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Subsidies and Countervailing Measures in the EU Biofuel Industry: A Welfare Analysis

Author

Listed:
  • Patrice Bougette

    (Université Côte d'Azur
    GREDEG CNRS)

  • Christophe Charlier

    (Université Côte d'Azur
    GREDEG CNRS)

Abstract

In 2019, following several investigations, the European Union decided to impose definitive anti-subsidy (AS) duties on imports of biodiesel from Argentina and Indonesia. While AS duties protect the domestic market and R\&D, this trade defense policy may interfere with environmental preservation. We investigate this issue using an international duopoly model with an environmental externality. We discuss the economic rationale of AS measures in the biodiesel context. We show that the larger the size of the domestic market, the higher the optimal AS level. Second, trade policies are less necessary when firms become more cost-efficient. Third, the sensitivity of AS policies to environmental externalities is ambiguous. Fourth, under certain conditions, the success of the innovation is negatively correlated with the strategic levels of both subsidies and AS policies.

Suggested Citation

  • Patrice Bougette & Christophe Charlier, 2020. "Subsidies and Countervailing Measures in the EU Biofuel Industry: A Welfare Analysis," GREDEG Working Papers 2020-38, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2020-38
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    References listed on IDEAS

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    1. Patrice Bougette and Christophe Charlier, 2018. "Antidumping and Feed-In Tariffs as Good Buddies? Modeling the EU-China Solar Panel Dispute," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
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    More about this item

    Keywords

    Anti-subsidy; countervailing duties; biodiesel; European Union; trade; environmental impact;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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