Keywords: EC bioethanol blend mandate, partial equilibrium, gasoline demand, petrol demand, carbon footprint, sustainable resource allocation, sustainability, EU transport sector, European Union, binding blend mandate, biofuels, bioethanol crops, commodities markets
Partial equilibrium analysis of the EC bioethanol blend mandate policy: its potential implications for EU transport sector
The aim of this study is to set up an EU27 bioethanol partial equilibrium model under a binding blend mandate and to determine the bioethanol market clearing conditions' implications on EU transport sector. Bioethanol supply is derived from EU27 bioethanol crops while its demand is a derived from that of transport fuel in the region. Results show that equilibrium bioethanol quantities at 70% tax rebate for the bioethanol component of the fuel mixture are 133 and 188 thousand barrels of bioethanol per day at 5.75% and 10% blend mandate respectively. This implies that a 5.75% and 10% blend mandate will decrease gasoline demand by 42% and 52% respectively from reference 2004 EU gasoline demand. Theoretically therefore, the EC biofuel blend mandate could reduce carbon foot print in the region but with questionable sustainable allocation of resources given the impact such a mandate will have on bioethanol crops commodities markets.