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Article

Interdependence between Energy Cost and Financial Situation of the EU Agricultural Farms—Towards the Implementation of the Bioeconomy

Department of Finance and Accounting, Poznan University of Life Sciences, 60-639 Poznan, Poland
Energies 2022, 15(23), 8853; https://doi.org/10.3390/en15238853
Submission received: 31 October 2022 / Revised: 21 November 2022 / Accepted: 21 November 2022 / Published: 23 November 2022

Abstract

:
The concept of a bioeconomy can be an opportunity for agricultural and rural development. The objective of this research is to identify groups of family farms which are able to implement the principles of this new development model based on a bioeconomy and to reduce operating costs, especially energy. The time scope of this study covers the period 2004–2020. The data source is the Farm Accountancy Data Network. On the basis of the values of output, family farm income, cash flow, net investment and total inputs (including energy costs), the classes of family farms are indicated. The ranking is based on geographical criteria and the results of panel data models with fixed effects which measure the relationship between energy costs and production, income, cash flow and net investment according to the economic size of the family farm. The results obtained are discussed within the framework of recommendations of the European Commission.

1. Introduction

As noted by the European Commission, we live in a world of limited resources. Global challenges (climate change, land and ecosystem degradation), coupled with a growing population, force us to seek new ways of producing and consuming that respect the ecological boundaries of our planet. These challenges enforce an improvement and innovation in the food, products and materials production and consumption within healthy ecosystems through a sustainable bioeconomy [1].
A bioeconomy is the production and use of renewable resources from land and sea, and the use of waste to make value added products, such as food, feed, bio-based products and bioenergy. It is a concept that provides a blueprint for a more competitive, renewables-based future for Europe. This vision of the future appreciates the value of the many sectors that make up the EU bioeconomy and enables them to become more competitive through better use of renewable resources. This, in turn, will help create new jobs, growth and environmental benefits for Europe. Currently the bioeconomy employs 9% of the workforce; over 22 million people [2]. This sector in the EU is worth an estimated €2 trillion [3].
In 2006, the OECD presented a report “The Bioeconomy 2030: Designing a policy agenda”, which was eventually published in 2009 [4]. It led to discussion that allowed the European Commission to adopt the strategy “Innovating for Sustainable Growth: A Bioeconomy for Europe” [5] on 13 February 2012. This strategy proposes a comprehensive approach to address the ecological, environmental, energy, food supply and natural resource challenges that Europe and the whole world are facing already today. In order to cope with an increasing global population (from 7 billion in 2012 to more than 9 billion in 2050), rapid depletion of many resources, increasing environmental pressures and climate change, Europe needs to radically change its approach to production, consumption, processing, storage, recycling and disposal of biological resources. According to this strategy, a bioeconomy is a key element for smart and green growth in Europe. Advancements in bioeconomy research and innovation uptake will allow Europe to improve the management of its renewable biological resources and to open new and diversified markets in food and bio-based products. These solutions have a great potential in Europe. Development of the bioeconomy sector can maintain and create economic growth and jobs in rural, coastal and industrial areas, reduce fossil fuel dependence and improve the economic and environmental sustainability of primary production and processing industries [5].
Nowadays, increased use of renewable resources is no longer just an option, it is a necessity. The European economy must drive the transition from a fossil-based to a bio-based society, with research and innovation as the motor. This new model of development approach combines scientific research and innovation, including a wide range of disciplines, such as agronomy, ecology, food processing, engineering, biotechnology, chemistry, genetics, economics and the social sciences. The strategy addresses the production of renewable biological resources and their conversion into vital products, ranging from food and feed to bio-based products and bioenergy [6].
It should be emphasized that the bioeconomy is a cross-sectoral form of activities affecting economic development. Today, Europe’s transition to an oil-independent economy is not just a possibility, but an urgent necessity. Change should be driven by scientific research, innovation and large- and small-scale investment.
Currently, a very important problem is the uneven distribution of natural resources, especially minerals, which are the main sources of energy. It is dangerous when a few countries have a high consumption which can no longer be excluded. International raw material and energy dependencies are becoming an element of pressure and may be the cause of socio-economic crises [7]. Now, energy is considered the driving force of every action. The control over energy flow determines the ruling power of human beings and their relative influence on nature, and it models the form of economic systems. In addition, it affects the individual lifestyle of human being. The significant role of energy is confirmed by the essential positive interrelation between its consumption and the economic growth or economic activity. It can be measured in macro and micro scale [8]. Family farms should play a significant role in the implementation of the bioeconomy strategy, including renewable energy, because they are an important link in the agricultural production sector between traditional and modern instruments of the Common Agricultural Policy. These farms are engaged in the production of agricultural products, providing at the same time rural areas with a chance for multidirectional development. However, their efficient operation and willingness to try and introduce new solutions depends on their financial situation. When households associated with farms do not have problems with meeting their basic needs, they may focus on production modernization, e.g., by implementing photovoltaics, using hybrid cars or biofuels. It seems necessary, therefore, that family farms should receive a significant income from the production of the farm, allowing them to build their own cash resources that may be invested. The objective of this research is to identify a group of family farms, which are able to implement the principles of this new development model and implement the abovementioned energy cost reduction. The interdependence between energy cost and financial situation of agricultural farms has not yet been analyzed in the literature. This is the first approach to estimate the above mentioned interdependence using the panel model regression with fixed effects.

