Abstract
Over the past decade, the relationship between agricultural and energy markets has strengthened. Traditional energy sources have been increasingly replaced by energy from biomass, and this trend is expected to continue into the future. Consequently, an assessment of the efficiency of bioenergy policies requires a comprehensive analysis of both agricultural and energy markets. The objective of this paper is to analyze the impacts of two detailed European Union (EU) greenhouse gas (GHG) emission mitigation policies on the utilization of biomass for energy production and the implications for agricultural prices and trade. The consequences of a policy-induced shift from consumption of fossil to renewable energy are assessed under full consideration of interrelations between the energy and agricultural sectors. To this end, we combine an energy system model and an agricultural sector model by establishing a consistent interface between them. Depending on the ambition of the GHG emission reduction scenarios, the results indicate significant price increases. Furthermore, the increase in European demand for energy crops is to a substantial degree covered by additional imports. These results highlight that GHG emission mitigation policies enacted in a large economy like the EU cannot be considered without accounting for indirect effects in the rest of the world. They put the efficiency and also the effectiveness of such policies in general into question.
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Notes
The CAP is the main policy for the agricultural sector in the EU. It mainly consists of area payments granted to European farmers, rural development measures, and market management measures.
We assume convergence when the difference in price and biomass demand changes is less than 1 % between two iterations for all exchange variables.
The marginal top-up for import prices is necessary to ensure that the model demands domestically produced biomass at first, which is required for technical reasons.
For example, Hertel (2011, 263) suggests that “global demand elasticities for food should be adjusted downward over the projection period” for long-term projections.
Prices developments published by Fischer (2009) are assumed to develop linearly until 2050. Thus, annual growth rates are adopted for the period between ESIM’s base year (06/07) and 2050. Additionally, the resulting world market price increase is augmented by the average price effects of different biofuel scenarios calculated in the same publication to roughly catch price effects resulting from bioenergy demand in the rest of the world. According to our estimations, average crop prices increase by 26 % in the EU27 and by 28 % at the world market in the baseline scenario. As Fischer (2009, 5) states, price developments should be interpreted as a characteristic of the reference simulation rather than predictions of future prices.
This figure is equivalent to 30 % of the maximum area available in ESIM, as ESIM does not comprise all agricultural commodities (e.g. vegetables, fruit, cotton, and tobacco are missing).
Since we have no information about relevant elasticity values applied in the models in Lotze-Campen et al. (2014), implicit land supply elasticities were calculated based on the presented price and land use changes to get an idea about the flexibility of area supply.
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Acknowledgments
The authors gratefully acknowledge helpful comments made by two anonymous referees as well as members of the DFG Research Unit SiAg and financial support from the German Research Foundation (DFG Research Unit: Structural Change in Agriculture (SiAg)).
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Deppermann, A., Blesl, M., Boysen, O. et al. Linkages between the energy and agricultural sectors: insights from European Union greenhouse gas mitigation scenarios. Mitig Adapt Strateg Glob Change 21, 743–759 (2016). https://doi.org/10.1007/s11027-014-9621-0
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DOI: https://doi.org/10.1007/s11027-014-9621-0