Sell or not sell biodiesel: local competition and government measures

Abstract

The introduction of biofuels is one of the objectives of the European Union. For this reason, measures to promote the production and consumption of this product have been implemented, such as tax exemptions, fixing a minimum amount of mixture or the introduction of public transport that consume biofuels. In this paper, we test different factors that can affect the introduction of biodiesel in the Spanish gasoline market. These factors are mainly the level of local competition, technical difficulties and local government action. Empirical evidence shows that a higher level of competition, more buses that consume biodiesel and a lower adjustment costs increase significantly the probability of sell biodiesel at service stations. These results show how the promotion of competition and public procurement of vehicles can improve the commercialization of biofuels.