There has been a slow movement over time to use payments under the EU’s Common Agricultural Policy (CAP) to address some of the environmental and climate challenges facing EU agriculture. This initially took the form of agri-environment-climate measures (AECMs) in the CAP’s rural development Pillar 2. Member States can compensate farmers who voluntarily undertake practices with positive environmental benefits going beyond good farming practice.
Since decoupled direct payments were introduced in 2005 farmers are also required to observe a set of minimum obligations, some of which reflect environmental concerns. This system is called cross-compliance. Farmers can lose a proportion of their CAP payments if they are found in breach of their cross-compliance obligations.
A new green architecture
In the 2013 CAP reform, an effort was made to further raise the environmental performance of EU agriculture by allocating 30% of each country’s Pillar 1 direct payments envelope to a greening payment. Farmers receive this greening payment in addition to their basic income support provided they observe a limited number of specific practices addressing environmental and climate goals. The greening payment together with voluntary AECMs and cross-compliance rules form the green architecture of the CAP.
The greening payment is widely seen as adding greatly to the complexity of the CAP while failing to bring about additional environmental improvement (see this criticism of the European Court of Auditors). The European Environment Agency has documented that improvements previously observed in some agri-environmental indicators (such as reducing nitrogen surpluses or greenhouse gas emissions) have levelled off, while other indicators (such as for biodiversity) continue to deteriorate.
On 1 June 2018 the Commission published its proposal for the CAP post 2020 with the twin objectives of simplification and modernisation of the CAP. This was part of the package of sectoral proposals linked to the publication of the proposal for the EU’s next Multi-annual Financial Framework for the period 2021-2027. The CAP proposal built on a public consultation in the first half of 2017 and a Communication on The Future of Food and Farming released in November 2017 (and previously discussed on this blog) which first announced the main ideas on which the proposal is based.
Proposed changes concearning the marine environment
The two main innovations for those interested in the marine environment are proposed changes in the CAP’s green architecture and in its governance. The Commission insists that it wants to see a higher level of environmental and climate ambition and its proposal revises the CAP’s green architecture. The greening payment would be eliminated and the greening obligations (maintenance of permanent pasture, crop diversification/rotation and a minimum share of the agricultural area devoted to non-productive features or areas) would be incorporated into cross-compliance obligations, which will in future be called conditionality.
A new requirement for farmers to use a Farm Sustainability Tool for Nutrients which holds out the potential to reduce nitrogen surpluses would also be added to the conditionality obligations.
It would continue to be mandatory for Member States to use at least 30% of their Pillar 2 envelope for environmental and climate measures. As the Pillar 2 budget will be smaller in absolute terms, this might suggest a similar fall in absolute spending on environmental and climate objectives in Pillar 2.
In the current CAP programming period, payments to farmers in less-favoured farming areas (so-called areas of natural constraints) are assumed to contribute to these objectives and are eligible to be included as part of the 30%. However, the intervention logic for these payments is often more social rather than environmental and, under the Commission proposal, they would no longer be eligible to be counted as part of the 30% ring-fencing for environmental and climate objectives. This could mean that some Member States would have to increase spending on AECMs despite the lower Pillar 2 budget overall.
Member States will be able to continue to transfer up to 15% of their Pillar 1 envelope to their Pillar 2 budget (and vice versa). They would also be allowed to transfer a further 15% of their Pillar 1 envelope provided it is used to finance AECMs without any obligation to provide co-financing. These possibilities could also be used by Member States to use more of their CAP budget for environmental objectives in Pillar 2.
Eco-schemes can attract more intensive farmers
The most innovative element of the proposed green architecture is that Member States would be obliged to offer an eco-scheme to farmers financed from their Pillar 1 envelopes. Eco-schemes in Pillar 1 will be able to finance the same kinds of agri-environment-climate measures that can be funded in Pillar 2.
The big difference will be that eco-scheme payments will not be limited to merely compensating farmers for the costs incurred or income foregone as a result of enrolling in an AECM, but will be a top-up on the basic income payment. This could potentially allow Member States to design schemes that might be more attractive to more intensive and productive farmers who are currently not attracted to enrol in AECMs in Pillar 2 because the payment offered does not compensate sufficiently for the loss of income from limiting agricultural production.
From compliance-based to performance-based
Whether this new CAP green architecture will deliver more for the environment and climate will depend very much on how Member States react to the proposed new governance arrangements. The Commission’s proposal is to move away from a compliance-based to a performance-based or results-based governance system for the CAP. It refers to this as the New Delivery Model.
The proposal is that the CAP legislation would set only basic policy parameters, such as the objectives of the CAP and basic requirements, while Member States should bear greater responsibility as to how they meet the objectives and achieve targets. Nine specific objectives are set out in the legislation, including the obligation to foster sustainable development and efficient management of natural resources such as water, soil and air, and to contribute to the protection of biodiversity, enhance ecosystem services and preserve habitats and landscapes.
A CAP Strategic Plan is key for each Member State
The key instrument to underpin the New Delivery Model will be the requirement for each Member State to draw up a CAP 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 drawing from the list of interventions set out in the CAP legislation (Figure 1).