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Document 52018SC0301

COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposals for a - Regulation of the European Parliament and of the Council establishing rules on support for strategic plans to be drawn up by Member States under the Common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulation (EU) No 1305/2013 of the European Parliament and of the Council and Regulation (EU) No 1307/2013 of the European Parliament and of the Council - Regulation of the European Parliament and of the Council on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013 - Regulation of the European Parliament and of the Council amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, (EU) No 1151/2012 on quality schemes for agricultural products and foodstuffs, (EU) No 251/2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products, (EU) No 228/2013 laying down specific measures for agriculture in the outermost regions of the Union and (EU) No 229/2013 laying down specific measures for agriculture in favour of the smaller Aegean islands

SWD/2018/301 final - 2018/0216 (COD)

Brussels,1.6.2018

SWD(2018) 301 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposals for a

- Regulation of the European Parliament and of the Council establishing rules on support for strategic plans to be drawn up by Member States under the Common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulation (EU) No 1305/2013 of the European Parliament and of the Council and Regulation (EU) No 1307/2013 of the European Parliament and of the Council

- Regulation of the European Parliament and of the Council on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013

- Regulation of the European Parliament and of the Council amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, (EU) No 1151/2012 on quality schemes for agricultural products and foodstuffs, (EU) No 251/2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products, (EU) No 228/2013 laying down specific measures for agriculture in the outermost regions of the Union and (EU) No 229/2013 laying down specific measures for agriculture in favour of the smaller Aegean islands

{COM(2018) 392 final}

{COM(2018) 393 final}
{COM(2018) 394 final}
{SEC(2018) 305 final}


Table of contents

1.Introduction: Political and legal context

2.THE OBJECTIVES

3.Programme structure and priorities

4.Delivery mechanisms of the intended funding

5.How will performance be monitored and evaluated?

Glossary 1

Term or acronym

Meaning or definition

AECM

Agri-Environment and Climate Measure

ANC

Areas with Natural or other Specific Constraints

AKIS

Agricultural Knowledge and Innovation Systems

AWU

Annual Working Unit

BPS

Basic Payment Scheme

CAP

Common Agricultural Policy

CATS

Clearance Audit Trail System

CDG

Civil Dialogue Groups

CLLD

Community-Led Local Development

CMEF

Common Monitoring and Evaluation Framework

CMES

Common Monitoring and Evaluation System

CMO

Common Market Organisation

DG AGRI

Directorate General for Agriculture and Rural Development

EAFRD

European Agricultural Fund for Rural Development

EAGF

European Agricultural Guarantee Fund

EIP-AGRI

European Innovation Partnership for Agricultural Productivity and Sustainability

ESIF

European Structural and Investment Funds

EU

European Union

FADN

Farm Accountancy Data Network

FAS

Farm Advisory System

FNVA

Farm Net Value Added

GAEC

Good Agricultural and Environmental Condition

IA

Impact Assessment

IACS

Integrated Administration and Control System

JRC

Joint Research Centre (European Commission)

LEADER

Links between actions for the development of the rural economy

LPIS

Land Parcel Information System

LULUCF

Land Use, Land Use Change and Forestry

MFF

Multi-annual Financial Framework

MS

Member States

POSEI

Programmes d'Options Spécifiques à l'Eloignement et à l'Insularité (for Outermost Regions)

RDP

Rural Development Programme

SDG

Sustainable Development Goals

SFS

Small Farmer Scheme

SMR

Statutory Management Requirements

TFUE

Treaty on the Functioning of the EU

UAA

Utilised Agricultural Area

VCS

Voluntary Coupled Support

WFD

Water Framework Directive

WTO

World Trade Organisation



1.Introduction: Political and legal context

This impact assessment accompanies the legislative proposals for the Common Agricultural Policy (CAP) Post 2020 in the context of the next Multi Annual Financial Framework (MFF). With first steps already undertaken with the establishment of an Inter Service Steering Group (ISSG) and the publication of an Inception Impact Assessment in February 2017, the work was reorganised in mid-2017 to align it to the requirements established within the Commission for the preparation of the next MFF and to fulfil the requirements of the Financial Regulation in respect of preparing an ex-ante evaluation.

Other programmes relevant for the CAP are assessed in separate Impact Assessments for the new MFF:

·While the European Agricultural Fund for Rural Development (EAFRD) is part of the European Structural and Investment Funds (ESIF) other Funds are pertinent: European Regional Development Fund (ERDF), European Social Fund (ESF), European Maritime and Fisheries Fund (EMFF) and the Cohesion Fund, as Article 174 of the TFEU governing cohesion refers to particular attention to be paid to rural areas.

·The 9th Framework Programme for Research and Innovation (R&I), that includes a component on agriculture promotion of Food and Nutrition Security and the Sustainable Management of Natural Resources aiming at supporting the growing innovation needs of a modernised CAP through stronger synergies through the development of an ambitious, integrated strategic R&I Agenda.

1.1.Scope and context

As foreseen in its Programme of Work for 2017, the Commission consulted widely on the simplification and modernisation of the CAP to maximise its contribution to the Commission's ten priorities and to the Sustainable Development Goals (SDGs). This focused on specific policy priorities for the future without prejudice to the financial allocations for the CAP in the next MFF.

The process included a large consultation, as well as analysis of available evidence on the performance of the CAP, including the relevant REFIT Platform opinions.

The outcome was presented in the Communication adopted on 29 November 2017 and entitled "the Future of Food and Farming". 2 This policy document outlined challenges, objectives and possible avenues for a "future-proof" CAP that needs to be simpler, smarter and modern, and lead the transition to a more sustainable agriculture.

In particular, the Commission 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.

It also proposed to improve the performance of the CAP based on a new delivery model that shifts the policy focus from compliance to performance and rebalances with more subsidiarity the responsibilities between the EU and the Member State (MS). The new model aims at better achieving EU objectives based on strategic planning, broad policy interventions and common performance indicators, thus improving policy coherence across the future CAP and with other EU objectives.

Public debate on the ideas presented in the Communication focused on the new delivery model of the CAP: while there is a general support to a movement towards a more result-based policy and more flexibility in its implementation, concerns have been raised regarding the need to preserve the common dimension of the policy with the appropriate safeguards at EU level that could guarantee a level-playing field as well as the adequate ambition in reaching the new objectives.

The Commission Reflection paper on the Future of EU Finances of 28 June 2017 3  set out options and scenarios for the future direction of the EU budget, calling for a shift towards new, sustainable growth and stronger focus on the provision of public goods.

The Communication "A new, modern MFF for a European Union that delivers efficiently on its priorities post-2020" 4  recalled that a modernised CAP must enhance its European added value by reflecting a higher level of environmental and climate ambition and address citizen's expectations for their health, the environment and climate. The document referred to "a prominent suggestion … to reduce and better target direct payments, in line with the objectives of the policy", with changes to the system of direct payments considered providing an opportunity to focus on expected results, such as sustained agricultural production in less profitable or mountainous regions, a focus on small and medium sized farms, investments in sustainable and resource efficient production systems and better coordination with rural development measures.

On 2 May 2018, the European Commission adopted its proposals for a new MFF for 2021-2027 5 . Under these proposals , the CAP will have a budget of EUR 365.2 billion (current prices) for the EU-27 over this period. This represents a 5% cut compared to the CAP allocation foreseen for 2020 (after deducing budget pre-allocated to the UK).

The MFF Communication stated that direct payments to farmers would remain an essential part of the policy but would be streamlined and better targeted via capping or degressive payments. This means that support is redistributed towards medium-sized and smaller farms, and possibly to rural development. Moreover, direct payment levels per hectare will continue to converge across MS towards the EU average. The Commission further specified ways to enhance the environmental and climate ambition.

This impact assessment report prepared the ground for the decisions of the MFF proposals and focuses on the changes and policy choices which are specific to the CAP.

1.2.Lessons learned from previous programmes

Established in the early sixties around goals enshrined in the Treaty, the CAP is deeply rooted in the construction and in the development of the European Union (EU). It has since undergone several waves of reforms to improve the competitiveness of the agricultural sector, to foster rural development, to address new challenges and to better reply to societal demands.

The most recent major reform was adopted in 2013 under co-decision, a first in the ordinary legislative procedure for CAP. In the context of the 2013 reform, the general objectives of the CAP were streamlined around three blocks: 6

I.Viable food production

II.Sustainable management of natural resources and climate action

III.Balanced territorial development

To assess progress towards achieving the above objectives and identify future challenges, a wide consultation process encouraged a structured debate with all stakeholders, including non-agricultural actors.

This process included an open public consultation (with more than 322.000 submissions), structured dialogue with stakeholders, five expert workshops, opinions of the REFIT Platform, contributions from the European Economic and Social Committee, the Committee of the Regions, and from National Parliaments. The results were presented in a public conference in July 2017(see Annex 2 for details).

The process also considered recommendations of the Agricultural Market Task Force (AMTF) 7 and the Cork Conference on Rural Development (2016). 8 Furthermore, evidence on the performance of the CAP was gathered from a wealth of information available on the CAP (briefly summarised in Box 1 below), which served as background for assessing the achievements and shortcomings of the CAP over the years, but especially with respect to its most recent reform.

Building on these sources for evidence and opinion, major findings about the current performance of the CAP with respect to its 2013 reform objectives are summarised in the following section, with emphasis on relevant challenges for the future CAP. In summary, these findings point towards significant successes in previous reforms of the CAP in the economic and social cohesion area, while progress in the environmental contribution of the policy has been more mixed, and especially in the need of major improvements to meet broader future challenges.

Box 1. Summary list of documentation on lessons learned from the CAP

1.Evidence collected through the Common Monitoring and Evaluation and Framework (CMEF) which serves for measuring the performance of the CAP. 9

2.A series of evaluation studies scheduled over the current Multiannual Financial Framework (2014-2020) to assess current CAP objectives, with first findings available in 2017/18 (see Annex 3). 10

3.Results concerning progress towards targets and corresponding financial envelopes available in the Annual Implementation Reports (AIR) for Rural Development.

4.Additional background documents, data, facts, figures relevant for the impact assessment have been published on the internet page of DG AGRI:

https://ec.europa.eu/agriculture/statistics/facts-and-figures_en

https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/eco_background_final_en.pdf

https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/env_background_final_en.pdf

https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/soc_background_final_en.pdf

Note: Annex 9 includes references that served as a basis for the impact assessment.

1.2.1.Viable food production

Direct payments fulfil multiple roles. Initially introduced to support the adjustment process of the sector to a more market oriented policy environment, they currently provide an income safety-net that supports the resilience of 7 million farms, contributing to more than 40% of the average income of the EU farming community (a proportion that is much higher in the most deprived regions and in some sectors). 11  

With income from agricultural activities still significantly below average wages in the overall economy (around 46% in 2017), the CAP supports the reduction of income gap between agricultural and other sectors and between Member States and regions. Without this income support, farming will not be economically viable in many parts of the EU and farmers. Beyond the negative impact on food security, phasing out the CAP would lead to land abandonment in some regions and concentration in the most productive areas. 12  

Several evaluations confirm that direct payments enhance income and provide relative income stability to farmers facing significant price and production volatility - which helps to keep the EU's vital food production base spread around the Union. At the same time, evidence suggests that the distribution of these payments, their targeting and their complementarity with interventions under rural development can all be improved. 13  

This is further supported by preliminary findings of the on-going evaluation of CAP measures addressing the general objective of "viable food production" which also indicate the administrative and management costs of the current CAP as considered to be generally higher than in the previous period.

In addition to direct payments, market instruments come into play to support farm income – mainly in times of crisis (to avoid distortion of market signals). Initial assessment of the exceptional measures deployed since 2015 confirm their effectiveness; while measures included in the dairy package were popular, their evaluation points to the risk of problems being moved forward instead of addressed, in particular as regards market imbalances. 14  

Rural development policy makes a substantial contribution in various ways. Among other things, in 2007-2013 it supported investments (e.g. 470 000 farm modernisation projects, through which EUR 10 billion of EAFRD funding led to total investment of EUR 49 billion), knowledge-building (e.g. 6.8 million days of training for farmers and others), and supply chain organisation (400 000 farms became involved in quality schemes).

Planned support from rural development programmes in 2014-2020 15 widened provisions for innovation 16 and risk management. However, evaluations point to the need to better use synergies in programming and designing measures, not only within rural development but also with other types of funding. According to the draft ex-post evaluation of the 2007-2013 Rural Development Programmes (RDP), the Objective “Improving the competitiveness of the agricultural and forestry sector” was achieved to a moderate extent at EU level. This was mainly due to trainings and investments in modern machinery and technology, improving the productivity of both human and physical capital. The average value for the related indicator change in labour productivity was estimated at 4 %. A greater potential is seen in the offer of so-called multi-functional measures which had positive effects for several fields of activity at the same time. 17

EU risk management tools complement direct payments and safety net systems to support income. In practice they are made available under RDPs, as the European Agricultural Fund for Rural Development (EAFRD) enables multi-annual payments. Causes of low uptake of EU risk management schemes have been widely analysed. 18 They include too stringent WTO Green-Box requirements (e.g. too high loss thresholds to receive compensation), budget unpredictability, lack of farm-level data, unfamiliarity of stakeholders with novel tools, and the likelihood of ex post public support reducing incentives for an ex-ante risk management approach at farm level.

Amendments introduced in the Omnibus package have addressed some of these issues, notably by lowering loss thresholds for certain instruments and introducing a new sector-specific tool for income losses. 19  

More attention should be paid to the enabling environment, such as functioning financial markets (futures to allow the development of insurance products), more transparent information exchange and overcoming the knowledge gap on risk management instruments at farm level. 20  

However, any action in this domain would need to allow for flexibility for both MS and farmers, since evidence confirms that a single model of risk management cannot be generalised across the EU. 21  

1.2.2.Sustainable management of natural resources and climate action

Land-based measures remain pivotal to achieving the environmental and climate-related goals of the EU, including clean energy production. Direct payments and associated mechanisms (cross compliance and greening) cover a large portion (90%) of the EU's farmed area and aim at mainstreaming practices beneficial for the environment.

