Impact of the EU Biofuels Directive on the EU food supply chain

The paper investigates the impact of the EU Biofuels Directive (BFD) on the EU agri-food supply chain using the computable general equilibrium model of the world economy named LEITAP. LEITAP is an extended version of the Global Trade Analysis Project (GTAP) model including an improved land market modeling, substitution possibilities between capital and energy as well as between different energy sources including biofuels, feed byproducts of the biofuel production process and substitution between different feed components and feed byproducts. The simulation results shows that the implementation of the EU BFD has a pronounced impact on the markets of cereals, oilseeds and sugar and shows only a limited impact on production and consumption of other agrifood commodities which are not directly affected by biofuel production. The harvested area and production of biofuel crops (grains, oilseeds) is expected to increase by 17% and 25% respectively and sugar production by 12% as a direct result the BFD. The EU-imports of these commodities are expected to rise more than twice. The increasing demand for biofuel crops and sugar will lift domestic prices of these commodities by 25% and 19% respectively but overall agri-food price inflation will be limited to 3% in the EU and to less than 1% at world market level.