The German Council for Sustainable Development has just published a report highlighting the environmental damage caused by intensive agriculture and calling for a reform of the CAP direct payments system. It proposes a three-fold structure of payments: an environmental basic payment, a series of targeted agri-environmental payments for farmers who accept higher obligations, and a series of payments for high nature-value areas where the continuation of agricultural production is desirable but threatened on economic grounds.

For the environmental basic payment, it suggests that eligibility would be conditional on farmers turning over at least 10% of their area to environmentally-friendly husbandry with a view to maintaining a high level of biodiversity in the agricultural landscape throughout the EU.

The Council explicitly argues against the idea that farmers should be remunerated for fulfilling their statutory obligations with respect to the environment, animal welfare and food safety (cross compliance). It also justifies full EU financing of most of the payments “so long as these are directed to fulfilling EU objectives”, thus apparently advocating that some of the existing co-financed agri-environmental payments in Pillar 2 might be moved to Pillar 1 at least as far as financing modalities are concerned.

The report provides an excellent summary of the state of the debate on the environmental implications of agricultural policy (in German only, at least for the moment).

Read it here. Google Translate renders a passable English version of the press release for non-German speakers here.

The president of the main farmers’ union, the Fedération Nationale des Syndicats d’Exploitants Agricoles (FNSEA) Jean Michel Le Metayer called for “a pause in agri-environmental measures” and the suspension of new measures. For French speaking readers, the (short) video is here.

The Ministry of agriculture seems sympathetic with this position, even though Nicolas Sarkozy has recently positioned himself as greener than his predecessors, with initiatives under a framework law called the “Grenelle of the environment” and a carbon tax (it turns out that farmers should be exempted from paying this tax, eventually). The French minister Bruno Le Maire apparently said a few days after that, indeed, a revision of the agri-environmental measures (AEM) was necessary and that it should start with an inventory of the provisions adopted throughout the Union according to the newspaper Le Figaro. On January 13 Le Maire unveiled a proposal for a new agricultural law to be discussed by the Parliament with little apparent concern for the protection of the environment.

The idea of suspending agri-environmental measures is bizarre, given that they are voluntary measures that are highly appreciated by farmers in some regions, providing often a third or more of the farm incomes in mountainous regions for example. So what did the FNSEA president actually mean? After some inquiry, it seems that he actually used the term “agri-environmental measures” for CAP jargon ignorant journalists. He was not in fact targeting the AEMs, i.e. second pillar measures, but rather the GAECs (Good Agri-Environmental Conditions, i.e. a set of technical constraints that farmers needed to respect in order to receive the Single Farm Payments, under Pillar 1, part of what is sometimes known as cross-compliance), as well as “any element of regulation that imposes environmental constraints such as the Nitrate Directive, or national measures under the new Grenelle law framewok” (FNSEA sources). Le Metayer argued in the interview that because of low prices and low incomes, farmers could not afford the ever growing stream of environmental regulations.

To FNSEA’s defense, some of the constraints imposed in 2009 turned out to be ill-designed in some regions. For example, farmers had to plant intermediate crops between harvests so as to keep soil covered and reduce nitrate leaching. In some areas, the lack of rain when these crops were planted resulted in extra costs without any environmental benefit. However, the FNSEA position sends an awkward signal regarding farmers’ image in the public opinion, while water pollution with nitrates makes headlines every summer. More worryingly, Le Metayer’s demand shows how much the the anti-environmental stance is widespread among the mainstream French farm lobby (another farmer’s union, the Coordination Rurale runs perhaps an even more anti-environmental program than the FNSEA). The FNSEA is highly representative and about to win again a majority in one of the main instances that co-manage the agricultural sector with the government in France. Only a minority of farmers belonging to the left wing Conféderation Paysanne seems in favour of a greener CAP, but their position regarding market regulation makes them hardly credible in the European debate (they favour a system of generalized quotas and a complex set of coupled payments restricted to small farms). A fringe of enlightened entrepreneurial farmers, the Société des Agriculteurs de France is open to produce public goods as much as wheat if the CAP pays them for that, but this is more a think tank than a powerful union.

