International bioenergy market: assessing institutional structures

• Grant number: 08/56113-0
• Support Opportunities: Program for Research on Bioenergy (BIOEN) - Thematic Grants
• Start date: June 01, 2009
• End date: May 31, 2013
• Field of knowledge: Applied Social Sciences - Economics - Agrarian and Natural Resource Economics
• Agreement: CNPq - Pronex
• Principal Investigator: Paulo Furquim de Azevedo
• Grantee: Paulo Furquim de Azevedo
• Host Institution: Escola de Economia de São Paulo (EESP). Fundação Getúlio Vargas (FGV). São Paulo , SP, Brazil

Abstract

The fast-growing global bioenergy market, and the particular features of its demand bring into question the production and trade of renewable products and how they should be regulated in the years to come. Institutional structures governing renewable energy trade are costly and still vaguely defined. That is the most likely reason why the majority of international trade of bioenergy products (mainly ethanol) is based on bilateral and idiosyncratic long-term contracts instead of multilateral transactions. Different from regular commodities markets, the emergence of market institutions in the international trade of bioenergy products requires mechanisms that transmit information about socio-environmental sustainability, inasmuch as this is an essential feature of its growing demand. We propose to analyze the institutions for the emerging global market of bioenergy products, in particular the capability of those institutions to encompass the production of a broader range of third world countries, so as to increase the number of suppliers and to mitigate risks associated to regional supply shocks, such as draughts or political instability. A more reliable supply of bioenergy products seems a necessary condition for fostering the international demand by energy consumers, particularly for the adoption of mandates and other mandatory consumer measures. This task is complex because bioenergy products are by large credence goods, i.e., they must carry the information of environment sustainability, which drives the demand for bioenergy products. As a consequence, specific coordination is required in order to establish international standards, and to build institutional arrangements to transact information about the credence aspects of those products, both oriented to the reduction of transaction costs in this emerging market. This research work aims to understand how institutions of international bioenergy markets will develop in the next years, and what the most relevant impacts will be on the competitiveness and production sustainability in Brazil and other potential producers, particularly in Latin America and África. By understanding better the factors involved in the development of bioenergy market institutions, we expect to support public policies oriented to the sustainable development of third world countries, as well as to stabilize the geopolitics tensions derived from the regional concentration of oil-based energy. (AU)