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Perennial energy crop production methods such as short rotation coppice (SRC) have gained interest among farmers and policy makers. SRC is characterised by rapid biomass production, low inputs, and high managerial flexibility. SRC plantations also provide environmental advantages relative to annual crop production and contribute to the transition towards renewable energy. Yet, the combination of high sunk costs and high uncertainty hampers SRC adoption among farmers. Policy instruments currently implemented to foster SRC adoption exhibit limited success. In this paper we assess the performance of different policy measures intended to stimulate SRC adoption in terms of efficiency and farm-level effects, taking into account related uncertainty. We use a combination of stochastic programming and the real options approach in our model featuring SRC poplar cultivation in Germany. We analyse four policy measures intended to foster SRC adoption: an establishment subsidy, a price floor, a guaranteed price, and increasing the “Ecological Focus Area” (EFA) value for SRC systems within the European Union Common Agricultural Policy. Our results indicate that a guaranteed price can stimulate immediate SRC adoption; however, it is inferior to the other instruments in other dimensions. An establishment subsidy as recently implemented in the study area might incentivise farmers to adopt SRC by contributing substantially to farm income, but should be modified because it may encourage postponement of SRC adoption. Increasing the EFA coefficient and a price floor are more efficient measures in terms of governmental expenditures, while having limited positive effects on bioenergy produced. [ABSTRACT FROM AUTHOR]

Biomass provides two thirds of the total energy produced from renewables in Europe. The share of bioenergy from energy crops is growing rapidly. Given the environmental pressures arising from pesticide pollution from current agricultural food production, a substantial increase in energy crop cultivation might put additional pressure on biodiversity and soil and water resources. In the present study, we examine the potential of energy crops for pesticide contamination and develop general conclusions and recommendations for the future large-scale expansion of agricultural bioenergy. We base our analysis on the development of energy crop cultivation in Germany, the European country with the largest share of energy crops. Our findings reveal that there will not necessarily be an increase or decrease in the amounts of pesticides released into the environment. Due to the great variety of energy crops, the potential effects will depend rather on the future design of the agricultural systems. Possible risks are associated with the increased cultivation of pesticide-intensive energy crops, such as rapeseed, especially when grown in monocultures or on formerly set-aside land or converted grassland. Instead, energy crops should be integrated into the existing food production systems. Financial incentives and further education are needed to encourage the use of sustainable crop rotations, innovative cropping systems and perennial energy crops, which may add to crop diversity and generate lower pesticide demands than intensive food farming systems. Optimised cultivation systems with diverse crop rotations could help to improve monotonous agricultural landscapes, increase biodiversity and minimise pesticide exposure. [ABSTRACT FROM AUTHOR]