Impact and competitiveness of EU biofuel market – First view of the prices of biofuel market in relation to the global players

The goal of this study is to investigate the price relationship of EU biofuel market with other main markets inboth horizontal level and vertical level. We first carry out Granger causality between ethanol price of EU,USA and Brazil. Secondly, we use vecto error cointegration Mechnism (VECM) to test the relationshipbetween three selected vegetable oil prices in EU to see the competive potential of EU rapeseed oilcompared with imported crude palm oil and soybean oil as the feedstock of biodiesel. Evidence shows thatthere is a unidirectional Granger causation from both USA and Brazil to EU market. USA price of ethanol isthe most influential among the three price series, and EU has the least influence on the contrary. It indicatesthat it is very necessary for EU to set up its own price indicator, for instance, futures prices in EURONEXT.However, in biodiesel market, production in EU has some potential in competing with outside of the worldsince rapeseed oil price show some potential in price competition with other vegetable oils.