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The JRC PESETA IV study shows that ecosystems, people and economies in the EU will face major impacts from climate change if we do not urgently mitigate greenhouse gas emissions or adapt to climate change. The burden of climate change shows a clear north-south divide, with southern regions in Europe much more impacted, through the effects of extreme heat, water scarcity, drought, forest fires and agriculture losses. Limiting global warming to well below 2°C would considerably reduce climate change impacts in Europe. Adaptation to climate change would further minimize unavoidable impacts in a cost-effective manner, with considerable co-benefits from nature-based solutions., JRC.C.6-Economics of Climate Change, Energy and Transport

The 2013 EU strategy on adaptation to climate change aims at contributing to a more climate-resilient Europe. However, there are still large gaps in understanding and characterising climate impacts in Europe and how impacts in the rest of the world could affect Europe. This report provides quantitative modelling-based results from biophysical and agro-economic models as part of the PESETA-IV (Projection of Economic impacts of climate change in Sectors of the European Union based on bottom-up Analysis) project. We analyse climate change projections for 2050 considering the Representative Concentration Pathway (RCP) of 8.5 W/m2 (with corresponding global warming levels ranging between 1.6 oC and 2.7 oC compared to pre-industrial levels), as well as for 1.5 °C and 2 °C warming conditions. Results show that climate change will pose a threat to global food production in the medium to long term, and that Europe will also be affected. Forced by the projected changes in daily temperature, precipitation, wind, relative humidity, and global radiation, grain maize yields in the EU will decline between 1% and 22%. In addition, wheat yields in Southern Europe are expected to decrease by up to 49%. However, in Northern Europe some of the negative productivity effects caused by climate change may be partially offset by higher levels of atmospheric CO2 concentrations and changing precipitation regimes. Losses, especially in Southern Europe may be reduced by tailored adaptation strategies; e.g. changing varieties and crop types, increasing and improving irrigation practices for certain crops and when economically feasible. However, limitations on sustainable water abstraction levels could become a barrier to increase irrigation levels, specifically in the Mediterranean countries (particularly Spain, Portugal, Greece, Cyprus, Malta, Italy and Turkey) where duration of water scarcity under global warming are projected to intensify. As large negative climate change impacts on productivity outside of the EU are estimated, large market spill-over effects will push up production in both Northern and Southern Europe through higher demand for some agricultural commodities outside of EU, resulting in higher producer prices. This, in turn, may benefit farmers' income and have positive effects on the EU’s agricultural commodity exports. However, other limiting factors (not all fully integrated into the used modelling system yet), such as increasing water shortage in Southern Europe (Task 10) and constraints on the expansion of irrigation, increasing impacts of heatwaves and droughts, consequences of reduction of nutrient use due to environmental and climate mitigation constraints, need to be further evaluated., JRC.D.4-Economics of Agriculture

This report highlights the importance of assessing emission mitigation from a multi-dimensional perspective. For this, a quantitative framework to analyse the potential contribution of different technological mitigation options in EU agriculture is described in this report. Within the boundaries of the analysis, the need to consider land use, land-use change and house gas mitigation targets is highlighted. The assessment of carbon dioxide emissions and removals is also important in light of the new flexibility introduced in the EU 2030 regulation framework. Regarding a possible ranking of mitigation technologies in terms of their mitigation potential and attached costs, the analysis clearly highlights the need to consider mitigation technologies as ‘a bundle’. It is important to avoid the simple aggregation of mitigation potentials by single measures without taking into account their interactions both from a biophysical and economic perspective. Moreover, the analysis quantifies how mitigation measures might influence differently the agricultural sector in different EU Member States, stating that there is no ‘one fits all’ rule that could be followed for selecting which mitigation technologies should be implemented at regional level. forestry emissions and removals for a comprehensive analysis of the sector’s potential contribution to achieve certain green, JRC.D.4-Economics of Agriculture

