Greening the Common Agricultural Policy

Written evidence submitted by the Institute for European Environmental Policy (IEEP) (GCAP 28)

Executive Summary

i. In the face of continuing pressures on the environment, we welcome the recognition of the importance of agriculture’s role in protecting and enhancing the environment and contributing to climate change adaptation and mitigation in the proposals for the CAP for 2014-2020.

ii. Evidence shows that currently the most beneficial measure within the CAP for delivering environmental outcomes is the agri-environment measure. However, the voluntary nature of agri-environment schemes, combined with the limited funding available through Pillar 2 and the reluctance of Member States to increase levels of co-financing, means that there are limits to what can be achieved for the environment through this measure on its own.

iii. Given the budgetary constraints on Pillar 2, the merit of ‘greening’ Pillar 1, is that it does at least provide a means of ensuring that the majority of agricultural land in the EU-27 is subject to some form of positive environmental management.

iv. It is difficult to be clear about precisely what the environmental impact of the proposed Pillar 1 greening measures is likely to be because the detailed rules and requirements of the measures have yet to be developed. There are likely to be considerable differences between Member States, but any assessment of potential impacts is highly speculative.

v. Universally applied measures in principle do have a place in a greening strategy for the CAP, although the limitations of purely annual payments restrict their effectiveness. A more robust strategy would give a larger role to Pillar 2 measures. At the pan European level, however, Pillar 1 measures do have the potential to deliver a range of environmental benefits, especially Ecological Focus Areas (EFA).

vi. It is important not to see the ‘greening’ measures in isolation. Perhaps the greatest potential environmental benefit from these measures is the foundation that they provide on which more focussed agri-environment schemes under Pillar 2 can build.

vii. Particular issues apply in the UK and England and it will be essential to ensure that the introduction of the ‘greening’ measures in Pillar 1 does not reduce the level of environmental benefits delivered through the CAP, and that a net increase in environmental delivery is achieved.

viii. It is also critical that any changes do not impact negatively on farmers who already have signed up to the delivery of environmental benefits by entering agri-environment schemes in order not to risk damaging the goodwill and commitment of farmers to the environment that has been built up over the years.

ix. While acknowledging the importance of food security as a goal, it should be remembered that long term food security relies on the sustainable management of natural resources. It is therefore, unhelpful to overstate the impacts that the ‘greening’ measures, particularly the EFA measure will have on levels of food (and energy) production.

Main Evidence from the Institute of European Environmental Policy

Introduction

1. IEEP welcomes the opportunity to submit evidence to the Environment, Food and Rural Affairs (Efra) Select Committee on ‘Greening the Common Agricultural Policy (CAP)’.

2. IEEP is an independent not-for-profit policy studies institute dedicated to advancing environmental sustainability in Europe. Our aim is to disseminate knowledge about Europe and the environment and to analyse and present policy options. Possessing a history of knowledge and involvement acquired over thirty years, we undertake research and consultancy on the development, implementation and evaluation of environmental and environment-related policies in Europe, focussing both on pressing short-term policy issues and long-term strategic studies. Our work on agricultural policy has been a core element of the Institute’s work since the 1980s and we are committed to being at the forefront of thinking about the environmental aspects of the CAP and other EU policies.

3. We have undertaken a range of studies both for the European Commission and European Parliament to inform the future direction of the CAP, arguing for a strong environmental rationale to be at its heart, and making the case for the adequate resources to be made available for the environment within the EU Budget. Our focus is EU-wide and it is within this context that our evidence is provided.

Greening the CAP: General Background and Context

4. Despite improvements on some issues, Europe’s environment continues to face significant pressures, including ongoing declines in biodiversity and the challenges of climate change. In the face of these pressures, the EU and its 27 Member States have committed to meet a number of environmental targets, including the EU’s 2020 biodiversity objectives and targets for greenhouse gas emission reductions. Agriculture plays an important role in helping meet these targets as it covers 44 per cent of land area in Europe, however it is clear that a step change is needed in the approach taken to land management if these targets are to be met.

