Future Common Agricultural Policy Research Articles

Towards the new Common Agricultural Policy for Biodiversity: custodian farmers for sustainable agricultural practices in the Apulia region (South of Italy)

The international debate on biodiversity has become increasingly explicit and predominant in different disciplinary fields, requiring efforts especially on a regional scale. The future Common Agricultural Policy will be integrated and strategically connected with the objectives of the Green Deal and biodiversity protection, requiring new approaches, especially at local level. Through a review of the international literature and programming documents, the path of a significant case in the south of Italy, the Apulia region, characterized by a progressive loss of biodiversity in agriculture, will be traced. The regional government has launched a significant initiative called “custodian farmers” within the framework of the CAP in the two programming cycles 2007-2013, 2014-2020 for the protection and maintenance of biodiversity. Using a combination of different sources, we will focus on this initiative to evaluate its weight and significance at the regional level through cartographic analysis. The results will be critically analyzed and will provide reflections for the future.

Landscape-level heterogeneity of agri-environment measures improves habitat suitability for farmland birds.

Agri-environment schemes (AESs), ecological focus areas (EFAs), and organic farming are the main tools of the common agricultural policy (CAP) to counteract the dramatic decline of farmland biodiversity in Europe. However, their effectiveness is repeatedly doubted because it seems to vary when measured at the field-versus-landscape level and to depend on the regional environmental and land-use context. Understanding the heterogeneity of their effectiveness is thus crucial to developing management recommendations that maximize their efficacy. Using ensemble species distribution models and spatially explicit field-level information on crops grown, farming practice (organic/conventional), and applied AES/EFA from the Integrated Administration and Control System, we investigated the contributions of five groups of measures (buffer areas, cover crops, extensive grassland management, fallow land, and organic farming) to habitat suitability for 15 farmland bird species in the Mulde River Basin, Germany. We used a multiscale approach to identify the scale of effect of the selected measures. Using simulated land-use scenarios, we further examined how breeding habitat suitability would change if the measures were completely removed and if their adoption by farmers increased to meet conservation-informed targets. Buffer areas, fallow land, and extensive grassland were beneficial measures for most species, but cover crops and organic farming had contrasting effects across species. While different measures acted at different spatial scales, our results highlight the importance of land-use management at the landscape level-at which most measures had the strongest effect. We found that the current level of adoption of the measures delivers only modest gains in breeding habitat suitability. However, habitat suitability improved for the majority of species when the implementation of the measures was increased, suggesting that they could be effective conservation tools if higher adoption levels were reached. The heterogeneity of responses across species and spatial scales indicated that a mix of different measures, applied widely across the agricultural landscape, would likely maximize the benefits for biodiversity. This can only be achieved if the measures in the future CAP will be cooperatively designed in a regionally targeted way to improve their attractiveness for farmers and widen their uptake.

Agriculture from Areas Facing Natural or Other Specific Constraints (ANCs) in Poland, Its Characteristics, Directions of Changes and Challenges in the Context of the European Green Deal

Increasing the European Union’s (EU) current efforts to protect the natural environment, especially in the context of protecting agricultural soils, is one of its basic challenges. The European Commission (EC) is now ready and willing to strongly strengthen protection of the natural environment. Activities are primarily supported by the European Green Deal (EGD) strategy from 2019 and its thematic strategies, as well as the currently revised Common Agricultural Policy (CAP) for 2023–2027. Further direct support for farms from Areas facing Natural or other Specific constraints (ANCs support), compensating for them at least some of the additional costs and lost income related to the difficulties for agricultural production, will be one of the most important actions of the future CAP in the context of the protection of agricultural soils. It should be added that, in recent years, all EU Member States, including Poland (in 2019), have carried out a mandatory new delimitation of ANCs according to the same rules established by the EC Joint Research Center (EC JRC) under the CAP 2014–2020. The aim of the study is to characterize the organizational situation of Polish agriculture, to indicate the direction and strength of the changes taking place in it, as well as the main determinants of its further functioning in areas (communes) with a particularly high saturation of current ANCs, as compared to other areas, with and without ANCs. It is also important to present the economic consequences and development opportunities for farms conducting agricultural production in these areas. The results of the study show the condition of Polish agriculture and changes taking place in this sector in areas with different saturation and specificity of ANCs related to challenges for environmental protection included in the EGD strategy and the current and future CAP. The research results will also provide an important basis for policymakers in undertaking effective agricultural support in ANCs and for the scientific community to develop agricultural research that can meet the most pressing challenges faced in the areas. It should be noted that the study emphasizes the significance of the new institutional economics, the postulates of which can provide solid support for the actions taken to better protect ANCs.