2. Background: Bioeconomy as a New Development Model of Agricultural Production

According to the European Commission, the bioeconomy includes those parts of the economy that use renewable biological resources from land to sea—such as plants, forests, fish, animals and microorganisms—to produce food, materials and energy. It is an important alternative to the current mining-based economy and can be seen as the next wave in economic development. It will bring opportunities for innovation, jobs and growth and contribute to the reindustrialization of Europe [9]. The bioeconomy is often understood as a concept that covers all sectors and systems that rely on biological resources (animals, plants, micro-organisms and derived biomass, including organic waste), their functions and principles. It includes and interlinks land and marine ecosystems and the services they provide, all primary production sectors that use and produce biological resources (agriculture, forestry, fisheries and aquaculture) and all economic and industrial sectors that use biological resources and processes to produce food, feed, bio-based products, energy and services.
To be successful, the European bioeconomy needs to focus on sustainability and circularity. This will drive the renewal of industries, the modernization of primary production systems, the protection of the environment and will enhance biodiversity [1]. The concepts of both the bioeconomy and the circular economy have been introduced in the European Union (EU) in response to concerns about the long-term viability of the prevailing resource-intensive economic model.
These solutions are different in origin: the bioeconomy is mostly driven by an innovation agenda and the circular economy by environmental concerns and resource scarcity. However, both aim to contribute to strategic and operational EU policy objectives, such as those described in the Seventh Environment Action Programme (7th EAP) for living well within the ecological limits of the planet, the report Transforming our world: the United Nations 2030 Agenda for Sustainable Development, and the New Innovation Agenda of the European Union [10,11,12,13]. The Bioeconomy Strategy of the EU (2013) and the Circular Economy Action Plan (first version in 2015, in 2019 the EC adopted a comprehensive report on the implementation of the action plan) both identify food waste, biomass and bio-based products as areas of intervention [6,14]. These documents also share some common concepts, such as the chain approach, sustainability, biorefining and the cascading use of biomass in the way of converging with respect to economic and environmental concerns, research and innovation and societal transition towards sustainability [11].
The primary production (agriculture, forestry, fisheries and aquaculture) and industrial sectors using and/or processing biological resources (food, pulp and paper industries and parts of the chemical, biotechnological and energy industries) are at the center of a sustainable development that delivers strong communities by creating a flourishing economy that respects the environment. The reducing dependence on fossil fuels and finite materials without overexploiting renewable resources, preventing biodiversity loss and land use change, regenerating the environment; these activities pave the way of development. Additionally, creating new economic growth and jobs and leveraging on local diversities and traditions (in particular in the rural, coastal and industrial areas) is very important [15,16]. Assuming that these changes are successful, they will promote the European Union’s economy as low-carbon and will contribute in the future to the growth of organic production and the mitigation of climate change. Such changes will also help adapt production systems to produce lower greenhouse gas emissions [17,18].
