Will EU Biofuel Policies Affect Global Agricultural Markets?

Abstract

This article assesses the implications of the EU Biofuels Directive (BFD) using a computable general equilibrium framework with endogenous land supply. The results show that, without policy intervention to stimulate the use of biofuel crops, the targets of the BFD will not be met. With the BFD, the enhanced demand for biofuel crops has a strong impact on agriculture globally and within Europe, leading to an increase in land use. On the other hand, the long-term declining trend in real agricultural prices may slow down or even reverse.

Keywords: biofuels, EU Biofuels Directive, agricultural markets, computable general equilibrium modelling, endogenous land supply

JEL Classification: F17, Q17, Q27, Q28