Predicting agri-food quality across space: A Machine Learning model for the acknowledgment of Geographical Indications

Geographical Indications (GIs), as Protected Designation of Origin (PDO)and Protected Geographical Indication (PGI), offer a unique protection scheme to preserve high-quality agri-food productions and support sustainable rural development at the territorial level. However, not all the areas with traditional agri-food products are acknowledged with a GI. Examining the Italian wine sector by a geo-referenced database and a machine learning framework, we show that municipalities which obtain a GI within the subsequent 10 year period (2002–2011) can be predicted using a large set of (lagged) municipality-level data (1981–2001). We find that the Random Forest algorithm is the best model to make out-of-sample predictions of municipalities which obtain GIs. Results show that there is a sort of optimal territorial condition characterized by the successful matching of wine-growing profession (vineyards), local actors involved (number of farmers), and physical dimension of farms (middle farms). Being in a vital economic system and the distance from major urban centers also emerges among the main relevant features in predicting the success of GIs. The methodology adopted and the evidence provided lead to policy reflections, in the light of the future Common Agricultural Policy (CAP) programming period and the scheduled reform of the GI’s quality scheme.

European agroforestry policy promotion in arable Mediterranean areas

Silvoarable is a type of agroforestry practice where a woody component is deliberately integrated with an arable crop as part of the understory. Silvoarable practices are generally associated with the delivery of more ecosystem services than monocultures in agricultural lands. Therefore, it is necessary to develop policies to foster silvoarable practices in the most climate-vulnerable areas such as the Mediterranean areas of Europe. This paper aims at analyzing the extent of silvoarable practices as well as the deployment and implementation of policies carried out in 27 Rural Development Programmes (Pillar II) within the framework of the Common Agricultural Policy 2014–2020, in the Mediterranean areas of Europe, to understand how silvoarable practices are promoted and provide insights to the Mediterranean Member States to develop better policies for agroforestry adoption in Europe within the future Common Agricultural Policy 2021–2027 where payments will be based on results. The silvoarable agroforestry practices deliver enormous ecosystem services in the Mediterranean areas of Europe despite the reduced current extent that this sustainable land use system has. Silvoarable practices should be promoted by the Common Agricultural Policy considering the enhancement of the extension services activities but also the development of adequate supply and value chains within the bioeconomy strategy to fulfil the green deal strategy promoted by the European Commission.

Extensive sheep grazing is associated with trends in steppe birds in Spain: recommendations for the Common Agricultural Policy.

