What farmers should do to qualify for the new CAP green payment

This post originally appeared on the Environment Nexus website.

The trilogue process between the Council, the Parliament and the Commission on the new CAP regulations has now started. Over thirty meetings are scheduled to take place between now and end-June with a view to reaching a political agreement on the four main CAP regulations proposed by the Commission (direct payments, rural development, the single CMO, and the horizontal regulation).

The proposed greening of Pillar 1 payments is one of the key elements in the direct payments regulation. In their responses to the Commission’s proposal both the Council and the Parliament have moved to dilute considerably the impact of the three greening measures proposed by the Commission. The Council’s position on greening following the March 2013 Council meeting is well summarised by this post on the IEEP CAP2020 blog.

Although there is considerable convergence of views between the Council and the Parliament on the greening amendments they put forward to the Commission’s proposal, one area where a significant gap has opened up following the Parliament’s plenary vote concerns the possible role for equivalent measures.

Whereas both the Council and the Parliament’s Agriculture Committee (COMAGRI) proposed that member states could substitute a range of equivalent measures for the Commission’s three greening measures, this flexibility was rejected by the Parliament when approving its negotiating mandate for the trilogue (the proposals of the Commission, COMAGRI, the Parliament and the Council can be found side by side in this spreadsheet, look for Article 29). Instead, the Parliament backed the Commission in limiting greening to the three measures proposed by the latter. This is thus one area where negotiations will be required to reach a common position.

In thinking about more flexible alternatives to the Commission’s proposals in creating eligibility for the Pillar 1 green payment, I find it useful to make a distinction between ‘green by definition’ approaches and ‘equivalent measures’ although, as we will see, these distinctions have become blurred as the legislative process has evolved.

Green by definition

The ‘green by definition’ approach was originally introduced by the Commission for organic farmers. Article 29(4) in the Commission’s proposal reads:

Farmers complying with the requirements laid down in Article 29(1) of Regulation (EC) No 834/2007 as regards organic farming shall be entitled ipso facto to the payment referred to in this Chapter.

The rationale for this exception spelled out in the preamble was that “organic farmers should benefit from the green payment without fulfilling any further obligation, given the recognised environmental benefits of the organic farming systems.” This, in itself, might have been deemed unexceptional, except that the Commission opened a hornet’s nest by also proposing (in the horizontal regulation, Article 30) an apparent exemption from the principle of no double funding for organic farming. But if organic farmers were already deemed to be doing their bit for the environment, what about farmers enrolled in agri-environment measures (AEMs)?

COMAGRI therefore proposed that ‘green by definition’ eligibility should also be conferred on all beneficiaries of AEM payments as well as farmers whose holdings are situated in areas covered by the Natura 2000 network. It also proposed that the environmental baseline for AEM measures (which are funded on the basis of income foregone) would not include the greening measures or their equivalent.
Taken in conjunction with the small farmer exemption from greening, and recognising that around 25% of the EU’s agricultural land area is enrolled in AEMs, this alone would mean no additional environmental benefit from greening on one-third or more of the EU’s agricultural land.

Equivalent practices

If the motivation for ‘green by definition’ approaches was not to penalise farmers who were already doing their bit for the environment, the motivation for ‘equivalence’ seems to have been a desire expressed by some member states for simplification. If farmers are already recognised as following green practices, why inspect and monitor them twice? (we come back later to assess whether equivalence would lead to simplification or not).

Although equivalence has been associated (and with justification) with ‘greenwashing’, it should also be acknowledged that some member states believe (also with justification) that they could achieve better environmental outcomes more cheaply with a different and more ambitious set of greening measures than the three limp measures proposed by the Commission.

Equivalence means that member states could substitute an alternative eligibility criterion for one or more of the Commission’s three greening measures. The most common formulation (adopting the wording of the COMAGRI proposal for a negotiating mandate) was that “Farmers whose holding is certified under national or regional environmental certification schemes shall be considered to be complying with the relevant agricultural practices referred to in paragraph 1 [i.e., the three greening measures] provided that these schemes have an impact that is at least equivalent to that of the relevant practices referred to in paragraph 1.”