Cross-compliance contributes to related EU objectives through the statutory management requirements (SMR) and good agricultural and environmental conditions (GAEC). However, the level of ambition for GAEC varies across MS, with the Court of Auditors noting an insufficient scrutiny role for the Commission. 22  

Since the 2013 reform of the CAP, a share (30%) of the national ceilings for direct payments is allocated to practices beneficial for climate and the environment, to be applied by farmers benefitting from direct payments, throughout the EU. The overall effects of the "greening" layer of direct payments, as currently applied, on farm management practices and the environment/climate are uncertain but appear to be fairly limited, although there are variations across MS. Its implementation is qualified as complex to manage and sometimes less ambitious than intended. 23   24   25   26

The area-based payments co-funded under Rural Development Policy build on this foundation, providing support to move beyond cross-compliance and requirements associated to direct payments. In 2007-2013, among other types of intervention, agri-environment and climate measures (AECM) paid farmers to care for soil, water, air and biodiversity in ways going beyond their legal obligations, on 48 million ha (around 25% of utilised agricultural area, UAA).

Support for investment and knowledge-building made a further contribution. Specific targets related to carbon sequestration, cutting greenhouse gas emissions and raising the efficiency of irrigation systems (on 15% of irrigated land) were added for the period 2014-2020.

The experience with agri-environment-climate measures shows that their potential could be better used, in particular to tackle local needs. Their design is not always sufficiently focused on environmental needs, often because some MS emphasise easier verifiability to reduce the risk of financial error. 27 In particular, co-ordinating the "greening" layer and agri-environment-climate payment has been challenging. 28  

Ex-post evaluations of RDPs for 2007-2013 conclude that support under Rural Development has contributed to a high extent to climate change mitigation and water management, and to a moderate extent to the protection of natural resources and landscape. Regarding the supply of renewable energy, most of the reports that have recognised a positive impact, also declared that the extent of the impact was difficult to determine and quantify. Climate change has in the meantime become an even more urgent priority, as well as clean energy transition, with important costs and opportunities to be faced by the farming community in the future. 29

In conclusion, it is clear that the "greening" measures have not fully realised their intended potential to provide ambitious benefits for climate and environment. Also, the current environmental and climate architecture of the CAP has proved to be somehow difficult to manage and complex. Both farming community and other stakeholders generally share this assessment. 30

1.2.3.Balanced territorial development

The CAP currently helps to achieve balanced territorial development both through support for the farm sector (which has strong links to the rest of the rural economy) and through direct assistance to non-farm entities and local strategies.

In 2007-2013, the CAP supported 280 000 projects related to non-farm micro-enterprises, local basic services (childcare, healthcare etc.) and other aspects of rural life – in addition to a further 170 000 projects under community-led local development (CLLD) strategies.

Ex-post evaluations for Rural Development Plans (RDP), strategies and frameworks for the period 2007-13 are predominantly positive about the contribution of RDPs to environment and climate action, as well as for growth and jobs. On the latter, the economic crisis was part of the limiting factors. Outcomes for the quality of life, diversification and innovation are more nuanced. Prioritisation within limited budget resources has had a limiting effect on innovative approaches. This support delivers benefits at the micro-level. There have sometimes been obstacles to effective targeting, including where this has required effective co-ordination with other EU funds (e.g. concerning infrastructure). 31

In the period 2014-2020, investment in the general rural fabric is continuing: further improvements to local basic services should cover a total area which is home to 51 million citizens, while 153 million people should be covered by CLLD strategies (LEADER). There is a sharper focus on ICT: 18 million citizens should be covered by better ICT services and infrastructure. Ex-ante evaluations point to a need to further enhance needs prioritisation and internal coherence. 32  

A recent addition on evidence from CAP's contribution to balanced territorial developments came from the publication of the World Bank's study of the CAP (preliminary results of which were presented to one of the IA Workshops).

While stressing the need for better targeting of support in the future, the report argues that the CAP was associated with the reduction of poverty and the creation of better jobs for farmers across the EU, although this role differs depending on where a country finds itself along the process of structural transformation. The report also stresses the positive impact of decoupled support in increasing productivity and in structural adjustment (while it does not find a significant or similar impact from coupled support). 33  

A recent report underlines that EU funding will be essential for the development of the support services sector in Europe, especially in rural areas where services are scarcer and less developed. 34  

While acknowledging that the design of the 2014-2020 programming framework was more ambitious, the European Court of Auditors (ECA) noted that the implementation was affected by significant shortcomings, for instance programmes did not started earlier than in the previous period, despite efforts. To make the programming process more manageable and efficient, the Court encourages the Commission to review the design of programming documents with a view to simplifying their content and reducing the number of requirements for the post-2020 programming period.

ECA further recommended that the Commission defines the various types of indicators more accurately to have a common set of result-oriented indicators that are more suitable for assessing results and the impact of interventions. 35  

Specific measures for agriculture have been implemented in Outermost Regions (OR) through the POSEI scheme (Programme of options specific to the remote and insular nature of the outermost regions). In its report presented in December 2016 after an external evaluation of the scheme, the Commission concluded that POSEI appears critical to maintaining agricultural production in these regions and to ensure a sufficient supply in agricultural products. 36 Following the Communication adopted by the Commission in December 2017 on a stronger and renewed strategic partnership with the EU's outermost regions, 37 no change was considered in this impact assessment for the specific provisions applying for agriculture in these regions.

1.2.4.Cross-cutting issues

Several concerns on cross-cutting issues emerged from the public debate and from studies and evaluations on the CAP. The REFIT Platform put emphasis on the perception of an excessive administrative burden of the current greening measures, the control and audit system and the growing overlaps between direct payments and rural development. 38 The stakeholders of the REFIT Platform called for a reduction of the regulatory burden of the CAP and an improvement of its value for money while ensuring the achievement of the objectives and increase its integration with other policy areas, especially with other European Structural Investment Funds (ESIF).

A study mapping the implementation of the 2013 reform of the CAP confirmed that the policy became more complex with the new flexibilities. 39 For the CAP Post 2020, MS are encouraged to establish a long-term strategy that better takes into account the CAP objectives including simplification. The public consultation on "modernising and simplifying the CAP" confirmed a widespread consensus on the idea that the current CAP tools successfully addresses current challenges to some extent only. A consensus also emerged on the EU value added of the CAP, but the excess of bureaucracy was highlighted as a key obstacle preventing the current policy from successfully delivering on its objectives.

Criticism about fairness and targeting was reiterated while the distribution of direct payments appears to remain unchanged, on average 20% of farmers still receive 80% of direct payments (although figures differ among MS). This ratio reflects land concentration, with half of CAP beneficiaries coming from very small farms while most of the payments go to medium-sized farms. 40

Another cross-cutting concern is generational renewal: only 5.6% of all European farms are run by farmers younger than 35 years. Access to land, reflecting both land mobility and farm succession constraints, together with access to credit, are often cited as the two main constraints for young farmers and other new entrants. 41 ECA recommended that CAP support should be better targeted to foster effective generational renewal. 42

The creation of the European Innovation Partnership for Agricultural Productivity and Sustainability (EIP) gave an impetus to knowledge creation and sharing, but important efforts should continue to be made to facilitate the access of farmers to knowledge. 43  

Finally, contributions in the public debate highlighted concerns on food-related issues, in particular food security, safety and quality.

2.THE OBJECTIVES 

2.1.Challenges for the programmes of the next MFF 

The total MFF allocation for the CAP for 2014-2020 in current prices amounts to EUR 408.3 billion for the EU-28, including an effect of phasing in of direct payments for Bulgaria, Romania and Croatia.

In its proposal for the next MFF, the Commission proposed an allocation of EUR 365 billion for the period 2021-2027 for the EU-27. After deducting the UK budget contribution, this amount represents a 5% cut compared to the CAP budget allocation for the EU-27 in 2020.

Within this background of the proposed CAP budget, EU agriculture and rural areas face developments that have significantly changed the broader environment and the challenges within which EU's agriculture and the CAP will have to operate. This is evident from the three major changes that have taken place since the 2013 CAP reform was implemented:

I.higher market-price uncertainty has replaced the high price/high volatility and high co-movement environment after the financial crisis,

II.trade negotiations have moved from multilateral to bilateral and regional agreements, while

III.new EU international commitments on Climate Change and on Sustainable Development Goals added new dimensions to the challenges and opportunities facing the CAP.

These shifts are reflected in the EU Agricultural Outlook, which provides updated projections for agricultural markets until 2030 under an unchanged policy assumption. 44 This outlook points to an agricultural income decline in real terms up to 2030 at sectoral level, but income per agricultural working unit is expected to increase driven by the continuous labour outflow from agriculture.

The public consultation confirmed the challenges identified with the lessons learnt from the latest CAP reform: replies about future CAP highlighted the continuous need for income support, although questions were raised about whether the current distribution of CAP support leads to the best possible outcomes, requests were made for agriculture to be more environment and climate-friendly, and expectations were advanced about farming's contribution to rural employment. Moreover, answers also reflected further societal demands about food (organic, quality) and animal welfare, while the most common answer to the open question on modernisation was sustainability.

Box 2. Stakeholder views on the CAP

·The participants to the public consultation considered that the current CAP successfully addresses the existing challenges to some extent only (57%). This view is shared among different types of respondents (farmers, other citizens and organisations).

·All types of respondents (farmers, other citizens and organisations) also share a negative reply when assessing to what extent the current CAP addresses the environmental challenges (63%).

·The excess of bureaucracy and lack of attention to sustainability was often highlighted as the main problems/obstacles preventing the current policy from successfully delivering on its objectives.

·At the same time, “greening”, aid applications and controls are identified as the most burdensome and complex elements.

·The call for a reduction of administrative burden is a generalised demand in the papers submitted by farmers and public administrations.

·The wider public also raised a series of concerns on how agriculture interacts with the environment, climate, animal welfare, food safety and consumer protection, health standards and broader sustainability challenges.

The public consultation also reiterated the call for simplification when it comes to future CAP, with specific suggestions including the reduction of overlaps between Rural Development and other CAP measures, better use of new technologies and e-government tools to reduce controls.

The public consultation and subsequent analysis also revealed concerns around three significant tensions that characterise modern agriculture in its transformation towards what is often termed as Farming 4.0 (digital farming). These tensions relate to:

·the need to improve simultaneously the economic and environmental and climate performance, which sometimes creates a short-term trade-off (the public consultation illustrated different perceptions on economic and environmental challenges);

·the risk for employment from efforts to raise productivity and growth, especially in the primary farm sector;

·the often-complex trade-off between simplification and targeting, and the appropriate degree of subsidiarity in the context of very different structural characteristics in the farming sector of 28 MS.

Turning such tensions into synergies would be the litmus test for the capacity of the future CAP to deliver in a coherent manner to its objectives, as well as those of related EU policies and priorities. Such priorities include CAP' contribution to many Union priorities, including to key priorities (Jobs, growth and investment; the Digital Single Market; Energy Union and climate action; a Stronger Global Actor; and Migration).

Synergies also link successive reforms of the CAP, that aimed at improving the sustainability of agriculture and rural areas since the adoption of the EU sustainable development strategy in 2001, to a number of UN Sustainable Development Goals (SDGs), in line with the "European Action for sustainability", which outlines that "sustainable development is an essential guiding principle for all policies". 45

Based on the lessons learnt from earlier reforms, a broader and more prospective analysis was carried out to identify problems and challenges, to anticipate needs up to 2030, in line with the horizon for the next MFF and SDGs.

Considering all the above, detailed analysis led to the classification of these challenges according to the three dimensions of sustainable development and linked them to the assessment of the related achievements and shortcomings of the CAP reviewed ahead of the Communication on "the Future of Food and Farming". 46 (These are summarised in Table 1).

Cross-cutting broader challenges such as those linked to food security, food safety, food quality, and sustainability are assumed to overarch the above challenges, and are thus not included in this table. The same applies for other cross-cutting challenges: simplification and modernisation.

Table 1. Main challenges facing EU agriculture and their consequences

Dimension

Challenge

Consequence

Economic

Pressures on farm income

Low standard of living

Weaknesses in competitiveness

Low farm income margins

Imbalance in value chains

Fragile farm bargaining power

Environmental and climate

Climate change

Extreme climate events, droughts, heatwaves, pests, forest fires

Ammonia emissions from agriculture

Impact on human health and the environment

Unsustainable soil management practices

Erosion, degraded soils, salinization, sub-optimal carbon sequestration

Inputs of nutrients and pesticides, over-abstraction (irrigation)

Water pollution and scarcity

Loss of nature and landscapes, habitats and land conversion

Loss of ecosystem and their services, reduced public goods, unfavourable conservation status

Socio-economic

Low growth, under employment, poor generational renewal

Depopulation, farm aging,
low job cre
ation

Sub-optimal infrastructure and services, social resilience

Lower quality of rural life

Inequalities between territories and groups

Rural/urban divide,
rural poverty

Complexity in terms of eligibility requirements and variety of measures leads to increased burden for beneficiaries (time for familiarising with information obligations and extent of information/evidence to be provided with applications) and lack of economies of scale for administrations. Gold-plating further increases burden as it adds unnecessary national requirements. A trade-off should be found between simplification and the need for accountability of the budget spent.

Major drivers for various problems include insufficient levels of innovation and knowledge, whether in products and processes or the provision of services. With investments in certain areas of R&D falling and difficulties in translating the results of research into practical innovation, the level of knowledge was deemed unsatisfactory.

Despite relevant CAP provisions on the Farm Advisory System, weaknesses and gaps in quality remain. Rural areas show lower participation in education and training than urban areas (in 2015 19% of the population of rural areas had tertiary education, compared with 27% of people in all areas).

2.2.Objectives for the programmes of the next MFF

CAP objectives are stemming from three different layers - the Treaty objectives, the broader policy objectives that link the CAP to other EU policies, and specific objectives stemming from the more immediate challenges identified above.

Treaty objectives

The CAP objectives, set out in Art. 39 TFEU, aim at: (a) increasing agricultural productivity (including through technical progress and optimum usage of the factors of production); (b) thus ensuring a fair standard of living for the agricultural community (including by increasing earnings); (c) stabilising markets; (d) ensuring the availability of supplies; and (e) ensuring that supplies reach consumers at reasonable prices.