Iberian natural steppes have traditionally been used for extensive sheep grazing, which has been noted to be positively associated with steppe bird abundance and diversity. Sheep numbers in Spain, which harbors the largest European populations of many steppe bird species, decreased by 9.2 million (37.3%) between 1992 and 2020. Steppe birds in Spain have faced dramatic declines during the same period, but there is a lack of knowledge about the potential association between sheep and open-habitat bird declines. We used sheep data from the Spanish Ministry of Agriculture and bird data (1998–2018) from the Spanish Common Bird Monitoring Program to assess the association at the Spanish scale between sheep decline and the Farmland Bird Index (FBI) and the Natural Shrub-steppe Bird Index (SBI). We also used an independent dataset on population trends of the Dupont’s Lark (Chersophilus duponti) to assess the relationship between sheep numbers and the decline of this threatened steppe specialist passerine in Spain, whose European population is restricted to Iberian natural steppes. To test for a spurious relationship between temporal series, variables were tested for cointegration. After confirming cointegration, we found a strong positive relationship between sheep abundance and the trends of the FBI and SBI indices during the period 1998–2018. The association between sheep abundance and trends of the Dupont’s Lark (2004–2015) was positive although it was not statistically significant. Although the main causes of decline of farmland and steppe birds are mainly related to agricultural intensification and land use changes, the correlation found, using two independent cointegrated datasets, between the reduction in farmland and shrub-steppe birds and sheep numbers at the country scale suggests that the decline of steppe birds in Spain may be also associated with the decline in sheep numbers. This agrees with previous studies that found a positive relationship between intermediate levels of sheep grazing and steppe bird abundance in Iberian steppes. Further research (e.g. experimental studies) is needed to corroborate our study and identify the most appropriate level of grazing intensity for protecting the most farmland and shrub-steppe birds. Our results suggest that the promotion of extensive grazing should be considered as a key factor in future Common Agricultural Policy reforms and conservation programmes to protect steppe birds.

Sustainability and competitiveness in farms: An evidence of Lazio region agriculture through FADN data analysis

The new legislative proposals related to the Common Agricultural Policy (CAP) reform 2021-2027 aim to promote a sustainable and competitive agricultural sector. The new CAP supports agriculture in making a much stronger contribution to climate, biodiversity, environment and improving farms' competitiveness in the agri-food sector, in a European context.The importance of a strong focus on results and performance in the CAP legislation requires a continuous assessment and monitoring of the effectiveness of the measures adopted in the Rural Development Programs (RDP) with respect to the specific goals set during the cap program. In order to assess the progress in improving the competitiveness and sustainability of the agri-food sector in reaching their targets and the objectives of the CAP, the need arises to investigate whether the RDP measures contribute to supporting the transition towards sustainable agriculture, to the competitiveness of the agri-food sector and to a balanced development of the rural areas. In this new legislative framework, where it becomes important to evaluate whether the CAP provides a much stronger contribution to achieving the specific objectives, our paper aims to describe agricultural sector in the Lazio region and to analyze the effects, in terms of sustainability and competitiveness, of the measures approved by RDP 2014-2020, which have almost expired. In particular, we provide a comparative analysis of the data collected by the Farm Accountancy Data Network (FADN), focusing on two different periods: one prior to the last programming and one referring to the latest available data. The collected data refer to farms, regarding their structural, economic, financial and patrimonial characteristics, as well as variables that describe attitudes and behaviour towards the environment. A multivariate analysis (clustering) is applied; it focuses on explorative factor analysis based on principal components, in order to identify homogeneous groups of farms with sustainability and competitiveness and identify similar characteristics and potential for development trajectories. The results found that farms are moving towards more sustainable and multifunctional development paths. The assessment of EU goals for social, environmental, and economic sustainability in agriculture and rural areas are a basis for discussion among public decisionmakers involved in the reforming process of the explanatory measures of the new strategic objectives of the post-2020 CAP.Our results can offer a contribution to meeting the current challenges posed by the EU to ensure a smooth transition to the future CAP program. Major challenges that raise policy debate on the considerable potential of the FADN for assessing sustainability and farm competitiveness in the EU framework which places strong emphasis on results and performance.

