential among the three price series, and EU has the least influence on the contrary. It indicates
that it is very necessary for EU to set up its own price indicator, for instance, futures prices in EURONEXT.
However, in biodiesel market, production in EU has some potential in competing with outside of the world
since rapeseed oil price show some potential in price competition with other vegetable oils.