Broader policy objectives: Simpler, smarter, modern and more sustainable CAP 

However, achieving the above objectives in the current context necessitates adjustments to the CAP’s objectives, which are herewith suggested as follows (see table 2).

Based on the Communication, this Impact Assessment as well as the broader EU political priorities, the corresponding policy objectives of the CAP can be summarised as follows:

·Foster a smart and resilient agricultural sector ensuring food security;

·Bolster environmental care and climate action and contribute to the environmental and climate objectives of the EU;

·Strengthen the socio-economic fabric of rural areas, including generational renewal.

These objectives correspond to the three dimensions of sustainability and complemented by the cross-cutting objectives pertaining to modernisation and simplification can be summarised in a cross-cutting manner:

·Further improve sustainable development for farming, food and rural areas; this includes addressing societal expectations about food and health;

·Promote modernisation by fostering knowledge, innovation and digitalisation in the agricultural sector and rural areas;

·Address simplification by streamlining the design and delivery of the CAP on relevant EU objectives through a shift from compliance to performance, in line with the requirements of Budget Focused on Results.

All the above is in line with the cross-cutting objectives for the next Multiannual Financial Framework: coherence, synergies, simplification and performance. The bulk of CAP expenditure is currently pre-allocated to MS to provide a degree of stability to MS and beneficiaries over the medium-term, but flexibility is offered to MS in the implementation of allocations within a newly defined EU framework.

These policy and cross-cutting objectives are broken down into more specific objectives which reflect the emphasis required by the identified challenges, Commission priorities and UN SDGs. Based on challenges highlighted in the previous section, table 2 summarises the general architecture of objectives. For evaluation and monitoring, these objectives were complemented by operational criteria that serve for the impact assessment as well as for setting up indicators (see Annex 5.3).

Compared to objectives stemming from the 2013 reform of the CAP, based on identified challenges, emphasis and/or wording are changing for some objectives and cross-cutting objectives are made more explicit within a streamlined architecture. Having three policy objectives - each of which is encompassing three specific objectives - aims at improving the balance across the dimensions of sustainable development. Moreover, the cross-cutting objective on sustainable development, alongside with the objectives of simplification and modernisation, are mainstreamed as part of this new architecture. These objectives apply to the whole CAP - they are the entry point for a single strategic planning encompassing both pillars (see section 3.3).

Table 2. Architecture of CAP objectives

Policy objectives

Specific objectives

Foster and smart and resilient agricultural sector ensuring food security

Support viable farm income and resilience throughout the territory

Enhance competitiveness and market orientation

Improve farmers position in value chains

Bolster environmental care and climate action and contribute to the relevant EU objectives

Contribute to climate change mitigation & adaptation

Foster sustainable and efficient management of resources

Preserve nature and landscapes

Strengthen the socio-economic fabric of rural areas

Attract new farmers and facilitate business development as well as generational renewal

Promote employment, growth and local development in rural areas

Address territorial imbalances, rural poverty and social inclusion

Cross-cutting objectives

Further improve sustainable development for farming, food and rural areas

Address societal expectations on food and health

Promote modernisation by fostering knowledge, innovation and digitalisation in agriculture and rural areas

Co-create innovation and share knowledge, including across generations

Address simplification and policy performance

Streamline CAP design and delivery on relevant EU objectives

3.Programme structure and priorities

In its Communication for the MFF for 2021-2027 47 , the Commission confirmed that it would propose a reformed, modernised CAP. This will allow maintaining a fully integrated single market, ensuring food security, safety and quality, as well as placing greater emphasis on the environment and climate. The reform should "support the transition towards a fully sustainable agricultural sector and the development of vibrant rural areas".

3.1.Why act through an EU-level policy?

3.1.1.Legal basis

The main legal basis for EU action stems from the Treaty (Arts. 38 to 44 TFEU), which enshrines an obligation to establish and implement a CAP. See previous section for the objectives set out in Art. 39. Other Articles of the Treaty are also relevant. Arts. 174 and 175 on economic, social and territorial cohesion include a reference to rural areas, as do Art. 191 to 193 on the environment.

This fundamental legal basis is interpreted in various legislation emphasising the strong links of agriculture to the wider economy (especially the rural economy) and to the natural environment. Art 11 states that environmental protection requirements must be integrated into the definition and implementation of Union policies and activities, in particular to promoting sustainable development. Additionally, the Charter of Fundamental Rights of the European Union provides for protection of intellectual property that includes geographical indications (Article 17).

3.1.2.EU Added value 

Most of the challenges identified above have cross-border and global nature which require a common action at EU level:

·Firstly, the single market for goods and services offers substantial economic opportunities to farmers as well as important pressures which require a common safety net, including a system of income support that avoids potential distortions of competition, and underpins food security as well as food safety.

·Secondly, the effects of increased exposure to world markets, resulting from previous CAP reforms and trade agreements can only be addressed at EU level.

·Thirdly, key sustainability challenges like climate change, water use, air quality and biodiversity are cross-border, and also require EU action to meet EU-wide objectives.

In other areas, a strong EU-wide dimension needs to be combined with more subsidiarity. These areas include food quality, public health and nutrition, rural area challenges (with big gaps in rural unemployment existing between MS), poor rural infrastructure and services, and weaknesses in research and innovation. An appropriate EU-level response to these challenges allows more effective and efficient action when combined with more flexibility at MS level. A common budget enables all MS and regions to respond to the challenges and objectives set out, including those with limited financial resources. In this respect it supports solidarity and limits gaps between regions. Furthermore, the CAP promotes networking, spreading of good practices and supports the delivery of public goods across the EU. Both the World Bank study on the CAP and the JRC study on Scenario 2030 provided additional evidence on the value added of the CAP. 48  

One of the tested scenarios in the JRC study shows notably that removing the CAP would result in an 18% drop in farm income on average in the EU, threatening the economic viability and attractiveness of rural areas, a sizeable decline in production affecting food security, land abandonment, a decline in permanent grassland and a stronger production intensification, which can lead to more pressure on the environment.

3.1.3.Subsidiarity and proportionality

The Communication on the Future of Food and Farming suggests a new delivery model for the CAP which, by rebalancing responsibilities between the EU, MS and beneficiaries, is expected to enhance subsidiarity and flexibility for MS as described in sections 3.3 and 3.4 below.

The future policy approach set out in section 3.3 is proportional. The economic, environmental and social challenges facing the EU's farm sector and rural areas require a substantial response which does justice to the EU dimension of those challenges. The greater power of choice to be offered to MS in selecting and adapting available policy tools within the CAP to meet objectives, in a more results-based model, should make it even less likely that the CAP oversteps a proportionate level of action.

3.2.Critical mass of funding/projects required

The CAP is currently implemented under shared management, with MS setting up their specific governance structures in order to ensure sound management of EU funds. With regard to a critical mass of "projects" to meet its economic, environmental and social objectives the CAP needs to offer funding to large numbers of farmers and other beneficiaries in rural areas, and improve its targeting, so that farm income, food security, food safety, environmental and climate ambition and the diversity of rural areas are adequately addressed. However, this will take place efficiently only if the total available budget is adequate.

The notion of a critical mass of projects is unlikely to be an issue for the CAP as a whole. Nevertheless, this could be critical for some MS/their authorities in some cases or for some measures. In a policy such as the CAP – which addresses large numbers of potential beneficiaries and a large physical area – there is a possible danger that support is spread too thinly to have a significant effect. The risk is perhaps greatest in the case of area-based payments (not only direct payments but also various environmental payments) but is also present in other types of support, e.g. for investment.

3.3.Envisaged changes in the scope and structure of programmes

Against the background of a difficult budgetary context, the May Communication for the 2021-2027 MFF proposes a moderate cut for the CAP budget (- 5%). 49 Nevertheless, a significant part of the EU budget should continue to be dedicated to this common policy of strategic importance.

The Communication further confirmed that the reformed policy would continue to be built around two pillars. In current prices, the following allocations are proposed:

·EUR 286.2 billion allocated to the European Agricultural Guarantee Fund (EAGF) – pillar I.

·EUR 78.8 billion for the European Agricultural Fund for Rural Development (EAFRD) – pillar II.

These agricultural funds are complemented by additional funding of EUR 5 billion from Horizon Europe, out of an allocation of EUR 10 billion proposed to support research and innovation in food, agriculture, rural development and the bio-economy.

A more balanced distribution of direct payments (pillar I) will be promoted through either compulsory capping at farm level or degressive payments. Direct payments will also continue to converge towards EU average.

For rural development, a 10% increase in national co-financing rates is proposed to rebalance the financing between the EU and Member States’ budgets, in line with what is foreseen for the other European Structural and Investment Funds. The distribution of EAFRD support will be based on objective criteria linked to the policy objectives and taking into account the current distribution across MS.

A certain level of flexibility for transfers between pillars will be offered to MS. Up to 10% can be transferred between direct payments and EAFRD, in both directions. A higher percentage can be transferred from direct payments to EAFRD allocation for interventions addressing environmental and climate objectives and installation grants for young farmers.

Although no significant changes are envisaged in the structure of the programmes of the CAP, major changes in the delivery mechanism and the scope of various interventions are proposed to respond to the urgency, the range and seriousness of the identified challenges.

On the one hand, the CAP will continue to operate through two funds. In general terms, the EAGF – (CAP pillar I) will finance the bulk of income support payments for farmers as well as market instruments, while the EAFRD – (CAP pillar II) will be the source of funding for most other types of intervention, as at present. The two-fund structure is kept, reflecting differences between the respective types of support concerned: annual and fully Union-financed (pillar I) vs. mainly multi-annual and mainly co-financed by EU and MS (pillar II).

On the other hand, the complementarity and the synergies between the two pillars will be enhanced thanks to a single strategic planning process.

As proposed in the Communication on the Future of Food and Farming and confirmed in the MFF Communications (February and May), a new delivery model will bring a fundamental shift in the CAP, moving away from compliance with detailed EU-level rules towards placing more emphasis on achieving results against the policy's common objectives, defined and agreed at EU level.

This draws on the lessons learnt from the implementation of policy and from the public consultation. Having detailed EU rules raises issues about the complexity of the policy, the limitations of a "one size fits all" approach, the effectiveness and the efficiency of the policy, including the excessive administrative burden. Moreover, there is need to strengthen the coordination and synergies between CAP pillars and interventions, and to maximise the CAP contribution to EU priorities. While striving to accommodate the diversity of situations and challenges, the policy became more and more complex and its main purposes lost visibility.

Against this background, it is proposed to further simplify the CAP and to improve its performance (Chart 1). With the proposed new delivery model, CAP design and implementation is streamlined around the EU objectives spelled out in section 2. These objectives, to be agreed at EU level, should be clearly outlined in a new basic act of the CAP that should bring together the two pillars under a common planning strategy (proposal for a regulation for CAP Strategic Plans).

Chart 1. The new delivery model for the CAP - key elements

Annex 4 provides detailed explanations and illustrations on the new delivery model, as well as an analysis of opportunities and challenges and related safeguards. In essence, each MS will draw up a "CAP strategic plan" – covering interventions planned under both CAP pillars to meet quantified targets (based on result indicators set out in EU legislation) linked to EU-level CAP objectives. The targets and planned interventions (with financial allocations) will be justified by an analysis of strengths, weaknesses, opportunities and threats (SWOT) which the MS in question will carry out with regard to its farm sector and rural areas, taking into account their planning tools emanating from EU environmental, climate and energy legislation.

MS will also need to identify how their plan performs in terms of simplification and reduced administrative burden and justify when national rules add additional administrative burden for beneficiaries.

The Commission will assess whether the draft plan sets appropriate targets and a credible approach to meeting them, and request modifications as necessary before approving it. The approval process is designed as a strong safeguard to ensure strategic planning and enhanced efficiency. While effectiveness of national CAP plans will be assessed on the basis of the needs analysis, simplification can be assessed based on the MS description of administrative burden reduction, but it can also be estimated on the basis of the complexity of the planned strategy. Identifying potential issues early on at planning stage will allow adapting the national plans and increasing their coherence with the EU CAP objectives, including simplification.

The progress of the plans will be assessed each year against the targets set in terms of result indicators (all of which will be, by their nature, closely linked to the CAP). When targets are missed by a significant margin, the Commission would request Member State to submit a formal action plan to remedy the situation. Where the intended remedial actions have not been implemented or the Member State is not willing to engage, the Commission may suspend payments. Should the problem not be solved, the suspended amounts would be definitively lost by the Member State. Such EU corrective actions would not apply at the level of beneficiaries.

The above-mentioned process will be the main means of "steering" what the CAP does, albeit in a manner less prescriptive and detailed than at present. Legislative acts will become more focused on creating a framework for MS to achieve EU-wide objectives in a more flexible way, while ensuring an EU level playing field and keeping accountability for results, in line with the principle of Budget Focused on Results.

This can be illustrated for environment and climate (Annex 4 also offers other examples). As previously mentioned, the current "green direct payments" have been heavily criticised. Among other things, what was originally supposed to be a short list of simple, generally applicable requirements expanded to encompass a mass of numerical thresholds and exemptions, and there have been loud calls for change.

But this does not mean that the new CAP will be shorn of environment - and climate-related rules connected to support payments.

A proposed new system of "conditionality" will draw on the most relevant aspects of cross-compliance and green direct payments. An extension of the scope is envisaged. This would lead to adding new requirements, for instance a ban on converting or ploughing wetlands or peatlands to protect carbon-rich soils, the use by farmers of a Farm Sustainability Tool for Nutrients that would reduce ammonia and N2O emissions, with reduced nutrient leaching and run-off expected to improve water quality. 50  

Other requirements could be more demanding than at present (e.g. crop rotation instead of crop diversification, which would bring multiple benefits such as helping replenish nitrogen in soil, reducing erosion, increasing the water infiltration capacity of the soil and preventing weeds - thus reducing pesticide use; ban on converting or ploughing any permanent grassland in Natura 2000 areas to preserve biodiversity and maintain carbon stocks).