The integration of environmental objectives in the common agricultural policy\u2014partisan politics in the European Parliament

This study examines the policy preferences of political groups in the 8th European Parliament regarding the design of agricultural policy and the integration of environmental goals therein. Due to the high degree of Europeanization of the Common Agricultural Policy, the analysis of party positions at the EU level is particularly interesting. To what extent are the positions of political groups changing against the background of the increasing public awareness for environmental and animal welfare issues in agricultural policy? By means of a discourse network analysis of the plenary debates on selected policy proposals during the 8th term of the European Parliament, the positions of the political groups in agricultural policymaking are explored. The comparative analysis clearly reveals differences in problem perceptions and preferred policy solutions between the different political groups. Substantive differences are apparent between the EPP on the one side and the Greens/EFA and the GUE/NGL on the other side. EPP members still mostly represent traditional agricultural goals such as food security and income support for farmers, whereas the Greens/EFA and the GUE/NGL deputies promote a change towards a more environmentally and animal welfare friendly agricultural policy. At the same time, the analysis reveals a broad consensus across political groups regarding the general need to increasingly integrate sustainability concerns in the design of the future Common Agricultural Policy.

Evaluating the New Common Agricultural Policy: Improving the Rules

SummaryThirty years after their conception and adoption, European rural development policies are about to enter a new programming period, splitting away from the cohesion funds and showing, for the first time since the implementation of agricultural policies, real integration with the so‐called first Pillar of the Common Agricultural Policy (CAP). The proposal for the new CAP from 2023–2027 includes some improvements through a new delivery model and organisational approach, which may reinforce future evaluations. As to overseeing the implementation of the CAP, the Commission proposed to move from a compliance‐based to a performance‐based approach. Nevertheless, we can highlight some elements that may weaken evaluation processes, with the risk of repeating past failures, as is the case in the current CAP programming period from 2014–2020. This article analyses the new framework proposed for the evaluation of the future CAP and is intended to promote a discussion on how to make evaluations more usable, useful and reliable for their users and evaluation practitioners. The analysis concerns only the rules for evaluation and does not discuss other specific monitoring, performance framework and control requirements, which are interrelated with evaluation.

Sentinel-1 Time Series for Crop Identification in the Framework of the Future CAP Monitoring

In this upcoming Common Agricultural Policy (CAP) reform, the use of satellite imagery is taking an increasing role for improving the Integrated Administration and Control System (IACS). Considering the operational aspect of the CAP monitoring process, the use of Sentinel-1 SAR (Synthetic Aperture Radar) images is highly relevant, especially in regions with a frequent cloud cover, such as Belgium. Indeed, SAR imagery does not depend on sunlight and is barely affected by the presence of clouds. Moreover, the SAR signal is particularly sensitive to the geometry and the water content of the target. Crop identification is often a pre-requisite to monitor agriculture at parcel level (ploughing, harvest, grassland mowing, intercropping, etc.) The main goal of this study is to assess the performances and constraints of a SAR-based crop classification in an operational large-scale application. The Random Forest object-oriented classification model is built on Sentinel-1 time series from January to August 2020 only. It can identify crops in the Walloon Region (south part of Belgium) with high performance: 93.4% of well-classified area, representing 88.4% of the parcels. Among the 48 crop groups, the six most represented ones get a F1-score higher or equal to 84%. Additionally, this research documents how the classification performance is affected by different parameters: the SAR orbit, the size of the training dataset, the use of different internal buffers on parcel polygons before signal extraction, the set of explanatory variables, and the period of the time series. In an operational context, this allows to choose the right balance between classification accuracy and model complexity. A key result is that using a training dataset containing only 3.2% of the total number of parcels allows to correctly classify 91.7% of the agricultural area. The impact of rain and snow is also discussed. Finally, this research analyses how the classification accuracy depends on some characteristics of the parcels like their shape or size. This allows to assess the relevance of the classification depending on those characteristics, as well as to identify a subset of parcels for which the global accuracy is higher.