There is concern that unilateral climate action in the EU agricultural sector may cause higher emissions abroad (i.e. emission leakage) and harm the competitiveness of the EU´s agricultural sector. Applying the CAPRI model, this paper assesses the potential for border carbon adjustments (BCA) in the form of import tariffs to limit the leakage of emissions and preserve the competitiveness of the EU agricultural sector. Our results show that even though BCA reduces emission leakage, 92 % of the emission reduction in the EU is still offset by emission increases outside the EU. What limits the effectiveness of the investigated BCA measures is that these measures are unilateral, and thus they only adjust for the reduced competitiveness at the EU internal market, whereas EU exports are still largely replaced by commodities produced in less GHG-efficient countries. Therefore, BCA alone cannot solve the high risk of emission leakage in the agri-food sector as a consequence of unilateral EU climate action.

Systematic model inter-comparison helps to narrow discrepancies in the analysis of the future impact of climate change on agricultural production. This paper presents a set of alternative scenarios by five global climate and agro-economic models. Covering integrated assessment (IMAGE), partial equilibrium (CAPRI, GLOBIOM, MAgPIE) and computable general equilibrium (MAGNET) models ensures a good coverage of biophysical and economic agricultural features. These models are harmonized with respect to basic model drivers, to assess the range of potential impacts of climate change on the agricultural sector by 2050. Moreover, they quantify the economic consequences of stringent global emission mitigation efforts, such as non-CO 2 emission taxes and land-based mitigation options, to stabilize global warming at 2 • C by the end of the century under different Shared Socioeconomic Pathways. A key contribution of the paper is a vis-` a-vis comparison of climate change impacts relative to the impact of mitigation measures. In addition, our scenario design allows assessing the impact of the residual climate change on the mitigation challenge. From a global perspective, the impact of climate change on agricultural production by mid-century is negative but small. A larger negative effect on agricultural production, most pronounced for ruminant meat production, is observed when emission mitigation measures compliant with a 2 • C target are put in place. Our results indicate that a mitigation strategy that embeds residual climate change effects (RCP2.6) has a negative impact on global agricultural production relative to a no-mitigation strategy with stronger climate impacts (RCP6.0). However, this is partially due to the limited impact of the climate change scenarios by 2050. The magnitude of price changes is different amongst models due to methodological differences. Further research to achieve a better harmonization is needed, especially regarding endogenous food and feed demand, including substitution across individual commodities, and endogenous technological change.

This report presents the agro-economic analysis within the PESETA III project, focusing on the effects of climate change on crop yields and related impacts on EU agricultural production, trade, prices, consumption, income, and welfare. For this purpose the CAPRI modelling system was employed, using a combination of a Shared Socioeconomic Pathway (SSP2) and a Representative Concentration Pathway (RCP8.5). For the climate change related EU-wide biophysical yield shocks, input of the agricultural biophysical modelling of the PESETA III project was used, which provided crop yield changes under water-limited conditions based on high-resolution bias-corrected EURO-CORDEX regional climate models, taking also gridded soil data into account. As agricultural markets are globally connected via world commodity trade, it is important for the agro-economic analysis to also consider climate change related yield effects outside the EU. The analysis, therefore, was complemented with biophysical yield shocks in non-EU countries as provided by the AgCLIM50 project. To simulate and assess the response of key economic variables to the changes in EU and non-EU biophysical crop yields, one reference scenario (without yield shocks) and two specific climate change scenarios were constructed, one scenario with yield shocks but without enhanced CO2 fertilization and another scenario with yield shocks under the assumption of enhanced CO2 fertilization. The projection horizon for the scenarios is 2050., JRC.D.4-Economics of Agriculture

The study assesses how climate change could affect Europe in eleven impact areas. Under a high warming scenario, several climate impacts show a clear geographical north-south divide. Most of the welfare losses, assessed for six impact areas, would be greatly reduced under a 2ᵒC scenario., JRC.C.6-Economics of Climate Change, Energy and Transport