The scope and definition of the elements included will ensure a solid foundation for a positive influence of the CAP on the environment and climate – especially as MS' planned implementation of conditionality will be assessed and approved in CAP strategic plans. But the level of prescriptiveness in EU legislation will be below that of green direct payments (i.e. with basic descriptions of the practices concerned, leaving MS to propose the details of implementation), giving MS sufficient flexibility to take into account the wide diversity of farming conditions across the EU.

This flexibility is essential for MS to meet their targets. In this respect, MS would also be able to deploy voluntary interventions promoting the provision of environmental and climate public goods, going beyond business as usual. In particular a new intervention is proposed under pillar I, the eco-scheme, aimed at enhancing the environmental and climate performance of the CAP, going beyond the basic conditionality. Additional commitments can be further supported under rural development (pillar II).

Chart 2 illustrates the changes proposed in the "green architecture" of the CAP. Enhancing current cross-compliance to a strengthened conditionality will work as a safeguard for related requirements stemming from EU legislation embedding statutory management requirements pertaining to public, animal and plant health (including relevant provisions of food law), as well as animal welfare, in addition to climate and environmental requirements.

Chart 2. Current and proposed new green architecture of the CAP

Conditionality also ensures that direct payments continue to serve several objectives (economic, climate and environmental, social). Their integration into strategic planning will further strengthen the linkage between needs, types of intervention and results. This new EU framework will still include some basic requirements, needed to ensure a level playing field, but it will enable MS to better target the implementation of direct payments according to needs.

The types of intervention which may be funded through CAP strategic plans will remain broadly like those available today – with possible amendments - and will be laid down in CAP legislation but bundled into broader categories (with fewer rules attached, as already indicated). In the following Box 3, a non-exhaustive list of such interventions is presented.

Box 3. Broad CAP interventions considered under the new delivery model

Interventions generally funded under pillar I

·decoupled direct payments;

·voluntary coupled support;

·new approaches for the environment and climate – voluntary for MS and farmers (e.g. eco-schemes, top-ups);

·some sectorial programmes;

Interventions generally funded under pillar II

·payments related to constraints (i.e. payments in areas facing natural constraints – ANCs – as well as payments related to the Natura Directives 51 and the Water Framework Directive 52 );

·(area- and animal-based) payments for voluntary management commitments;

·support for investments of various kinds;

·support for business development (including for farmers setting up for the first time);

·risk management tools;

·support for co-operation (including innovation and the Leader approach);

·support for building human capital (training, other knowledge transfer etc.).

The approach of steering policy design and implementation through plans rather than through compliance with detailed EU rules will mark a bigger change for pillar I rather than pillar II, as the new "planning" process for both pillars will have elements in common with the process for drawing up and implementing rural development programmes in the current period.

To summarise these main changes:

·Objectives: are streamlined into a limited number of general and specific objectives, applying to both pillars of the CAP.

·Interventions: the essence will remain the same but there will be a reorganisation. Current "measures" will be bundled into broader "types of intervention". More significantly, the number and detail of related EU rules will be cut back to what is strictly needed at EU level to ensure level playing field.

·CAP Plan: Member States will submit a single strategic document for both CAP pillars for their entire territory. However, where elements of the CAP Strategic Plan are established at regional level, the Member State will ensure the coherence and the consistency with the elements of the CAP Strategic Plan established at national level.

·Length of plans/programmes: the intention is that CAP strategic plans will contain less detail than current rural development programmes – though enough to judge whether MS are presenting a credible approach to meeting the objectives.

·Factual basis for designing plans/programmes: the obligation to base future CAP strategic plans on sound evidence will not mark a theoretical change from what should happen with current rural development programmes. However, a new policy period offers a chance to correct some cases of poor application of this principle. For pillar I, this implies moving from notifications to planning (MS must integrate interventions into their strategic analysis and plan, Commission must approve).

·Reporting: instead of annual notifications and implementation reports, annual performance reports will focus on outputs and results, with common indicators.

·Technical assistance and networks will be extended to cover both pillars.

In view of the large number of beneficiaries from CAP support, shared management remains the main implementation mode for the major part of the policy. Shared management provides for the possibility to establish tailor made instruments which take into account the envisaged geographical distribution.

The existing CAP governance bodies set up in the Member States, notably the paying agencies and certification bodies, have shown their effectiveness in protecting the EU budget and ensuring sound financial management and reasonable assurance. The new CAP delivery model acknowledges this situation by conferring more flexibility to Member States in deciding and managing the control systems in place. Changes in the assurance framework are explained in Annex 4.

The new delivery model for the CAP will involve a shift from compliance towards results and performance and a new distribution of responsibilities between the EU and Member States, involving substantial changes at three different levels:

1)A multi-annual programming approach that will cover the two pillars of the CAP (direct payments, sectorial strategies under the current CMO and rural development), based on a common set of objectives, indicators and a common catalogue of broad types of interventions.

2)A new system of monitoring and steering policy implementation

3)An adapted approach to get assurance and perform audit

This policy shift comes with challenges and risks that are analysed in great detail in Annexes 4 and 5. The related safeguards to minimise these are further analysed in section 4 below. Section 5 outlines changes considered in the Common Monitoring and Evaluation Framework to improve performance reporting. These various checks and balances of the policy cycle are summarised in Chart 3.

Chart 3. The checks and balances of the policy cycle

The funding mechanisms should remain mainly grants, mixed with financial instruments in the EAFRD as currently. Financial instruments may be used independently or in combination with grants. On CAP plan level they may contribute with additional financing in particular for revenue generating projects. The use of financial instruments under Rural Development is to be further encouraged in the next MFF as access to capital for the sector differs very much between MS. A limiting factor for further use of financial instruments is the lack of experience of the MS authorities. Specific actions under technical assistance will also be necessary in future to facilitate the implementation. Furthermore, the preparation and programming of financial instruments needs to be simplified.

3.4.Types of action to be prioritised

For the sake of preserving the balance across the dimensions of sustainable development, all the objectives identified in section 2 do matter. However, within their CAP strategic plans MS will respond to the EU objectives in ways which reflect the analysis of their situation and needs. A wealth of evidence drawing on the experience of implementing the CAP over many years points to a need for various types of support through the CAP – along the lines of those described in section 3.3.

The best way to meet the CAP's objectives is to strike the right balance between common rules established at EU level and flexibility granted to MS in selecting broad intervention types and designing measures within this framework. In such a way MS can better prioritise the appropriate interventions to address the objectives considering the economic, environmental and social conditions prevailing on their respective territories.

In the proposed future CAP, MS will address potential difficulties in the choices which they make (within CAP strategic plans) about how to allocate funding on their territory to achieve objectives. The easiness or difficulty of this exercise depends partly on available funding.

Significant involvement and oversight from the Commission will ensure a level-playing field with common requirements, for instance on conditionality, indicators and minimum target setting and accountability (see section 5). In the areas of the environment and climate it emerged that, although voluntary tools have a very large role to play, they need to be complemented by a certain level of "mandatory" standards, especially (but not only) regarding domains in which there is no EU legislation but nevertheless commitments for action, such as that of soil. 53  

Options testing various degrees of emphasis on EU objectives/broad interventions are assessed in the next section.

4.Delivery mechanisms of the intended funding

Options were designed to test how EU objectives can be best met (Table 2 in section 2), while reflecting broad ideas of the ongoing public debate, i.e. better targeting of payments, increased environmental and climate ambition and fostering of modernisation and simplification. In addition, the greater subsidiarity given to MS under the new delivery model to plan CAP interventions against EU objectives and to shift from compliance to performance is assessed. This section summarises the options tested in this impact assessment and presents key impacts that would result from a shift in priorities to address EU objectives (more details are available in Annex 5).

4.1.Which options are assessed?

The baseline for the period post 2020 takes into account the fully phased-in envelopes by MS and the distribution between direct payments and rural development as currently in place (i.e. after applying the flexibility between pillars). A "post-Brexit baseline" for the EU-27 deducting UK pre-allocated envelopes and related contributions was developed.

The overall budgetary envelopes for options were determined by assuming that the withdrawal of the UK would translate into an 8.9% reduction in CAP budget. In this assessment, the budget for market measures is kept unchanged as their share in total CAP support is now very small (reaching 5% of the total CAP budget).

With these instruments offering limited possibilities for cuts since they perform an essential role in times of price declines, in particular as safety net, a higher cut for direct payments (-10%) was simulated instead. Since options tested in this impact assessment could not prejudge the next Multiannual Financial Framework (MFF), they did not include assumptions on EU resources and kept the distribution of envelopes between MS unchanged. Specifications about proposals tabled by the Commission for the future MFF can be found in the summary section (4.2.7).

Since MS potential choices in their future CAP Strategic Plans are not known, options should be interpreted as illustrative of different ways to achieve these objectives, more particularly in terms of environment-climate performance as well as for targeting and re-distributing support. Because of this design, options are not mutually exclusive, and results should not be interpreted as indicative of a preferred option. Sub-options were defined to reflect the degree of subsidiarity left for MS under the new delivery model and possible differences in the level of ambition in the environmental and climate priorities of MS, as these are the areas where most uncertainty exists about these possible differences. Both voluntary and mandatory (conditionality) approaches were tested to achieve higher environmental sustainability (insights on behavioural differences for those approaches summarised in Annex 8).

To ensure an increase in environmental and climate ambition, a new basic conditionality is proposed; it includes some additional minimum requirements going beyond the current cross-compliance rules (as explained in section 3.3). While the Commission reaffirmed the need to enhance the environmental and climate ambition, this new conditionality applies to all options with different ways of articulating with voluntary measures. (see 4.2.2).

4.1.1.Policy options 54

All assessed options assume the 2013 CAP reform fully implemented and 2030 market environment as described in the EU agricultural Outlook, 55  with a value of production increasing on average by 2 % per year in nominal terms, i.e. almost stagnating in real terms and subject to risks of output variability. The initial baseline was updated to incorporate the post-Brexit budgetary envelopes.

Option 3 (incentives for environment, climate action and health) tests the potential of a voluntary eco-scheme to increase environmental sustainability. It also examines the potential role of risk management tools with lower direct payments in supporting farmers' income. Two sub-options reflect different MS environmental ambitions and approaches to direct payments:

·Option 3a: Stronger priority on environment than on economic sustainability

·Option 3b: Lower environmental ambition than in 3a, but greater focus on direct payments redistribution.

In option 4 (jointly address environmental and economic sustainability), direct payments are better targeted and the implementation of conditionality is more ambitious in order to improve the joint economic and environmental performance of the CAP, as well as address climate challenges. Sub-options are also developed to illustrate possible differences in MS ambition regarding environmental targets.

·Option 4a: Environmental and climate ambition addressed via higher requirements exceeding basic conditionality

·Option 4b: No requirements beyond basic conditionality (already more ambitious than currently).

Option 5 (focus on small farms and the environment) places strong emphasis on environmental care and employment – and shifts the focus on small and medium size farmers to keep jobs in rural areas. MS are obliged to allocate 30% of pillar I payments to provide top ups for four schemes that would be voluntary for farmers, organic farming, permanent grassland, Areas with Natural Constraints (ANC) and linear landscape elements. This ring-fencing obligation would further encourage climate action and sustainable management of natural resources.

4.2.Assessment of the analysed options

Chart 4 summarises the elements included in the analysed options and sub- options.

Chart 4. Summary of main assumptions for IA options 56

Note: The above allocation of funds to different policy interventions in the various options is purely based on assumptions for purposes of analysis and is in no-way indicative of preference of a specific option. Some differences were on purpose made wide so that differential impacts could be better assessed.

Options 4a and 4b are similar in terms of direct payments.

Interventions: BP= Basic Payment, RP= Redistributive Payment, YF= Young Farmers, RM= Risk Management, AECH = Agri-Environmental-Climate and Health, VCS= Voluntary Coupled Support, Comp= Competitiveness, EIP= European Innovation Partnership, ANC= Areas with natural constraints.

The different budget allocations and interventions were translated into more detailed schemes and payment levels for modelling purposes. Some environmental requirements were selected in view of their modelling feasibility for the purpose of testing the options. In particular, a number of requirements considered under the new conditionality could be assessed (crop rotation, winter soil cover, nutrient management, minimum share of area devoted to non-productive features, restrictions on permanent grassland…).

These were applied at farm level, regional or national level depending on the model used and results could be aggregated at EU level. More explanations on what was precisely modelled in this impact assessment can be found in Annex 5.1. In addition, to cover the items which are not sufficiently captured by the models, and to summarize the impact of the options vis-à-vis the baseline, Multi-criteria Analysis, including an extensive literature review, was used (See Annex 5.2).

4.2.1.Impact on farm income

The role of direct payments in stabilising farm income is generally recognised, but both the Communication on the Future of Food and Farming and the MFF related documents called for a more balanced distribution of support. This possibility was further explored across the various options in three ways: a compulsory capping of direct payments, degressive payments as a way of reducing the support for larger farms, and with enhanced focus on a redistributive payment in order to be able to provide support in a targeted manner e.g. to small-medium sized farms.

A different focus on environmental and climate payments also affects the distribution of support, and thus income. In option 3 basic payments are significantly reduced and support is targeted towards a new voluntary eco-scheme; option 3a is more environmentally ambitious, but entails no further redistribution of support (as direct payments are reduced), while option 3b is less environmentally ambitious, but combined with more redistribution, capping and coupled support. Option 4 tests jointness by coupling direct income support with extra environmental requirements, while also redistributing towards permanent grassland; the latter is associated with lower incomes. Option 5 targets small and medium size farms.

A note of caution is necessary about the interpretation of results. In this analysis, farm income decline is overestimated, as the model used does not account for structural change, iterative price feedbacks and longer term benefits due to changes in production systems. Nonetheless, the analysis gives an accurate indication of the relative performance of the various options in the short-term, as well as of the expected impact on different farm types and sectors.

Cumulating budget cuts, redistribution and higher requirements weighs on the scoring of options

The quantitative assessment of income impacts (see Table 3) shows that the baseline pre- Brexit outperforms all options (given the higher budget). The baseline post-Brexit (which implies a linear cut) already has a significant impact on income in some sectors (Graph 1). In addition to the budget reduction, alternative allocations (e.g. towards risk management), redistribution of support (e.g. towards small farms and regionalisation) and the additional environmental requirements in the options bear on the final impact of options on average EU income level.