5. The Commission’s legislative proposals for the CAP for 2014-2020 recognise the importance of agriculture’s role in protecting and enhancing the environment and ensuring that farming and rural areas can play their role in contributing to climate change adaptation and mitigation. However, finding the right balance between improving the quality of environmental goods and services alongside creating favourable conditions for producing crops, livestock and energy is a significant challenge.

6. Evidence shows that currently the most beneficial measure within the CAP for delivering environmental outcomes is the agri-environment measure, under Pillar 2, underpinned by cross-compliance and environmental regulation. However, the voluntary nature of agri-environment schemes, combined with the limited funding available through Pillar 2 and the reluctance of Member States to increase levels of co-financing, means that there are limits to what can be achieved for the environment through this measure on its own.

7. Set within this context, the merit of ‘greening’ Pillar 1, irrespective of the precise way in which the Commission has approached it, is that it does at least provide a means of ensuring that the majority of agricultural land in the EU-27 is subject to some form of positive environmental management, given the budgetary constraints on Pillar 2.

8. Given the current budgetary constraints and accepting that Pillar 1 direct payments were likely to continue at least for the next programming period, IEEP reviewed the available evidence about the most appropriate policy measures for greening the CAP as part of a study for the European Parliament (Hart et al, 2011). This demonstrated that different greening measures were suited to Pillar 1 and Pillar 2. Overall there was a clear need for environmental management to be carried out over a far greater area of farmland than is currently the case, requiring a combination of simple, basic, broad brush management and more tailored and targeted approaches. The study identified a number of pros and cons of including basic environmental measures within Pillar 1. One of the most fundamental issues being the difficulty of finding one-size-fits-all measures for delivering environmental benefits in all EU-27 countries. Ideally measure need to be tailored and targeted to ensure the efficient delivery of environmental outcomes that address the specific local needs. The study did identify, however, a number of measures that could be universally applied and that did not require significant flexibility in their design. These included the maintenance of landscape features, the maintenance of permanent pasture and organic farming. However, it was concluded that other measures required some degree of flexibility in their operation whether or not this be done through Pillar 1 or Pillar 2.

9. In developing the measures, the Commission has had to strike a balance between the value of a common approach that is applied fairly uniformly in all Member States and flexibility to address the diverse conditions in the EU-27. By proposing a set of generally applicable, simple, annual payments, they have clearly opted for the former. Clearly, if only the UK situation needed to be considered, then the choices made would have been quite different.

Environmental impacts

10. It is difficult to be clear about precisely what the environmental impact of the proposed Pillar 1 greening measures is likely to be because much depends on precisely what sorts of management is required and the way that the measures are designed and operate in practice. This is not yet possible to determine as the detailed rules and requirements of the measures have yet to be developed and will be adopted by the Commission as delegated acts once the negotiations on the main legislative texts have been concluded. Any assessment of potential impacts, therefore, is highly speculative and can be based only on the information available within the current draft legislative texts. Nonetheless, some general comments can be made.

11. Universally applied measures in principle do have a place in a greening strategy for the CAP, although the limitations of purely annual payments restrict their effectiveness. A more robust strategy would give a larger role to Pillar 2 measures. At the pan European level, however, Pillar 1 measures do have the potential to deliver a range of environmental benefits, especially Ecological Focus Areas (EFA) measure. One reason for this, at the most basic level, is that some management that should nominally be a condition of cross compliance standards of Good Agricultural and Environmental Condition (GAEC) is not being delivered in practice in some Member States (Alliance Environnement, 2007). The ‘greening’ measures, therefore, provide a stronger means of ensuring a basic level of environmental management across the farmed area. Of course this is difficult to measure and the additional environmental benefit will be greater in countries which have been less ambitious in implementing and enforcing cross compliance. However, at the EU level this does raise the question of the added value of measures compared to what is already required through cross compliance, with associated issues of policy efficiency and cost-effectiveness. Our view on the potential environmental benefits of the individual greening measures is set out below.

