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

Abstract

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.

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