Table 3. Impact of policy options on EU average farm income

Relative to

baseline
pre-Brexit

Relative to baseline post-Brexit

Post Brexit

3a

3b

4a

4b

5

Direct payments

-10%

-75%

-40%

-6%

-6%

-26%

Total support

-10%

-11%

-7%

-4%

-4%

-6%

Income

-2%

-10%

-5%

-8%

-5%

-5%

Note: Direct payments include BP, RP, YF, VCS; Total support includes Direct payments, eco-schemes and ANC.

Source: JRC, IFM-CAP

Compared to the post-Brexit baseline, farm income declines on average by 5% in option 3b, 4b and 5; the decline in options 3a and 4a is higher, 10% and 8% respectively. The latter difference is explained by the very low basic payment in option 3a as budget is devoted to other measures. When adding other criteria, such as targeting smaller farms and farms with lower incomes, option 5 outperforms the other options in terms of income distribution. However, this result is also conditional to the fact that the total level of support (EU and national) is maintained in areas with natural constraints (ANC).  57

Sectorial impacts differ and are substantial (Graph 1 and 2). The cut in direct payments (baseline post-Brexit and option 3) has a strong effect on cattle, crop, sheep and olive producers because direct payments represent a large share of their income. In addition, cattle and sheep sectors, where significant coupled support is currently granted, are by definition more affected when coupled support is removed (option 3a).

Furthermore, the stronger the link to high historic references the higher the income drop due to the regionalisation of the basic payment (flat rate) and to capping (options 3a and 4). This is typically the case for olive growers, intensive livestock and cereal producers. The redistribution of support to smaller farms (options 3b and 5) leads to higher income drops for larger farms (mostly cereal producers and extensive livestock farms), while olive growers (on average 65% smaller than the average EU farm) benefit from this redistribution.

By contrast, the redistribution of support to permanent grassland benefits to extensive systems (option 4 and 5). Finally, the higher requirements to increase environmental performance have a bigger impact on crop producers; a 3 year rotation affects particularly sugar beet and potato producers.

Graph 1. Impact of a 10% linear cut in support on EU income by type of farming

Graph 2. Impact of a shift in priorities applying on top of a support cut on EU income by type of farming

Source: JRC, IFM-CAP

Source: JRC, IFM-CAP, changes relative to option 1

Impact on income depends on choice of target

The quantitative analysis shows that targeting small and medium size farms can be best achieved with decoupled payments modulated by size (combining both degressivity of payments by size and capping). However, this redistribution results in undesired effects: a strong reduction in support for very large farms (more than 500 ha, employing 20 persons on average), an increase in basic payments for more intensive farms (smaller on average, selecting products with higher returns), as well as a decline of support to most extensive farmers.

Therefore, in option 5, whose support redistribution is based on such a mechanism, the latter effect can partly be compensated with coupled support to extensive livestock systems and top-ups to permanent grassland. Granting a redistributive payment (top-up on first hectares of the farm, as applied in option 3b) is another possibility to redirect support to small-and medium-sized farms, while limiting undesired effects of a payment modulated by size.

Coupled support, if not well tailored, can lead to unfair competition and affect the EU level playing field. In addition, contrary to decoupled payments and pillar II support, it hampers productivity gains. However, it can address specific issues that the decoupled payment would otherwise leave unresolved. Coupled support could be limited and granted to sectors identified by MS as undergoing certain difficulties, in line with the EU legislative framework.

Targeting EU support to environmental benefits via top-ups to permanent grassland, organic farming and biodiversity-enhancing elements could be envisaged by MS in their CAP strategic plans (option 5). However, the analysis shows the difficulties linked to obliging MS to have the same share of pillar I envelope to be dedicated to these top-ups and ANC due to significant differences in these features across MS.

Capping direct payments per farm can address concerns about the high level of support received by few large beneficiaries. However, a correction for salaries paid could be considered since often these large farms provide a large number of jobs, all the more since they are mainly located in central Europe where income levels are lower. In the absence of further convergence of direct payment level (option 3b), capping per hectare (proportional to the national or regional average payment) could limit differences in support between farmers. However, this will have more negative effects on Southern MS and on certain sectors (e.g. olive oil, cattle).

In addition, the introduction of a capping with the objective to create savings could go against cohesion and convergence, concentrating the burden on a few MS (notably BG and RO, which one would expect on the contrary to benefit from convergence). By contrast, it could be envisaged to redistribute the capped amount to smaller beneficiaries. Finally, lower available budget and shifts in priorities as well as possible reductions in direct payment imply potentially lower capped amounts.

Overall, quantitative analysis demonstrates that the most effective way to achieve a reduction in support concentration is to modulate decoupled payments by size (e.g. by classes of hectares as included in option 5) and, second, to introduce a redistributive payment.

In mountain areas, farmers’ income is nearly 40% below the income of farms located outside areas with natural constraints (ANC), and in other ANCs the income is more than 30% lower. Any cut in this support might threaten the viability of farms in ANC, which have a key role for the vitality of rural areas and for the provision of environmental services. This result is also supported by findings of the recent World Bank study, which shows that the CAP contributes significantly to poverty reduction in rural areas. This is why maintaining support to ANCs is key, even when other interventions are cut. Thus, for MS with large ANC area, it is better to keep ANC payments in pillar II, where co-financing allows granting higher support, while keeping EU funds to address other challenges. In addition, income disparity between ANCs and outside ANCs can be reduced with a redistribution of support to permanent grassland (options 4 and 5) and increasing support to ANCs.

4.2.2.Impact on higher environmental and climate ambition

The higher ambition of the new CAP in terms of environmental sustainability is reflected in an increase of minimum green requirements of the new conditionality applying in all options. These green requirements, applying in the whole EU, go beyond the current cross-compliance rules and account for current greening provisions while overcoming some drawbacks in its implementation identified in previous analyses. In addition, the removal of exemptions automatically broadens the area covered by conditionality.

Beyond these minimum requirements, MS would have the possibility to define stricter conditionality requirements and opt for voluntary schemes, via an eco-scheme or via agri-environment, climate action and health interventions (AECH). 58 Moreover, the assumed budget allocation to AECH, EIP and FAS is another determining factor partly explaining the difference in the environmental performance of the various options.

Voluntary schemes come with more uncertainty

From the Multi-Criteria Analysis (MCA), which combines a qualitative assessment with elements from the quantitative assessment, it emerges that the more ambitious environmental schemes (options 3a and 4a) perform best in terms of addressing environmental and climate ambition.

The MCA also finds that the overall environmental outcome depends on the uncertainty surrounding the coverage and implementation of measures by MS. An approach based on ambitious conditionality (option 4a) seems to be more effective than a voluntary approach as it is easier to control and it avoids annual budget swings. Most importantly, it ensures the engagement of all farmers: conditionality works as a safeguard to enforce the law and any additional requirements set at EU or MS level. 59

Furthermore, enhanced conditionality could perform better where there is no existing regulation in place (e.g. for soil) or if the issue is of general concern (e.g. climate change). As enhanced conditionality needs to apply to all farmers concerned, it will be necessarily less demanding/targeted compared to the eco-scheme. Option 5 also scores high on environmental outcomes as it combines both conditionality and environmentally targeted top-ups. But the effect of these top-ups is not uniform across MS, as highlighted in the previous section, because of the significant differences in features across MS, such as permanent grassland and organic area.

A voluntary eco-scheme is more effective in the case of hot spot problems as it can better target the desired environmental outcome. Typically under a voluntary eco-scheme, those already performing well will sign up, while those lagging behind will hesitate to engage if the provided incentive is not high enough, all the more as the economic incentive remains key for farmers to change practices (see Annex 8 on behavioural insights).

Thus, in order to stimulate ambitious environmental and climate choices, additional safeguards (e.g. target setting or budget earmarking) would be needed. The approval of CAP plans by the Commission will serve as a first safeguard to ensure sufficient ambition is translated into adequate targets and financial means, while performance reporting, and incentives for performance, will bring MS to follow up on their ambition.

All analysed options show potential for climate and environmental gains

Previous analysis shows that there is a need to give an incentive to farmers in order to reduce GHG emissions. The EcAMPA project showed that, in the absence of a compulsory emission reduction target for agriculture, a subsidy covering 80% of the costs of mitigation technologies, could deliver significant non-CO2 emission reductions, with little negative impact on EU production.

However, a widespread adoption of these practices by farmers would come with considerable budgetary and unitary costs and imply substantial incentives. The fact that such incentives are not explicitly included in the present analysis (also because of its budget-neutral assumption) explains why only small reductions in non CO2 emissions compared to baseline are reached in this assessment.

In the present quantitative assessment, the main driver for the reduction in N20 emissions is the introduction of a farm sustainability tool for nutrients with reduction targets of N-surplus. Close to 60% of the total reduction in GHG emissions is achieved via mitigation technologies in option 4a, while it is around 25%-45% in the other options. The major part of the reduction is due to precision farming and the use of nitrification inhibitors out of four farming practices modelled.

However, the positive effect of a reduction in GHG emissions is partly offset by leakage of emissions to other parts of the world. This effect is the strongest in option 3a due to the strong decline of EU beef production replaced by imports from less efficient regions in terms of GHG emissions/kg of product. The qualitative assessment considered that the main factors to reduce non-CO2 emissions are policy measures that impact on cattle numbers and fertiliser use (included in options 3a, 4a and 5); not all such measures could be modelled in this exercise.

The analysis assumes that the minimum conditionality requirement to maintain the share of permanent grassland in UAA and the redistribution of support towards permanent grassland (option 4 and 5) both favour the preservation and sequestration of carbon, and therefore reduce CO2 emissions. This might also lead to the maintenance of animal numbers, but the net impact on emissions is always difficult to assess. The protection of wetlands and peatlands under basic conditionality in all options is clearly seen as an improvement compared to current policy as it preserves or restores the large existing carbon pool.

The assessment explored how the introduction of farm sustainability tool for nutrients combined with nutrient reduction targets could contribute to improve water quality, concentrating the analysis on nitrogen and introducing reduction targets, differentiated by regions according to their N surplus and to the possibility they have to trade manure.

The imposed reduction targets were met with an average reduction for the EU of close to 4% of N-surplus in the most constraining scenario. Farmers take advantage of more N-efficient technologies and are reducing significantly the use of mineral fertiliser, by 1.5% (option 3b) to 5% (options 3a and 4a).

The analysis shows that cover crops can potentially reduce soil erosion on arable land by 15% and on permanent crops by 30% with a cover rate at 75% in the EU. They can also produce additional biomass for energy (e.g. biogas) and non-energy uses, without land use competition (although these impacts were not assessed in the model simulations). However, soil cover is not systematically used by farmers and not sufficient to decrease soil erosion. Therefore, the winter soil cover requirement would need to be combined with other measures e.g. crop rotation, in order to reduce erosion to acceptable levels in all MS. Crop rotation obligation leads notably to a decline in grain maize and durum wheat area, which are more often cultivated in monoculture.

The simulated obligation to dedicate 3% of the UAA to non-productive elements such as set aside, fallow land, linear elements and afforested area is binding in several MS (and thus for many farmers) and should contribute positively to improving biodiversity.

This IA shows the efficiency of some specific requirements in addressing challenges. Within the EU legislative framework, based on the analysis to draw their strategic plans, MS should select the most relevant interventions and requirements to address local and national needs.

4.2.3.Strong CAP needed to address societal expectations on food and health

As stated during the public consultation and in the Communication on the Future of food and farming, the CAP is expected to respond better to consumer demands on food and health. Related societal expectations stretch over various food-related aspects such as food security, safety and quality, affordability of food, health issues such as pesticide load and antimicrobial resistance, food waste and agricultural losses as well as responding and anticipating to changing demands. These issues are covered across several of the objectives against which the different options are tested 60 .

Regarding food security, the Scenar 2030 study 61 clearly shows the negative impact of removing the CAP on EU production and trade balance. In addition to the overall level of production (-6%), the impact on its localisation needs to be considered (concentration in most productive areas, abandonment elsewhere). For the other options tested in this Impact Assessment, the quantitative analysis 62 shows a predominantly negative effect on the EU's net trade balance due to the increased environmental climate requirements, the redistribution of support and the budget cut.

The impact on food safety is not assessed as it is part of the basic requirements and should be ensured in all options. On top, advances in reduction of pesticide load and antimicrobial resistance are analysed for the different options in the qualitative part under the environmental objective.

The many societal expectations on food and health touch upon several economic, social and environmental objectives. None of the tested options achieves best scores on all items, hence the interest of complementary approaches. As an example, to quickly transmit consumer demands to farmers, the policy should not blur market signals (e.g. through excessive use of coupled support), provide for a well-functioning advisory system, create synergies along the value chain (e.g. by organising farmers in producer organisations) while also leaving room for short supply chains. Food waste and agricultural losses can be reduced by stimulating efficiency gains (through advice, extension and investment support) and further embedding agriculture in the bio-economy (innovation, investment on farms and in rural areas).

4.2.4.Assessing how options address specific objectives

From the quantitative analysis it becomes clear that budget cuts together with changes in income support and higher environmental ambition have strong negative effects on farmers’ income, with a decline of overall farm income in the options compared to the baseline. CAP support is crucial in reducing the income gap between agricultural income and other economic sectors and between Member States and regions.

The analysis further shows that budget cuts have strong negative effects on farms viability for cattle, sheep and cereal producers, sectors for which direct payments represent a large share of income. A re-allocation of support to production systems contributing to environmental sustainability, notably through coupled support to extensive livestock production systems and redistribution of support to permanent grassland, can attenuate their drop in income.

The qualitative assessment on its turn shows that none of the options come close to the theoretical maximum (100), so combining the strong points of the different option designs will further increase the performance (Graph 3). In general, the policy compensates for the provision of public goods, which are not sufficiently rewarded by the market, resulting in better scores on the environmental and social objectives.

From the analysis, several trade-offs emerge. Enhancing the environmental and climatic performance of the CAP will contribute to preserve natural resources (e.g. the soil) to produce in a more sustainable way; over the medium and long term, this is expected to have positive effects on productivity. However in the short term, it could come at an economic cost for farmers and the agri-food sector.