The Evaluation Framework in the New CAP 2023–2027: A Reflection in the Light of Lessons Learned from Rural Development

The new Common Agricultural Policy (CAP) proposal includes few improvements compared to previous programming periods which may reinforce future evaluation, but we can also observe elements that may weaken the assessment, with the risk of repeating past failures. The objective of this essay is to analyse the new framework proposed for evaluation in the future CAP and to promote a collective discussion on how to make evaluations more usable, useful and reliable for users and practitioners. The first part of the paper analyses the main elements of evaluation during the different rural development programming cycles. A second part is dedicated to an examination of the current programming period (2014–2020) and the implications of the introduction of the Common Monitoring and Evaluation Framework (CMEF) and the evaluation plan. In a third part, we critically discuss the proposals for the next programming period and we offer some concluding reflections and two main open questions. From the analyses carried out, many elements emerge to encourage discussion on the role that evaluation has played and can play and the critical points to face. The experiences in rural development policies have introduced important changes in theoretical and implementation terms. In particular, they helped to build evaluation capacity and enabled the involvement of the civil society. However, it is also clear that the European Commission (EC) designed path has often led to an increase in rigidity and orthodoxy towards common frameworks compliance.

FROM FARM TO FORK: HUMAN HEALTH AND WELL-BEING THROUGH SUSTAINABLE AGRI-FOOD SYSTEMS

From Farm to Fork Strategy is at the heart of the European Green Deal – the new growth strategy of the EU and a key to the implementation of Sustainable Development Goals (SDGs). From Farm to Fork Strategy is designed for building a fair, healthy and environmentally-friendly food system with an integrated food safety policy in the Union. Current paper presents some of the strategic accents of the main European documents and initiatives concerning future sustainable agri-food systems in the context of human health and well-being through the ecological, economic and social aspects of sustainability. Special attention is also paid to how the future Common Agricultural Policy (CAP) will contribute to the EU Green Deal, food quality and safety, and sustainable development as a whole. Particular examples are presented showing the support to the agriculture and food sectors amid Coronavirus and rural responses to the COVID-19 crisis as collected by the European Network for Rural Development (ENRD). Good practices from Bulgaria are also analyzed regarding the initiatives of promoting local food through farmers’ markets and online platforms and new challenges and best solutions. Conclusions focus on the general measures and actions for the effective transition to a fair, healthy and environmentally-friendly agri-food system. JEL Codes: I31, Q12, Q18, Q56

Why Cannot Direct Payments Be Capped in Slovakia? A Political Economy Perspective

Annually the Common Agricultural Policy (CAP) provides support to the farming sector amounting to more than EUR 50 billion in the EU, of which direct payments (DPs) take around 70%. DPs are often argued to be granted unfairly to large farms. In this paper we analyse implications and the political economy of DP capping in Slovakia in the context of the ongoing negations about the future CAP reform. The simulation results for Slovakia show that if the 2018 Commission proposal was approved it would lead to losses of EUR 190.1 million (68% of total DPs) to large farms when labour costs are not subtracted. These losses would decrease to only EUR 12.2 million (4.4% of total DPs) when the labour costs are subtracted. Further, the results show that potentially affected large farms in Slovakia show lower performance and lower compliance with the agricultural policy objectives than farms unaffected by the DP capping. Similar to the past CAP reforms, the position of Slovakia against DP capping is expected to be maintained also in future, which could be explained by three main factors: the productivity argument, the political economy argument linked to the lobby pressure from large farms and low economic distortions caused by DPs.

Do differential payments for agri-environment schemes affect the environmental benefits? A case study in the North-Eastern Italy

Promoting sustainable agricultural systems, maintaining biodiversity, and establishing measures to counteract climate change are the clear objectives of the future Common Agricultural Policy (CAP); however, there is still uncertainty regarding its implementation. At the level of the European Union, the justification for the CAP appears increasingly linked to the translation of policy objectives into results-based measures. Accordingly, in this paper, we estimate a composite indicator to track changes at the farm level and assess the impacts of agri-environment climate schemes (AECSs) on the change in management intensity. As AECS payments are tailored to compensate for the costs and income forgone due to participation in environmentally friendly measures, we assume that any environmental benefits increase with the amount of payment received. We estimate the effects of differential payments on management intensity by applying a generalised propensity score approach to a case study comprising all AECSs implemented in the Veneto region (North-eastern Italy). We find that AECSs have a significant effect on the composite indicator of extensification, but the provision of environmental good differs among the varying levels of payments. Our results contribute in-depth reflections and a proposal for measuring the cost-effectiveness of AECSs to the ongoing debate on the post-2020 CAP regarding AECSs.

