Tag: New Delivery Model

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Evaluating the legislative basis for the new CAP Strategic Plans

The main novelty in the Commission’s legislative proposals for the CAP after 2020 is the New Delivery Model (NDM) which has been described by Commissioner Hogan as representing a shift from a compliance-based to a performance-based or results-based governance system for the CAP.

As set out in a recital to the CAP legislation: “In the CAP based on delivery of performance (‘delivery model’), the Union should set the basic policy parameters, such as objectives of the CAP and basic requirements, while Member States should bear greater responsibility as to how they meet the objectives and achieve targets. Enhanced subsidiarity makes it possible to better take into account local conditions and needs, tailoring the support to maximise the contribution to Union objectives.”

The key instrument designed to underpin the NDM will be the requirement for each Member State to draw up a Strategic Plan setting out its assessment of needs, the specific CAP objectives it intends to address, its intervention strategy including the targets it intends to achieve with respect to these objectives, and the interventions it plans to use. The rules for these Strategic Plans are set out in Title V of the Commission’s draft Regulation establishing rules on support for strategic plans to be drawn up by Member States under the Common Agricultural Policy (CAP Strategic Plans).

Whether these rules are adequate to ensure that the Commission’s declared objectives for the CAP post 2020 can be realised or not has just been thoroughly examined in a study by Professor Emil Erjavec and his colleagues from the University of Ljubljana in Slovenia commissioned by the Policy Department for Structural and Cohesion Policies of the European Parliament (this builds on a previous post on this blog by Professor Erjavec). The purpose of the study is to assist the COMAGRI rapporteurs and members in drawing up their reports on the Commission’s legislative proposals.

In this post, I review the suggested rules in the draft Regulation and outline seven suggestions in the Erjavec at al. paper on how they could be improved.

CAP Strategic Plan

The rules cover the four main elements for Strategic Plans: the procedural requirements for drawing up the Plans, the content of the Plans, the method for their approval, and their performance monitoring.

Procedural requirements (Art 94)

Member States should use transparent procedures when preparing their Strategic Plans. The competent regional and local authorities, including relevant public authorities, economic and social partners, and relevant bodies representing civil society, should be involved in the preparation of the plan. Specifically, the competent authorities for environment and climate should be effectively involved in the preparation of the environmental and climate aspects of the plan.

Elements making up the Strategic Plans (Art 95-103)

An explicit structure for the Strategic Plans is proposed containing the following sections.

(a) an assessment of needs. The Plan should include an identification and description of needs for all nine specific objectives set out in Article 6 of the draft Regulation regardless whether they will be addressed in the CAP Strategic Plan or not (a summary of these nine specific objectives taken from the Erjavec et al. study is shown in Table 1). Needs in relation to risk management in connection with the specific objective of support for viable farm incomes and resilience should be specifically described. These needs should then be ranked and prioritised and a sound justification of the choices made should be given, including why certain identified needs might not be addressed or only partially addressed in the Strategic Plans. (In passing, while this suggests that Member States may decide not to pursue one or more of the specific objectives shown in Table 1 if they can provide appropriate justification, in practice the mandatory nature of the agri-environment-climate interventions and the existence of the performance bonus (see below) makes the inclusion of the related specific objectives for the general environment and climate objective also mandatory).

(b) an intervention strategy. This section should set out quantitative targets and milestones to achieve each specific objective set out in Table 1 that is addressed in the Strategic Plan (not all objectives need to be addressed if the omissions are justified, as noted in previous paragraph). Targets should be defined using a common set of result indicators set out in an Annex to the draft Regulation. The value of the targets should be justified by reference to the needs assessment.

The intervention strategy should also set out the interventions proposed to reach these targets drawn from the menu set out in the Regulation. It should describe how the interventions allow reaching the targets and how they are mutually coherent and compatible.

Additional specific requirements include (i) an overview of the environmental and climate architecture showing the complementarity and coherence between the proposed conditionality attached to receipt of farm payments, the eco-scheme in Pillar 1 and the AECM measures in Pillar 2 and how this architecture contributes to meeting long-term national targets set out in relevant environmental legislation; (ii) in relation to the specific objective ‘attract young farmers and facilitate their business development’ the overall package of measures included in the Plan should be described, including their interplay with relevant national instruments; (iii) where coupled supports and other sector-related interventions are included in the Plan, the justification for targeting the sectors concerned, the list of interventions per sector, their complementarity, as well as the possible specific additional targets related to the interventions should be described; as well as (iv) an explanation as to which interventions will contribute to ensure a coherent and integrated approach to risk management.

(c) a description of elements common to several interventions. This is a catch-all heading that refers to a few disparate requirements. The most important is a description of the system of conditionality, including a detailed account of how each GAEC standard in the Regulation will be implemented and, specifically, how it will contribute to the environmental and climate specific objectives set out in Article 6 (see Table 1). Member States should also include information on the specific definitions they have adopted for some of the terms in the Regulation that are left up to Member States (for example, the definitions of agricultural activity, agricultural area, eligible area, genuine farmer, small farm and young farmer); on the use made of technical assistance; on the functioning of payment entitlements where the Member State opts to continue their use; on the uses made of revenues raised by capping and degressivity; as well as an overview of the coordination, demarcation and complementarities between the EAFRD and other Union funds active in rural areas.

(d) a description of the direct payments, sectoral and rural development interventions specified in the strategy. This should include an account of the design of the intervention and its eligibility conditions, the annual planned outputs for the intervention, the annual planned unit amount of support and its justification; and the resulting annual financial allocation for the intervention. Member States should also show how the intervention relates to the criteria for determining whether measures are trade-distorting or not in the WTO Agreement on Agriculture, and whether the intervention falls outside the scope of Article 42 TFEU and is subject to State aid assessment.

(e) target and financial plans. These should build on the annual financial allocations per intervention set out in (d) as well as detail transfers between Pillars and confirm that any minimum spending requirements set down in the Regulation have been met.