12. Ecological Focus Areas: Amongst the proposals, the measure that perhaps has the most potential to deliver additional environmental benefit is the ‘ecological focus area’. This requires a proportion (currently 7 per cent is proposed) of a farm’s eligible hectares (excluding land under permanent grassland) to be managed for ecological purposes. Examples of the types of land that could count as ecological focus areas included in the proposed regulation are landscape features, buffer strips, fallow land or land afforested through rural development grant schemes. A full list, however, of what types of land would count and will be defined only in delegated acts.

13. Despite this uncertainty, however, it is clear that managing a proportion of the cropped area for ecological purposes has the potential to provide significant benefits for biodiversity (such as for birds, mammals and invertebrates), water quality, soil quality and carbon storage if managed appropriately. This is evidenced from the monitoring of similar management undertaken within agri-environment schemes and under set-aside in the past. However, the actual magnitude of the benefits will depend on the precise requirements under this measure, and in particular the location of the EFAs and their extent. Furthermore, given the generalised nature of the measure, there is a risk that its potential benefits may not be maximised due to farmer preferences. This is because the provision of in-field habitats such as fallow land would be most beneficial for biodiversity, whereas experience from agri-environment schemes indicates that practices that are limited to field boundaries and margins are most popular with farmers. The benefits for biodiversity as well as water quality, soils, carbon storage and climate adaptation could therefore be increased significantly by targeting and appropriate tailoring of management practices on the land concerned. This could be achieved through embodying this approach in the design of the measure and tying it in to more sophisticated management options supported by agri-environment schemes.

14. Permanent Grassland: Requiring permanent pasture to be maintained at the farm level should deliver some biodiversity benefits as well as benefits for water quality, soil quality and carbon storage. However, the measure focuses only on maintaining grassland area rather than protecting or enhancing its ecological quality. The most widespread impacts would be in terms of constraining the conversion of improved grasslands to temporary grasslands and arable crops (eg maize), with benefits for soil condition and biodiversity, and knock-on benefits higher up the food chain, as well as for aquatic biodiversity.

15. The conversion of semi-natural grasslands, which are of particularly high biodiversity value, to temporary grassland or arable would also be constrained. However, the risks such habitats face from agricultural improvement or abandonment will not be addressed by this measure, so this will continue to need to be dealt with via agri-environment schemes. In addition, as currently proposed, the measure‘s environmental impact is limited by the CAP’s definition of permanent grassland, which allows the ploughing and reseeding of such grasslands as long as they are returned to grass, although the extent to which this occurs in practice varies significantly in the EU-27. Furthermore, the setting of 2014 as the baseline for the measure provides a powerful incentive for the ploughing up of permanent grassland in the interim, which would lead to significant ecological damage as well as soil carbon losses.

16. Crop Diversity: Introducing a minimum level of diversity into cropping patterns, as proposed by the European Commission, has the potential to bring modest benefits for the environment, particularly if it encourages greater rotation of crops, including the introduction of fallow or legumes into the rotation. Benefits for biodiversity will largely be in relation to common and widespread species, due to improvements in soil biodiversity and overall invertebrate populations, whereas the most seriously declining species are unlikely to benefit significantly. As with all these measures, impacts will be context specific

17. It is important not to see the ‘greening’ measures in isolation. Indeed, perhaps the greatest potential environmental benefit from these measures is the foundation that they provide on which more focussed agri-environment schemes under Pillar 2 can build. By funding these basic measures through Pillar 1, a greater proportion of the current agri-environment budget should in principle be available to incentivise more tailored and targeted management activities and to increase the extent of their coverage. The ‘greening’ measures, in contrast would reach a much larger proportion of farms, particularly those in sectors where the attractiveness of the payment levels for agri-environment schemes has been a limiting factor, for example in arable areas.

