EFFECTS OF A POTENTIAL NEW BIOFUEL DIRECTIVE ON EU LAND USE AND AGRICULTURAL MARKETS

In its Progress Report on Biofuels the European Commission proposes a more restrictive biofuel directive which sets a mandatory minimum share of biofuels in total fuel consumption in the transport sector of 10% per Member State by 2020. This is likely to have a strong impact on demand for biofuel inputs such as plant oils, cereals and sugar beet. To analyze the effects of this proposal on land use and agricultural markets, an extended version of the partial equilibrium model ESIM of the European agricultural sector is developed and applied which covers the production of and demand for biofuels. Two policy scenarios are simulated for the projection horizon until 2020: a baseline under which the share of biofuels in total transport fuels increases to 6.9% by 2020, and a scenario with a more demanding biofuel directive resulting in a 10% share. Results show that a substantial part of the policy-induced demand for biofuels is covered by imports of biofuels and biofuel inputs. Especially after the implementation of a potential Doha agreement, EU production of bioethanol strongly decreases, while almost all bioethanol demand is covered by imports.Biofuels, EU Biofuels Directive, agricultural markets, partial equilibrium modeling, Land Economics/Use, Resource /Energy Economics and Policy,

Budgetary Effects of Including the CEC into Dynamic Modulation

The EU Commission suggests to exclude CEC from the dynamic modulation mechanism, being part of the MTR package. This article looks at the distributional aspects of including the CEC into dynamic modulation. Under the current accession proposal the CEC would account for only 18% of the rural development budget by 2006. If modulation would be realised with the CEC being excluded this share would drop to 14% by 2010. According to the criteria proposed by the Commission for the distribution of the modulation budget the CEC would get a higher share of the modulation budget if they were included as they account for high shares in agricultural area and employment, and their GDP per capita is relatively low. Based on the assumptions made for this article they would be eligible for about 66% of the modulation budget. As a result of their participation in the modulation mechanism their share in the rural development budget would be at 30% by 2010. The financial net gains for the CEC from participation are estimated to be at 1.7 bln. €.Modulation, EU-enlargement, CAP-budget, Agricultural and Food Policy,

Impact of different biofuel policy options on agricultural production and land use in Germany

biofuel, Environmental Economics and Policy, Resource /Energy Economics and Policy,

The didactic value of linking models: experiences from the LEI model funnel

The complexity of agri-environmental economic issues is such that a model that is fully consistent at all levels of aggregation and all type of questions to be addressed is not available at the Agricultural Economics Research Institute in the Hague LEI. Such a model is probably also not feasible. At LEI this problem is solved by linking models at different scales of analysis: global economic, national economy-wide, regional agricultural, national spatial and farm levels. This linked model system enlarges scope and consistency of the analysis. The goal of the model linking, however, is not a full integration and, ultimately, simultaneous optimization of the models. Therefore, the different models of the LEI model funnel are often rather loosely linked. Hence, it is not surprising that the models sometimes produce different results even for the shared variables. This article describes the difficulties to share and exchange information between different models and identifies possible solutions which aim at a more consistent analysis along the models combined at LEI while maintaining the diversity of modelling approaches.economic models, combined models, quantitative policy analysis, Agricultural and Food Policy, Research Methods/ Statistical Methods,

MODELLING THE EFFECTS OF EU SUGAR MARKET LIBERALIZATION ON AREA ALLOCATION, PRODUCTION AND TRADE

This paper presents a partial equilibrium simulation analysis of EU sugar market reforms with a version of the European Simulation Model (ESIM) addressing three issues: preferential EU imports are a function of the price differential between world market and EU price, EU supply functions are estimated based on FADN data, and the production of bioethanol in the EU and the rest of the world is taken into account as an important component in sugar beet and sugar cane demand. It is found that the current sugar market reform including the restructuring process until the end of 2007 is sufficient to allow the EU to comply with its WTO commitments only very narrowly. EU sugar supply is simulated to decrease from roughly 19 million tons in the base period to 15.5 million tons by 2015 and the EU price remains at a level of about 450 €/t and thus significantly above the reference price. In case of full liberalization production in the EU is projected to decrease to 7.5 million tonnes by 2015.Sugar, Common Agricultural Policy, Sugar Market Reform, Partial Equilibrium Modelling, Everything But Arms, Agricultural and Food Policy, Crop Production/Industries, International Relations/Trade,