In this paper we conduct a simulation experiment to quantitatively assess the impacts of reallocating budgetary resources within Pillar 1 of the Common Agricultural Policy (CAP) from direct income support to a direct greenhouse gas (GHG) reduction subsidy for EU farmers. Although such a budgetary shift is not foreseen in the current political discussions on the future CAP post 2020, the analysis is motivated by calls for both an increased contribution from the agricultural sector to combat global warming, and a more incentive-based delivery system for direct payments. For the analysis, we apply a partial equilibrium model for the agricultural sector (CAPRI) covering both the EU farming sector with high geographical detail as well as global food commodity markets. An integrated emission accounting for EU agriculture and global agri-food products, as well as optional technological GHG mitigation options for EU farmers make CAPRI specifically suitable for the impact assessment. For the scenario we assess a policy that removes the basic direct payments under Pillar 1 of the current CAP and provides farmers a GHG-saving subsidy instead, without increasing the total budget for direct payments. A major empirical contribution of the paper is the calculation of budget-neutral subsidy rates for the hypothetical GHG-reduction subsidy, factoring in farmers' supply and technology-adjusting responses to the policy change. The subsidy rates are derived by combining the regional representative farm models of CAPRI with a Newton-Raphson numerical approximation method that guarantees budget-neutrality. We find that a budget-neutral re-allocation of financial resources towards subsidized emission savings can reduce agricultural non-CO2 emissions by 21% in the EU by 2030, compared to a business-as-usual baseline. Almost two-thirds of the EU emission savings are due to production decreases, and, therefore, part of this GHG reduction is threaten to be offset globally by emission leakage effects. At the aggregated level, the emission-saving subsidy and increased producer prices compensate farmers for the foregone direct income support, but the significant regional differences indicate both an accelerated structural change and heterogeneous income effects in the farm population. We conclude that the assumed regional budget-neutrality condition introduces inefficiencies in the incentive system, and the full potential of the EU farming sector for GHG emissions reduction is not reached in the scenario; leaving ample room for the design of more efficient agricultural policies to combat global warming.

This paper highlights the work of developing a methodology in the Aglink-Cosimo model of transmitting the impact on agricultural markets of a low carbon intensive economy. The Aglink-Cosimo model is a recursive-dynamic, partial equilibrium, multi-commodity market model of world agriculture. The model is used to simulate the development of annual supply, demand and prices for the main agricultural commodities produced, consumed and traded worldwide. In the present version it covers 82 countries/regions, clearing markets at the world level for 40 commodities (OECD, 2015; Araujo-Enciso et. al. 2015). Given that the model is a partial model of the global economy, the impact of a low carbon economy cannot be directly evaluated, since the majority of emission reductions are made by other sectors of the economy. An indirect approach is therefore called for. This involves; i) capturing the macro-economic impact of a low carbon economy in a Computable General Equilibrium (CGE) model and transmitting these changes to the Aglink-Cosimo model, ii) implementing agriculture's contribution to reductions in GHG emissions and iii) taking into account LULUC impacts. An initial scenario has been under taken where a homogenous GHG tax per ton of CO2eq has been imposed on all developed and developing countries. The results from the model show that global GHG emissions from the primary agricultural sector are reduced by 5 percent in 2030 compared to the baseline, with 3 percent of the total agricultural emission reduction coursed by indirect macro effects (energy, fertiliser, pesticides prices and changes in GDP).

