CAP Reform

The new CAP reform has been promoted by its creators as being more target-oriented and better adjusted to what the public expects from the funds invested in agriculture. To meet these expectations and particularly to preserve as much funds for agriculture as possible, the first pillar direct payments have been veiled under various new support schemes. The most important ones are the basic payment scheme and its “greening” component. Let us focus on the basic payment, which will take up from 43 to 55 per cent of the direct payments envelope.

Politics trumps economics

The aim of the basic payment is unify the payments among the Member States and at the same time provide a kind of income support to agriculture. It could be understood as a single regional payment, i.e. a single payment per-hectare of all eligible areas in a region; the size of the region has not yet been defined, so far the condition was set at a minimum of 3 million inhabitants.… Read the rest

Latest proposals of the European Commission seems to maintain the two-pillar structure of the CAP, in which Pillar 1 finances direct payments as well as market measures while Pillar 2 funds rural development measures. The clear separation of objectives between the two Pillars is now somewhat blurred by the latest proposals. It seems that Pillar 1 funds can be used for measures traditionally addressed by rural development funds (e.g. payments to the provision of public goods), creating the need for raising Pillar 1 funds partly by a backward modulation (i.e. transferring funds from Pillar 2 to Pillar 1). This argument stands on dubious theoretical grounds as each and every communication since 2000 was in favour of transferring funds to rural development and easing the currently unequal financial distribution between the pillars. The debate is now underway on how Pillar 2 can tackle the enormous rural and agri-environmental tasks ahead without posing a crucial question – is the current structure working well?… Read the rest

The term public goods first entered into the CAP debate in 2007 when it was used in an agricultural context by the environmental NGOs. Since then it has gradually infiltrated the mainstream policy debate appearing in many papers and speeches from research papers to the highest level of decision making. The need for securing mainly environmental public goods in the future CAP is echoed by an increasing number of stakeholders, rallying behind the slogan of “Public Money for Public Goods”, developed by Zahrnt (2009). Becoming the primary focus, the concept is now used more generally to refer to any sort of public benefit from agriculture, thereby justifying the need for public support, as expressed by various stakeholders.

Now it seems that the Commission wants to link the provision of public goods to direct payments by greening the first pillar which would represent a very important innovation in the history of the CAP.… Read the rest

Earlier this week, at the European Parliament, I moderated a seminar on the Commission’s proposal for ‘greening’ measures for the direct payments of the CAP, with a particular emphasis on the plans for ecological focus areas. The event was organised by the European Environmental Bureau and hosted by Austrian MEP Karin Kadenbach, who sits on the Parliament’s environment committee.

To qualify for the 30 per cent of the direct payments budget that the Commission has earmarked for ‘greening’ the CAP, farmers with grazing livestock will be required to preserve permanent grasslands, arable farmers will be required to cultivate a diversity of (three) crops and practice basic crop rotation. In addition, all farms must designate 7 per cent of their farmland as ecological focus areas (EFAs).

EFAs draw on a Swiss policy in which farmers are paid a subsidy to dedicate a fixed percentage of the farm land to an environmental use rather than agricultural production.… Read the rest

Among others, the latest proposal of the EU Commission aims to green the Common Agricultural Policy (CAP). One of the proposed measures looks very much like a new ‘set-aside’ programme. Generally, the programme stipulates that individual farmers have to set aside seven per cent of their arable land. Some exceptions are allowed in case individual farmers already produce environmentally friendly, e.g. organic production, or have already contributed to desired environmental effects. As the proposal is not yet put into legal form, it may be worthwhile to discuss the new measure’s rationale, to evaluate its associated costs and effects on incentive compatibility and to look for alternatives for achieving the objectives.
Rationale of the envisaged programme
The first question that has to be investigated concerns the aim of the measure. Objectives are based on norms and these norms reflect value judgments; of course, the norms of scientists are not necessarily better than those of anybody else.… Read the rest

Among others, the latest proposal of the EU Commission aims to green the Common Agricultural Policy (CAP). One of the proposed measures looks very much like a new ‘set-aside’ programme. Generally, the programme stipulates that individual farmers have to set aside seven per cent of their arable land. Some exceptions are allowed in case individual farmers already produce environmentally friendly, e.g. organic production, or have already contributed to desired environmental effects. As the proposal is not yet put into legal form, it may be worthwhile to discuss the new measure’s rationale, to evaluate its associated costs and effects on incentive compatibility and to look for alternatives for achieving the objectives.

Rationale of the envisaged programme

The first question that has to be investigated concerns the aim of the measure. Objectives are based on norms and these norms reflect value judgments; of course, the norms of scientists are not necessarily better than those of anybody else.… Read the rest