AgriFood-WP 2013:3

Assessing the impact of EU member states' plans for biofuel on land use and agricultural markets in the EU

This paper assesses the impact on the agricultural sector in the EU of implementing the National Renewable Energy Action Plans, set up by each of the EU member states, with respect to biofuels. The analysis is based on simulations conducted in the CAPRI model, which is a detailed partial equilibrium model of the European agricultural sector. The key contribution compared to previous studies is that the detailed official plans for the expansion of biofuel production is analysed rather than specific policy measures. In addition, the current CAPRI version allows analysis of changes in the total area used for agricultural purposes since land supply is endogenous to the model. The analysis shows that the impact of increasing the production from current (2010) levels to the production levels indicated in the National Plans would result in a limited increase in land used for agricultural purposes (+0.04 per cent) in the EU. However there are reallocations of the land use within the sector and a substantial increase in imports of primary agricultural products. This would imply that the policy will also affect land use outside the EU. The importance of the biofuel industry will grow significantly and the biofuel industry will become the most important outlet for some feedstocks (oilseeds), thus we should expect a closer link between agricultural markets and fuel prices. The expansion of biofuel production increases the prices of primary agricultural products, in particular for oil seeds, but even more so for vegetable oils which are used to produce biodiesel.