In particular, the extended requirements considered under the new conditionality (e.g. obligation to dedicate more land to non-productive elements, land re-allocation to fulfil crop rotation and cover crop costs) lead to a significant decline in cereal area in favour of set aside and fallow land, and thus to a decline in market revenue of arable crop producers as well as to a deterioration of the EU trade balance. Approaches supporting the shift towards different production systems and new technologies are necessary to smoothen the impact on farm income and food security.

Graph 3. Effectiveness of the options towards the policy objectives

(details for sub-options a and b below)

Also from options comparison, potential trade-offs between policy objectives emerge. This is for example clear for sub-options 4a and 4b, with 4a scoring better on environmental objectives, while 4b scores better on economic objectives, as it is less environmentally demanding. From a pure economic point of view option 3a performs best because the stronger reduction in the basic payment is supposed to trigger faster structural change, making the agricultural sector, after an abrupt transition, more efficient and resilient (for example by using more risk management tools). This comes at the detriment of the social (and potentially environmental) dimension, as fewer farms will survive. By contrast, option 5 contributes greatly towards social objectives but attains a lower score on the economic objectives. As explained in Annex 5, according to the Multi-Criteria Analysis, its strong focus on small farms is hampering structural change driven by economies of scale.

Regarding consumers' demands on food and health, the (sub-) options scoring better on price and economic efficiency underperform somewhat with respect to contributing to healthier lifestyles and sustainable use of pesticides and antibiotics. So also here there is a trade-off between higher priced food with higher environmental and health quality attributes versus lower priced food.

A transfer of funding from direct payments to risk management tools could potentially help farmers facing income variability. Risk management tools should be seen in combination with the direct payments and market measures that also provide a buffer against volatility. As shown in Annex 5, compensating income drop via an income stabilisation tool for all EU farmers is very costly. 63 It would need to be targeted to those that are more frequently exposed to high income variability and have fewer alternative tools available (futures, insurances, etc.).

This targeting could drive support away from sectors where the main problem is the level of income rather than its variability, for which direct income support remains a better solution. Furthermore, there is no guarantee of uptake given the complexity of such tools and the need for farmers to get organised (e.g. to create mutual funds). 64

Rendering the access to a possible agricultural crisis reserve conditional to the use of risk management tools at farm or sectorial level might result in penalising certain farm types, especially the most vulnerable and unprotected, not always in the best position to adopt risk management tools. In addition, it would generate deadweight losses as those who already receive compensation from their risk management schemes would also benefit from the crisis reserve. Finally, the heterogeneity of risks and tools related to price, income or climate makes compliance to conditionality difficult to assess at farm level.

4.2.5.Research and innovation can turn tensions into synergies

Agriculture research may deliver new insights which often remain confined to the scientific world only; also, the agricultural sector itself has a considerable and under-used innovation capacity. Overall, with take up of new knowledge and technology still rather slow, bridging the gap between research and farming practice is key.

The tensions identified in the previous sections between enhanced environmental ambition and viable farm income can be partly bridged and turned into synergies in a well performing Agricultural Knowledge and Innovation System (AKIS). Current technological advances offer an unprecedented opportunity to move toward modern farming - more sustainable, resilient, and productive, to a significant extent also based on EU advanced technologies (e.g. Copernicus). Nature-based solutions can also be further considered, and knowledge from their applications better spread. However besides advice, farmers need support to adopt innovation, as the positive effect on income comes after several years and some environmental requirements will lead to lower returns, at least in the short/ medium term.

The basis for enabling an innovation environment is a well-functioning AKIS, where the actors and potential partners in innovation projects can meet and discuss the main challenges, and be fed with innovative knowledge. The efficiency and effectiveness of advisory services can best be upgraded by improving their connections within the AKIS and sharing knowledge and innovative applications more intensively.

Enhancing interactive innovation is essential to develop solutions which are more ready to be applied in practice and cover real needs. Supporting digital transition in agriculture is needed to make sure the potential of digital technologies is fully realized.

All options score significantly better in this area, especially compared to the baseline post-Brexit. The CAP plans should include a strategic approach towards modernisation, which will be followed up in the performance reporting. Experts consider that most significant impact on this objective is to be expected from the EIP, hence its budget allocation is significantly increased in the alternative options. Other instruments, such as the young farmer payment, or additional budget for competitiveness or infrastructure and services, are also important to facilitate innovation uptake.

A digital farm dossier, as well as organising the data gathering and sharing through the whole supply chain can lead to the simplification of the CAP administration, monitoring and management systems; together with the building of efficient learning networks useful for cross-policies implementations. (Additional insights are available in Annex 6)

4.2.6.Synergies from greater flexibility and focus on performance 

Annex 7 assesses the simplification under the new delivery model, driven by the shift towards performance and a streamlined CAP implementation approach. Simplification of programming and notification procedures, better adaptation to local needs and better coordination of the actions of the two pillars can reduce administrative burden and can also improve the acceptance of the CAP.

Higher policy coherence could also result in simplification for administrations and farmers alike. 65

Less prescriptive EU compliance elements and less detail for measures and eligibility rules would allow economies of scale for checks and reduce burden for planning and applications as less time would be required for familiarising with information obligations. Performance-orientation allows putting less emphasis on ex-ante checks, reducing further administrative burden for applications (less evidence to collect/submit) and for administrative checks (less evidence to check). Cutting down on EU requirements also provides for simplification of audits performed by the Commission.

Option 4 holds potential for improved performance with reduced administrative burden because of the lower uncertainty of conditionality compared to eco-schemes, which are dependent on their uptake by farmers. High potential reduction in administrative burden stems from the lower variety and complexity in the schemes taken up by MS, which simplifies administrative processes at all levels. While orientation towards performance is assessed as comparable for options 3 and 5, uncertainties in simplification derive from the divergences in ambition and related interventions, and how these translate into the administrative processes. With regard to proportionality of administrative burden options 3a and 5 score best, due to their higher effectiveness. However, under greater subsidiarity, the development of national CAP Plans and the way administrations implement them at beneficiary level will strongly determine the resulting simplification and performance.

Safeguards and mitigating measures built into the policy cycle should guarantee that both are met. The EU legislation will include a number of safeguards for anticipation of risks such as imbalanced strategies, inadequate targeting or lack of ambition. Safeguards include requirements for content of CAP plans, more ambitious EU basic requirements (e.g. conditionality), a rule on no back-sliding/increased ambition, and budget earmarking.

The need to increase the environmental performance requires securing some minimum requirements (current cross-compliance plus greening) via conditionality. This was tested across all options, as their basic conditionality contained higher environmental requirements compared to the baseline. The comparison of the options indicates that setting minimum requirements works well. In option 4a, minimum requirements for environmental and climate action were set at a higher level, resulting in a better environmental performance compared to the baseline. At the same time, the level of prescriptiveness in EU legislation will be lower and MS will define the details of implementation of conditionality leading to simplification.

While ambition under measures like conditionality can bring some certainty on performance, enhanced incentives (some degree of budget earmarking, performance bonus) to performance could also be needed. As the comparison between option 3a and 3b shows, when more budget is allocated to the eco-scheme, the environmental and climate performance also improves.

Approval of CAP plans is thus an essential safeguard to assess the completeness, consistency, coherence and effective contribution to the CAP objectives of the national strategy. CAP plans should include elements related to simplification and reduced administrative burden for final beneficiaries. Synergies between economic, social and environmental objectives can be achieved from better targeting on local needs. Planning based on needs analysis allows for adequate targeting of measures to regional needs.

The setting of targets in the CAP plans is an important safeguard to monitor whether MS action is genuine and delivering on the ground. Appropriate attention should be paid to translating these targets at regional and beneficiary level. It is hence at planning stage that possible issues can be first detected, such as imbalances, incoherencies, lack of ambition and gold plating. The continuous and strengthened technical assistance from the Commission throughout the planning process can help for a better understanding of EU requirements in terms of planning and so avoiding delays at time of approval. The scope of the current network for rural development will be extended to the first pillar, to cover the whole CAP Plan.

The annual performance review process constitutes a further basis for detecting upcoming risks, such as issues with data quality or first signs of underperformance. In case of underperformance or deficiencies, the European Commission will be able to take corrective actions including the request to Member States for an action plan for remedial actions, suspension of payments and financial correction. Last but not least, timely evaluation will identify remaining issues, by assessing the effectiveness of the CAP and the realised administrative burden reduction, and allow taking on board lessons for the next MFF.

4.2.7.Summary of results in the context of the next MFF

The results of the present analysis point out that difficult trade-offs are inherent when the basic parameters of a policy addressing diverse objectives are significantly changed.

With respect to farm income, both the level and the distribution of support matter. Securing an adequate level of support and thus farm income remains a key element for the future, in order to ensure food security, environmental and climate ambition, as well as rural vitality. In a context of growing market uncertainties, there are limits in pushing the uptake of risk management tools, as they come at a significant cost and are not equally available and efficient in all sectors and regions. Moreover, targeting support to small and medium sized farms and areas with natural constraints can help keeping more jobs on farms and farming activity on the whole territory, hence strengthening the socio-economic fabric. In addition, capping and degressivity can improve the distribution of direct payments. It is clear that any option that significantly redistributes direct payments towards farms and regions of lower productivity will, in the short-term, lead to a reduction of EU competitiveness, while it enhances the protection of environment.

Less clear, however, is the appropriate combination of measures that could mitigate negative income and competitiveness effects, while at the same time better addressing challenges that are also pertinent for agriculture - such as environment and climate, and societal expectations. This requires incentivising adjustments that improve both the economic as well as the environmental performance of the sector and its modernisation.

Contributions from the stakeholder consultation and analyses demonstrate that this is possible, provided that the necessary accompanying measures addressing a higher environmental and climate action ambition enable the adoption of best practices (in both conventional and other forms of farming) that include knowledge, innovation and the latest pertinent technology. In addition, as shown in various analyses, the economic incentive for farmers remains a key element to promote the uptake of these practices.

On the basis of the assumptions and choices made in the present analysis, Graph 4 below summarises the potential trade-offs in the achievement of economic, environmental and social objectives of the CAP, as well as with respect to its desired modernisation and simplification. In summary, redistribution could lead to manageable income impacts, and support the desired increased ambition of environmental and climate action and other CAP synergies. This, however, would require that the sector and the policy grasp the opportunities offered by innovation and technologies already allowing modernisation and simplification.

Other assumptions and choices would certainly alter this graph, but not its underlying message – that the preferred option for the future CAP should combine the most performing elements of the various options, but avoid their weaknesses by introducing the necessary safeguards to ensure an EU level-playing field. This implies the need for clear criteria for the level and the distribution of income support, the climate and environmental conditionality and overall ambition, the incentives for modernisation and the appropriate degree of subsidiarity/simplification.

Graph 4. Overall assessment of options performance towards policy objectives

On the basis of the assessment of all these options and combinations thereof, further specifications can be added on elements included in the proposals for the next MFF for the CAP (both under the May MFF Communication and the CAP legislative proposals):

·Cut in CAP budget: the cut of 5% proposed by the Commission is within the range assessed in this impact assessment, and appears moderate in the difficult context for the next MFF. While accounting for revealed MS preferences as regards transfers between pillars, options tested various combinations of allocations between broad interventions. This shows that the combined effect of the cut in budget, the redistribution of support and the emphasis put on environment and climate is significant. Distribution of support across broad interventions matters for achieving common objectives assigned to the CAP, hence the relevance of considering some degrees of earmarking/ring-fencing.

·External convergence: It is proposed that all MS with direct payments below 90% of the EU average will close 50% of the existing gap to 90%, in continuation of the process started in the period of 2014-2020. All MS above average will contribute to financing this external convergence of direct payments levels. It means that the envelopes distribution between MS proposed is somewhat different from the one used in this impact assessment. Further analysis confirmed that external convergence contributes to cohesion by reducing differences between MS.

·Capping or degressivity of direct payments will promote a more balanced distribution of support. As shown in the analysis, the impact of capping or degressivity should not be used to create savings and should remain budgetary neutral for MS. Therefore, it is proposed that the product of capping could be used to finance a redistribution of support to smaller farms within the same MS or potentially be transferred to pillar II. Within this impact assessment, capping was tested in all options, with a ceiling ranging between EUR 60 000 and 100 000. Moreover, the analysis pointed to the importance of taking into account labour cost when applying capping, to avoid negative effects on jobs. To further acknowledge family labour, related costs could also be taken into consideration, especially with a low ceiling.

·Rural Development: In line with other ESIF, it is proposed to increase the national co-financing rate for rural development by 10%. However, less developed regions should continue to benefit from higher EU co-financing rates. This should also apply to interventions of EU priority such as LEADER and the payments for Agri-Environment, Climate and Health.

·Higher level of environmental and climate ambition, thanks to safeguards:

oThe strengthening of conditionality: the analysis showed that this works as a safeguard for ensuring observance of the requirements covered by the extended conditionality.

oThe introduction of voluntary eco-schemes in pillar I.

oThe ring-fencing of a significant part of pillar II funding for environment and climate action.

oClimate mainstreaming: in line with the Paris Agreement and the commitment to the United Nations Sustainable Development Goals, the Commission proposes to set a more ambitious goal for climate mainstreaming across all EU programmes, and thus the CAP, with a target of 25% of EU expenditure contributing to climate objectives. This should be seen together with ring-fencing, as many interventions deliver win-win effects for both climate and environment.

·Market measures: against the background of budget cut and needs for external convergence, a limited reduction of pre-allocated amounts is proposed. On the other hand, the operation of the crisis management reserve is smoothened. Moreover, it is proposed to transfer part of the interventions currently undertaken under the Common Market Organisation (CMO) with sectorial programmes under the CAP Strategic Plans. This will enhance the coherence of sectorial interventions with the objectives of the CAP. Based on the effectiveness of existing programmes, it is proposed to extend this possibility to other sectors within a given budget allocation.

·Crisis reserve: A new agricultural reserve will be established in the EAGF, to provide additional support for the agricultural sector for the purpose of market management or stabilisation or in case of crises affecting the agricultural production or distribution.

