European SImulation Model (ESIM)
ESIM is a comparative static partial equilibrium net-trade multi-country model of the agricultural sector. It covers supply and demand for agricultural products, with a detailed specification of cross-commodity relationships, and some first-stage processing activities. Its geographical coverage is global, although not all countries are individually represented. All EU Member States, as well as accession candidate Turkey and the USA, are modelled as individual countries; all other countries are combined into one aggregate, the 'rest of the world' (ROW).
In ESIM, market outcomes are driven by prices, conditional upon a rich specification of relevant EU agricultural policies, including trade policy instruments and direct payments. Since ESIM is mainly designed to simulate the outcomes in agricultural markets in the EU and accession candidates, policies are modelled only for these countries. For the USA and the ROW, production and consumption are assumed to take place at world market prices.
The production of agricultural products for biofuels production (oilseeds/plant oils for biodiesel; wheat, maize and sugar for ethanol) as well as the processing of these products and the production of biofuels have been explicitly included in ESIM since 2006. In addition, market demand for biofuels is modelled, and various biofuels policies are also represented. Thus, ESIM can treat both prices and quantities of biofuels endogenously, and is able to simulate them jointly under alternative sets of assumptions.
In its standard version ESIM is a comparative static model, as no links between the simulation periods exists. All simulation results have to be interpreted as long term equilibrium states. Nonetheless, ESIM is a projection model as shifters ate the supply as well as the demand side (e.g. productivity and income growth) are accounted for. Projections are mode for a period of 15 years (2006-2020). After the base period which is the 2004/05. All projections are independent comparative static equilibriums.
ESIM is used by the European Commissiom since 2001. ESIM was developed by the ERS of the USDA in cooperation with Josling and Tangerman. It was first used in 1994. Thereafter, the model has been further developed by Tangermann and Münch (1995) as well as Münch (1995). Country coverage of ESIM has been expanded first by Münch (1997) and then by Münch (2002). In 2004, the model was updated and extended in terms of base period, product and country coverage, as well as policy formulation. It was also rewritten from SuperCalc into GAMS (General Algebraic Modelling System) software (Banse et al., 2005). In 2010, an update of the base year and baseline will be available.