Methodology to assess EU Biofuel Policies: The CAPRI Approach

This report is based on the outcome of a study carried out by the European Commission's Joint Research Centre - Institute for Prospective Technological Studies (JRC-IPTS, Spain) in cooperation with EuroCARE (Bonn, Germany). The report provides a detailed description of the methodology developed to assess the implications of the European Renewable Energy Directive on the agricultural sector, with an explicit focus on regional effects of biofuel targets in the EU. For the analysis, the spatial agricultural sector model CAPRI has been extended to include a global representation of biofuel markets (with endogenous supply, demand and trade flows for biofuels and biofuel feedstocks) while keeping the focus on regional impacts in the EU. The model is capable to simulate the impacts of EU biofuel policies on food production and prices, the potential use of by-products in the feed chain, the increasing pressure on marginal and idle land and the share of imported biofuels (self-sufficiency indicators). CAPRI is now able to jointly assess biofuel and agricultural policies, including policy instruments defined at the Member State level. The CAPRI biofuel module allows for a detailed analysis of most relevant biofuel support instruments like consumer tax exemptions, quota obligations, import tariffs and other trade measures. Additionally, the model allows for analysing scenarios regarding technical progress in 2nd generation technologies for biofuels.

Impacts of the EU Biofuel Target on Agricultural Markets and Land Use - A Comparative Modelling Assessment

The Renewable Energy Directive (2009/28/EC) requires that 20% of the EU's energy needs should come from renewable sources by 2020, and includes a target for the transport sector of 10% from biofuels. This report analyses and discusses the global impacts of this biofuel target on agricultural production, markets and land use, as simulated by three agricultural sector models, AGLINK-COSIMO, ESIM and CAPRI. The impacts identified include higher EU production of ethanol and biodiesel, and of the crops used to produce them, as well as more imports of both biofuels. Trade flows of biofuel feedstocks also change to reflect greater EU demand, including a significant increase in vegetable oil imports. However, as the extra demand is small in world market terms, the impact on world market prices is limited. With the EU biofuel target, global use of land for crop cultivation is higher by 5.2 million hectares. About one quarter is area within the EU, some of which would otherwise have left agriculture.

Latin American Agricultural Trade: The Role of the WTO in Sustainable Virtual Water Flows, European Association of Agricultural Economists

International agricultural trade has been growing significantly during the last decade. Many countries rely on imports to ensure adequate food supplies to the people. A few are becoming food baskets of the world. This process raises issues about the food security in depending countries and potentially unsustainable land and water use in exporting countries. In this paper, we analyse the impacts of amplified farm trade on natural resources, especially water. Farm exports and imports of five Latin America countries (Brazil, Argentina, Mexico, Peru and Chile) are examined carefully. A preliminary analysis indicates that virtual water imports can save valuable water resources in water-short countries, such as Mexico and Chile. Major exporting countries, including Brazil and Argentina, have become big exporters due to abundant natural resource endowments. The opportunity costs of agricultural production in those countries are identified as being low, because of the predominant green water use. It is concluded that virtual water trade can be a powerful tool to alleviate water stress in semi-arid countries. However, for exporting nations a sustainable water use can only be guaranteed if environmental production costs are fully reflected in the commodity prices. There is no basis for erecting environmental trade tariffs on exporters though. Setting up legal foundations for them in full compliance with WTOs processes would be a daunting task.