Impacts on food production and competitiveness

18. There has been a great deal of criticism of the proposed ‘greening’ measures, particularly the Ecological Focus Area proposal, in relation to the impacts that this will have on levels of food (and energy) production. This is understandable and a valid consideration, but it is important not to overstate the potential effect. While the proposals continue to be vague, it is nonetheless disingenuous to argue that EFAs will lead to seven per cent of the most productive arable land being taken out of production, as some have been suggesting.

19. As stated above, EFAs require seven per cent of all eligible hectares, excluding permanent grassland, to be managed for ecological purposes. The Commission’s own impact assessment suggested that on average 2.7 per cent of the current EU eligible area would be likely to count already as part of the EFA. In many Member States, landscape features are excluded currently from the eligible area. If this is exclusion is reversed, which it is possible to do, as part of the reforms, then this percentage qualifying as EFA will increase. Of course these percentages will vary between farms and so the remaining percentage of cropped area that will need to be found to form the EFA will also vary significantly. However, the production effect will always be less than the area effect because the least productive land usually will be used for the EFA first.

20. Nonetheless it is inevitable that the EFA measure will lead to some reduction in production levels, most notably in the most productive arable areas of the EU. Some argue that this is counter to food security objectives. However, food security is not simply about short term increases in food production, but about balancing production and sustainability over time as long term food security depends on the sustainable management of the natural resource base. It is therefore critical to protect the EU’s capacity to produce food into the future. Indeed analysis has shown that ‘in the longer term there may be a positive feedback from more sustainable agricultural practices in terms of higher yields, [although] the likely importance of this … is hard to quantify’ (Matthews, 2011).

21. Overall, therefore, it the available analysis suggests that the overall production impact of the EFA measure is likely to be small and other non-policy drivers will continue to have a much greater influence over production levels in the EU. The conclusion of a recent ICTSD review of the CAP proposals states that ‘…the legislative proposals, ceteris paribus, will slightly lower future EU production potential. But whether actual EU production in the future will be greater or smaller than today will depend on market conditions. In particular, if global supply tensions persist and world market prices remain high, then EU farmers will undoubtedly respond with increased production. Nonetheless, the EU’s share of global agricultural production will be (slightly) smaller than if it had not prioritised environmental public goods so highly’ (Matthews, 2011).

22. One merit of the model of greening Pillar 1 proposed by the Commission is that all measures apply in all Member States equally and therefore there is a level playing field across the EU. This can only be beneficial for the UK as one of the Member States that has taken a proactive approach to addressing environmental issues in the past, taking forward cross compliance in a transparent manner.

Coherence with agri-environment schemes

23. Agri-environment schemes vary significantly in different Member States in terms of their design and the types of options and associated payments that are offered to land managers. England operates a sophisticated scheme that has built on experiences over the past 25 years and enjoys buy-in from farmers and environmentalists alike. It will be essential to ensure that the introduction of the ‘greening’ measures in Pillar 1 does not reduce the level of environmental benefits delivered through the CAP, and that a net increase in environmental delivery is achieved. It is also critical that any changes do not impact negatively on farmers who already have signed up to agri-environment schemes in order not to risk damaging the goodwill and commitment of farmers to the environment that has been built up over the years.

24. It is difficult to comment on the coherence between the ‘greening’ measures and agri-environment schemes in more than generalised terms at this stage, given that the detail of the greening measures is not available. In their current formulation, however, it looks as if there is likely to be some overlap between the ‘greening’ measures proposed and the current agri-environment options under Environmental Stewardship, particularly ELS and UELS. Given that organic farmers are exempt from the ‘greening’ measures, OELS may not be affected. It would seem logical, therefore, that the introduction of these measures would in principle require some re-design of current agri-environment schemes and certain payment rates may need to be altered.

25. Alternative solutions are worth exploring, for example those farmers undertaking a certain level of management under an ELS agreement could be exempt from the ‘greening’ requirements in the same way as it is proposed organic farmers should be. Other possibilities may be to seek additional flexibility within the rules for the ‘greening’ measures to allow them to be designed to ensure the most appropriate fit with existing agri-environment schemes.

