Model-Based Governance of Phosphate Market Imbalances

Abstract

Phosphorus is essential for all life on this planet. It is needed to provide for high productivity yields in modern agriculture: a key part of the Green Revolution that took place in the twentieth century. There is no substitute for phosphate rock and phosphate fertilizer in their agricultural role. Both the markets for phosphate rock and phosphate fertilizers have an oligopolistic structure, oligopolistic behaviour is observed as well as an increasing influence of state ownership. Exporting countries are thus in the position to influence importers by using their phosphate resources in a geo-strategic way through trade restrictions and strategic market behaviour. This master thesis advocates and demonstrates a novel approach of modelling: namely to use stock-flow mechanisms, decision-making mechanisms and market-clearing mechanisms to represent commodity markets. The focus is on the process of constructing a quantitative model through mixing and matching of building blocks that originate from different modelling methods: system dynamics, agent-based modelling and economic game theory. Conclusions are drawn on what policies European phosphate-importing countries should use to strengthen phosphate market governance. Conclusions are also drawn on how to take the utmost advantage of modern computational tools to flexibly model problems in commodity markets.