Linkages between the energy and agricultural sectors: insights from European Union greenhouse gas mitigation scenarios

Abstract

Over the past decade, the relationship between agricultural and energy markets has strengthened. Traditional energy sources have been increasingly replaced by energy from biomass, and this trend is expected to continue into the future. Consequently, an assessment of the efficiency of bioenergy policies requires a comprehensive analysis of both agricultural and energy markets. The objective of this paper is to analyze the impacts of two detailed European Union (EU) greenhouse gas (GHG) emission mitigation policies on the utilization of biomass for energy production and the implications for agricultural prices and trade. The consequences of a policy-induced shift from consumption of fossil to renewable energy are assessed under full consideration of interrelations between the energy and agricultural sectors. To this end, we combine an energy system model and an agricultural sector model by establishing a consistent interface between them. Depending on the ambition of the GHG emission reduction scenarios, the results indicate significant price increases. Furthermore, the increase in European demand for energy crops is to a substantial degree covered by additional imports. These results highlight that GHG emission mitigation policies enacted in a large economy like the EU cannot be considered without accounting for indirect effects in the rest of the world. They put the efficiency and also the effectiveness of such policies in general into question.