Europe has a vision of a modern, competitive, prosperous and climate-neutral economy. The aim of this long-term strategy is to confirm Europe’s commitment to leading global climate action and to present a vision that can lead to achieving net-zero greenhouse gas emissions by 2050 through a socially fair transition in a cost-efficient manner. This is an opportunity that this transformation offers to European citizens and its economy, whilst identifying challenges ahead [19]. It should be underlined that the increased use of energy from renewable sources also has a fundamental part to play in promoting the security of energy supply, sustainable energy at affordable prices, technological development and innovation, as well as technological and industrial leadership [20]. In order to achieve these targets, Europe provides a stable legal framework to foster the necessary investment, but this is a long-term perspective; with its 2050 long-term climate neutrality strategy, the EU is also looking further ahead than 2030, setting the foundations for what a cleaner planet will look like by the middle of the century and beyond [21]. The EU has been working for decades to improve the climate and the environment, for example: improving air quality by controlling emissions of harmful substances into the atmosphere, improving fuel quality and by integrating environmental protection requirements into the transport, industrial and energy sectors [22].
Now, the European Green Deal is a response to tackling climate and environmental-related challenges. This new growth strategy aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy [23]. According to the EU, now is this moment for the world’s response to the climate and biodiversity emergencies. This decade is a make or break moment for delivering on these commitments in the interest of the health, wellbeing and prosperity of all. These goals are no longer aspirations or ambitions, but obligations laid down in the first European Climate Law that create new opportunities for innovation, investment and jobs [24].
Creation of a circular bioeconomy capable of developing more sustainable products, with processes that use natural resources and energy more efficiently, is a huge challenge [25]. Now, a perfect example of circular bioeconomy are processes applied in bioindustries, which create smarter products based on raw materials, enabling carbon to be recycled at the end of the product’s life [26]. A critical role in creating a circular economy is played by the biorefineries, where biomass, including crops, wood, forest and agricultural residues, are converted into everyday materials, such as chemicals, bioplastic, fuels, food and feed [27,28]. It is worth emphasizing that industrial biotechnology uses enzymes and microorganisms (bacteria or fungi) to make biobased products. This process plays a vital role in transforming a biomass, residues and CO2 into everyday products. This is an alternative to using fossil carbon resources, such as crude oil, natural gas or coal as the basic feedstock [29], easing the dependence of the contemporary economy on fossil carbon-burning oil and gas to power homes, industry and transport [30].
It seems that rural areas will be particularly interested in the development of the bioeconomy, as well as valuable areas due to their natural values and peripheral areas, because the implementation of its assumptions will transform the economies of rural regions and their social structure [31]. It is worth noticing that in agriculture, the economic processes are heavily dependent on the natural environment. The agricultural sector plays a special environmental role due its direct impact on ecosystems, food safety and on the condition of rural areas [32]. It should not be forgotten that agricultural development has been historically based on the maximization of economic benefits (profits or incomes) at the expense of the disequilibrium in the ecological and social system. In highly developed countries, this agricultural model is stimulated by an agricultural policy which supported the quantitative growth of agricultural production. This results in agricultural practices becoming more and more intensive, while also driving excessive supply of food and environmental degradation [33].
The development of bioeconomy sectors represents an opportunity to promote innovation and job creation in rural and industrial areas [34]. Therefore, a circular bioeconomy can be an important pro-development factor for agricultural farms [35]. The potential inherent in human resources and financial and infrastructural capacities in the rural areas should generate the development of new types of products and production techniques as a result of the application of the principles of the bioeconomy [36].
Taking the abovementioned discussion into consideration, it is assumed that farms generating a sufficiently high family farm income, having cash surpluses and being able to renew their assets, will be primarily interested in introducing a new model of development based on the bioeconomy.

