Transmission of variations in the biodiesel mandate for Brazilian biodiesel market

Abstract

To preserve the environment, several countries have promoted the insertion and expansion of biodiesel into their energy matrices through mandates (mandatory blending of biodiesel and fossil diesel). This study analyzed the short- and long-term effects of changes in biodiesel mandates on certain representative variables in the biodiesel industry, including biodiesel demand, fossil diesel imports, and the retail price of diesel B. Three potential scenarios (growth, stability, and decline) were established to forecast future fluctuations in biodiesel mandates from September 2021 to December 2023. The short-term and long-term equilibrium relationships were determined using the vector error correction model with an exogenous variable (VECX), considering the biodiesel mandate as an exogenous variable. The results of this study are as follows. (i) The time series analyzed were non-stationary and cointegrated. (ii) In the long term, the 1% increase in biodiesel mandate caused increases of 1.1946% in the demand for biodiesel, 1.1967% in the price of diesel B, and only 0.7712% in fossil diesel imports. (iii) In the short term, the 1% increase in biodiesel mandate caused increases of 0.9249% in biodiesel demand, 0.7659% in the price of diesel B, and only 0.0361% in fossil diesel imports.