(f) a description of the governance and coordination system. The most important element here is information on the control system and penalties including the integrated administration and control system and the control and penalty system for conditionality. The monitoring and reporting structure should also be described.

(g) a description of the elements that ensure modernisation of the CAP. This covers two specific obligations; an overview how the Strategic Plan will contribute to the fostering and sharing of knowledge, innovation and digitalisation and encourage their uptake, including a description of the AKIS organisational set-up and how advice and innovation services are provided; and a description of the strategy for the development of digital technologies in agriculture and rural areas and for the use of these technologies to improve the effectiveness and efficiency of the CAP Strategic Plan interventions.

(h) a description of the elements related to simplification and reduced administrative burden for final beneficiaries. In addition, each CAP Strategic Plan should contain the following annexes:
(a) Annex I on the ex-ante evaluation and the strategic environmental assessment (SEA);
(b) Annex II on the SWOT analysis;
(c) Annex III on the consultation of the partners;
(d) Annex IV on the crop-specific payment for cotton;
(e) Annex V on the additional national financing provided within the scope of the CAP Strategic Plan.

Approval procedure (Art 106-108)

Member States are required to submit their Strategic Plans no later than 1 January 2020, although there is some ambiguity in the text whether this date is intended to be in square brackets or not (indicating that it is subject to further negotiation). The specific conditions for approval of the Strategic Plans are worth citing in full:

“The Commission shall assess the proposed CAP Strategic Plans on the basis of the completeness of the plans, the consistency and coherence with the general principles of Union law, with this Regulation and the provisions adopted pursuant to it and with the Horizontal Regulation, their effective contribution to the specific objectives set out in Article 6(1), the impact on the proper functioning of the internal market and distortion of competition, the level of administrative burden on beneficiaries and administration. The assessment shall address, in particular, the adequacy of the strategy of the CAP Strategic Plan, the corresponding specific objectives, targets, interventions and the allocation of budgetary resources to meet the specific CAP Strategic Plan objectives through the proposed set of interventions on the basis of the SWOT analysis and the ex-ante evaluation.”

Annexes 1-4 as well as the Member State plans for controls and penalties are explicitly excluded from the approval process. The Commission can address observations to the Member State within three months of receiving the Plan, and the Member State is required to provide any additional information requested and, if necessary, to revise the proposed Plan. It is further specified that approval should not take longer than eight months after submission of a Plan (but this time limit excludes any time required for a Member State to respond to Commission observations). Partial approval of elements of the Plan is also permitted. Member States can amend their Plans at any stage by following the prescribed procedure.

Performance monitoring (Art 115-124)

The draft Regulation specifies a performance framework consisting of a set of common context, output, result and impact indicators that will be used as the basis for monitoring, evaluation and annual performance reporting. Targets and annual milestones will be based on output and result indicators and progress will be reported in an annual performance report.

Mechanisms to reward good performance and to address low performance are proposed. Where the reported value of one or more result indicators deviates by more than 25% from the respective milestone for the reporting year concerned, the Commission can ask the Member State to submit an action plan with intended remedial actions and a timeframe. The performance bonus (actually a performance penalty) will be implemented by withholding in 2016 5% of each Member State’s pre-allocated Pillar 2 funding in 2017. This amount will be released to the Member State if the result indicators applied to the three specific environmental- and climate-related objectives in its CAP Strategic Plan have achieved at least 90% of their target value for the year 2025.

Recommendations of the European Parliament study by Erjavec et al. (2018)

The Erjavec et al. study welcomes in principle the shift to the NDM, pointing out that it is line with the principles of evidence-based policy making. It sees the greatest opportunity arising from the proposed approach in greater flexibility for Member States and efficiency for the EU. Risks are associated with the administrative burden of planning for Member States and lowering standards or ‘race to the bottom’ for the EU.

It suggests that the proposed new model of policy delivery draws on the established model of Rural Development programming and essentially the same governance system, and thus contains all the shortcomings of the current system. The study doubts that the proposed arrangements will lead to a genuine results-based policy. It sees limited incentives for Member States to make efforts for better policies, and highlights an “accountability gap” and a “systemic weakness in the intervention logic” in the new delivery model. It is too easy for Member States to draw up Strategic Plans that are mainly designed to minimise the hassle associated with the absorption and distribution of funds.

I distil seven main recommendations in the study designed to encourage and strengthen the results-based approach advocated by the Commission in its legislative proposal.

Make the specific objectives in the legislative proposal more concrete by setting quantified goals, drawing on related EU legislation where appropriate. The study accepts that, for CAP measures to contribute to the achievement of its specific objectives, these objectives should be sufficiently concrete and measurable so that quantified, measurable milestones and targets can then be established in Member States’ CAP plans and subsequently monitored. It notes that “The CAP policy objectives are relatively clear, what is missing is only their quantification”. Most of the discussion on quantified indicators at the EU level refers to the environmental and climate objectives. The study underlines that the need for quantification applies to all nine specific objectives. It recognises that for some of the other objectives, notably farm viability and resilience, the process of quantification could lead to considerable political and economic tensions.

Strengthen the commitment to greater environmental and climate ambition. An important foundation for the greater level of environmental and climate ambition desired by the Commission for the CAP post 2020 is set out in Article 92, which sets out that there should be no backsliding with regard to environmental and climate-related objectives in the current period (I have previously discussed Article 92 in this post):

“Member States shall aim to make, through their CAP Strategic Plans and in particular through the elements of the intervention … a greater overall contribution to the achievement of the specific environmental- and climate-related objectives … in comparison to the overall contribution made to the achievement of the objective … in the period 2014 to 2020.”

The study points out that implementing this commitment depends on the evaluation of the current state and goals and fails to instruct on how to define the situation and goals. It suggests strengthening the principle of ‘no backsliding’ with the requirement to maintain at least the absolute and relative share of support for climate and environmental objectives.

