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

Abstract

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.

Keywords: Agriculture, biofuels, Germany

JEL Classification: Q1, Q42