Regulation as a way to force innovation: the biodiesel case

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 and fixing a minimum amount of mixture. In this paper, we test the level of competition as a factor that can significantly affect the introduction of this new product. The empirical analysis conducted of the biodiesel market in Spain shows a non-linear and inverted U among the level of competition in the market and the introduction of biodiesel by petrol stations. This result justifies the adoption of measures to promote competition in order to improve the commercialization of biofuels.