The workshop 'Medium-term Outlook for the EU Agricultural Commodity markets' is an integral part of the intensive validation procedure of the results of the European Commission’s report 'Prospects for EU agricultural markets and income'. It provides a forum for presentations on preliminary medium term projections of the most relevant EU agricultural commodity markets and discussing in-depth the EU prospects in a global context. This year the workshop was held on 22-23 October in Brussels. The workshop was jointly organised by the Joint Research Centre (JRC) and the Directorate-General for Agriculture and Rural Development (DG AGRI). Participants included policy makers, modelling and market experts from various countries, as well as stakeholders of the agri food industry. This document summarises the presentations and discussions on the macroeconomic and energy assumptions associated with this outlook, and on each of the EU agricultural markets addressed: biofuels, cereals and oilseeds, sweeteners, milk and dairy, meats and wine. Additionally this year challenges regarding international trade disputes, organic agriculture and climate change were also discussed. Published Proceedings of the October 2018 workshop

The project 'Economic Assessment of GHG mitigation policy options for EU agriculture (EcAMPA)' is designed to assess some aspects of a potential inclusion of the agricultural sector into the EU 2030 climate policy framework. In the context of possible reductions of non-CO2 emissions from EU agriculture, the scenario results of the EcAMPA 2 study highlight issues related to production effects, the importance of technological mitigation options and the need to consider emission leakage for an effective reduction of global agricultural GHG emissions., JRC.J.4-Agriculture and Life Sciences in the Economy

Scenar 2030 aims at identifying major future trends and driving factors for European agriculture and rural regions and the perspectives and challenges resulting from them. The use of a suite of economic simulation models allows for the construction of a well-founded and plausible reference scenario (baseline) and different policy scenarios resulting in a comprehensive set of outcomes depicting economic, social and environmental indicators., JRC.D.4-Economics of Agriculture

We present a further developed CAPRI modelling approach for technological (i.e. technical and management-based) greenhouse gas emission mitigation options. The model is employed to assess the potential of mitigation technologies in EU agriculture by 2030, and how their application could impact agricultural market and emission developments. Scenario results show that without incentives the uptake of the considered technologies is very limited. Setting a 15% emission reduction obligation for EU agriculture is an incentive that triggers technology adoption. Once technology uptake is subsidised, their share in mitigation increases substantially, which considerably decreases any adverse effects on EU production and emission leakage. The results underline the importance of activating and supporting the uptake of mitigation technologies in order to effectively increase agriculture's contribution to emission mitigation in the EU

The report presents an overview of the historical and projected development of agricultural GHG emissions in the EU. The major objective of the report is to present the improvements made in the CAPRI modelling system with respect to GHG emission accounting and especially regarding the implementation of endogenous technological mitigation options. Furthermore, the CAPRI model was applied to provide a quantitative assessment of illustrative GHG mitigation policy options in the agricultural sector, and their production and economic implications., JRC.J.4-Agriculture and Life Sciences in the Economy

Food security remains to be a major societal concern. In the light of the current expectations of population growth, world food production has to be massively increased to sustain the associated food demand rise. While agricultural productivity was rising during recent decades in the US, Europe and also in some developing countries, the corresponding growth rates lately appeared to be slowing down. In fact, the only world region with a significant amount of arable land, which currently is not under cultivation and which at the same time is, moreover, experiencing rising productivity figures, is the so called 'Eurasian wheat belt', comprising of Russia, Ukraine, Kazakhstan and the Central Asian countries, namely Uzbekistan, Tajikistan, Turkmenistan, and Kirgizstan. In this light, the Joint Research Centre and the Directorate-General for Agriculture and Rural Development organized a thematic workshop, held during 20 – 22 May 2014 in Istanbul/Turkey, set up to bring experts on the matter together and to discuss to what extent these countries could play a role for regional and international food security. Following the workshop analysis and discussion, this report provides a comprehensive technical overview of the wheat production, and the main factors to achieve full production potential across the Eurasian wheat belt with regards to national, regional and global issues of cereal supply and food security in evolving global markets. It reviews key horizontal issues, such as land policy, credit and finance, privatization, farm structures, social consequences of transition, environmental challenges, against the backdrop of agrarian reforms implemented during the transition period. In addition the report explores production potential and corresponding institutional and policy restrictions in a series of Eurasian countries. Finally, the report closes with expert opined policy-relevant conclusions as a basis for policy suggestions and recommendations., JRC.J.4-Agriculture and Life Sciences in the Economy