3. Materials and Methods

This research is based on the data obtained from Farm Accountancy Data Network (FADN). The FADN data provide a detailed presentation and analysis of the main determinants of the farms’ financial situations from the EU in the years 2004–2020. Data for the United Kingdom from 2020 are also included in this research.
This database provides information, among others, about revenues, costs and production conditions. There are no data on the bioeconomy itself. Unfortunately, one cannot find information about the cost of biomass, types of fertilizers, production techniques; however, the energy costs in farms can be analyzed.
It is assumed that that family farms receive a sufficient income from the production of the farm, have their own cash resources and are ready to invest and to implement innovation. The first step towards a bioeconomy is likely to be the reduction in energy costs.
In order to analyze family farms, several variables are analyzed (in EUR):
-
Output;
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Inputs and also energy costs;
-
Income;
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Cash flow;
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Net investment.
The study sought to answer the following questions:
  • How much did the European family farm spend on energy between the years 2004 and 2020 and what were at the same time costs, production, incomes, cash flows and net investments?
  • In which European country are family farms are affected by energy costs to the largest extent?
  • Does the financial situation of farms in the examined range differ depending on their economic size?
  • Which financial categories (output, income, cash flow, net investment) interact with energy costs?
To answer questions 1–3, the FADN data are analyzed. In order to answer to question 4, panel models using the Gretl program are estimated.
The most general formulation of a panel data model can be expressed by the following equation [37]:
yi,t = αi + X′i,t β + ui,t + εi,t
with i (i = 1, …, N) denoting individuals, t (t = 1, …, T) denoting time periods and X′i,t denoting the observation of K explanatory variables in country i at time t.
Parameter αi is time invariant and accounts for any individual-specific effect not included in the regression equation. Two different interpretations may be given to the αi. Two different basic models may be distinguished: Fixed Effect Panel Data Model (FEM) and Random Effect Panel Data Model (REM) [38]. In order to choose between the Random and Fixed Effect Model, the Hausman test was used. The idea is that one uses the random effects estimates unless the Hausman test rejects it. In practice, a failure to reject means either that the RE and FE estimates are sufficiently close so that it does not matter which one is used, or the sampling variation is so large in the FE estimates that one cannot conclude practically significant differences are statistically significant [39]. It should be emphasized that other characteristics of the test sample should also have an influence on choice between these models. The estimator in the FE model may not be compatible for a short panel time series, but the FE model appears to be more appropriate if the analysis objects are not selected randomly and it is important to estimate individual effects for each object [40].
The FADN data is not the original data, as it is the aggregated average information calculated on the basis of 15 farms with the obligation of data secrecy applied. Taking this into consideration, it was decided to estimate the FE models, i.e., models with fixed effects. This decision was supported by the Hausman test which was used and showed. In addition, the autocorrelation test and collinearity analysis (VIF) were used to select the relevant parameters. The Variance Inflation Factors (VIF) were used to measure the increase of the variance of the estimated coefficients compared with the case of no correlation among the independent variables [41].

4. Results

In the analyzed period in the European Union, the average farm’s output was between EUR 60.6 thousand in 2004 and EUR 92.6 thousand in 2020. The farms’ inputs were between EUR 53.1 thousand and EUR 82.7 thousand for the same time. Therefore, the average family farm income change was not relevant (EUR 17.9 thousand in 2004—EUR 24.3 thousand in 2020). The average energy costs by farm were growing from EUR 3.5 thousand in 2004 to EUR 5.6 thousand in 2020. It was about 6.8% of the total output value. At the same time, the average farm’s cash flow increased from EUR 25.1 thousand in 2004 to EUR 34.7 thousand in 2020, but the value of net investment was variable; between EUR −236 in 2016 and EUR 1.8 thousand in 2012 (Table 1). It can therefore be concluded that the financial situation of farms improved during the period considered despite rising costs, including energy. In addition, energy costs grew more slowly than total inputs and total output (Figure 1).
To highlight the countries with the highest energy costs and other financial information, the ranking of farms was prepared according to the country in 2020 (Table 2). The highest energy costs per farm were observed in Slovakia, Czech Republic, Netherlands, Germany, Denmark, Sweden, Belgium, Finland, United Kingdom and Estonia. Taking into account the highest financial results, the financial situation of farms in the following countries was recognized as favorable: Slovakia, Czech Republic, Netherlands, Germany, Denmark, Sweden, Belgium, United Kingdom, Luxembourg and France, but in Finland and Estonia the financial situation of farms was not much worse. In this ranking, farms from Poland, Slovenia, Portugal, Greece, Croatia and Romania achieved particularly low results (Table 2).
The economic size (which is one of the criteria used to classify agricultural farms according to the community typology, measured as the total Standard Output of the farm in euro for a reference period of five successive years) of all farms increased in the analyzed period at a similar pace. Only the share of energy cost in the total output of the farm was more differentiable (Table 3). Along with the decrease of the economic size of farm, the differences between cash flow and the income tended to diminish, and the net investment tended to decrease. Small farms did not have the capacity to increase the capital reserves of farm.
In order to fulfil the main target of this research, forward stepwise variable selection was introduced. Using the Gretl Program, the FE Models were obtained (Table 4). In the estimated models all variables are characterized by a level of significance below 0.05. Three variables have a statistically significant influence on the dependent variable (energy cost), namely: output, family farm income and net investment. The values of VIF test for all variables are low and the autocorrelation does not occur.
Among the smallest farms (classes 1, 2 and 3), the impact on energy costs is exerted by the total output. However, in the class of medium–large farms (class 4) only the family farm income has statistical importance. The latter variable also has a noticeable impact on the energy cost of the largest sized farms (classes 5 and 6) along with the net investment. Therefore, the results obtained show that the determinants affecting the energy costs vary depending on the economic size of the farm. The cash flow was insignificant statistically in all six classes (Table 4).
Summing up this part of the research, it can be concluded that the energy costs increased from year to year in Europe, but slower than the increase in production and inputs. The largest farms, with a significant income from production, which are able to invest, bear also the highest costs, including energy costs. This phenomenon occurred in farms in Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Luxembourg, Netherlands, Slovakia, Sweden and United Kingdom.
When energy costs unexpectedly increase, these dependencies gain a great importance. Nowadays, particular attention should be paid to these results in the context of rising energy prices.