Improve accountability through a more comprehensive reporting system. As noted previously, the performance framework will require Member States to report only on output and result indicators in their annual performance reports. This study suggests this should be expanded to also include changes in the impact and contextual indicators. Specifically, better quantification of CAP objectives and indicators at the EU level could drive the monitoring of these objectives at the national level. Here the study raises but leaves open the question of how the EU-level objectives can be transmitted to Member States. It suggests it could be helpful to draw on independent quantitative and qualitative public assessment of experts and groups at the EU and national level.

Strengthen rules to ensure genuine consultation in Plan preparation. The study notes the current experiences with Rural Development programming, where the level of stakeholder consultation and engagement vary significantly from one country to another – even if the rules are common and fall under the European Code of Conduct on Partnership. In the future, the CAP Strategic Plans will no longer fall under this Code set out in the Common Provisions Regulation. The study concludes that it will be even more important that a strong framework on partnership and common rules be inserted into the CAP proposals. As it stands, while there is a requirement for Member States to consult adequately with “relevant” stakeholders, the annex on consultation will not be part of the approval process of the Plans.

The study recommends strengthening the stakeholder consultation process with more binding requirements concerning the composition of parties involved in the process, joint decision-making, monitoring and evaluation. These requirements could be drafted in line with the provisions put in place in cohesion policy and using the European Code of Conduct on Partnership as a basis. The objective should be to ensure that stakeholders’ opinions at national level are seriously taken into account.

Formalise more the approval process for Strategic Plans. The procedure related to the approval of the Strategic Plans is practically the only mechanism in the Commission’s power to ensure targeted and ambitious strategic planning. The study underlines the importance of ensuring that the Commission is empowered to make a proper qualitative assessment of the Strategic Plans. Here it proposes that the adoption procedure should be more formalised, with stakeholders’ opinions at national level taken into account. It believes this would improve the quality of the design as well as the legitimacy of the documents.

Make substantial investment in personnel, processes and analytical support for the preparation of Strategic Plans. The study underlines in various places the dramatic culture shift that the introduction of strategic planning will imply for those involved. While superficially there are similarities to the process used in drawing up Rural Development Programmes at present, the study suggests that the latter is more of a technical activity than a substantive, political task. To be implemented effectively, the strategic planning approach “demands competent human resources (e.g. strategic workgroups), effective coordination and organisation of the process, a well-established culture of democratic dialogue and learning that involves a broad spectrum of stakeholders, as well as sufficient external analytical and expert support”.

“Strategic planning is supposed to be a creative, intellectual and democratic endeavour, which requires excellent staff and a comprehensive approach. Will civil servants in Member States be up to the challenge? How to build a newly required culture of action and cooperation? In truth, probably in most Member States, civil servants are not sufficiently trained for quality strategic planning. Deficiencies also arise from the weak position of agricultural officials in society, inappropriate and narrow education, lack of training and practical experience, poor quality of management and politicized state administrations.”

The study notes that, for several Member States, the transition towards a strategically oriented and performance-based agricultural policy will prove to be a daunting task that will require increased efforts in terms of substantially upgrading strategic, analytical and administrative capacities, procedures and methods of work. Without serious investment in personnel, processes, analytical support and inclusive preparation of Strategic Plans, there may be considerable differences in policy implementation between individual countries.

The study emphasises the need for capacity building, and improvement of training and knowledge exchange in support of strategic planning. Among other suggestions, the study recommends establishing a common platform with open access to all Strategic Plans, progress and evaluation reports to assist in the process of mutual learning.

Make greater investment in data collection to support the results-based approach. The study underlines the importance of strengthening the data sources related to needs analyses, as well as making available appropriate data that will be employed as indicators for identifying and monitoring objectives. It sees the need for an upgraded system of data collection and data management in support of strategic planning. Both Member States and EU bodies (JRC, EEA, Eurostat) have a role to play here. The study proposes an enlarged technical assistance budget could be used to improve the depth and quality of data collection.

Additional issues

These recommendations are relevant and worth supporting. There are several other issues around the Strategic Plan instrument that would be worth exploring in more depth.

What role should the Parliament have? COMAGRI has raised concerns that the NDM implemented through the Strategic Plans reduces the role of the Parliament in the definition of the CAP and could even make the AGRI Committee of the Parliament redundant. AgraFocus (72-18) reported that the Committee in September had sought the advice of the Parliament’s legal services comparing the powers the Parliament currently has with those it would have under the Commission’s proposal, but I am not aware that this legal advice has been made public. It is not clear exactly where the Committee’s concerns arise, but one might speculate that the reversion of significant powers to Member States to define how the CAP is implemented in their countries could remove these decisions from the remit of the Parliament’s scrutiny.

The draft Regulation envisages a limited oversight role for the Parliament in the CAP after 2020. The Commission would carry out an interim evaluation by the end of the third year after the start of the CAP Strategic Plans based on the impact, result and output indicators set out in the Annex to the draft Regulation. An initial report based on first results of implementing the new CAP would then be forwarded to the Parliament and Council after this interim evaluation. A second report including an assessment of the performance of the CAP shall be presented by 31 December 2031. All in all, this does not suggest that COMAGRI will have a particularly busy agenda in the coming parliamentary period.

Handling disagreement in the approval process. The study rightly highlights the crucial role of the approval process in ensuring that Member States deliver on the CAP’s EU objectives in their Strategic Plans. Compared to the current process for the approval of Rural Development Programmes, the approval of Strategic Plans will potentially be a more political process under a results-based strategic planning model. The Commission will not just be checking that the Plans comply with various requirements set out in legislation but will be required to evaluate whether the Plans make a sufficient contribution to meeting EU objectives.

The Plans will arrive on the Commission’s desk with considerable legitimacy behind them (an ex ante evaluation, a SWOT analysis, a stakeholder consultation process). It will take a brave desk officer to challenge the country’s priorities and choice of intervention strategy. But suppose the Commission does send observations that the Member State refuses to accept, and perhaps there are good grounds for this refusal. In this situation, the Commission can withhold its approval and thus delay the transfer of funds to the Member State. What procedures for arbitration will exist in cases where the two parties cannot reach agreement?

