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Will improved access to capital dampen the need for more agricultural land? A CGE analysis of agricultural capital markets and world-wide biofuel policies

  • Banse, Martin
  • Rothe, Andrea
  • Tabeau, Andrzej
  • Van Meijl, Hans
  • Woltjer,Geert

This paper analyses the consequences of enhanced biofuel production in regions and countries of the world that have announced plans to implement or expand on biofuel policies. The analysis considers biofuel policies implemented as binding blending targets for transportation fuels. The chosen quantitative modelling approach is two-fold: it combines the analysis of biofuel policies in a multisectoral economic model (MAGNET) with systematic variation of the functioning of capital and labour markets. This paper adds to existing research by considering biofuel policies in the EU, the US and various other countries with considerable agricultural production and trade, such as Brazil, India and China. Moreover, the application multi-sectoral modelling system with different assumptions on the mobility of factor markets allows for the observation of changes in economic indicators under different conditions of how factor markets work. Systematic variation of factor mobility indicates that the ‘burden’ of global biofuel policies is not equally distributed across different factors within agricultural production. Agricultural land, as the pre-dominant and sector-specific factor, is, regardless of different degrees of inter-sectoral or intrasectoral factor mobility, the most important factor limiting the expansion of agricultural production. More capital and higher employment in agriculture will ease the pressure on additional land use – but only partly. To expand agricultural production at global scale requires both land and mobile factors adapted to increase total factor productivity in agriculture in the most efficient way.

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Paper provided by Centre for European Policy Studies in its series Factor Markets Working Papers with number 160.

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Length: 19 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:eps:fmwppr:160
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  1. Hertel, Thomas, . "Global Trade Analysis: Modeling and applications," GTAP Books 7685, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Shutes, Lindsay & Rothe, Andrea & Banse, Martin, 2012. "Factor Markets in Applied Equilibrium Models: The current state and planned extensions towards an improved presentation of factor markets in agriculture," Working Papers 122851, Factor Markets, Centre for European Policy Studies.
  3. Rajagopal, Deepak & Zilberman, David, 2007. "Review of environmental, economic and policy aspects of biofuels," Policy Research Working Paper Series 4341, The World Bank.
  4. Sorda, Giovanni & Banse, Martin & Kemfert, Claudia, 2010. "An overview of biofuel policies across the world," Energy Policy, Elsevier, vol. 38(11), pages 6977-6988, November.
  5. Eickhout, Bas & van Meijl, Hans & Tabeau, Andrzej & Stehfest, Elke, 2008. "The Impact of Environmental and Climate Constraints on Global Food Supply," GTAP Working Papers 2608, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  6. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Martin Banse & Hans van Meijl & Andrzej Tabeau & Geert Woltjer, 2008. "Will EU biofuel policies affect global agricultural markets?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 35(2), pages 117-141, June.
  8. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  9. Thomas W. Hertel & Wallace E. Tyner & Dileep K. Birur, 2010. "The Global Impacts of Biofuel Mandates," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-100.
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