5. Discussion

The results of these studies should be compared with the position of the European Commission. The EC expressed the hope, when developing the concept of the bioeconomy within the framework of the Common Agricultural Policy and the Europe 2020 Strategy, that due to the wide range of impact of the bioeconomy, it is possible to improve the economic situation of farms, including small ones. When considering the importance of this issue, the Commission’s Horizon 2020 research program takes into account the need to increase public funding for bioeconomy research and innovation. An amount of EUR 4.5 billion has been earmarked for actions under the challenge “Food Security, Sustainable Agriculture and Forestry, Marine and Maritime and Inland Water Research and the Bioeconomy”, and complementary funding is foreseen in other areas of Horizon 2020 [5,42]. Part of these funds will also support the development of farms.
Bioeconomy is of high attractiveness as a potential solution for green growth and competitiveness [43]. It is a great opportunity to revitalize productivity and growth by improving the competitiveness of domestic industries through new technologies and reducing dependence on imported raw materials by rehabilitating marginalized areas [44,45]. Especially in the European Economic Community, countries could play a special role in focusing green investments. The processing sectors, including food and feed, still lag behind. Their economies are between the low and moderate innovators, and substantial progress depends on their modernization. Additionally, global challenges do require new priorities on modernization, which is implemented with the help of new funding mechanisms. New projects in these countries could provide unique opportunities for progress if the countries focus their investments. A bioeconomy could create viable rural areas if special focus is set on national operational programs and national research and innovation strategies for bioeconomies [46], but we should note that since the concept of a bioeconomy emerged in the political agenda, its contribution to the economy has been estimated for different points over time and across locations [47].
In microeconomic terms, we must remember that the transformation towards a circular economy poses significant challenges for established companies, in many cases requiring a strong modification of their current business models, start-ups and new ventures. Firms need to completely rethink their value proposition, modifying how the product or service is produced, delivered to the customers and disposed of [48]. Still, we are not seeing widespread adoption of circular business models based on remanufacturing and reuse, which promise significant cost savings as well as radical reductions in environmental impact in industry [49]. The entrepreneurs saw their contribution to sustainable development primarily in the generation of new knowledge and employment. The ecological or social motives were less frequently reported [50]. In a future circular economy, new business models are needed that slow, close and narrow resource loops to address key resource and climate challenges. We should remember that after a phase of excitement and inspiration, an operationalization phase needs to start to ensure the best possible implementation and transition towards a circular economy. This operationalization phase will involve the development of products, processes and business models that significantly lower the negative impact on the environment, reduce waste and resource pressures and create a positive impact on society and environment [51].
The recognition of the full potential of biotechnological research and innovation for the economy and society as a whole is a concept which has been promoted over the last twenty years by the Netherlands, Germany and Finland; countries pioneering in biotechnologies [52]. Today, more than 50 countries have a dedicated bioeconomy strategy or related policies. While a bioeconomy is consistent with sustainability policy, synergy must be ensured to avoid over-exploitation of natural resources and conflicting global needs [53]. Countries are formulating strategies in accordance with their goals to attain a bioeconomy; therefore, proper measurement, monitoring and reporting of the outcomes of these strategies are crucial for long-term success [54].
As the priority fields of bioeconomy strategies “lose” their ecological focus and acquire a social, and at the same time capitalist, vision, priorities now focus on economic growth, gross value added, entrepreneurship, competitiveness, employment and technology development. Future research has been suggested to avoid some of the previous trends, such as the focus on biodiversity, the development of remote regions and agroecological systems. It is also important to carry out future research on the training of bioeconomy participants, and to include education as a priority in strategies [55].
It should be remembered that a lack of long-term political commitment and incentives means that development of a bioeconomy will slow down. The investments and high qualified workforce can be relocated to regions which are more supportive, e.g., the United States. Thus, a potential job and innovation growth in Europe can be endangered. Therefore, it is worth taking care of political solutions at the level of the European Union and member states in the long term.
We must remember that in the near future, bioeconomy policy development will require a much broader policy mix, aligned with national challenges and missions and aimed at enabling innovation, experimentation, diffusion and networking, as well as facilitating structural economic change [56]. Bioeconomy governance is crucial to maximize synergetic effects of sectoral policies, creating a level playing field. It is also important to frame coherent sustainability criteria across policy areas. Fostering inter-ministerial cooperation, policy coherence and vertical coordination at local, national, EU and international levels allows the bioeconomy to fulfil its potential [57].
Finally, it is worth noting that some Member States of the European Union, including Denmark, Finland, the Netherlands and Germany, have already introduced national strategies for the bioeconomy. Internationally, China, Canada, South Africa and the US have, or are developing, ambitious strategies in this area. That is why it is important that farms, even small ones, are willing to introduce new production solutions. Unfortunately, without a satisfactory income, with a lack of net investment, they can focus only on current consumption and ensuring the survival of the farm. This may translate into a reluctance towards the proposed changes aimed at popularizing the bioeconomy.
The results of this study determine the interdependence between energy costs and the financial situation of farms. They may break some misperceptions on environmental sustainability and the use of energy in implementation of the bioeconomy strategy in agriculture. The knowledge of eco-misperceptions is useful for increasing the eco-knowledge, to apply the methods correctly and to not replicate the errors [58]. In addition, the energy productivity and potential for a better consideration of important environmental factors of a technological agriculture may be underestimated [59]. Optimization of energy improves energy use efficiency and input costs [60], but it is dependent on the type of farm production [61,62] or even on the different barn planning systems [63]. Other factors may also have an impact on energy productivity and efficiency. For example, farmers’ education, access to agricultural information and training in wheat production significantly improve this efficiency, whereas phenomena such as a delay in planting and first fertilization significantly reduce it [64]. This research clearly shows that the higher the economic size of farm, the weaker the link between energy costs and output, and the stronger the link between these costs and income as well as net investment. Therefore, decisions of farms may depend on their size and not on the recommended EU strategy.
We must remember that saving energy, i.e., reducing energy consumption through price signals, energy efficiency measures or voluntary efforts can often be the cheapest, safest and cleanest way to reduce reliance on fossil fuel imports from Russia. Moreover, using less energy supports security of supply, facilitates storage requirements and underpins the clean energy transition [65]. However, other development goals may be important for farmers, or their actions may be determined by factors other than the strategy imposed by politicians.