Changing the audit culture. An under-researched topic to date in the evaluation of the NDM is the role that the EU audit process will play. This process has come in for heavy criticism in recent years for its allegedly heavy-handed controls and its dampening effect on innovation (for a well-documented cri de coeur, see this submission from Freistaat Sachsen on how the audit process should be retooled in the CAP after 2020). The Parliament’s Budget Committee has also raised concerns that financial and performance control and audit functions of the CAP are performed to the same standard and under the same criteria across all Member States under the NDM. The mechanisms to ensure this in the draft legislation are not clear. Exactly the role that the EU audit function will play in the new results-driven model deserves much greater examination.

Where is the simplification? Simplification along with modernisation are the two over-arching objectives of the Commission’s CAP proposals. But initial reactions from Member States and farm groups suggest that many do not regard the proposals as a real simplification. Indeed, it should be recognised that strategic planning will result in a substantially greater administrative burden at the Member State level. The Commission proposals envisage considerable simplification at the beneficiary level (in part because Member States will now be able to design rules more appropriate to their farming circumstances, and in part through using new technologies to minimise the inputs required from farmers). Member States will be required to spell out, in one section of their Strategic Plans, the extent of this simplification at the level of beneficiaries. No doubt the Commission in its roadshow around the Member States to begin the process of strategic planning has identified ways in which the NDM also has advantages for the paying agencies and Member State administrations.

Maintaining a level playing field. One of the big concerns voiced by farm groups is that greater subsidiarity for Member States to design their own agricultural policies could lead to strong differences in the regulatory frameworks in different Member States (in the definition of conditionality standards and in the mix of support interventions that are employed). These groups fear that this ‘renationalisation of the CAP’ could lead to the fragmentation of the internal market and disrupt the level playing field for farmers in different Member States.

The significance of this objection is greatly overstated. Those groups who raise this objection against the NDM are usually the greatest proponents of the most trade-distorting CAP instrument, namely, coupled payments at the Member State level. The CAP has never been entirely uniform for a least a decade, with strong differences in the levels of direct payments per hectare and different payment models, and the single market has survived. More important, the conditions attached to the ‘licence to farm’ in Member States, in terms of regulation and taxation policies, remain very different.

Nonetheless, concerns over the disruption of the level playing field cannot be entirely dismissed. The single market is one of the greatest achievements of the European Union and should not be arbitrarily undermined. The Commission has recognised the issue and has stated that the level playing field will be ensured by using the Commission’s power to approve individual Strategic Plans “to ensure consistency and protection of the single market”. This has also been the position taken by Commissioner Hogan. But how the potential contradiction between giving Member States the power to design a results-based agricultural strategy while minimising different regulatory and support regimes across the EU can be avoided or minimised needs to be more clearly set out.

Conclusions

The Erjavec et al. study is the first systematic attempt to review and evaluate and suggest improvements to the Strategic Plan instrument which will be the centrepiece of the NDM in the CAP post 2020. It makes a valuable contribution and its recommendations must be seriously considered by the co-legislature when adopting the new legislation.

One of the main messages of the study is that the period 2021-2027 should be seen as a ‘deployment’ period for CAP strategic planning where no major adjustment of the measures nor particularly improved results can be expected.

The range of changes is so profound that a more long-term view should be taken, stressing the importance of collective learning and system building, to be able to implement better in the future.

Indeed, the Commission’s timetable for drawing up these Plans is ridiculously tight. According to the date in the draft legislation, Plans should be submitted to the Commission for approval by 1 January 2020, less than 15 months away.

During this period, Member States are expected to conduct a SWOT analysis, a multi-stakeholder consultation exercise, prepare a draft Strategic Plan, conduct an ex ante evaluation on this draft, revise the Plan and then submit it to Brussels.

And all this while the draft legislation itself has not yet been approved!

Given the magnitude of the changes implied by the NDM and the need to get it right (bearing in mind the difficulties around introducing greening without full analysis and piloting of the proposals) it is hard to defend this rushed timetable, however much we see a need for CAP reform. However, the Commission is unlikely to shift its position until it becomes clearer that the timetable for adopting the new CAP legislation prior to the European Parliament elections in May 2019 itself cannot be met.

The Erjavec et al. study on the CAP Strategic Plans is one of three studies commissioned by the Parliament that will be presented at a COMAGRI workshop on 15 October next “The Common Agricultural Policy beyond 2020: appraisal of the EC legislative proposals” (draft programme here). The other two studies are by Roel Jongeneel on assessing the future structure of direct payments and the rural development interventions in the light of the EU agricultural and environmental challenges and by Tomas Garcia Azcárate on possible options to improve the EU food value chain.

This post was written by Alan Matthews

Photo credit: Near Montpellier, own photo.

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The greening architecture in the new CAP

Environmental NGOs were harsh in their immediate criticism of the legislative proposals on the new CAP. Greepeace said that the EU farming plan “could spell disaster for the environment”. BirdLife Europe said that “The European Commission’s claim that the new proposal will deliver a higher environmental and climate ambition has fallen flat”, arguing that the new plan “does not guarantee any spending on biodiversity and grotesquely slashes funds ring-fenced for the environment across the board”.

Birdlife Europe has produced a detailed assessment of the Commission’s proposals in a handy tabular form, pointing out both weaknesses in the proposals themselves as well as omissions where the proposals could be strengtened (a summary of this assessment has appeared on this blog).

In this post, I review some of the issues raised by these critiques and explain some of the key differences between the proposed new greening architecture and the policy that it would replace. The leitmotiv of the legislative proposal as a whole is to devolve responsibility to Member States to design their menu of interventions funded by the CAP in the form of a Strategic Plan in line with a needs assessment.