·Risk management: Access to the crisis reserve will be conditional on the set-up of a risk management strategy at national level (not at farm-level). Risk management tools are to be included into the CAP strategic plans, and a platform will facilitate exchange of experience.

5.How will performance be monitored and evaluated?

A shift towards a more performance-oriented policy requires the establishment of a solid performance framework that, based on a set of common indicators, will allow the Commission to assess and monitor the performance of the policy.

The current Common Monitoring and Evaluation Framework (CMEF) and the current monitoring system of Direct Payments and Rural Development would be used as a basis for monitoring and assessing policy performance, but they will have to be streamlined and further developed (including consistency between the two pillars). Further investment into developing appropriate indicators and ensuring sufficient data streams would be needed.

A new Performance Monitoring and Evaluation Framework (PMEF) will cover all instruments of the future CAP: the CAP strategic plans as well as those elements of the CAP not covered by the CAP plans (some parts of the Common Markets Organisation, specific schemes). Performance would be measured in relation to the Specific Objectives of the policy by using a set of common indicators.

5.1.Experience from the current Common Monitoring and Evaluation Framework

5.1.1.Two different Monitoring and Evaluation approaches 

The 2013 reform of the CAP established, for the first time, a monitoring and evaluation framework that would cover the whole CAP (both pillars). This framework has undergone some changes in terms of promoting simplification and coherence while still maintaining an indepth coverage of policy interventions. The monitoring and evaluation framework for the CAP 2014–2020 is set out by EU regulations at different levels:

·The horizontal regulation (Regulation (EU) No 1306/2013, Article 110) establishes a common monitoring and evaluation framework with a view to measuring the performance of the CAP. It covers all instruments related to the monitoring and evaluation of CAP measures and in particular direct payments, market measures and rural development measures.

·More specifically, for pillar II (rural development), the monitoring and evaluation system is set out by: the common provisions regulation (Regulation (EU) No 1303/2013), which defines the common monitoring and evaluation elements for the European Structural and Investment Funds (ESIF); and the rural development regulation (Regulation (EU) No 1305/2013), which addresses the specificities for the rural development programmes.

In the current framework, the performance of the CAP measures is assessed in relation to the three general objectives of the current CAP (i.e. viable food production, sustainable management of natural resources and climate action, and balanced territorial development) and, in the case of pillar II, in relation to the thematic objectives and rural development priorities for the Europe 2020 strategy for smart, sustainable and inclusive growth.

Despite the important advance in developing a single framework for monitoring and evaluation of the CAP based on the current three general objectives of the CAP, the existence of different delivery models among the two pillars of the CAP imply, in practical terms, the coexistence of two different systems to assess performance: a programming approach in pillar II implies a set of rules and mechanisms for monitoring and evaluation that coexist with the general mechanisms for the whole policy.

5.1.2.Evaluations

These two approaches also imply different allocation of responsibilities concerning evaluations: 

·Evaluations of pillar I measures and of CAP horizontal issues (covering both pillar I and pillar II) are carried out by independent external contractors under the responsibility of the Commission services on the basis of a multiannual evaluation plan. The independent external contractor carries out the evaluation according to the terms of references under supervision of a steering group in a given, contractually fixed time period.

·For pillar II, the CMES established that MS report on implementation and are responsible for evaluating their rural development programmes (ex-ante evaluation, evaluation replies in 2017 and 2019, ex post evaluation). MS must also submit the ex-post evaluation reports to the Commission by the end of 2024. The Commission is responsible for the syntheses at EU level of the ex ante and ex post evaluations (the latter are planned for 31 December 2025).

The process of alignment of the objectives of the policy and the growing overlaps among the instruments of the two pillars require a more consistent and coherent evaluation system covering all the instruments of the CAP.

5.1.3.Indicators, data and reporting obligations. Key lessons learnt

In 2018, the Commission will present an initial report on the implementation of the current Common Monitoring and Evaluation Framework, including first results on the performance of the CAP 66 . With a view to this report, some findings have already been identified:

·Number of indicators. Apart from 45 context indicators describing general operational environment of the policy current CMEF contains 166 indicators which are used to determine whether the CAP is achieving its objectives. It includes 16 impact indicators, 41 result indicators (16 for pillar I and 25 for pillar II), 24 target indicators for pillar II and 85 output indicators (58 for pillar I, and 26 for pillar II). Indicators should give an overview of the achievements of the policy. Experience has shown that currently there are too many indicators (and sub-indicators). Therefore, the new framework will propose a significant reduction of the number of indicators.

·Suitability of the indicators to their monitoring purposes. The current output and result/target indicators used in the Rural Development policy aim at the follow up of targets set by MS for the programming period. Therefore, the indicators defined and their specific reporting requirements (e.g. with regard to frequency and timing) do not always make them suitable for monitoring purposes on annual basis. Therefore, the new framework should ensure that the indicators used for monitoring purposes are, taking into account programming transition period, available on annual basis.

·Overlapping in the reporting obligations. The current implementation has allowed Commission services to identify the coexistence of different reporting obligations covering the same or similar information. For example, the data reported to CATS-Combo for audit purposes and data reported in the RD Annual Implementation Report. A future CAP organised under a single CAP Strategic plan and a single set of reporting mechanisms should allow for important simplification in this domain.

·Reliability/quality of data. There are quality concerns on available data: beyond material errors in the notification, inconsistencies among data from MS have been detected. Therefore, for the future CAP, certification bodies should ensure the quality of the data before the data is sent to the Commission.

·Availability of data. The current framework includes result and target indicators for which the data should be obtained via surveys by evaluators in MS. Problems have been identified concerning the availability of this data. Therefore, future output and result indicators should primarily be based on data which are directly available via existing systems. Timing of data delivery should be clear. Particular attention is needed with regards to data availability for the agro-environmental, biodiversity and climate related indicators.

·Sharing of data: the future set of indicators should take into account increasing reluctance from MS to introduce new indicators and their decreasing administrative capacity to follow-up existing ones. This is why the use of new technologies, new data sources and optimisation of existing administrative data oriented procedures should be encouraged.

5.2.The new Performance Monitoring and Evaluation Framework (PMEF)

5.2.1.Basic principles – indicators

The new model will be organised around the following principles:

·Context indicators remain pertinent, as they reflect relevant aspects of the general trends in the economy, environment and society, and are likely to have an influence on performance.

·A selection of a limited, but more targeted set of indicators should be made primarily in a way to choose those that reflect as closely as possible whether the supported intervention contributes to achieving the objectives versus established baseline and using clear definitions.

·Overall policy performance will be assessed multi-annually on the basis of impact indicators. Regular policy performance follow-up will rely on the full list of result indicators by using different means of analysis to arrive at conclusions on policy efficiency and effectiveness.

·Output indicators would annually link expenditure with the performance of policy implementation. The latter is an annual exercise, and relies on a list of (primarily already available) output indicators.

·The reliability of relevant performance indicators can be facilitated by synergies between statistical and administrative data, but requires the presence of a system of quality controls.

Chart 5. Rationale of sets of indicators

In essence, what is being proposed is a shift in responsibilities and opportunities within a common framework, clearly defined and enforced, to deliver on more than one key objective at the same time, namely simplification, result-orientation (rather than compliance) and policy efficiency and effectiveness.

The new performance-based delivery model requires a solid evidence base composed of indicators which are reliable, comparable and available on time. Both the Commission and MS have to commit themselves to producing and using them.

It is proposed to organise the monitoring and evaluation of the future policy on the basis of a common set of indicators that was developed in line with the impact assessment (see Table on indicators in the legislative proposal on establishing rules on support for CAP strategic plans).

5.2.2.Annual Performance review

An annual performance review is foreseen as the key element of the ongoing monitoring and steering of policy implementation. In order to make an annual performance review operational, adequate output indicators and result indicators will have to be submitted jointly in an annual report on the implementation of the CAP plan, the so-called Annual Performance Report. MS will report annually on financial allocations, along with realised output and expenditure as well as distance to targets set for the whole period, expressed as values of common and programme specific result indicators.

In cases of delayed progress towards the targets set for results for the whole period, or where schemes/interventions are failing to take off, MS will carry out an analysis of shortcomings and will include in the report proposals for remedying actions. The assessment of those reports would trigger interaction with MS in view of helping them to implementing the planned policy in an efficient way. This exercise would also involve the continuous exchange between MS and the Commission including in a regular Annual Review and Monitoring Committee meetings, on the state of play of the evolution of programme implementation towards the targets. In this context, on the basis of the provided information and available evidence, the Commission could provide pertinent recommendations to MS.

5.2.3.Evaluation planning and reporting obligations

The following steps are foreseen as regards evaluation planning and reporting obligations:

·MS are responsible for evaluating their strategic plans (ex-ante, on-going and ex-post) and report yearly on implementation. MS also establish and carry out a specific evaluation plan for their strategic plan.

·The Commission will provide a synthesis of the MS ex-ante and ex-post evaluations. 

·On top of the annual reporting by MS on their strategic plans, the Commission will launch specific evaluations on specific topics during the programming period. These evaluations will combine the information facilitated by MS with the evidence directly available to the Commission.

·Evaluations are planned in accordance with the policy cycle and the study and evaluation plan of DG AGRI (which is publicly available).

·All CAP evaluations should be based on robust methodologies, using counterfactual approaches where feasible.

·The Commission will carry out a mid-term assessment of the performance of the policy when the available evidence permits a meaningful causality link of the policy to results (e.g. after the first 3 years of implementation).

·The Commission would present two reports to the European Parliament and the Council on the implementation of the CAP strategic plans. These reports would be based on information collected from the PMEF, covering all instruments of the future CAP: the CAP strategic plans as well as those elements of the CAP not covered by the CAP plans. It also includes common context, output, result and impact indicators. This would include findings from both MS CAP strategic plan evaluations and from the Commission evaluations. The Commission could present an initial report, including first results on the performance of the CAP by December 2025 and a second report by December 2031.

5.2.4.Data / Sources of information

The new focus on policy performance requires comprehensive, complete, timely and reliable information on EU agriculture and rural areas. Existing data sources need to be adapted and strengthened to match better with the new policy and where needed, new data sources should be explored and mobilised in order to reduce the burden for farmers and administrations, while at the same time improving policy evidence base.

The FADN database is already widely used for analytical and evaluation purposes but FADN coverage needs to be expanded to provide the best possible representation of market-oriented farms in the EU. This may require a revision of variables in the farm return (also taking into account the recommendations of the FLINT project 67 ), and the way in which CAP beneficiaries participation in the FADN data collection is organised.

Agricultural statistics will continue to play a major role in CAP performance assessment. The ongoing modernisation of agricultural statistics is providing the foundation for future data availability and aims to ensure continuity of core data combined with an element of flexibility for new and urgent data needs.

Further development of data quality especially in relation to impact indicators linked to agro-environmental, biodiversity and climate related issues is needed in order to make them more fit for purpose to evaluate the performance of the CAP.

A key challenge lies in cross-linking existing data sets such as administrative databases stemming from application forms (IACS, LPIS) and registers maintained by MS and data collected and coordinated by Eurostat (Farm Structural Survey, land use and livestock surveys, agro-monetary and agro-environmental statistics) and FADN in DG AGRI. Close cooperation between the European Statistical System (ESS), European institutions and MS' administrations is crucial to ensure that data collected for administrative purposes can also be used for statistics and analyses and for overall functioning of the evaluation framework of the future CAP.

In addition, new sources of data such as satellite monitoring (Copernicus), big data solutions, and cooperation with specific data providers should be better utilised.

(1)    A more detailed Glossary is available in Annex 10. A full-fledged glossary including definitions on the CAP can be found on the internet page of the Directorate General for Agriculture and Rural Development: European Commission (2015) Glossary of the Common Agricultural Policy , (DG AGRI).
(2)    European Commission (2017) The Future Of Food And Farming , Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM 713 final of 29 November.
(3)

     European Commission (2017) Reflection Paper on the future of EU Finances , COM 358 final of 28 June .

(4)      European Commission (2018) A new, modern Multiannual Financial Framework for a European Union that delivers efficiently on its priorities post-2020 , Communication from the Commission to the European Parliament, the European Council and the Council, COM 98 final, 14 February.
(5)      European Commission (2018) A Modern Budget for a Union that Protects, Empowers and Defends, the Multiannual Financial Framework for 2021-2027  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – COM 321 final, 2 May.
(6)      European Parliament and Council Regulation (EU) No 1306/2013 (article 110(2)) of 17 December 2013 on the financing, management and monitoring of the common agricultural policy (…)
(7)    Report of the Agricultural Markets Task Force (the AMTF report) (2016) Improving market outcomes enhancing the position of farmers in the supply chain .
(8)      European Commission (2016) Cork 2.0: European Conference on Rural Development , website .
(9)      Established in art. 110 of European Parliament and Council Regulation (EU) No 1306/2013 of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations  and the Commission Implementing Regulation (EU) No 834/2014 of 22 July 2014 laying down rules for the application of the common monitoring and evaluation framework of the common agricultural policy.
(10)      European Commission (2017) Evaluation and studies plan 2017-2021, Directorate General for Agriculture and Rural Development .
(11)      European Commission (2016) Annual Activity Report: annexes , DG AGRI, p. 210.
(12)      M’barek, R. et al. (2017) Scenar 2030 - Pathways for the European agriculture and food sector beyond 2020 , Study to the European Commission.
(13)

     Ecorys et al. (2016) Mapping and first analysis of the CAP implementation , Study to the European Commission.

(14)      Interim results for the forthcoming evaluation of the impact of CAP measures towards the general objective of viable food production.
(15)      All planned outputs/results stated for 2014-2020 rural development programmes valid as of September 2016 (Cork 2.0 Conference on Rural Development). Some programmes have been modified since then.
(16)      Especially through the European Innovation Partnership for Agricultural Productivity and Sustainability – EIP-AGRI – which brings together researchers, farmers and others to turn research into practical innovation.
(17)      Ecorys (forthcoming) Synthesis of Rural Development Programmes (RDP) ex-post evaluations of period 2007-2013 (forthcoming).
(18)      See references in Annex 1 for various sources: Commission, Agricultural Market Task Force, OECD, etc.
(19)      Amendments to the basic acts of the CAP adopted under co-decision in 2017.
(20)      Ecorys et al. (Forthcoming-2018) Study on risk management in EU agriculture, Study to the European Commission.
(21)      Workshop on Risk Management: https://ec.europa.eu/agriculture/events/cap-have-your-say/workshops_en .
(22)      European Court of Auditors (2016) Making cross compliance more effective and achieving simplification remains challenging , Special report No 26.
(23)      European Commission (2016) Review of the Greening after one year , Staff Working Document, 218 final.
(24)

     European Commission (2017) Implementation of the ecological focus area obligation under the green direct payment scheme , Report from the Commission to the European Parliament and the Council, COM 152 final of 29 March.

