Effects of Increased Biofuel Blending on Demand for Biomass, Food Production and Commodity Prices in Eastern Germany

Abstract

Renewable resources are gaining importance in modern society due to their expected positive effects on agriculture, the environment and the economy. To support renewable energy from biomass the EU promotes the cultivation of energy crops. A spatial equilibrium model is applied based on the concept of maximizing net welfare, to provide information whether energy crop production competes with food production for land area and to show the effects of increased biofuel demand on food prices. The Model of Interregional Trade of Energy Crops (ITEC) refers to Eastern Germany and adjacent areas of Poland. Results show that the regions produce enough feedstocks to meet the demand for food and biofuel production. In many cases both food crops and biofuels are either traded on interregional basis or exported to Rest of Europe indicating that there is no competition between food and energy crops. The assumed demand shift for biofuels has almost no effect on prices for wheat and rye.