6. Conclusions

The bioeconomy is a series of changes affecting all sectors that produce, process or use biological resources. This is an important solution for the future of the agricultural sector and improving its competitiveness. If it is assumed that the introduction of bioeconomy rules is an opportunity to improve the economic conditions for agricultural operators, it is obvious that it requires them to incur expenditures on the implementation of new solutions. This paper assumes that higher-income commodity farms, able to invest and generate a positive cash flow will be more likely to do so.
The survey was carried out encompassing 28 European Union countries (including the UK) between 2004 and 2020, using representative FADN data for family farms. The research shows that farms from Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Luxembourg, Netherlands, Slovakia, Sweden and United Kingdom may be most inclined to introduce bioeconomy principles. They have, on average, higher results in terms of their production, income, ability to self-finance, savings (cash flow) and assets restoration (net investment). This is accompanied by higher inputs, including energy costs. The least inclined to new implementations may be the economically weakest farms from countries such as Croatia, Greece, Poland, Portugal, Romania and Slovenia.
In addition, larger farms (EUR 50 000 and more of Standard Production, classes 4–6) may be interested in new bioeconomy principles. Their farm net income and cash flow were higher than the average results observed in EU countries. These farms were capable of investing because a positive value of net investment occurred.
It should also be noted that the following pattern is observed: the higher the economic size of farm, the weaker the link between energy costs and output, and the stronger link between these costs and income as well as net investment.
In conclusion, it can be noted that the selection of potential economic determinants affecting farm energy costs depends on the adopted research perspective. This is an opportunity for new research in this field, as well as for adopting new research perspectives and instruments similar to the panel fixed effect models used in this article to analyze farms according to their economic size.
There are some limitations of the conducted analysis, however. This research is based on the FADN database that provides only average information calculated on the basis of a limited sample of farms from each country. This database does not include all agricultural farms in analyzed countries. Moreover, this dataset includes only agricultural farms that keep their accounts according to the FADN requirements. This means that some agricultural farms, especially small ones, are not able to be included in the FADN database and the model calculated in this research does not take them into account, so the achieved results may be biased by the excessive presence of large agricultural farms.