The key take home message is that this flexibility could allow the ambition that is necessary to move agricultural production in a more sustainable direction in the way the environmental NGOs would desire. But at the same time it puts limited constraints on Member States for whom this goal is not seen as a priority, leaving open the risk that these opportunities will not be used. We return at the end to discuss some ways in which this gap might be filled.

Visualising the new greening architecture

I reproduce below the slide the Commission has used to explain the new greening architecture. There are three components. A new ‘enhanced conditionality’ replaces the current cross-compliance and greening payment requirements. A new eco-scheme is proposed in Pillar 1. And voluntary agri-environment-climate measures (AECMs) would continue in Pillar 2.

In itself, this slide tells a story, because it suggests two alternative architectures. One is where Member States use some of their Pillar 1 money to fund the eco-scheme, and then offer a more demanding menu of options to farmers who are prepared to opt into a more ambitious AECM. In the other option (right hand side), the Member State does not offer the eco-scheme and relies solely on voluntary enrollment in an AECM for management practices that go beyond enhanced conditionality.

This slide was being used in Commission presentations to the Council as late as March this year and possibly even later. However, in the legislative proposals, this right-hand option has been eliminated. The proposals make clear that Member States shall introduce an eco-scheme (even if the amount of funding allocated is left open, see below), so the option of not doing so has been removed.

Whether this was the result of the inter-service consultations and pressure from DG Environment within the Commission or for other reasons will be up to the historians to uncover. Nonetheless, it illustrates that key elements of the Commission proposals were still in play until shortly before their announcement on 1 June. As another example, the hierarchical relationship suggested in the diagram between the eco-scheme and voluntary AECMS in which the latter require more demanding measures is not necessarily reflected in the legislative proposals which leave open that either scheme could fund broadly similar measures, although the commitments funded under AECMs must be different than those funded under the eco-scheme (this is further discussed below).

A higher level of ambition

The starting point for the new greening architecture is the commitment that a modernised Common Agricultural Policy must enhance its European added value by reflecting a higher level of environmental and climate ambition. The Commission points out that, in the November 2017 CAP Communication, it “identified higher environmental and climate action ambition, the better targeting of support and the stronger reliance on the virtuous Research-Innovation-Advice nexus as top priorities of the post-2020 CAP.”

Or as the preamble to the draft CAP Strategic Plan Regulation makes clear: “Bolstering environmental care and climate action and contributing to the achievement of Union environmental- and climate-related objectives is a very high priority in the future of Union agriculture and forestry. The architecture of the CAP should therefore reflect greater ambition with respect to these objectives”.

So this is the standard by which the proposals should be judged.

Articles 5 and 6 of the draft Strategic Plan Regulation identify three general objectives for the CAP. One of these is to bolster environmental care and climate action and to contribute to the environmental- and climate-related objectives of the Union. In turn, this is broken down into three specific objectives:

• Contribute to climate change mitigation and adaptation, as well as sustainable energy;
• Foster sustainable development and efficient management of natural resources such as water, soil and air;
• Contribute to the protection of biodiversity, enhance ecosystem services and preserve habitats and landscapes.

Let us now see how the new green architecture proposes to deliver a higher ambition with respect to these objectives.

Enhanced conditionality

The nature of the enhanced conditionality proposed by the Commission for the CAP post 2020 is shown in the table below. There are two sets of changes. One is to (re-)incorporate the three greening practices into the conditionality, as GAEC 1 permanent pasture, GAEC 8 crop rotation (to replace crop diversification) and GAEC 9 non-productive areas (to replace Ecological Focus Areas).

It is important to underline that, in making this change, all of the exemptions which limit the scope of the greening practices in the current CAP (e.g. organic farms, farms below a certain size or below a certain arable area) have been eliminated. In future, these requirements would apply to all farms in receipt of direct payments, unless Member States are able to reintroduce them in their Strategic Plans – this is not clear.

The other change is the addition of new requirements GAEC 2 to protect carbon-rich soils, GAEC 5 to make compulsory the use of the new Farm Sustainability Tool for Nutrients and GAEC 10 the ban on converting grassland in Natura 2000 sites. GAEC 5 means that the need to have a nutrient management plan is extended to all agricultural land, and not only land in Nitrates Vulnerable Zones as currently.

Furthermore, the number of SMRs has been increased with the addition of requirements to respect oblgiations under Water Framework Directive and the Sustainable Use of Pesticides Directive (as well as a further regulation on transmissable animal diseases though this is outside the scope of environmental issues).

(click on figure for a clearer image)

Member States will be required to define, at national or regional level, minimum standards for beneficiaries in line with the main objective of these GAEC standards, taking into account the specific characteristics of the areas concerned, including soil and climatic condition, existing farming systems, land use, crop rotation, farming practices, and farm structures.

Member States will also be able to prescribe standards additional to those laid down in the Annex to the proposed Regulation against those main objectives. However, to protect against gold-plating, Member States are not allowed to define minimum standards for main objectives other than the main objectives laid down in the Regulation. This does not prevent Member States from requiring farmers to observe additional standards. It only means that the cross-compliance mechanism, whereby a farmer’s direct payments are reduced in the case of infringements, cannot be applied to ensure enforcement in those situations.

The new GAECs are welcome and underpin the enhanced conditionality sought by the Commission. The criticism is made that Member States may interpret them in a lax way, as previous evaluations of cross-compliance in practice have found. For example, Ecological Focus Areas are required to be a minimum of 5% of the arable area on those farms to which it applies in the current CAP but there is no minimum area specified for non-productive areas in GAEC 9. Some Member States might be tempted to set the standard at 1% of the arable area while others might opt for 3% or even 5%.

As we will see throughout this blog post, the proposed Regulation gives Member States lots of tools to be environmentally ambitious if they choose, but there are limited formal constraints in the legislation to require them to be so. Ultimately, it will all come down to the quality of the programming process at both Member State and Commission level.