According to the European Council's recent agreement on domestic climate and energy goals, greenhouse gas emissions from sectors outside the EU’s Emission Trading Scheme have to be cut by 30% below 2005 levels by 2030. So far no decision has been taken on agriculture's specific involvement in mitigation obligations or on how mitigation targets would be distributed between Member States. Based on hypothetical assumptions, we employ the CAPRI model to illustrate and highlight some potential impacts and challenges related to an integration of the agricultural sector into the new EU climate policy framework. Results of the hypothetical mitigation policy scenario show important impacts on EU agriculture, in particular the livestock sector, if the distribution key of the current Effort Sharing Decision would be rigidly applied as in our assumptions. The results highlight the importance of a targeted but flexible implementation of mitigation policy instruments in the EU and its Member States, as well as the need for a wider consideration and adoption of technological mitigation options.

According to the European Council's recent agreement on domestic climate and energy goals, greenhouse gas emissions from sectors outside the EU's Emission Trading Scheme have to be cut by 30% below 2005 levels by 2030. So far no decision has been taken on agriculture's specific involvement in mitigation obligations or on how mitigation targets would be distributed between Member States. Based on hypothetical assumptions, we employ the CAPRI model to illustrate and highlight some potential impacts and challenges related to an integration of the agricultural sector into the new EU climate policy framework. Results of the hypothetical mitigation policy scenario show important impacts on EU agriculture, in particular the livestock sector, if the distribution key of the current Effort Sharing Decision would be rigidly applied as in our assumptions. The results highlight the importance of a targeted but flexible implementation of mitigation policy instruments in the EU and its Member States, as well as the need for a wider consideration and adoption of technological mitigation options.

This report gives an overview on the Russian agri-food sector and provides an outlook for the developments in agricultural markets for Russia, focussing on the main agricultural commodities. For the purpose of the study a detailed dataset and modelling structure for the main agricultural commodities in Russia has been developed and integrated into the overall AGMEMOD modelling framework., JRC.J.4-Agriculture and Life Sciences in the Economy

The European Commission started to reflect on a new policy framework on climate and energy for 2030. Identifying the best options for agriculture to contribute to future GHG emission reductions in the EU requires a comprehensive analysis of a wide range of possible policies, technological and management measures. In this context the CAPRI model has been further improved with respect to GHG emission accounting and especially regarding the endogenous implementation of technological mitigation options. In this paper we present the methodology of the new model features and highlight the importance of including endogenous technological GHG emission mitigation options in the model analysis. Results of illustrative emission mitigation scenarios show that different assumptions on the availability and uptake of technologies alter the scenario outcome significantly. The analysis indicates that possible negative impacts of mitigation policies on agricultural production and trade can drastically be reduced when technological mitigation options are available to farmers. This is a strong signal for enhanced research and development in the area of technological mitigation options, as well as policies that promote their diffusion., JRC.J.4-Agriculture and Life Sciences in the Economy

This report gives an overview on the Ukrainian agri-food sector and provides an outlook for the developments in agricultural markets for Ukraine, focussing on the main agricultural commodities. For the purpose of the study a detailed dataset and modelling structure for the main agricultural commodities in Ukraine has been developed and integrated into the overall AGMEMOD modelling framework., JRC.J.4-Agriculture and Life Sciences in the Economy

The main objective of this report is to assess the GHG emission reduction potential of a selected number of policy options and to quantify related production and economic impacts for the agricultural sector in the EU. Therefore the possible future evolution of agricultural GHG emissions in the EU are assessed through the simulation of scenarios including expected macro- and micro-economic changes. The proposed mitigation policy scenarios are all exploratory, i.e. it is intended to explore what could happen if policies would be implemented that explicitly force farmers in the EU-27 to reach certain GHG emission reduction targets. It has to be stressed that all policy scenarios are rather theoretical and hypothetical and do not necessarily reflect mitigation policies that are already agreed on, or are under formal discussion., JRC.J.4-Agriculture and Life Sciences in the Economy

