The Article 92 commitment to increased ambition with regard to environmental- and climate-related objectives

Article 92 of the draft CAP Strategic Plan regulation is headed “Increased ambition with regard to environmental- and climate-related objectives”. In my previous discussion of the proposed green architecture in the CAP post 2020, I interpreted this Article as a commitment to no back-sliding on expenditure on agri-environment and climate objectives in the new CAP. For this reason, I took a more positive view of the potential of the new legislation to live up to the Commission’s declared ambition in this area than reflected in initial statements from environmental NGOs.

In the wake of further conversations with Birdlife Europe who have had the benefit of discussions with DG AGRI officials, I conclude that my initial interpretation of Article 92 as guaranteeing no back-sliding in expenditure was incorrect. On closer reading the Article says nothing about financial commitments and indeed seems hardly to bind Member States to any substantive commitments at all.

If the Commissioner’s claim that his CAP proposal will deliver more for the environment and climate is to be substantiated, then we must examine the likely impact of the proposal as a whole. There are positive elements that deserve to be underlined but there are also risks, depending how Member States implement the new responsibilities they are given. To avoid the risk of back-sliding, it would be highly desirable to strengthen the language now used in Article 92.

What does Article 92 say

Because of its importance, it is necessary to quote the two paragraphs in Article 92 in their entirety.

“1. Member States shall aim to make, through their CAP Strategic Plans and in particular through the elements of the intervention strategy referred to in point (a) of Article 97(2), a greater overall contribution to the achievement of the specific environmental- and climate-related objectives set out in points (d), (e) and (f) of Article 6(1) in comparison to the overall contribution made to the achievement of the objective laid down in point (b) of the first subparagraph of Article 110(2) of Regulation (EU) No 1306/2013 through support under the EAGF and the EAFRD in the period 2014 to 2020.

2. Member States shall explain in their CAP Strategic Plans, on the basis of available information, how they intend to achieve the greater overall contribution set out to in paragraph 1. That explanation shall be based on relevant information such as the elements referred to in points (a) to (f) of Article 95(1) and in point (b) of Article 95(2).”

Getting behind the legalese, what Article 92 says is that Member States “shall aim” to make a greater overall contribution to achieving the specific agri-environment and climate objectives in their CAP Strategic Plans as compared to the contribution to the sustainable management of natural resources and climate action through support under the EAGF and the EAFRD in the current programming period.

Given the reference to the two budget funds, I had interpreted ‘contribution’ in this context as meaning expenditure. I had thus dubbed this clause the ‘no back-sliding’ clause on the presumption that Member States would have to spend at least as much on fulfilling agri-environment and climate objectives in the next programming period as in the current one.

But this is apparently not what the Article intends. DG AGRI officials make clear that the term ‘contribution’ in this Article does not refer to monetary amounts or expenditure. All that is required is that Member States “shall aim” to show, in drafting their Plans, how they are expecting to achieve this “greater overall contribution”. As set out in paragraph 2, this demonstration should be based on “relevant information” drawn mainly from the needs assessment, SWOT analysis, intervention logic, targets and financial plans included in the CAP Strategic Plan.

How will the Plan’s overall contribution to environmental and climate objectives be defined?

Moving away from a preoccupation with financial inputs towards a greater emphasis on effort and results achieved is not necessarily a bad thing. The problem is that a “greater overall contribution” is not well defined and is a very vague yardstick by which to measure a Member State’s commitment.

A more precise definition might define “a greater overall contribution” in terms of targets only. For example, if a country had N thousand hectares under organic farming in the current programming period, this target might be set at X * N where X is some positive number greater than 1 in the coming period. Ideally, one would like to be able to use impact indicators rather than the results indicators that will be used in the Strategic Plan (for example, a reduction in greenhouse gas emissions from agriculture by X% rather than the number of hectares of carbon-rich soils protected from drainage and ploughing), but there are well-known difficulties in using impact indicators to measure progress over relatively short periods.

By comparison, the formulation in Article 92 seems particularly weak.

