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Abstract

In its Progress Report on Biofuels the European Commission proposes a more restrictive biofuel directive which sets a mandatory minimum share of biofuels in total fuel consumption in the transport sector of 10% per Member State by 2020. This is likely to have a strong impact on demand for biofuel inputs such as plant oils, cereals and sugar beet. To analyze the effects of this proposal on land use and agricultural markets, an extended version of the partial equilibrium model ESIM of the European agricultural sector is developed and applied which covers the production of and demand for biofuels. Two policy scenarios are simulated for the projection horizon until 2020: a baseline under which the share of biofuels in total transport fuels increases to 6.9% by 2020, and a scenario with a more demanding biofuel directive resulting in a 10% share. Results show that a substantial part of the policy-induced demand for biofuels is covered by imports of biofuels and biofuel inputs. Especially after the implementation of a potential Doha agreement, EU production of bioethanol strongly decreases, while almost all bioethanol demand is covered by imports.

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