This report is based on the outcome of a study carried out by the European Commission's Joint Research Centre - Institute for Prospective Technological Studies (JRC-IPTS, Spain) in cooperation with EuroCARE (Bonn, Germany) and the collaboration of the Agricultural Economics Research Institute (LEI, the Netherlands) and the Catholic University of the Sacred Heart (Unicatt, Italy). The report provides an economic impact assessment of possible implications of the Health Check of the Common Agricultural Policy (CAP), with an explicit focus on regional effects of a milk quota abolition in the EU-27 in the year 2015. For the analysis the CAPRI model was updated with econometric estimates of milk quota rents at regional level and simulation results are presented for the year 2020. The detailed spatial resolution allows identifying regions where economic changes are larger than visible from aggregated impacts at Member State or European level., JRC.J.5-Agriculture and Life Sciences in the Economy

This report contains a summary and the presentations of the expert workshop 'Commodity Market Development in Europe – Outlook', held in October 2013 in Brussels. The workshop was held to present and discuss the preliminary results of the European Commission's outlook on EU agricultural market developments. The workshop gathered high-level policy makers, modelling and market experts and provided a forum to present and discuss recent and projected developments on the EU agricultural and commodity markets, to outline the reasons behind observed and prospected developments, and to draw conclusions on the short/medium term perspectives of European agricultural markets in the global context. Special focus was given on the discussion of the influence of different settings/assumptions (regarding e.g. drivers of demand and supply, macroeconomic uncertainties, etc.) on the projected market developments., JRC.J.4-Agriculture and Life Sciences in the Economy

The European Commission started to reflect on a new policy framework on climate and energy for 2030. Identifying the best options for agriculture to contribute to future GHG emission reductions in the EU requires a comprehensive analysis of a wide range of possible policies, technological and management measures. In this context the CAPRI model has been further improved with respect to GHG emission accounting and especially regarding the endogenous implementation of technological mitigation options. In this paper we present the methodology of the new model features and highlight the importance of including endogenous technological GHG emission mitigation options in the model analysis. Results of illustrative emission mitigation scenarios show that different assumptions on the availability and uptake of technologies alter the scenario outcome significantly. The analysis indicates that possible negative impacts of mitigation policies on agricultural production and trade can drastically be reduced when technological mitigation options are available to farmers. This is a strong signal for enhanced research and development in the area of technological mitigation options, as well as policies that promote their diffusion.

This report contains a summary and the presentations of the expert workshop 'Commodity Market Development in Europe – Outlook', held in October 2014 in Brussels. The workshop was held in order to present and discuss the preliminary results of the DG AGRI outlook on EU agricultural market developments. The workshop gathered high-level policy makers, modelling and market experts and provided a forum to present and discuss recent and projected developments on the EU agricultural and commodity markets, to outline the reasons behind observed and prospected developments, and to draw conclusions on the short/medium term perspectives of European agricultural markets in the context of world market developments. Special focus was given on the discussion of the influence of different settings/assumptions (regarding e.g. drivers of demand and supply, macroeconomic uncertainties, etc.) on the projected market developments., JRC.J.4-Agriculture and Life Sciences in the Economy

Food security, natural resources and climate change related questions focusing on a longer time horizon (2050+) are gaining importance. To assess the requirements and challenges entailed with the simulation of long-term issues in the agri-food sector the JRC-IPTS carried out the project “Methodological requirements of a modelling tool for simulation of long-term (2050) effects of policies affecting the agricultural and food sectors”, involving experts for different methodologies. Partial and General Equilibrium models are covered as well as Dynamic Stochastic General Equilibrium (DSGE) and Optimal Control Theory (OCT) approaches are taken into account, evaluated and discussed.[résumé des auteurs]