COMAGRI went on to identify various kinds of certification schemes which it felt would be sufficient to confer eligibility for the green payment. They included (but would not necessarily be confined to) an on-farm nutrient management plan; an on-farm energy efficiency plan for the holding, including optimisation for the use of effluents; a biodiversity action plan, including creation or maintenance of biodiversity corridors; a water management plan; soil cover; or integrated pest management.

The Council has also endorsed the use of equivalent practices as an alternative to the Commission’s three measures. In the Council’s view, eligibility for the green payment could be met by national or regional certification schemes which aim to meet objectives relating to soil and water quality, biodiversity, landscape preservation, and climate change mitigation and adaptation. In the Council’s view, these schemes must be “effective and objective”.

Commission’s concept paper on greening

The Commission had argued that the strength of its three proposed greening measures is the fact that they are compulsory for almost all farmers (apart from farmers in the small farmers scheme), would apply to the entire relevant area of their holding, and ensure a level playing field in the Union. It also expressed the view that, because the greening measures go beyond cross-compliance obligations and raise the baseline, they thereby increase the environmental ambition for more targeted rural development measures.

However, in its concept paper on greening circulated in May 2012, “with a view to simplification and recognising the environmental contributions farmers may make by taking up Pillar II agri-environment-climate commitments or in the context of an environmental certification scheme” it proposed:

• to foresee, under certain conditions, that a beneficiary of a Pillar II agri-environment-climate measure can be considered as fulfilling one (or several) of the greening measures;
• to foresee, under certain conditions, that a farmer, subject to an environmental certification scheme can be considered as fulfilling one or several of the greening measures.

The conditions which the agri-environment-climate commitments or the environmental certification scheme would have to comply with concern:

• the coverage of the whole farm (in line with the greening objective that almost all agricultural area is subject to greening requirements),
• an environmental ambition level that goes beyond the ambition level of greening and
• a type of agri-environment-climate commitment or certification scheme requirement that corresponds to the nature of the greening measures (e.g. crop rotation requirements corresponding to the greening requirement of crop diversification).

Note a subtle difference in this last Commission formulation from the COMAGRI position. COMAGRI wanted mere enrolment in an AEM to be sufficient to make a farmer eligible for the green payment, thus ‘green by definition’. The Commission insists that the AEM requirements should contain measures similar to its three greening proposals in order to confer eligibility, and thus requires a form of ‘equivalence’.

Moreover, only certification schemes that ensure equivalence in environmental ambition, are effective, with a sound quality control system, impartial and operate in a fully transparent manner may be taken into consideration.

The Commission commented that: “This adjustment could bring simplification to those farmers who already generate significant benefits for the environment and the climate. It would also encourage other farmers to join the schemes and programmes in question thus increasing the overall environmental and climate benefit of the CAP.“

But allowing AEM measures to qualify a farmer for eligibility for the green payment would only encourage farmers to join AEMs if the principle of no double funding were abandoned. And in this case, there would be no basis for the Commission’s aspiration that, because the greening measures go beyond cross-compliance obligations and raise the baseline, they thereby increase the environmental ambition for more targeted rural development measures.

The Council of Minister’s general approach

The Council’s general approach would give member states four different options.

1. Farmers could qualify for the green payment by observing the three Commission greening measures. However, as the IEEP post notes, the content and reach of the three green measures has been altered in a way that will reduce their potential impact and the list of types of farms to whom the measures do not apply has been extended.

2. Farmers could also qualify by observing equivalent practices instead of or in combination with the Commission proposals. These equivalent practices should yield an equivalent or higher benefit for the climate and the environment compared to the Commission’s greening measures. Equivalent practices could be measures undertaken as part of enrolment in an AEM, or as part of a national or regional certification scheme. In either case, member states must notify the specific commitments which they intend to qualify as equivalent practices, and the Commission must decide on the equivalence of these practices. Note that mere membership of an AEM would not necessarily be sufficient to confer eligibility, so one must be careful in describing enrolment in an AEM as conferring ‘green by definition’ status.

3. As a third option, the equivalent practices in AEMs could be identified in member state rural development programmes which must in any case undergo an approval process by the Commission.

4. As a fourth option, member states may decide that farmers should carry out the three greening measures in the Commission’s proposal in accordance with national or regional certification schemes. Presumably, the attraction of this option, which was only added at the last minute during the midnight discussions during the March 2013 Council meeting, is that member states would be freer to set their own monitoring and inspection criteria and would not be bound by the requirements in the horizontal directive. Otherwise it is hard to see what additional flexibility is given to member states by this option, as the certification scheme must cover the Commission’s three greening measures and only those measures.