Eco-scheme

The second innovation in the green architecture is the requirement that Member States must implement an eco-scheme financed from their Pillar 1 direct payments ceiling (Article 28 of the draft Strategic Plan Regulation). These are defined as voluntary schemes (for farmers) for the climate and environment and should be specified in greater detail in their Strategic Plans. As the draft Regulation proposes that Member States will also be obliged to offer AECMs to farmers under Article 65, the question might be asked what is the point of have two instruments focused on the one set of objectives.

It is important to point out two differences between the compulsory eco-scheme under Article 28 and the compulsory AECMs under Article 65.

One difference concerns what can be compensated. AECMs follow the traditional limitation that beneficiaries can only be compensated for costs incurred and income foregone resulting from the commitments made. This is the language taken from the requirements for Green Box measures when notifying agricultural support to the WTO. Where necessary, they may also cover transaction costs. Member States may grant support as a flat-rate or as a one- off payment per unit.

Support for eco-schemes must take the form of an annual payment per eligible hectare. Importantly, it shall be granted either as

• (a) a payment additional to the basic income support; or
• (b) as a payment compensating beneficiaries for all or part of the additional costs incurred and income foregone as a result of the commitments as set pursuant to Article 65.

Option (a) does away with any necessary link between the payment received by a farmer and the costs (or value) of achieving an environmental outcome. It allows 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 WTO rules.

Option (b) is not a model of drafting and it is difficult to interpret what is implied by the reference to “commitments as set pursuant to Article 65”. One admittedly far-out interpretation is that, for a beneficiary who enrols in a voluntary AECM under Article 65, the Member State could use the eco-scheme funding in Pillar 1 to partially or fully fund the payment to compensate him or her without having to formally transfer the funds to EAFRD. This would be a budgetary nightmare and surely not what the drafter intended.

A more plausible interpretation might be that the eco-scheme can be used to fund management practices beneficial for the environment and climate on the same basis as in Article 65 (that is, they go beyond the SMRs and GAEC standards in the enhanced conditionality and the conditions established for the maintenance of agricultural areas). However, in this case, why the eco-scheme would only pay part of the additional costs involved is not obvious (as this is a voluntary scheme for farmers, this would be a sure way to guarantee zero enrollment). Nor is it obvious why an option (b) is necessary and why payments would not be covered anyway under option (a) (though see below for a possible answer to this question).

Only limited guidance is given as to what might be funded by Member States with the eco-scheme. In the preamble to the draft Strategic Plan Regulation, there is an indication that “Member States may decide to set up eco-schemes for agricultural practices such as the enhanced management of permanent pastures and landscape features, and organic farming. These schemes may also include ‘entry-level schemes’ which may be a condition for taking up more ambitious rural development commitments”. However, the legislation states that the eco-scheme can be designed to meet any of the environmental-climate specific objectives outlined above, just as AECMs funded from Pillar 2.

In one of the options (3a) in the Impact Assessment, the Commission models a range of practices funded by the eco-scheme. These include winter soil cover; permanent crop crop between trees or permanent crop area; a three year crop rotation; 5% non-productive arable land; reduction targets of nutrient surplus; a strong push on the development of Integrated Pest Management; a reduction of antibiotic use; the development of cattle genomics targeting GHG efficiency.

Leaving aside the need to work around what seem to be potential overlaps with some of the GAEC standards in enhanced conditionality, this list illustrates the very wide scope that eco-schemes could potentially embrace.

The second difference between eco-schemes and AECMs relates to who can benefit. Member States are required to limit support under eco-schemes to genuine farmers, or at least to those benefiting from support under possibility (a) in the previous discussion. Support under AECMs, on the other hand, can be paid to “farmers and other beneficiaries” who undertake, on a voluntary basis, management commitments which are considered to be beneficial to achieving the specific objectives set out in Article 6. Thus, environmental trusts that manage land can be supported under AECM Pillar 2 funding.

While environmental trusts cannot be funded under option (a) for funding the eco-scheme, it may be that they can be funded under option (b). This is because option (b) allows for compensating “beneficiaries” (not only genuine farmers) on a costs foregone basis “as a result of the commitments as set pursuant to Article 65”. Here the reference to Article 65 could be interpreted as allowing a broader range of beneficiaries, provided they are not allowed to benefit from the income support hidden in option (a).

It all sounds terribly complicated and seems to arise from a desire to have an eco-scheme that can both be an income support scheme for so-called ‘genuine farmers’ but might also fund ‘proper’ agri-environment-climate schemes for non-farmer beneficiaries such as environmental trusts.

Voluntary AECMs

The third change in the new green architecture is that the various agri-environment-climate interventions available under the current Rural Development Regulation are collapsed into a single Article 65 which refers to environmental, climate and other management commitments. Eco-schemes can only fund farmers for practices which target the three specific environment and climate objectives out of the nine specific objectives specified for the CAP in Article 6 of the draft Strategic Plan Regulation. Article 65 is considerably broader than the corresponding Articles in the current Rural Development Regulation. It refers to support for environmental, climate and other management commitments, provided they target any one of the nine specific objectives set out in Article 6.

One issue here is the relationship between a country’s AECM and its eco-scheme. Under Article 65, Member States can only fund management commitments in an AECM that are different than those funded in the voluntary (for farmers) eco-scheme. Thus, a farmer who wanted to enrol in both will have to make two separate applications. The option is also there that countries may require a farmer to enrol in the eco-scheme as a condition for enrolling in the AECM.

Getting these two schemes to work together in a way that makes sense from an the point of view of maximising environment and climate objectives is going to be a challenge for Member States.

