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Effects of the German Renewable Energy Act on structural change in agriculture – The case of biogas

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  • Appel, Franziska
  • Ostermeyer-Wiethaup, Arlette
  • Balmann, Alfons

Abstract

The strong political support for biogas production in Germany over the past decade has greatly affected agricultural production, farms and land markets. This paper analyzes the effects of Germany's biogas policies on agricultural development by using the agent-based simulation model AgriPoliS. Particular focus is placed on the effects of the previous German Renewable Energy Act (REA, German “EEG”) of 2012, as well as the latest amendments, which were added in 2014. Our results show that under the previous REA and its predecessors, biogas production provided an attractive investment opportunity, especially for large farms, which led to a boost in biogas production. However, this policy also caused distortions within the agricultural sector, including increasing land rental prices. These effects particularly threatened farms that were not able to invest in biogas, as well as smaller biogas farms. On average, biogas farms could not increase their profitability. The main reason for this effect can be seen in the fact that a significant share of the value added is transferred via increased rental prices to land owners. The amendment of the REA in 2014, which reduced support levels substantially, partly attenuates some of these effects, though the previous policy will cast a long shadow.

Suggested Citation

  • Appel, Franziska & Ostermeyer-Wiethaup, Arlette & Balmann, Alfons, 2016. "Effects of the German Renewable Energy Act on structural change in agriculture – The case of biogas," Utilities Policy, Elsevier, vol. 41(C), pages 172-182.
    • Handle: RePEc:eee:juipol:v:41:y:2016:i:c:p:172-182
    DOI: 10.1016/j.jup.2016.02.013
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    1. Ellen Goddard & Alfons Weersink & Kevin Chen & Calum G. Turvey, 1993. "Economics of Structural Change in Agriculture," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 41(4), pages 475-489, December.
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    4. Habermann, Hendrik & Breustedt, Gunnar, 2011. "Einfluss der Biogaserzeugung auf landwirtschaftliche Pachtpreise in Deutschland," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 60(02), pages 1-16, May.
    5. Ostermeyer, Arlette, 2015. "Milchproduktion zwischen Pfadabhängigkeit und Pfadbrechung: Partizipative Analysen mit Hilfe des agentenbasierten Modells AgriPoliS," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 81, number 81.
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    More about this item

    Keywords

    Biogas production; Agent-based modelling; Renewable energy act;
    All these keywords.

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other

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