First, the commitment is expressed in terms of intentions. Paragraph 1 states that Member States “shall aim to make” a greater overall contribution so it is only their plans that are assessed and not any outcomes. This is even clearer in Paragraph 2 where all a Member State is required to do is to “explain… how they intend to achieve the greater overall contribution”.

Second, Paragraph 2 allows a whole series of qualitative justifications to be used to defend the claim that the Plan seeks to achieve a greater overall contribution, and not only targets and financial plans. Because it requires a qualitative rather than a quantitative assessment it is much easier to fudge. This will make evaluating whether the Plan does achieve this objective particularly difficult to assess.

The implication of this vagueness is that the Commission has very limited grounds to ask a Member State to revise its Strategic Plan on the basis that it fails to show a “greater overall contribution” to environmental and climate objectives during the approval process. This is not to underestimate the Commission’s power of approval.

Even without a clear legal basis, Commission requests for Plan revisions can delay the approval process and put payments to beneficiaries at risk. A Member State may find it easier to simply accede to the request rather than put up a fight to defend its original Plan. Nonetheless, a clearer definition of what is meant by a “greater overall contribution” would clarify both the goals that Member States should be aiming at when preparing their Plans as well as the approval procedures.

Is higher ambition with less money possible?

Let us suppose that, in spite of these caveats, a Member State clearly demonstrates in its Strategic Plan that it intends to achieve a higher level of environmental and climate ambition. Can this be done without increasing spending on these objectives? Can a Member State credibly claim it is increasing its environmental and climate ambition even while reducing expenditure on this objective?

To do so would imply a significant increase in the efficiency of agri-environmental and climate expenditure. Are there other changes in the draft Regulation which would suggest that this will happen?

In my earlier post I discussed the changes in the green architecture in the proposal for the CAP post 2020 but not their likely effectiveness. The three changes that are important here are (a) the addition of new obligations under enhanced conditionality as compared to cross-compliance, which partly reflects the abolition of greening but also includes some additional elements; (b) giving Member States greater responsibility for defining the GAEC requirements farmers must observe as part of enhanced conditionality when receiving direct payments, and (c) the new eco-scheme.

In terms of enhanced conditionality, important changes are the three new GAEC standards: GAEC 2 Protection of carbon-rich soils (peatlands and wetlands); GAEC 5 Use of Farm Sustainability Tool for Nutrients: and GAEC 10 Ban on converting or ploughing permanent grassland in Natura 2000 sites. These three new GAEC standards will contribute to improved environmental and climate outcomes without additional expenditure, although it is notable that the Impact Assessment does not make any attempt to try to quantify their impacts.

Furthermore, three new or extended GAECs (GAEC 1 Maintenance of permanent pasture, GAEC 8 Crop rotation and GAEC 9 addition of Maintenance of non-productive features including a minimum share of agricultural area devoted to non-productive features or areas) bring revised greening requirements within the scope of enhanced conditionality. In the basic Regulation these standards apply to all farms receiving direct payments without the current exemptions, although whether Member States in their Strategic Plans will be able to add exemptions is not clear.

No doubt Member States will be keen to emphasise the importance of these changes when they come to make their case in their Strategic Plans that they are upping their game with respect to environment and climate objectives.

Potentially of greater importance will be the way Member States implement both these and the other GAECs. It is up to Member States to define, at national or regional level, minimum standards for beneficiaries in line with the main objectives of the GAEC standards.

This greater subsidiarity could allow Member States to define more appropriate and thus more efficient standards that take into account their specific farming conditions, in contrast to the ‘one size fits all’ approach of the current greening regulations. One example might be the substitution of sensible crop rotation rules adapted to specific farming systems in place of the crop diversification greening obligation. There is a consensus that the environmental benefits of the greening payment are limited, so improving on its performance should not be difficult.

This greater subsidiarity could also justify the view that there will be an increase in the efficiency of CAP spending with respect to its environmental and climate objectives post 2020. On the other hand, there will be a suspicion that Member States will use their additional flexibility to water down these requirements as far as possible. Until we know how Member States will implement their GAEC standards, the jury must remain out on this question.