Some concern has been expressed that this might open the door to using Pillar 2 money under this Article for measures mainly targeting economic viability or territorial cohesion rather than agri-environment-climate. However, only agri-environment-climate schemes under this Article are mandatory. The preamble to the Regulation gives the following examples of what might be funded under this Article, even though the legal text in Article 65 seems much broader:

Member States should grant payments to farmers and other land managers who undertake, on a voluntary basis, management commitments that contribute to climate change mitigation and adaptation and to the protection and improvement of the environment including water quality and quantity, air quality, soil, biodiversity and ecosystem services including voluntary commitments in Natura 2000 and support for genetic diversity. Support under payments for management commitments may also be granted in the form of locally-led, integrated or cooperative approaches and result-based interventions. Support for management commitments may include organic farming premia for the maintenance of and the conversion to organic land; payments for other types of interventions supporting environmentally friendly production systems such as agroecology, conservation agriculture and integrated production; forest environmental and climate services and forest conservation; premia for forests and establishment of agroforestry systems; animal welfare; conservation, sustainable use and development of genetic resources. Member States may develop other schemes under this type of interventions on the basis of their needs.

Farm advisory service

An important part of the new green architecture is a beefed-up farm advisory service for the purpose of improving the sustainable management and overall performance of agricultural holdings and rural businesses, covering economic, environmental and social dimensions. These farm advisory services should help farmers and other beneficiaries of CAP support to become more aware of the relationship between farm management and land management on the one hand, and the standards and requirements, including environmental and climate ones, they are asked to follow on the other hand. This emphasis on knowledge transfer and engaging farmers more around the practices they are asked to follow can only be welcomed.

Funding for the new green architecture

Another concern that has been expressed is that the funding will not be there to implement the higher level of environmental and climate ambition even where the Regulation facilitates it. This concern is even more forcefully expressed in the light of the proposed reduction in the budget for Pillar 2 payments (for the figures, see this post). Farm unions push back against being asked to do more for less money. The environmental NGOs worry about the apparent lack of ring-fencing in the CAP budget for agr-environment-climate objectives.

Bolstering Pillar 2 funding. In principle, there is scope to make up for the reduction in the Pillar 2 CAP allocations to Member States in five ways:

• Member States can be asked to increase their national co-financing of Pillar 2 expenditure. This option is already included in the draft Strategic Plan Regulation where, in line with other European Structural and Investment Funds, the national co-financing rates have been increased by 10 percentage points.
• Member States can top up their Pillar 2 spending out of their own resources without falling foul of State aid rules.
• Member States can make use of the flexibility to shift resources between their Pillars. There is a general allowance for Member States to shift up to 15% of either Pillar in either direction. This symmetry conceals the fact that 15% of Pillar 1 funds will generally be much greater in absolute terms than 15% of Pillar 2 funds. In the current CAP period, there was a net transfer from Pillar 1 to Pillar 2. Money transferred in this way does not require national co-financing (Article 85(3)).
• Member States may, in addition, transfer up to a further 15% of their Pillar 1 allocation to Pillar 2 provided it is used for interventions addressing environmental and climate objectives. The percentage amounts under this and the previous bullet point can vary from year by year but must be specified in advance in the CAP Strategic Plan, though Member States can review these decisions as part of a request for amendment of the Plan.
• Finally, for the sake of completeness but nothing else, we should mention that money from the proceeds of capping can be transferred to that Member State’s Pillar 2 allocation on top of these other transfers. However, as the yield from capping as proposed is expected to be very limited in most Member States, in practical terms this is irrelevant.

Birdlife Europe has argued that, in order to allow a higher level of environmental and climate ambition, a Member State should not be constrained at all in the percentage share of its Pillar 1 ceiling that it can transfer to AECMs in Pillar2. However, the relative sizes of the two Pillars is now much less important, given that Member States, if they wish, can spend their Pillar 1 ceiling directly on agri-environment-climate measures through the eco-scheme.

In the Impact Assessment, under the Option 3 scenario which is the one most emphasising environmental and climate ambition, the Commission simulated the impacts of between 30% and 60% of a Member State’s Pillar 1 ceiling allocated to the eco-scheme, with the share of the basic income payment falling to just 25% of the ceiling in the latter case. Once again, it is more the political will of Member States to make use of these possibilities rather than the Regulation itself which is at issue.

Minimum spending thresholds. There are three minimum spending commitments which attempt to maintain a high level of environmental and climate ambition: a climate expenditure tracker; a minimum spend on AECMs; and a no back-sliding commitment. Let us examine each of these in turn.

Minimum CAP spend on climate action. Actions under the CAP are expected to contribute 40% of the overall financial envelope of the CAP to climate objectives (Recital 52 of the draft CAP SP Regulation). To allocate particular categories of development co-operation expenditure to climate in its development assistance effort, the EU uses the system of ‘Rio markers’ when reporting on its expenditure on climate and environmental aid commitments to the OECD. It has now taken over this system to track climate expenditure in the EU budget as a whole.

The ‘Rio markers’ (see this explanation here) distinguish between expenditure that is (a) principally targeted (b) significantly targeted or (c) not targeted at climate objectives. Depending on the degree of targeting, fixed percentages of the overall budget are considered to be relevant for the theme. The EU uses 0%, 40% and 100%, respectively for non-targeted, significantly-targeted and principally-targeted expenditure.

On this basis, Article 87 of the draft Strategic Plan Regulation assigns the following weights to different CAP instruments when tracking climate expenditure:

• 40% for the expenditure under the Basic Income Support for Sustainability and the Complementary Redistributive Income Support
• 100% for expenditure under eco-schemes
• 100% for expenditure for the interventions that count towards the minimum 30% for AECMs (see next section)
• 40% for expenditure for natural or other area-specific constraints.

One can debate whether these assignments are more than a book-keeping exercise and actually reflect real mitigation and adaptation action on the ground. On the other hand, expenditure on some measures, including knowledge transfer and some investments, do not get covered in this tracker. Whether real or not, the climate tracker 40% minimum limit could prove to be a constraint for a Member State that wanted to prioritise spending on coupled support (in Pillar 1) and investment aids (in Pillar 2).

Minimum 30% spend on AECMs. This obligation is contained in Article 86 of the draft Strategic Plan Regulation. At least 30% of the total EAFRD contribution to the CAP Strategic Plan shall be reserved for interventions addressing specific environmental and climate-related objectives in AECMs. Recall that AECMs are mandatory, and unlike the eco-scheme this provision requires a minimum 30% spend of the Pillar 2 ceiling on these schemes.