Fit for the task? Integration of biodiversity policy into the post-2020 Common Agricultural Policy: Illustration on the case of Slovenia

In the European Union (EU), the Common Agricultural Policy (CAP) is considered to be the critical public policy in terms of both impacts and funds dedicated to nature conservation, yet the goal of halting biodiversity loss in the EU remains elusive. The present paper examines the degree of biodiversity policy integration into the CAP and the quality of policy programming in a selected EU Member State in the 2014–2020 period. We use a heuristic model combining an assessment of biodiversity policy integration and a program theory analysis of the policy’s logic model. In addition, the elaboration of the logic model for other agricultural policy objectives, relevance and potential effects of measures and allocation of budgetary funds are evaluated for comparative purposes.The program logic model was found to be only loosely defined for most objectives of Slovenian agricultural policy. At the strategic level, the integration of biodiversity policy is limited to instruments that remunerate above-standard farming practices, investments and payments to areas with natural constraints. In contrast, the inclusion and consistency of biodiversity conservation in instruments supporting standard practices (e.g. direct payment schemes) is addressed only to a limited extent. Given their design and implementation, fewer than 10 % of relevant measures were judged to have strong or significant potential effects and will thus probably only partly meet the policy objectives. Finally, biodiversity conservation (estimated 5% of the total agricultural policy budget), as well as other environmental objectives (22–23 %), have a significantly lower priority than income- and production-related objectives (54–60 %).The future CAP should include adequate safeguards and incentives to improve the quality of programming and integration of biodiversity policy, particularly since an increasing emphasis is given to decision-making at the national level. However, although the post-2020 CAP programming system could, in principle, be seen as a step forward, there remains a high risk of underperformance in the field of biodiversity conservation in the EU Member States.

Decentralisation of agri-environmental policy design

Abstract We theoretically examine the gains of the decentralisation of agri-environmental policy design. We consider a model with homogeneous regions and joint production of local and global public goods from agriculture. Assuming that governments are characterised by different agency costs and knowledge of the PG values, we evaluate whether decentralisation is a suitable strategy to improve the efficiency of agri-environmental payments. We find that partial decentralisation always improves the welfare. We apply our theoretical model to the case of abandoned wetlands in Brittany. We find that national governments are the most suitable to design agri-environmental policies. Our results contribute to reflections on future Common Agricultural Policy.

CAP Measures Towards Environmental Sustainability: Trade Opportunities for Africa?

The future EU Common Agricultural Policy (CAP) requires coherence with the Sustainable Development Goals (SDGs) and the international commitments in the fight against climate change. Next to ensuring stable food supply by supporting farmers and enhancing agricultural productivity, environmental sustainability is a core aspect of the proposed future CAP. At the same time, new policies must not compromise socio-economic development in low-income countries, especially in Africa, as stated in the European consensus on development. On the contrary, the extensification of agriculture in the EU may create trade opportunities for African countries. We apply a global agri-economic model to assess trade-related impacts of potential, environmentally motivated changes of CAP policies in the EU and Africa. Our findings suggest that EU production levels of meat would change with a stronger environmental focus of the CAP. These changes reduce the EU’s share in agri-trade flows to Africa. However, food supply in Africa is not projected to deteriorate, as imports from other world regions and, to a limited extent, increasing domestic production can fill the gap. In how far potentials for domestic production growth can be used in African regions depends at least partly on their competitiveness vis-a-vis substituting importers. A sensitivity analysis on reduced transport costs shows that infrastructure investments could contribute to a stronger integration of Africa in international markets. On a global level, our analysis reveals the need to balance sustainability trade-offs in terms of avoiding leakage effects from EU agricultural production changes versus facilitating economic growth potentials in low- and middle-income countries.