Funding

The article was funded by Poznan University of Life Sciences, Poland within statutory activities.

Data Availability Statement

FADN—Farm Accountancy Data Network (Public Database) at https://agridata.ec.europa.eu/extensions/FADNPublicDatabase/FADNPublicDatabase.html (accessed on 10 October 2022).

Conflicts of Interest

The author declares no conflict of interest.

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Figure 1. Total output, inputs and energy cost by farm in the European Union in 2004–2020. Source: own preparation based on Table 1. * Including the United Kingdom.
Figure 1. Total output, inputs and energy cost by farm in the European Union in 2004–2020. Source: own preparation based on Table 1. * Including the United Kingdom.
Energies 15 08853 g001
Table 1. Information about the financial situation of farms in the European Union in 2004–2020.
Table 1. Information about the financial situation of farms in the European Union in 2004–2020.
YearTotal Output (€/farm)Total Inputs (€/farm)Energy Costs (€/farm)Energy Costs/Output (%)Farm Net Income (€/farm)Cash Flow (€/farm)Net Investment (€/farm)
200460,63053,15035235.817,94025,050523
200560,76053,94041006.717,87625,8941089
200663,26255,83443196.819,59827,638−114
200757,06748,10336836.518,36223,758773
200857,63551,37940867.115,98322,573433
200955,44653,03039607.113,22021,16064
201062,08055,03044287.118,12925,298−364
201167,23659,15149807.419,13826,398745
201270,28661,71352677.519,40127,1091802
201369,52762,66652697.617,68426,229737
201470,96064,36251627.317,45225,401395
201572,54565,84948336.717,61925,497620
201672,14065,26645556.318,29226,618−236
201776,45166,68848486.321,53329,783691
201888,49579,18958726.623,01332,7361622
201992,38981,72759146.424,70833,9041098
2020 *92,60382,71155566.024,31034,6991498
* Including the United Kingdom. Source: own calculation based on FADN 2022.
Table 2. Ranking of the European farms according to the energy cost and other financial information in 2020.
Table 2. Ranking of the European farms according to the energy cost and other financial information in 2020.
Place in RankingCountryEnergy Costs (€/farm)Energy Costs/Output(%)Total Output (€/farm)Total Inputs
(€/farm)
Farm Net Income (€/farm)Cash Flow (€/farm)Net Investment (€/farm)
1Slovakia52,4777.7678,534753,20854,78281,434−20,292
2Czech Republic36,8208.8420,470490,35555,52888,32514,748
3Netherlands28,4505.0567,583511,18373,333143,59121,977
4Germany18,8896.8276,302277,8073563875,38911,335
5Denmark17,3252.8610,056564,09994,847153,80526,590
6Sweden16,6447.9211,199224,13824,09650,16321,525
7Belgium14,9175.1291,010260,97057,16097,73514,876
8Finland14,22011.0129,212159,23627,15150,8207513
9United Kingdom13,4265.0267,119266,23244,09879,52311,657
10Estonia11,5678.1141,933156,63520,87938,59411,597
11Luxembourg10,6274.7228,251242,91559,014122,32515,431
12France10,3645.1203,736197,96036,05768,5824650
13Latvia73349.279,79879,70219,17029,2142435
14Hungary70008.483,16774,74124,96731,9364371
15Bulgaria62548.672,48775,98117,55226,7073650
16Austria56995.6102,28091,51931,84651,4694410
17Spain45584.698,50070,42740,38044,252−1552
18Italy44496.073,57349,00935,10838,402−3110
19Cyprus33238.041,41733,85712,48114,135483
20Ireland32564.375,87969,63724,98333,6515343
21Malta30947.839,91231,56711,11412,4221954
22Lithuania29596.644,58840,70618,04224,8806798
23Poland25637.833,04728,17310,83515,687−1407
