Promoting extensive cattle production in the European Union has major implications for global agricultural trade and climate change

This paper assesses the potential market-mediated impacts, including global Land Use Change (LUC) and GHG emissions, from increased subsidies to pastureland-based livestock sectors in the EU, through a “tax recycling strategy” simulated against a baseline under SSP2 up to 2030. The budget neutral increase in the level of pastureland subsidy rates in different Member States is achieved by a decrease in land subsidies to other cropping activities. We employ an integrated CGE-MRIO approach, in which we link a recursive dynamic version of the well-known GTAP-CGE model, called GTAP-RDEM to the FABIO MRIO. This approach allows to take advantages from both methods. FABIO offers better resolution with regards to agricultural sectors than in the GTAP database, while the combined use of this MRIO with a CGE model allows to consider price and income dependent feedbacks, required for policy analyses and long run assessments of changes in the global economy. Results show that the redistribution of land-based subsidies provokes significant changes in agricultural markets across the EU. Pastureland areas and cattle production increases in almost all EU Member States, whereas crop land and crop production decreases. The resulting increase in crop prices translates into reduced output of intensive animal production sector, mainly pig and poultry, which rely on concentrate feed to a larger extent compared to cattle. As a result of the decrease in cropland area and overall crop production in the EU, most EU countries increase imports of grain, oilseeds, and cakes from major agricultural producers, essentially soybean cake from Brazil and North America. This generates significant LUC and related GHG emissions that spill outside the EU, mainly in major feed exporters while some emission saving is observed at global level.