The third change is the new eco-scheme to be funded from the first Pillar. I noted in my previous post that both the eco-scheme and agri-environment-climate measures (AECMs) funded from Pillar 2 can fund interventions designed to address environmental and climate objectives. The big difference is that the former can be a top-up to basic income support, while the latter are limited to compensating farmers for the costs incurred and income foregone as a result of their participation.

There are those who argue that, because of this funding principle, AECMs generally focus on compensating for management practices on a flat-rate basis and that Member States are reluctant to fund more result-based schemes or payments for ecosystem services in Pillar 2 because of the fear of the risk of disallowance. Whether this is really the case or not is disputed (see this post by Jean-Christophe Bureau that discusses whether the relevant WTO rules really are a constraint on the design of AECMs, although what really counts of course is the attitude of the Commission when it comes to auditing and approving Member State expenditure).

To the extent that this link is broken in the eco-scheme in Pillar 1, Member States may be encouraged to be more innovative in the types of agri-environment and climate measures they will design. On the other hand, Member States could decide to allocate their eco-scheme funding to entry-level schemes that achieve limited environmental additionality.

Agri-environment and climate payments in an eco-scheme can include the possibility of a much larger element of income support in an environmental payment than would be permitted under an AECM designed to be consistent with a narrow interpretation of the WTO rules. This could make participation in the eco-scheme more attractive particularly to more intensive farmers for whom a payment based on average costs incurred and income foregone is not an incentive.

Allowing an environmental scheme to also provide a measure of income support, by definition, implies that its efficiency from an environmental perspective per unit of spending is reduced. This objection may be over-ridden if farmers are prepared to enrol a greater area in the environmental scheme or to adopt more ambitious measures, but this assumes that the budget resources are there to fund this greater participation. So we are back where we started, and what Article 92 and the other elements in the draft Strategic Plan Regulation imply for overall spending on environmental and climate action.

Financial implications

The one definite requirement in the draft Regulation is that at least 30% of the EAFRD contribution in Pillar 2 must be reserved for interventions addressing specific environmental and climate-related objectives in AECMs. Unlike in the current programming period, expenditure on Areas of Natural Constraints and other area-specific constraints (except where the latter result from certain mandatory requirements) cannot be counted towards this 30% requirement.

Even with a reduction in the Pillar 2 ceiling available to a Member State (either directly in the draft Regulation or because a Member State opts to transfer up to 15% of its EAFRD ceiling to the EAGF for use in Pillar 1), this requirement could still imply an absolute increase in spending (in current price terms) on AECMs in a number of Member States (if anyone would like to run the numbers on this, I would be happy to publish them).

Under Article 85 of the draft Strategic Plan Regulation, the EAFRD contribution to AECM expenditure is raised to 80% from 75% in the current period, and compares to a proposed 43% share for other EAFRD interventions in developed regions and 70% in the less developed and outermost regions. This could encourage some Member States particularly in the east and south of Europe to give greater priority to AECMs in their Strategic Plans if they are keen to minimise their additional national expenditure on rural development programmes.

There is no such minimum spending threshold set for the eco-scheme in Pillar 1. If Article 92 were to be interpreted in financial terms, and if the greening payment in the current programming period were deemed to be a payment made to achieve the objective of the sustainable management of natural resources in the current CAP, then there is a lower bound on the amount of its Pillar 1 ceiling that a Member State would have to devote to the eco-scheme. Its total spending in the 2014-20 period on the greening payment and AECMs is known. Its proposed spending on AECMs in the 2021-27 period would be set out in its CAP Strategic Plan, and a no-backsliding commitment in financial terms would give the minimum required spending on the eco-scheme by subtraction.

As we have seen, this is not a correct interpretation of Article 92. As a result, there is no effective minimum floor for spending on the eco-scheme. The Impact Assessment of the Commission’s legislative proposal runs simulations where Member States allocate between 30% and 60% of their Pillar 1 ceilings to the eco-scheme, but a Member State could decide to allocate only 10% or even 5% to the eco-scheme.