It is hard to make predictions regarding the future behaviour of France as far as the coming debate on the CAP is concerned. With France becoming a net contributor to the CAP, the unholy alliance between the ministry and agriculture and the ministry of finance to defend large CAP budget is about to end. The former minister, Michel Barnier, used Health Check flexibility to reallocate 1.4 billion euro of Single Farm Payments towards the extensive grass-fed livestock sector. This has turned the powerful cereal producers against the government. Given that farm incomes have decreased much more than the EU average in 2009, the Ministry of agriculture can hardly afford more radicalization of the farmers, and his apparent scorn for environmental causes is perhaps tactic. However the historical aversion of the FNSEA for the environment has been particularly effective in the past. France will certainly resist any greening of the CAP in the future.

The EU spends around 30 billion euros each year on the single payment scheme, by far the largest of the myriad schemes and programmes that together comprise the 54 billion euro budget of the Common Agriculture Policy. The scheme was first introduced in 2005 but it is hard to see it surviving in its current form beyond the end of the EU’s 2007-13 financial perspective. Here are five reasons why the single payment scheme is not politically sustainable. Five more will follow tomorrow. [...]

It’s no wonder that the Commission suppressed the Court of Auditors report on cross compliance for as long as it could – the report is damning and undermines the Commission’s case for the legitimacy of EU farm subsidies.

Speaking in 2005, Agriculture Commissioner Mariann Fischer Boel explained how she sees cross compliance in relation nearly 40 billion euros of public expenditure on payments to farmers:

“I would emphasise that decoupled payments are not “money for nothing”. To get the cheque in the post, a farmer has to respect a demanding range of standards related to the environment and animal welfare. We call this system “cross-compliance”.”

Today’s report by the Court shows that such a view is at best wishful thinking and at worst deliberately deceitful. Cross compliance does not represent a ‘demanding range of standards’ at all.

It should be stressed that this study is the biggest and most comprehensive to date. The Court says that it “carried out an audit in 2008 of the cross-compliance policy at the Commission and in seven Member States representing the diversity of agriculture across Europe”.

The top line conclusion pulls no punches:

“the objectives of this policy have not been defined in a specific, measurable, relevant, and realistic way, and that at farm level many obligations are still only for form’s sake and therefore have little chance of leading to the expected changes, whether reducing the size of payments or modifying farming practices.”

Senior officials at the Court are reported to be fuming at the suppression of the report until after the CAP health check was concluded. They should rest assured that their work has not been in vain: this report will play a big part in the discussions of the future of the CAP as part of the EU budget review.

Read the press release and the full report (60+ pages).

A week ago I asked why a unfavourable report on cross compliance by the Court of Auditors, adopted on 4 November, has not yet been published. I wondered whether it had anything to do with the imminent end game of the health check negotiations, which featured propoals to further weaken cross compliance requirements. Turns out my hunch was correct. The Commission did not want the report to see the light of day, at least not until the health check was done and dusted, according to Paulo Casaca MEP.
[...]

As Wyn Grant has observed, the Court of Auditors annual report on the 2007 EU budget published on Monday identified a clutch of weaknesses associated with the controls on spending on EU farm policies. The Court observes that “Some 20 percent of payments audited at final beneficiary level and revealed incorrect payments, a limited number of which had a high financial impact.” It concludes that farm subsidies remained “affected by a material level of error of legality and/or regularity”.

Strangely absent from the Court’s report was an evaluation of cross compliance – the environmental and animal health and welfare conditions that are required of all recipients of CAP direct payments: public expenditure which totals some 36 billion euros a year (28 billion euros of which is spent under the Single Payment Scheme). Could this be because the Court has just adopted a separate special report on this very subject? But that the report is being held back until the health check is concluded? [...]

