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One objective of Computable general equilibrium (CGE) models is the analysis of economywideeffects of policy measures. The focus of the Factor Markets project is to analyse thefunctioning of factor markets for agriculture in the EU-27, including the CandidateCountries. While agricultural and food markets are fully integrated in a European singlemarket, subject to an EU-wide common policy, the Common Agricultural Policy (CAP), this isnot the case for the agricultural factor markets capital, labour and land. There are partlyserious differences with regard to member state regulations and institutions affecting land,labour and capital markets. The presentation of this heterogeneity of factor markets amongstEU Member States have been implemented in the CGE models to improve model-basedanalyses of the CAP and other policy measures affecting agricultural production.This final report comprises the outcome of a systematic extension and improvement of theModular Applied GeNeral Equilibrium Tool (MAGNET) model starting from an overview ofthe current state of the art to represent factor markets in CGE models to a description ofwork on labour, land and capital in MAGNET.

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 multi-sectoral 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 intra-sectoral 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.

How to feed the growing world populations and fulfil and reduce climate change impact at the same time is one of the key challenges in the world. This enormous challenge implies an increasing complexity and interconnectivity of for example the agricultural, land and energy using sectors and disciplines. The issues become so complex that modelling teams have to work together to contribute to this challenge. The philosophy of MAGNET (Modular Applied GeNeral Equilibrium Tool) is in line with the GTAP philosophy to lower entry barriers for CGE analyses and it aims to facilitate working in (cross-institutional) modelling teams for more complex models. MAGNET is a modular global CGE model that covers the whole economy and has been used extensively in agricultural, environmental and trade policy analysis. MAGNET builds on the global general equilibrium Global Trade Analysis Project (GTAP) model and is the successor of LEITAP (Meijl, et al. 2006, Banse et al. 2008). MAGNET adopts a modular approach, whereby the standard GTAP-based core can be augmented with modules depending on the purpose of the study. Therefore MAGNET contains some institutional innovations and is supported by various tools. It supports more users, more developers, larger flexibility, greater reliability and more attractive (tools). Currently the system is used at LEI-WUR, JRC-IPTS and vTI.

The paper investigates the CAP impacts on the EU agriculture by means of policy simulations conducted with the AGMEMOD model. To isolate the policy effects in the historical period 2000-2005, counterfactual simulations for this period are run. To simulate the response of the EU agriculture on different policy changes in the period 2006-2020, a ‘no-policy change’ baseline scenario is developed and then policy experiments are conducted such as the abolition of milk quota, the implementation of the regional payments and some budget cuts. To identify the policy effects, the policy scenarios are compared with the ‘no-policy change’ baseline.