No doubt, if a Member State submits a CAP Strategic Plan for approval with a very low allocation to the eco-scheme, the Plan’s intervention logic and its justification under Article 92 showing that it is making a greater contribution to environmental and climate objectives will be scrutinised more carefully by the Commission. However, the language of Article 92 is so loosely drawn that it is hard to imagine that any half-decent civil servant could not make out an apparently convincing case that the Plan is “intending” to make a greater contribution.

Participation in the eco-scheme is voluntary for farmers. Some might fear that, even if 30% of the Pillar 1 scheme is allocated to the eco-scheme, a Member State might deliberately make the scheme unattractive for farmers so as to maximise the amount of its Pillar 1 budget available for the basic income support scheme. However, presumably in this case its Plan targets for enrollment in the scheme would not be met. The Commission following its annual performance review could then request the Member State to take remedial action under an action plan possibly including an adjustment in the financial allocations to make the eco-scheme more attractive.

Conclusions

There has been much focus on what the new CAP legislative proposals mean for the share of the CAP budget devoted to environmental and climate objectives. Article 92 sets out a requirement for increased ambition with regard to environmental- and climate-related objectives. This Article does not have direct financial implications. It simply requires each Member State to show in its Strategic Plan how it intends to achieve a greater overall contribution to these objectives in the coming programming period as compared to the current one.

The following table shows how the changes to the green architecture could potentially impact on achieving a greater contribution to environmental and climate objectives. It identifies both positive elements in the Commission’s proposal as well as highlighting the risks.

Moving away from a focus on inputs (i.e. financial envelopes) to outputs (i.e. actual impacts on environmental and climate objectives) is potentially a desirable step. The problem is that the lack of any clear definition of what is meant by a “greater overall contribution” leaves considerable scope for story-telling and creative invention in the CAP Strategic Plans. If the Commissioner’s goal of greater ambition for environmental and climate objectives is to be realised, then Article 92 will need to be tightened up.

This post was written by Alan Matthews

Photo credit: Alex Berger via Flickr, (CC BY-NC 2.0) licence

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One Response to “The Article 92 commitment to increased ambition with regard to environmental- and climate-related objectives”

  1. Eimantas Pranauskas
    July 31, 2018 at 06:58 #

    Let me present three whales (in my opinion) of CAP post 2020

    1. Definition of „Persons engaged in agriculture“ and „Average person engaged in agriculture unit” (analogous to AWU).
    Amendment of Article 3
    a) Person engaged in agriculture – farm labour family and hired.
    b) Average person engaged in agriculture unit – (analogous to AWU)
    Explanation.
    The reference to Preamble (5) of Proposal* very clearly reveals a fundamental shortcoming of the current CAP. Lisbon Treaty‘s CAP focuses not on the land area, hectare, but human beings:
    ? persons engaged in agriculture (by ensuring his income, market stability, ) and
    ? consumers (assuring food safety at affordable prices)
    It must be also noted that The Court of Justice also uses the definition of „persons engaged in agriculture“ in the cases concerned with income support

    2. Replacement the definition of „Farmer“ by „Farm“.
    „FARMER“ ============> „FARM“
    Explanation.
    Disregard for the changes in the structure of the EU‘s agriculture as result of EU enlargement is no longer possible. Attempts to adapt the concept of “farmer” to the definition of large family farms or legal persons engaged in agricultural activities looks equitable to classification of motorcycle as a bicycle.

    3. Splitting the definition of ‘agricultural activity’ into two areas:

    Amendment of Article 4
    (a) ‘agricultural activity’ shall be defined:
    i. ‘PRODUCTIVE agricultural activity’ shall be defined in a way that it includes production of agricultural products listed in Annex I to the TFEU, including cotton and short rotation coppice,
    ii. ‘PASSIVE agricultural activity’ shall be defined in a way that it includes maintenance of the agricultural area in a state which makes it suitable for grazing or cultivation, without preparatory action going beyond usual agricultural methods and machineries;
    Payments under Article 14 (6) are differentiated depending on the nature of the agricultural activity: productive or passive.
    Explanation.
    It seems, that efforts to define the concept of an “Active farmer” have failed, but this problem needs to be addressed for the sake of result-oriented use of public money.