The Canola Oil Industry and EU Trade Integration: A Gravity Model Approach

Abstract

Recently biodiesel has become more prominent in countries of the European Union (EU). The rapidly increasing domestic production and consumption of biodiesel is accompanied by increasing trade flows. It is questionable if these trade flows are caused mainly by EU regulations concerning trade or concerning the bioenergy sector. A sector-specific analysis taking industry patterns into consideration is necessary to evaluate the impact of these two policy areas on trade flows. The obtained results suggest that while the mandatory biofuel blending quota has a positive impact, investment subsidies cannot be shown to have any effect and trade integration might even have a trade inhibiting effect among EU members.