Renewable energy - new forces in global ethanol trade?
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The paper presents an extended gravity equation application for the global trade with ethanol.
The background and different attempts for a theoretical foundation of the standard approach
are discussed. The econometric work takes regional integration schemes into account, as well
as the influence of the production factor agricultural land and the level of oil prices on the
world market. Results indicate that global bilateral trade flows of ethanol can be explained by
a set of comprehensive explanatory variables, including regional agreements and the price
level of oil. From a global perspective the EU effect on trade flows is trade diverting as the
regional agreement reduces the linkage to world markets and increases the intra-regional level
of trade with ethanol. The analysis over time however indicates that the decoupling of the EU
ethanol market from the world market is decreasing, potentially reflecting demand increases
within the EU.