24Slovenia25408.629,69229,630681512,324101
25Portugal22526.534,88527,91315,17318,4753539
26Greece21369.422,82517,99511,20913,898−1737
27Croatia16005.528,95922,66816,82019,243−40
28Romania14747.220,38316,993753682777
Source: own calculation based on FADN 2022.
Table 3. Energy costs and other financial information of farms according to the farm’s economic size in the European Union * in 2020.
Table 3. Energy costs and other financial information of farms according to the farm’s economic size in the European Union * in 2020.
Classes of Economic
Size
1
2000 ≤ 8000 €
Very Small
2
8000 < 25,000 €
Small
3
25,000 < 50,000 €
Medium–Low
4
50,000 < 100,000 €
Medium–Large
5
100,000 < 500,000 €
Large
6
≥500,000 €
Very Large
EU Average
Chosen
Characteristic
Energy Costs (€/farm)68615513225540813,30162,4425556
Energy Costs/Output (%)9.27.97.66.75.75.36.0
Total Output (€/farm)749519,55442,62080,493233,3751,184,20392,603
Total Inputs (€/farm)664215,31237,34170,345210,4761,083,89082,711
Farm Net Income (€/farm)2615959317,21129,90458,680195,78624,310
Cash Flow (€/farm)392311,95923,54540,31387,759293,07234,699
Net Investment (€/farm)−477−1044−46041576840,9721498
* Including the United Kingdom. Source: own calculation based on FADN 2022.
Table 4. Panel Fixed Effect Models for energy cost of the European * farms according to the economic size.
Table 4. Panel Fixed Effect Models for energy cost of the European * farms according to the economic size.
Classes of Economic
Size
1
2000 < 8000 €
Very Small
2
8000 < 25,000 €
Small
3
25,000 < 50,000 €
Medium–Low
4
50,000 < 100,000 €
Medium–Large
5
100,000 < 500,000 €
Large
6
≥500,000 €
Very Large
Details
Number of Observations227371453461461348
LSDV R20.71500.84780.78540.76730.87320.8885
Within R20.23710.18010.33380.04570.11520.1098
const261.9780
(0.0010) *
1540.2600
(0.0000) *
1638.5300
(0.0000) *
6191.7900
(0.0000) *
16000.6000
(0.0000) *
97255.7000
(0.0000) *
X1-Total Output0.07825
(0.0000) *
0.0247
(0.0000) *
0.0542
(0.0000) *
---
X2-Family Farm Net Income---0.0357
(0.0000) *
0.0424
(0.0003) *
0.0179
(0.0200) *
X3-Cash Flow------
X4-Net Investment----0.0600
(0.0000) *
0.0803
(0.0000) *
Hausman Testχ2 (1) = 0.2655
(0.6063)
REM
Rejected
χ2 (1) = 0.3397 (0.5600)
REM
Rejected
χ2 (1) = 4.0796
(0.0738)
REM
Not Rejected
FEM
Sufficiently Close
χ2 (1) = 1.1076
(0.2926)
REM
Rejected
χ2 (2) = 5.3256
(0.0698)
REM
Rejected
χ2 (2) = 1.1024
(0.5763)
REM
Rejected
* Including the United Kingdom. Source: own calculation based on FADN 2022.
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Ryś-Jurek, R. Interdependence between Energy Cost and Financial Situation of the EU Agricultural Farms—Towards the Implementation of the Bioeconomy. Energies 2022, 15, 8853. https://doi.org/10.3390/en15238853

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Ryś-Jurek R. Interdependence between Energy Cost and Financial Situation of the EU Agricultural Farms—Towards the Implementation of the Bioeconomy. Energies. 2022; 15(23):8853. https://doi.org/10.3390/en15238853

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Ryś-Jurek, Roma. 2022. "Interdependence between Energy Cost and Financial Situation of the EU Agricultural Farms—Towards the Implementation of the Bioeconomy" Energies 15, no. 23: 8853. https://doi.org/10.3390/en15238853

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