EU‐Wide Impacts of the 2013 CAP Direct Payments Reform: A Farm‐Level Analysis

AbstractThis paper analyzes the microeconomic effects of the 2013 reform of the EU's Common Agricultural Policy (CAP). This is done using the EU‐wide individual farm model (IFM‐CAP). Simulation results show that although the reform succeeded to partially harmonize direct payments (DP) among farms and Member States, relatively strong differences in the distribution still remain in place. Around 62% of the farms increase their income, whereas the remaining 38% lose from the reform. The reform benefits small farms, while large farms lose out. As measured by the Gini coefficient, the 2013‐CAP reform only partially reduces the disparity in the distribution of DP and farm income among farms. The Gini decomposition shows that subsidies (in particular decoupled payments) contribute to a decrease in the inequality of total farm income. The future CAP reform needs to have a stronger overhaul of the DP system in order to achieve a substantial reduction in inequality in the distribution of payments among farms and regions in EU.

European Rural Development Policy Approaching Health Issues: An Exploration of Programming Schemes.

Malnutrition, obesity, type 2 diabetes, micronutrient deficiencies, and the increase in non-communicable diseases are among the future European key challenges in health and welfare. Agriculture and rural development policies can positively contribute to a healthier and nutritious supply of food. The objective of the research is to analyze to what extent European 2007–2013 and 2014–2020 rural development programmes address the nexus between agriculture, food, health, and nutrition to respond to the evolving dietary needs. The research carries out a quali-quantitative content analysis on all 210 European rural development programmes. Results show that the interconnection between agriculture, food, health, and nutrition is present, with differences in the European agricultural and rural policy programming periods. The main interlinking issues of the nexus are food safety, food quality, diseases, nutritional aspect, animal health and welfare, plant health, and environmental health. Healthier and nutritious food-related issues are emerging, addressing dietary needs, and sustaining consumer food trends. Healthy and nutritious food is pursued by combating foodborne communicable diseases and non-communicable diseases. The future Common Agricultural Policy, including its rural dimensions, should support the consumption of healthy foods produced in ways that are environmentally and economically sustainable.

Setting Climate Action as the Priority for the Common Agricultural Policy: A Simulation Experiment

AbstractWe quantitatively assess the impacts of re‐allocating budgetary resources within Pillar 1 of the EU's Common Agricultural Policy (CAP) from direct income support to a direct greenhouse gas (GHG) reduction subsidy for EU farmers. The analysis is motivated by the discussion on the future CAP, with calls for both an increased ambition on climate action from the agricultural sector and for a more incentive‐based delivery system of direct payments under strict budgetary restrictions. By conducting a simulation experiment with an agricultural partial equilibrium model (CAPRI), we are able to factor in farmers’ supply and technology‐adjusting responses to the policy change and to estimate the potential uptake of the GHG‐reduction subsidy in EU regions. We find that a budget‐neutral re‐allocation of financial resources towards subsidised emission savings can reduce EU agricultural non‐CO2 emissions by 21% by 2030, compared to a business‐as‐usual baseline. Two‐thirds of the emission savings are due to changes in production levels and composition, implying that a significant part of the achieved GHG reduction is offset globally by emission leakage. At the aggregated level, the emission‐saving subsidy and increased producer prices compensate farmers for the foregone direct income support, but differences in regional impacts indicate accelerated structural change and heterogeneous income effects in the farm population. We conclude that the assumed regional budget‐neutrality condition introduces inefficiencies in the incentive system, and the full potential of the EU farming sector for GHG emissions reduction is not reached, leaving ample room for the design of more efficient agricultural policies for climate action.