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The economic effects of the EU biofuel target

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  • Kretschmer, Bettina
  • Narita, Daiju
  • Peterson, Sonja

Abstract

In this paper we use the CGE model DART to assess the economic impacts and optimality of different aspects of the EU climate package. A special focus is placed on the 10% biofuel target in the EU. In particular we analyze the development in the biofuel sectors, the effects on agricultural production and prices, and finally overall welfare implications. One of the main findings is that the EU emission targets alone lead to onlyminor increases in biofuel production. Additional subsidies are necessary to reach the 10% biofuel target. This in turn increases European agricultural prices by up to 7%. Compared to a cost-effective scenario in which the EU 20% emission reduction target is reached, additional welfare losses occur due to separated carbon markets and the renewable quotas. The biofuel target has relatively small negative or even positive welfare effects in some scenarios.

Suggested Citation

  • Kretschmer, Bettina & Narita, Daiju & Peterson, Sonja, 2009. "The economic effects of the EU biofuel target," Open Access Publications from Kiel Institute for the World Economy 32984, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkie:32984
    DOI: 10.1016/j.eneco.2009.07.008
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    References listed on IDEAS

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    1. Beghin, John C. & Dong, Fengxia & Elobeid, Amani E. & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen & Tokgoz, Simla & Yu, Tun-Hsiang (Edward) & Wailes, Eric J. & Chavez, Eddi, 2007. "FAPRI 2007 U.S. and World Agricultural Outlook," FAPRI Staff Reports 7296, Food and Agricultural Policy Research Institute (FAPRI).
    2. Martin Banse & Hans van Meijl & Andrzej Tabeau & Geert Woltjer, 2008. "Will EU biofuel policies affect global agricultural markets?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 35(2), pages 117-141, June.
    3. Kretschmer, Bettina & Peterson, Sonja, 2010. "Integrating bioenergy into computable general equilibrium models -- A survey," Energy Economics, Elsevier, vol. 32(3), pages 673-686, May.
    4. Peterson, Sonja & Klepper, Gernot, 2008. "The competitiveness effects of the EU climate policy," Kiel Working Papers 1464, Kiel Institute for the World Economy (IfW Kiel).
    5. Oecd, 2006. "Agricultural Market Impacts of Future Growth in the Production of Biofuels," OECD Papers, OECD Publishing, vol. 6(1), pages 1-57.
    6. Klepper, Gernot & Peterson, Sonja, 2006. "Marginal abatement cost curves in general equilibrium: The influence of world energy prices," Resource and Energy Economics, Elsevier, vol. 28(1), pages 1-23, January.
    7. Kretschmer, Bettina & Peterson, Sonja & Ignaciuk, Adriana M., 2008. "Integrating biofuels into the DART model," Kiel Working Papers 1472, Kiel Institute for the World Economy (IfW Kiel).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    CGE model; Climate policy; EU; Biofuels;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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