EFFECTS OF A POTENTIAL NEW BIOFUEL DIRECTIVE ON EU LAND USE AND AGRICULTURAL MARKETS

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