The interaction between EU biofuel policy and first- and second-generation biodiesel production

We build a tractable partial equilibrium model to study the interactions between the EU biofuel policies (mandate and double-counting of second-generation biofuels) and first- and second-generation biodiesel production. We find that increasing the biodiesel mandate results in a higher share of first-generation biodiesel in total diesel fuel, but leads to a lower share of second-generation biodiesel. The double-counting policy supports the production of second-generation biodiesel at the expense of a lower share of first-generation biodiesel, and increases the consumption of fossil diesel as compared to treating first- and second-generation biodiesel equally. Finally, improved collection of used cooking oil reduces the price of oilseeds and oils thereof, the prices of both biofuel types, and negligibly also the consumer fuel price.