The green light for a modern CAP?

8 March 2013
Romain Pardo (Former Policy Analyst at the EPC)

As a part of EU budget negotiations over the next Multiannual Financial Framework (MFF), EU heads of state and government agreed in February 2013 to cut the overall agriculture and natural resources budget by 11.3%. It will decrease from €420 billion for the 2007-13 period to €373 billion for the 2014-2020 period. The decision means that the Common Agricultural Policy (CAP) will account for around 36% of the 2014-2020 EU budget, thus remaining the largest part of the MFF.

At first glance, an uninitiated observer would probably come to the conclusion that there is a broad consensus in favour of a policy perceived as vital for the future of the EU. However, the story is much more complicated than that. Debate over the CAP’s future is still ongoing and the policy is a continuous source of friction between member states, as well as between NGOs and farmers. Opponents of the CAP vividly argue that it is irrational in its spending, because it is too costly, primarily benefits large farms, and is not adapted to the overall economic context. Its supporters deem it to play an essential role in enhancing food security, securing farmers’ incomes and enabling them to compete globally.

It is time to future-proof and ‘green’ the CAP

The CAP needs modernising in order to meet the economic, social and environmental challenges of today and tomorrow. An important part of this modernisation process should be the correction of past shortcomings with regard to the environment, to ensure that it contributes to achieving the EU’s environmental objectives. This is often called ‘greening the CAP’. Farmers are the custodians of nearly half the EU’s land area, and the challenges and opportunities related to protecting, managing and enjoying environmental benefits are strongly interlinked with the agricultural sector. For a long time, the CAP has promoted an intensive farming model with harmful environmental consequences. The agricultural sector accounts for 44% of water abstraction in Europe and much more work is needed to promote more sustainable use of Europe’s water resources. The sector relies heavily on the use of pesticides and chemical fertilisers containing nitrates which are significant sources of water pollution. In France alone, the cost of treating water pollution originating from farming is €54 billion a year, most of which is passed on to consumers. Furthermore, this sector produces 9% of EU greenhouse gas emissions and 70% of the nitrous oxide emissions in Europe, despite generating only 1.6% of EU GDP and employing 5% of EU citizens (figures from 2011).

At the same time, the CAP suffers from a legitimacy crisis, as direct payments to farmers are increasingly difficult to justify in the current austerity context. These payments will have to be progressively phased out as the EU cannot provide indefinite financial assistance to economically unsustainable practices. Nonetheless, as long as European farmers benefit from these direct subsidies, it is important to ensure that this support is in line with other European policy objectives, such as the Europe 2020 Strategy’s call for sustainable growth. These subsidies must encourage European farmers to carry out measures that allow the sector to become more competitive. They must be used to support market access for environmentally-friendly goods, such as organic food, which may provide business opportunities in the long term. In addition, the funds attributed to the CAP should be used, for example, to promote biodiversity protection and to improve water quality and management. Carrying out greening measures and preserving natural resources is in the interest of the agricultural sector, as it is the basis for sustaining agriculture in Europe. An important part of future-proofing the European agricultural sector is adapting it to the potential impacts of climate change and natural disasters, for example by encouraging crop diversification and innovative irrigation technologies. Understanding and building on the positive effects of these measures, including the business opportunities, would also significantly boost the CAP’s credibility.

But will the EU do that?

In October 2011, the European Commission presented a set of legal proposals with the objective of boosting the CAP’s competitiveness while improving the sustainability of agriculture. The proposal maintained the CAP’s two-pillar structure, in which Pillar I finances direct payments and market measures, and Pillar II funds rural development measures.

At the same time, the Commission advocated a greener CAP. It called for 30% of the annual national ceiling of direct payments to farmers under Pillar I to be linked to compliance with “greening measures”. These measures should meet three conditions: cultivation of arable land must consist of at least three different crops simultaneously, permanent grassland must be maintained, and 7% of each farmer’s eligible area must be devoted to an ecological focus. The Commission also outlined EU-wide priorities for rural development under Pillar II, which include preserving and enhancing ecosystems dependent on agriculture and forestry, promoting resource efficiency, and encouraging the transition to a low-carbon economy in agriculture and forestry.

For their part, EU leaders have agreed on how to allocate the financial resources of the reduced CAP budget. The compromise reached between the 27 EU governments differs from the Commission proposal, as it allocates less money to rural development and allows member states to transfer up to 15% of their rural development budget to direct payments under Pillar I. This is a step backwards in greening the CAP, as it reduces the emphasis on Pillar II, which finances agri-environmental measures designed to encourage farmers to carry out environmentally-friendly practices such as conserving natural habitats and protecting biodiversity.

The Commission’s proposal was also weakened by the vote of the European Parliament’s Agriculture & Rural Development Committee (COMAGRI) on 23 January 2013. Even though the Committee backed the Commission’s proposal to link 30% of direct payments to environmental performance, the range of criteria for exemptions is so broad that the effectiveness of this measure will be greatly reduced. For example, exemptions will apply to farmers with less than 10 hectares of land and those who meet individual member states’ environmental certification programmes: in other words, to 82% of European farmers. By comparison, the Commission had proposed to only exempt organic farmers, which would account for approximately 5% of EU farmland.

Furthermore, COMAGRI voted in favour of controversial ‘double funding’, which allows farmers to be paid twice for the same environment practices. Farmers receiving payments for agri-environmental schemes under Pillar II would automatically qualify for direct payments for greening under Pillar I. EU Agriculture Commissioner Dacian Cioloş and the Parliament’s rapporteur on the CAP, MEP Luis Manuel Capoula Santos, have criticised this decision, which goes against the spirit of greening the CAP. It would be irresponsible to deprive this programme of its environmental ambitions. This could also lead to using greening as a pretext for continuing to justify direct payments. The Parliament’s Environment Committee (ENVI) has also expressed its opposition to COMAGRI’s proposal and has rightfully recommended for robust cross-compliance with environmental rules and inspections.

The CAP’s environmental ambitions would suffer a major blow if the Parliament decides to follow COMAGRI’s propositions during its plenary vote, scheduled for 12 March 2013. Such an outcome would be a missed opportunity for the Parliament to show its power and to call for a more economically and environmentally sustainable European agricultural sector. Validating measures such as ‘double funding’ would also put the Parliament’s legitimacy at risk. 

The European Parliament has the right and the obligation to restore ambitious greening measures, give resonance to ENVI’s recommendations, and reflect EU citizens’ environmental concerns. When MEPs sit down to vote, they should keep in mind the results of the Commission’s 2011 survey, which showed that environment is an important personal concern of more than 90% of respondents in every single EU member state.

As a result of the Lisbon Treaty, for the first time in history the European Parliament and the Council will decide on an equal basis on the new agriculture legislative package. The Parliament has to rise to this historical occasion and strongly use its co-decision right to advocate for a modern greener CAP before starting negotiations with EU governments.

Romain Pardo is a programme assistant at the European Policy Centre (EPC) in Brussels.

Disclaimer: The views expressed in this Commentary are the sole responsibility of the author.

The green light for a modern CAP?