Update 21 April 2013. It should also be pointed out that, in addition, the Council has separately proposed an exemption from the EFA and crop diversification requirements for any holding where at least 75% of the eligible arable area is enrolled in an AEM where the only requirement (Article 29(2) of the Rural Development regulation) is that the farmer carry out at at least one agri-environment-climate commitment on that land. This exemption possibility is quite separate from any use of AEM enrolment as a form of equivalence, where in that case the equivalent measures in the AEM must be identified and approved by the Commission. Given that making use of AEM enrolment through the exemption route is far less onerous than the equivalence route, it would seem daft for member states to want to pursue equivalence through AEMs.
The rapporteurs’ dilemma.

The Commission, in its May 2012 concept paper, moved a long way towards meeting member state and COMAGRI desires for flexibility. It accepted that, under certain conditions, both a beneficiary of a Pillar 2 AEM and a farmer enrolled in an environmental certification scheme could be considered as fulfilling one (or several) of the greening measures.

Yet the Parliament, in its plenary vote on the mandate for the trilogue, wanting to register (rightly, in my view) its objection to the possibility of double funding, not only threw out double funding but also threw out flexibility. The Parliament mandate says only the Commission’s three greening proposals should give eligibility for the green payment. No additional flexibility. No brownie points for participating in an AEM.

We now have the surreal situation where the Parliament’s representatives in the trilogue (the COMAGRI rapporteurs and shadow rapporteurs) will be defending a position which, in their heart of hearts, they clearly do not believe in. One would love to be a fly on the wall in the relevant trilogue meeting to hear these rapporteurs denounce flexibility and defend a strict interpretation of the Commission’s proposals against the Presidency’s arguments for equivalence. It does not take a genius to work out which side is going to win on this particular issue.

The future of equivalence

Assuming that equivalence appears in the final legislation and includes AEM measures, then the question of double funding must also be addressed. Here the Council and Parliament representatives do have a genuine difference of opinion. Hopefully, the presence of the Commission at these discussions will ensure that the long-established principle in Union law of no double funding is maintained.

A very practical issue is the requirement for the Commission to pronounce on equivalence. This could take the form of prior approval, but with potentially hundreds of individual certification schemes the question of establishing their equivalence in the period before the launch of the new scheme (now accepted to be 1 January 2015 given the slow pace of the legislative process) this could threaten to overwhelm the capacity of the Commission.

The alternative is to allow member states to proceed on the basis of their best judgement and for the Commission to assess ex post whether the measures required of farmers in AEMs or certification schemes are indeed equivalent. But no member state is going to allow the possibility of large disallowances and face the prospect of returning large sums of money to Brussels because of a differing interpretation of a highly subjective comparison.

There is also the unresolved question of how to compare the environmental impact of very different types of measures – hence the Commission’s insistence that, under flexibility, the equivalent measures should correspond to its three greening requirements so as to make this comparison feasible. So the simple injunction in the Council draft of the regulation that “The Commission shall decide on the equivalence of these practices” is fraught with difficulty.

From another perspective, it is becoming increasingly clear that administering flexibility at the national or regional level is far from being an administrative panacea. Flexibility is more likely to introduce additional parallel systems of monitoring and inspection and complicate even more the life of the paying agencies.

A recent study conducted by the IEEP for the European Environmental Bureau concluded that, while the concept of equivalence may sound like a sensible and practical option in theory, the practical issues with its application are likely to lead to far greater administrative complexity and cost, both for member states and within the Commission, with arguably little additional environmental benefit. Update 16 April The full IEEP study can now be downloaded here.

It is thus not unlikely that, faced with the very emasculated greening conditions likely to emerge from the trilogue process, member state administrations will simply decide that certification and AEM equivalence is not worth the candle.
For those few member states which genuinely regret the missed opportunity in this CAP reform to properly integrate environmental objectives into the CAP, the alternative is to make use of the modulation option under financial flexibility and to transfer up to 15% of the Pillar 1 national ceiling to Pillar 2 to strengthen their AEMs, where the funding should have gone in the first place.

This post was written by Alan Matthews