One important change compared to the current period is that expenditure on Areas of Natural Constraints and areas with other specific constraints is no longer included in this envelope. Even with a smaller EAFRD budget, this will require increased spending on AECMs in some countries that did not prioritise this objective in their current Rural Development Plans.

No backsliding. Both of the previous commitments are expressed in percentage terms. With a smaller EAFRD budget, spending in absolute terms could still decrease. This is where Article 92 which is meant to copper-fasten the Commission’s commitment to increased ambition with regard to environmental- and climate-related objectives becomes important.

Article 92 requires 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. In an earlier version of this post, I had argued that this implied a comparison of financial commitments to address environmental and climate issues in the two programming periods, but this is not the case.

Instead, Member States are asked to explain in their CAP Strategic Plans how they intend to achieve the greater overall contribution based on “relevant information” drawn mainly from the needs assessment, SWOT analysis, intervention logic, targets and financial plans included in the Strategic Plan. In a subsequent post, I argue that this is rather a toothless commitment because it evaluates a Member State’s intentions rather than outcomes and requires a qualitative rather than quantitative assessment and is thus much easier to fudge. This Article badly needs to be strengthened if it is to contribute meaningfully to delivering on increased environmental and climate ambition.

Performance bonus. A final innovative element introduced in the draft Strategic Plan Regulation is the notion of a performance bonus that would be attributed to Member States in the year 2026 to reward satisfactory performance in relation to the environmental and climate targets.

In 2026, the Commission will withhold an amount equal to 5% of each country’s allocation for the 2017 financial year. This will be released (attributed) to the Member State provided that its performance review in 2016 shows that the result indicators applied to the specific environmental- and climate-related objectives in its CAP Strategic Plan have achieved at least 90% of their target value for the year 2025.

There are some technical points left unclear in this formulation. There are 18 result indicators for these specific objectives labelled R12 through R29. Does a Member State have to reach at least 90% fulfilment on all of these result indicators or just an arithmetic average? What happens in the case of a country like Belgium which will have one CAP Strategic Plan but say Wallonia meets the 90% criterion but Flanders does not and, as a result, the country as a whole falls short of the target?

My greater concern is that this performance reserve will act as a perverse incentive. To avoid the risk of not hitting the 90% target, the obvious incentive for a Member State is to set the target as low as possible. In its Plan the Member State is going to have to show how it intends to draw down the CAP money, so reducing targets in one area (which are usually set as a share of the farm population participating in a scheme, or the share of the UAA covered by a scheme) will require targets to be increased in another area. If only agri-environment-climate performance is penalised in this way, then Member States have an extra incentive to shift funds from this ‘risky’ set of activities to ones where the performance reserve will not apply.

Conclusions

This reading of the new green architecture put forward in the Commission’s legislative proposals suggests a more optimistic picture than the initial reactions of the environmental NGOs. What I emphasise here is the potential, or the possibility, for Member States that wish to focus more on raising the level of environmental and climate ambition to do so. The enhanced conditionality can potentially be a significant advance on the combined cross-compliance and greening rules. With respect to expenditure, the Article 92 clause (assuming it survives the legislative process) seems to guarantee that at least spending on agri-climate-environmental measures will not fall in the post-CAP 2020 period.

In view of the urgent need to address the environmental and sustainability challenges of agricultural production in Europe, this will seem to many as a very low bar. And indeed, we must try to do better. And here there are two possible paths.

One way to go is to try to write greater ambition into the basic regulation itself (e.g. higher minimum thresholds for AECMs, minimum percentages for non-productive areas in GAEC). Such an approach will be popular among activitists in those countries (including my own, Ireland) where historically there has been a limited appetite for ambitious environmental and climate interventions and where, as a result, much environmental improvement has depended on prodding and compliance with EU legislation.

It could also be popular, paradoxically, with farm unions in high-ambition countries who worry that too big a gap between the level of standards they face and the alleged risk of lower standards in low-ambition countries could hurt their competitiveness. Exporting higher standards through EU legislation is then a way of levelling the playing field to their advantage.

On the other hand, this approach goes against the philosophy of returning greater responsibility to Member States in the New Delivery Model. It also risks going against the political tide which sees ‘Europe’ imposing rules and regulations against the wishes of national parliaments and populations.

The Commission’s response is to point to the checks and balances built into the formulation and approval of the CAP Strategic Plans: the requirement to have a wide group of stakeholders involved in drawing up the Plans; the requirement to justify the choices made among competing specific objectives by reference to objective indicators and a needs assessment; the requirement to justify the choice of interventions and the definition of GAEC standards to meet these objectives through a clear intervention logic; the requirement for Commission approval of the Plans in the light of data and methodology used; and the requirement to meet the (minimal) requirements set out in the basic legislation.

It’s a defence that deserves to be taken seriously. Whether it works or not with respect to the goal of achieving a higher level of environmental and climate ambition which is the stated objective of the proposal will largely depend on the openness of the processes used to formulate the Strategic Plans; the calibre of the officials involved in drawing up the Plans and their ability to think strategically; the rigor of the approval process by the Commission; and in particular on the ability of transparency (around the objectives identified, the instruments chosen and the associated indicators) to break at the national level the political log-jam around agricultural policy-making at the Brussels level. For many Member States, this will be a tall order.

These are the areas where attention will need to be focused if the proposed legislation is approved.

This post was written by Alan Matthews

Photo credit: Somerset Levels, UK Wikipedia under CC licence

Update 20 June 2018: This post was corrected to make clear that funds transferred from Pillar 1 to Pillar 2 under flexibility and capping provisions do not require national co-financing as part of EAFRD. Also the relationship between the eco-schemes and AECMs was further elaborated.

Update 30 June: The inference that Article 92 would require Member States to keep financial commitments to address environmental and climate objectives at least at the level of the curent programming period has been corrected and removed, and the link to a subsequent post explaining this point in greater detail has been added.