A new report commissioned by the Budget Committee of the European Parliament makes interesting reading. The report, written by Jorge Núñez Ferrer (a former Commission fonctionnaire) and Eleni A. Kaditi, both of the Centre for European Policy Studies in Brussels, aims to asses whether the CAP provides ‘added value’. Núñez Ferrer and Kaditi define this as whether “the benefits outweigh the costs, not only of implementing the policy, but also the costs created in other areas.” The authors don’t pull their punches, particularly when it comes to direct payments which, costing some €30 billion a year, are by far the biggest ticket item in the CAP. [...]

The European Parliament is seeking an outcome to the CAP Health Check that does not compromise the competitiveness of EU farming or diminish the value of farm subsidy receipts. This is the vision presented in a working document drafted by German MEP Lutz Goepel of the Parliament’s Committee on Agriculture and Rural Development. The paper acknowledges the need for some evolution of the CAP, but presents a sometimes inconsistent set of suggestions, a number of which are likely to run counter to arguments in favour of promoting a more environmentally sustainable CAP. The paper is examined in further detail below. [...]

The objectives of the present incarnation of the CAP are the subject of intense debate in policy circles. Cross compliance is seen by some as a way to justify the Single Payment Scheme, by aligning the receipt of largely untargeted subsidy payments to the delivery of public goods. To some extent this is true. Farmers need to meet a set of fairly basic standards centred on pre-existing EU environment, food safety and animal welfare legislation (called Statutory Management Requirements (SMRs) in CAP jargon). They must also respect a set of baseline soil and habitat maintenance standards (collectively referred to as standards for Good Agricultural and Environmental Condition (GAEC)). In the event of non-compliance, recipients of the Single Payment risk a deduction to the following year’s subsidy payment. [...]

Ariel Brunner in a recent post lamented the fact that the EU has proposed to set the rate of compulsory set-aside to 0% for the 2008 harvest without putting in place alternative measures to secure the environmental benefits which set-aside land provides. The reason why the decision only concerns autumn 2007 and spring 2008 sowings is that a decision to eliminate set-aside can only be done in the context of a global review of arable crops policy. This will be undertaken as part of the CAP Health Check, when the Commission has promised an analysis on how and by which means we can address the positive environmental side effects of set aside. A recent policy options paper for the UK Land Use Policy Group discusses four main options which the Commission might consider. [...]

Speaking at a meeting of the Parliamentary Agriculture Committee in Nicosia, Cyprus on 29 June, Agriculture Commissioner laid out her current thinking on the future of the CAP, in particular the changes she will be proposing later this year for the CAP Health Check. [...]

The Commission review of Cross Compliance proposes some “simplifications” that may indeed make the cross compliance system easier to administer. However it does not address the real flaws of the system, and these have little to do with the alleged “burden” for farmers and civil servants. [...]

The Agriculture Commission has today announced a series of changes to the cross compliance system under which European farm subsidy payments are made conditional on farmers meeting basic rules relating to farm management and environmental conservation. The thrust of the changes is to streamline the system, make it less onerous for farmers and for the government authorities charged with inspecting farms and enforcing penalties where rules have been broken. [...]

During last week’s furore over trading in CAP subsidy entitlements, the question of what farmers must do in return for their subsidy was raised. In a speech on 6 March 2007 in India, Agriculture Commissioner Mariann Fischer Boel said that the CAP’s new Single Farm Payment (SFP) is conditional on farmers observing “tough standards of environmental care, animal welfare and public health”. But a new report from the Institute for European Environment Policy provides some evidence that the conditionality of subsidy payments is something of a mirage. Only in a very small number of cases do the requirements actually exceed what was already required by member states’ pre-existing laws on environmental pollution and animal welfare. [...]

The past week has seen a series of revelations in the media about the way that decoupled farm subsidies are operating in Scotland. It has become evident that farm subsidy entitlements are being sold by farmers and that investors – who may never have set foot on a farm – are buying up entitlements to claim the new Single Farm Payment, which accounts for the bulk of the European Union’s €48.5 billion Common Agricultural Policy. [...]