A recent study published in the European Review of Agricultural Economics has revealed the potential inflationary impact that biogas subsidies may have on land rents. The study focuses on Northern Germany, specifically the federal regions of Schleswig-Holstein and Lower Saxony, which have seen marked increases in biogas capacity in recent years. In tandem with high livestock density, this concentration of biogas production is shown to have led to increases in regional rent prices.
In Germany, the Renewable Energy Act (Erneuerbare Energien Gesetz – EEG) has created favourable conditions for biogas investment. Incentives introduced within this included high feed-in tariffs (2004 amendment) that are guaranteed for 20 years at a constant level regardless of supply or demand, as well as bonuses for use of manure in fermenters (2009 amendment). The authors suggest that the promise of feed-in tariffs fuelled the willingness of prospective leasers to expend higher rents, in effect transferring a proportion of the subsidy to the landlord. Incentives surrounding manure inputs also concentrated investors in the area given the high livestock density, further increasing competition and thus contributing to willingness to pay higher rents.
Policy-makers admit that these EEG amendments have over-stimulated the biofuel sector, and reforms in 2012 and 2014 were targeted at supporting less land-use intensive enterprises. Further, a 2016 amendment has abolished the feed-in tariff guarantee and replaced it with a competitive bidding system. The authors regard this measure as capable of nullifying cash rent inflation caused by the presence of biogas production.
This study holds great relevance for equitable land governance, particularly in the aftermath of the commitments made at the UN Climate Summit in Paris back in 2015. As European nations start to invest more in climate-sensitive energy generation, caution must be taken to ensure that negative impacts in terms of land access are avoided.
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