Developing biofuel markets: The importance of standardisation in supply chain management

Abstract

The transition from a fossil based to a biobased economy has been proposed as a solution towards a sustainable society. Biofuels are expected to become an important pillar in such society, by increasing energy security, reducing greenhouse gas emissions and stimulating local economies of both developed as developing countries. Standards can increase stability, benefit and greater growth of markets. Furthermore, standards can assist in the legitimisation of new technologies and their diffusion into a central position. However, it is unknown how and to what extent standards can influence the development of biofuel markets. Therefore, a diffusion model has been proposed explaining the relation between standardisation and the trading volumes. In order to test this model, a historic market analysis of the established commodities coal and palm oil was conducted. Furthermore, a stakeholder analysis was performed for determining the role of standardisation and stakeholder influence in the development of biofuel markets.

A large correlation between standardisation and the development of commoditised markets was found. Furthermore, a specific pattern in standard development has been detected in which certain standard types dominate the different phases in market development. For the development of biofuel markets, standards related to quality and sustainability are regarded as most important. A number of barriers have been identified regarding the institutionalisation of biofuel markets. The observed stakeholder relations and lack of an optimal network density might impede the realisation of institutionalised biofuel trading. Furthermore, the current lack of such internationally accepted standards negatively impact further development of standardised contracts. In order to create optimal conditions for institutionalised trading, further research is required to investigate possibilities regarding the determination of internal boundaries and values for standardised trading at an exchange.