26. Whatever the outcome, Environmental Stewardship will play an important role in adding value to the greening measures. The critical issue will be to ensure that whatever new measures are required under Pillar 1 are compatible and able to interact with the options available through ES. This may mean that some options within (U)ELS will need to be tweaked to ensure that they can build on the options under Pillar 1, and new options may also need to be introduced. Advice will also be essential to ensure the appropriate siting of measures to maximise environmental benefits.

Coherence with the simplification agenda

27. The evidence suggests that the delivery of environmental benefits is maximised, the more that measures are tailored and targeted to location needs and situations. Greater benefits are also associated with greater levels of advice provision. Given this, it is inevitable that delivering environmental outcomes will involve some form of administrative burden in terms of processing payments, checking compliance, ensuring adequate enforcement, providing advice and training for farmers and undertaking adequate monitoring and evaluation.

28. The generalised nature of the greening measures would appear to be an attempt to minimise any additional administrative burden, particularly in terms of enforcement and compliance checking for the paying agencies, although this seems to have come at the expense of more flexibility within the measures themselves. Ensuring that delivery is as simple and straightforward as possible is an important goal, but seeking simplification should not be at the expense of achieving environmental outcomes.

Comments on other elements of the proposals

29. In terms of the other elements of the CAP reform proposals from the Commission, we are pleased to see that climate change is signalled as an important issue for the CAP for the first time, in keeping with the priorities of the EU2020 strategy and there is also a greater emphasis on the importance of advice, collaborative action and innovation.

30. We are also particularly pleased to see that monitoring and evaluation requirements have been extended beyond rural development to cover all elements of the CAP, including direct payments and cross compliance. The absence of formal regular monitoring and evaluation requirements for these elements of the CAP has long been an issue in terms of being able to access good quality information from all 27 Member States on which their impact can be assessed. This has been an issue particularly with cross-compliance.

31. In relation to Pillar 2, it will be critical that the budget proposed in the draft multi-annual financial framework is not eroded further, given that the current proposals represent already a decrease in real terms over the next programming period. Of particular concern, therefore, is the inclusion of the possibility for a selection of Member States, including the UK, to transfer funding from Pillar 2 to top up their Pillar 1 funding, which would appear to be counter to political commitments made in June at the time of the Budget announcement to maintain a strong Pillar 2.

32. Given these constraints, we are pleased to see the requirement that all priorities for Pillar 2 must contribute to ‘the cross-cutting objectives of innovation, environment and climate change mitigation and adaptation’ (Art 5 of COM(2011) 267/3). We are also pleased that there is a commitment to earmark funds for environmental and climate purposes, with the continuation of the requirement on Member States to spend a minimum of 25 per cent of the EAFRD proportion of the budget ‘for climate change mitigation and adaptation and land management, through the agri-environment-climate, organic farming and payments to areas facing natural or other specific constraints measures’. This earmarking, however, is only stated in the preamble to the regulation and needs to be included also within the legislative text to ensure that it is suitably reflected in the development of Rural Development Programmes.

November 2011

 

References

Alliance Environnement (2007) Evaluation of the application of cross compliance as foreseen under regulation 1782/2003. Part 1: Descriptive report - 26/07/2007. Deliverable prepared for DG Agriculture, Alliance Environnement, London/Brussels.

Hart, K, Baldock, D, Weingarten, P, Osterburg, B, Povellato, A, Vanni, F, Pirzio-Biroli, C and Boyes, A (2011) What tools for the European agricultural policy to encourage the provision of public goods. Report prepared for the European Parliament, Directorate General for internal policies. Policy department B: structural and cohesion policies. IP/B/AGRI/IC/2010_094, Institute for European Environmental Policy, London.

Matthews A (2011) Post-2013 EU Common Agricultural Policy, Trade and Development: A Review of Legislative Proposals, ICSTD Issue Paper No 39

Prepared 30th November 2011