Europe: Green Deal to increase beer price and to decrease competiveness of European malt

As part of its Green Deal to make Europe climate neutral by 2050, the European Commission has presented on 20 May 2020 its EU Biodiversity Strategy for 2030 to protect the fragile natural resources on our planet and the Farm To Fork Strategy to make food systems more sustainable. The Economic Research Service (ERS) of the US Department of Agriculture has now calculated the economic and financial implications. The consequences would be dramatic not only for European farmers, but also for global food prices.

The beer price which is also very much dependent on the price of its raw materials would rise as a consequence, especially in those countries which use raw materials from countries adopting those strategies. As European malt is used worldwide in beer, the consequences would be also noted worldwide.

Another inevitable consequence would be that the competitiveness of European malt would shrink and the European malting industries, which is leading in the world, would face increasingly the competition from other barley growing regions in the world, such as Canada, Australia, the Southern Latin America and the Black Sea region, provided that other region in the world will not follow the European example.

According to the findings,

•  the decline in agricultural production in the EU would range from 7 percent (global adoption) to 12 percent (EU-only) within the next decade. Impacts on production would be smaller worldwide, except in the case of global adoption, when production would decline by 11 percent.

• The decline in agricultural production would tighten the EU food supply, resulting in price increases that impact consumer budgets. Prices and per capita food costs would increase the most for the EU, across each of the three scenarios. However, price and food cost increases would be significant for most regions if Strategies are adopted globally. For the United States, price and food costs would remain relatively unchanged except in the case of global adoption.

• Production declines in the EU and elsewhere would lead to reduced trade, although some regions would benefit depending on changes in import demand. However, if trade is restricted as a result of the imposition of the proposed measures, the negative impacts are concentrated in regions with the world’s most food-insecure populations.

• The declines in production and trade, coupled with the projected increases in food commodity prices, would significantly reduce the EU’s gross domestic product (GDP), especially if adoption was limited to the EU. In that case, the EU’s decline in GDP would represent 76 percent of the decline in the worldwide GDP. If the Strategies were adopted beyond the EU, however, the EU’s share in decline of worldwide GDP would drop to 49 percent in the middle scenario and as low as 12 percent if globally adopted. The effects on the GDP of the United States would be smaller than for the EU and worldwide under all adoption scenarios.

• Food insecurity, measured as the number of people who lack access to a diet of at least 2,100 calories a day, increases significantly in the 76 low- and middle-income countries covered in our analysis due to increases in food commodity prices and declines in income, particularly in Africa. By 2030, the number of food-insecure people in the case of EU-only adoption would increase by an additional 22 million more than projected without the EC’s proposed Strategies. The number would climb to 103 million under the middle scenario and 185 million under global adoption.

“We do not have all answers yet,” the president of the European Commission, Ursula von der Leyen, said one year ago, when she presented the Green Deal to the public. “Today is the start of a journey. But this is Europe’s man on the moon moment.”

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