Renewable energy - new forces in global ethanol trade?

The paper presents an extended gravity equation application for the global trade with ethanol.The background and different attempts for a theoretical foundation of the standard approachare discussed. The econometric work takes regional integration schemes into account, as wellas the influence of the production factor agricultural land and the level of oil prices on theworld market. Results indicate that global bilateral trade flows of ethanol can be explained bya set of comprehensive explanatory variables, including regional agreements and the pricelevel of oil. From a global perspective the EU effect on trade flows is trade diverting as theregional agreement reduces the linkage to world markets and increases the intra-regional levelof trade with ethanol. The analysis over time however indicates that the decoupling of the EUethanol market from the world market is decreasing, potentially reflecting demand increaseswithin the EU.