The Impact of Domestic and Global Biofuel Mandates on the German Agricultural Sector

The aim of this work is to evaluate the impact of domestic and global biofuel policies on Germany's agricultural sector. The central part of our study is divided into four sections. Section 2 presents in detail the issues that make biofuels a debated topic in today's economic policies. Fundamental aspects of our energy consumption patterns and the geographic location of our natural resources are highlighted together with a quantitative analysis of the recent surge in biofuels output capacity and estimates of their near-future deployment. An introduction to current and future biofuels production technologies is coupled with an overview of recent studies that assess their net contribution to harmful gaseous emissions and energy efficiency. The concerns associated with rising food prices and their likely causes are then briefly examined. Section 3 provides a thorough description of the subsidy, taxation and protection measures granted to biofuels across the world. Current governmental policies in the EU and its member states are given special attention. Section 4 presents the current literature on economic modelling and focuses on partial equilibrium (AGLINK-COSIMO, Impact, Esim, etc.) and general equilibrium frameworks (EPPA, GTAP, etc.). Section 5 simulates the impact of domestic and global biofuel policies in Germany within a Computable General Equilibrium framework. The LEITAP model is introduced. A description of the analysed scenarios is given on the basis of the envisaged biofuel blending mandates described in section 3. The simulation results are then evaluated with respect to production, prices, international trade and land use of the relevant commodities. The outcome clearly indicates that current biofuels policies significantly affect food markets as well as land allocation. The conclusion summarizes the main findings of our study and draws a comparison with results of other publications.

Consequences of EU Biofuel Policies on Agricultural Production and Land Use

Resource /Energy Economics and Policy, D58, Q13, Q24, Q27, Q28,

Die zukünftige Ausgestaltung der Direktzahlungen – Eine quantitative Analyse möglicher Reformen in einer erweiterten Europäischen Union

The introduction of the current Common European Agricultural Policy in ten new member states in central and eastern Europe will be a major financial challenge for the European Union. On the basis of the partial equilibrium model ESIM this article analyses potential consequences of different options for a reformed CAP. While the impact on agricultural markets will be relatively small, the financial burden of a harmonisation of agricultural policies and an introduction of direct payments in the new member states has to be carried mainly by the old member states of the EU-15. The burden of the main net-payers, especially Germany, would be significantly lower, if CAP were reformed according to the proposals of the EU-Commission's Mid-term Report. However, the remaining negative impacts on world agricultural trade and on world market prices for agricultural products, clearly show the necessity of a further reform of the CAP.EU Enlargement, EU Mid-term Report, costs of CAP, partial equilibrium analysis, Agricultural and Food Policy,

Future of European agriculture after the Health Check

This paper identifies major future trends and driving factors and perspectives and challenges resulting from them for European agriculture and food sectors until the year 2020. The focus of the paper is an analysis of key driving forces and the provision of a well developed reference scenario under the assumption of continued CAP reform and taking into account the framework discussions in the Doha Development Round. To assess the impact of policies the paper also examines a liberalisation (no support) and regionalization (maximum support) scenario. In terms of policy options the paper shows that the structural change process in agriculture (measured in terms of agricultural share in GDP) is a long-term process that continues with or without policy changes. The EU is facing an increasing diversity of structure and structural adjustment. The livestock sector (especially cattle) faces important challenges and restructuring. Alternative policy settings may not produce very different effect on the overall production as factor markets adjust. However, the regional impact on the environment and on the number of farms may prove to be more significant.economic modelling, future, CAP policy options, structural change, Agricultural and Food Policy,

SCENAR2020: Future of European Agriculture under Different Policy Options, the economic modelling framework

This paper identifies major future trends and driving factors and perspectives and challenges resulting from them for European agriculture and food sectors until the year 2020. The focus of the paper is an analysis of key driving forces and the provision of a well developed reference scenario under the assumption of continued CAP reform and taking into account the framework discussions in the Doha Development Round. To assess the impact of policies the paper also examines a liberalisation (no support) and regionalisation (max support) scenario. In terms of policy options the paper shows that structural change process in agriculture is a long-term process that continues with or without policy changes. EU is facing an increasing diversity of structure and structural adjustment. The livestock sector faces important challenges and restructuring. Alternative policy settings may not produce very different effect on the overall production. However, the regional impact may prove to be more significant.Economic Modelling, Future, CAP Policy Options, Structural Change, Agricultural and Food Policy, International Relations/Trade, Livestock Production/Industries,