(25)      European Court of Auditors (2017) Greening – a more complex income support scheme, not yet environmentally effective , Special Report No 21.
(26)      Alliance Environment et al. (2017), Report of the evaluator for the Evaluation study of the payment for agricultural practices beneficial for the environment and climate.
(27)      European Commission (2017), Directorate General for Agriculture and Rural Development, Background Document on climate and environmental challenges facing agriculture and rural areas.
(28)      Workshop on Agri-Environment-Climate Measures (AECMs): Challenges of controllability and verifiability, 07/12/2016, Brussels.
(29)

     Pérez Domínguez, I. et al. (2016): An economic assessment of GHG mitigation policy options for EU agriculture (EcAMPA 2) . JRC Science for Policy Report, European Commission, Luxembourg: Publications Office of the European Union.

(30)      European Commission (2017) Consultation on modernising and simplifying the common agricultural policy (CAP) , Directorate General for Agriculture and Rural Development.
(31)      See, for example, European Court of Auditors (2015) EU support for rural infrastructure: potential to achieve significantly greater value for money , Special Report N°25. Note that this refers to the 2007-2013 programming period.
(32)

     Kantor (2015) Synthesis of ex ante evaluations of rural development programmes 2014 - 2020 , Study to the European Commission.

(33)

     World Bank on the European Union (2017) Thinking CAP Supporting Agricultural Jobs and Incomes in the EU  EU Regular Economic Report 4.

(34)      Arroyo De Sande el al. (2018) Provision of social care and support services in remote rural areas: Challenges and opportunities, European association of service providers for persons with disabilities.
(35)      European Court of Auditors (2017) Rural Development Programming: less complexity and more focus on results needed , Special report N°16.
(36)      European Commission (2016) The implementation of the scheme of specific measures for agriculture in favour of the outermost regions of the Union (POSEI) Report from the Commission to the European Parliament and the Council, COM 797 final.
(37)      European Commission (2017) "A stronger and renewed strategic partnership with the EU's outermost regions" COM 623 final.
(38)      REFIT Platform Opinions on "Cross Compliance", "Greening", "Overlaps between pillar I and II", "Control and Audit", "Rural Development support" and "EU legislation on the Farm subsidies reform". Available at: European Commission (2016) REFIT Platform Recommendations: Agriculture and Rural Development , website.
(39)      Ecorys et al. (2016) Mapping and analysis of the implementation of the CAP , Study to the European Commission.
(40)      European Commission (2017) Direct Payments , Directorate General for Agriculture and Rural Development.
(41)      The survey on the needs of young farmers provided full evidence on these barriers: Ecorys (2015) Pilot project: Exchange programmes for young farmers , Study to the European Commission; question Number 8 of the on-line public consultation confirmed this (See Annex II); see also (EP) Young Farmers – policy implementation after the 2013 CAP reform, (EC) Young Farmers in the EU – structural and economic characteristics.
(42)      European Court of Auditors (2017) EU support to young farmers should be better targeted to foster effective generational renewal , Special Report N°10.
(43)

     Coffey et al. (2016) Evaluation study on the implementation of the new European Innovation Partnerships (EIP) for Agricultural Productivity and Sustainability , Study to the European Commission.

(44)      European Commission (2017) EU Agricultural outlook for the agricultural markets and income 2017-2030 (DG AGRI with the support of the Joint Research Centre), presented in a conference with stakeholders in December 2017.
(45)    European Commission (2016) Next steps for a sustainable European future: European Action for sustainability  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM 739 final.
(46)      Annex 1, and especially European Commission (2017) Background documents on challenges facing EU agriculture and rural areas: economic, social, environmental and climate , Directorate General for agriculture and rural development and reports of workshops for the present impact assessment.
(47)      COM(2018) 321 final, full quotation under 4.
(48)      M’barek, R. et al. (2017) Scenar 2030 - Pathways for the European agriculture and food sector beyond 2020 , Study to the European Commission.
(49)    COM (2018) 321 final as referenced under 4) as well as related documents, in particular Factsheet on the Common Agricultural Policy
(50)      The situation with respect to the Water Framework Directive will be further assessed based upon the forthcoming Commission report on the implementation status of this Directive.
(51)      European Council (1992) Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora and European Parliament and Council Directive 2009/147/EC of 30 November 2009  on the conservation of wild birds .
(52)      European Parliament and Council Directive 2000/60/EC of 23 October 2000 establishing a framework for Community action in the field of water policy .
(53)      EU soil thematic strategy aiming at protecting soils and preventing soil degradation, SDGs, FAO voluntary guidelines for soil sustainable management.
(54)      Initially, an Option 2 was developed to assess the value-added of the CAP (for more details see footnote 46), but this option was not retained in this impact assessment as phasing out CAP would not be in line with the Treaty obligations. However, to avoid confusion, the original numbering of options was kept as in the inception impact assessment.
(55)       EU Agricultural outlook for the agricultural markets and income 2017-2030 .
(56)      See Tables 1.1 and 1.2 in Annex 5.
(57)      In this simulation, total ANC support (EU and national) was maintained in all options, including in option 5 where ANC support is granted in pillar I via a top-up at fixed level. This level is below the current level of EU and national support in several MS. It was assumed that the gap was bridged with national funds. However, this co-financing of pillar I interventions is unlikely.
(58)      AECH include the agri-environment-climate measures as well as the support to organic, Natura 2000, water framework directive payments, animal welfare, forestry and non-productive investments.
(59)      Farmers face a possible reduction of their CAP support if they do not comply with these requirements.
(60)      Annex 5 p73 and onwards.
(61)      Reference see footnote 47.
(62)      Annex 5 p25, Table 2.10. Also in the qualitative part (Annex 5 p. 48-49) the impact of the policy options on trade is assessed, with broadly similar conclusions.
(63)      The average annual cost of an IST for all EU farmers was estimated close to the current pillar II budget.
(64)      See footnotes 17 and 19.
(65)      European Commission (2018) Annex to the Communication on the Multiannual Financial Framework for 2021-2027 COMM (2018) 321 final, P. 54
(66)      Art. 110 of European Parliament and Council Regulation (EU) No 1306/2013 of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations  and the Commission Implementing Regulation (EU) No 834/2014 of 22 July 2014 laying down rules for the application of the common monitoring and evaluation framework of the common agricultural policy.
(67)      LEI- WUR et al. (2016) Farm Level Indicators for New Topics in policy evaluation project (FLINT) , financed under the FP7, website.
Top

Brussels,1.6.2018

SWD(2018) 301 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposals for a

- Regulation of the European Parliament and of the Council establishing rules on support for strategic plans to be drawn up by Member States under the Common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulation (EU) No 1305/2013 of the European Parliament and of the Council and Regulation (EU) No 1307/2013 of the European Parliament and of the Council

- Regulation of the European Parliament and of the Council on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013

- Regulation of the European Parliament and of the Council amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, (EU) No 1151/2012 on quality schemes for agricultural products and foodstuffs, (EU) No 251/2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products, (EU) No 228/2013 laying down specific measures for agriculture in the outermost regions of the Union and (EU) No 229/2013 laying down specific measures for agriculture in favour of the smaller Aegean islands

{COM(2018) 392 final}

{COM(2018) 393 final}
{COM(2018) 394 final}
{SEC(2018) 305 final}


Annexes

Table of contents

Annex 1: Procedural information

1.Lead DG(s), Decide Planning/CWP references

2.Organisation and timing

3.Consultation of the Regulatory Scrutiny Board (RSB)

4.Evidence, sources and quality

Annex 2: Stakeholder consultation

1.Scope of the stakeholder consultation

2.On-line public consultation

2.1.    Basic information    

2.2.    Description of the participants and coverage    

2.3.    Most relevant conclusions from the on-line public consultation    

2.4.    Overview of the position papers    

3.Civil dialogue groups: organised dialogue with the key stakeholders

3.1.    Basic information    

3.2.    Main messages from the meetings    

4.Specialised workshops to collect evidence

4.1.    Workshop 1: Best practices addressing environmental and climate needs    

4.2.    Workshop 2: Risk management    

4.3.    Workshop 3: Food and related issues    

4.4.    Workshop 4: Socio-economic issues    

4.5.    Workshop 5: Measuring the CAP environmental and climate performance    27

5.Institutional consultative bodies: active role of the EESC and CoR

5.1.    European Economic and Social Committee (EESC)    

5.2.    Committee of the Regions    

6.Listening on simplification: REFIT Platform opinions on the future CAP

6.1.    Basic information and submissions received    

6.2.    Key messages from the REFIT Platform    

7.National Parliaments

7.1.    Assemblée Nationale and Sénat (FR)    

7.2.    Oireachtas (IE)    

7.3.    Joint Parliamentary Declaration by chambers from France, Italy, Poland and Ireland    

8.Integrating opinions and evidence: Conference 7th July 2017 “Have your say”

9.Communication "Future of food and farming". Public debate on the new delivery model of the CAP.

9.1.    Council of the European Union    

9.2.    European Parliament    

9.3.    European Court of Auditors    

9.4.    Stakeholders    

Annex 3: Relevant Evaluations

Annex 4: A New Delivery Model for the CAP

1.introduction

2.the new delivery model explained

2.1.    Programming approach based on a common set of objectives and indicators    

2.2.    Monitoring progress and steering policy implementation    

2.3.    Assurance framework    

3.the new delivery model illustrated: examples

3.1.    Example 1: Rewarding practices beneficial for the environment and the climate under pillar I (Greening/eco-schemes)    

3.2.    Example 2: Supporting fairly farmers’ income through decoupled direct payments under pillar I    

3.3.    Example 3: Supporting investments under pillar II    

4.opportunities and challenges/risks

4.1.    Opportunities    

4.2.    Challenges and risks    

5.Mitigating measures/safeguards

Annex 1: Procedural information

1.Lead DG(s), Decide Planning/CWP references

DG Agriculture and Rural Development

2.Organisation and timing

This impact assessment supports the legislative proposals for the CAP Post 2020 in the context of the next MFF. The first steps were already undertaken with a view to the adoption of the Communication on the Future of Food and Farming 1 , including, the publication of an Inception Impact Assessment and the launch of a public consultation in February 2017. This process followed the logical sequence of assessing the current performance of the CAP, taking into account the consultation, identifying challenges, considering EU value-added, objectives and policy options.

The Inter Service Steering Group (ISSG) was set up in December 2016, with an invitation sent to all Directorates General (DGs). Up to 29 DGs participated in ISSG meetings (in addition to SG and AGRI) 2 .

Five meetings were held in 2017, including on the draft for the above-mentioned Communication. In 2017, the ISSG was also invited to participate in 4 workshops as well as in the Conference where the outcomes of the public consultation were shared with stakeholders (see Annex 2).

By Mid-2017, the work was reorganised to align with requirements established within the Commission for the preparation of the next MFF. Under these new settings, the ISSG held 4 meetings in 2018, including a presentation of the draft legislative proposals. In addition, the ISSG was invited for a new workshop (on measuring environmental and climate performance) and 3 technical meetings were organised with DGs expressing interest/comments on specific issues, as well as bilateral meetings.

Documents were made available on a Collaborative Work Space.

3.Consultation of the Regulatory Scrutiny Board (RSB)

Informal upstream meetings with RSB representatives were held on 9 January 2017 as well as on 16 January 2018 (the latter included participation of representatives of SG, DG BUDG and JRC). During this discussion Board members and representatives of the horizontal Services provided early feedback and advice on the basis of the updated inception impact assessment. Board members' feedback did not prejudge in any way the subsequent formal deliberations of the RSB.

The RSB examined the draft Impact Assessment Report on 18 April 2018. It issued a negative opinion on 20 April 2018. Following resubmission of a revised version of the documents, the Board gave a positive opinion with reservations on 8 May 2018.

The Board's initial recommendations were addressed in revised versions of the Impact Assessment documents, re-submitted to RSB on 27 April 2018. While the main comments of the Board focused on the proposed new delivery system, an annex (new Annex 4) was added to provide detailed explanations, examples and to further assess challenges and risks as well as proposed safeguards to mitigate them. The main report, as well as in existing annexes, were adjusted accordingly. Explanations were also added in the glossary.

The following tables provide an overview of the adjustments made to the text to meet the requirements of the Board’s opinions.

Table 1: First opinion of the Board and related adjustments

RSB recommendations

Adjustments

Main considerations

The Board appreciates the ambition to modernise the Common Agricultural Policy and gear it towards a simpler and more results-oriented funding system. The report presents well the current programme and the challenges it faces. It analyses in-depth different scenarios that usefully highlight the trade-offs between the policy objectives. It identifies potential simplifications.

However, the Board gives a negative opinion, because the report contains an important shortcoming that needs to be addressed, given its central role in the envisaged reform of the CAP:

The announced policy intention to introduce a new performance-based delivery system represents a significant departure from the current management mode. The report does not sufficiently explain elements of the system. It does not analyse the challenges and risks attached to the new system and proposed safeguards to mitigate them. It is not sufficiently clear how the new system would function in practice.

References to the requested elements were added in the main report and further developed in a new Annex (4). Lessons learnt from previous reforms and results of the impact assessment on the implications of the new delivery model were better explained in the main report.

Further considerations and recommendations for improvement

1) New Delivery Model

The report should better explain the rationale, feasibility and functioning of the new performance-based management system. 

Explanations were added in the main report and further developed in the new Annex 4.

It should be clearer on what spending instruments and requirements the programme would fix centrally, and which ones would be determined by each Member State, both for pillars I and II, national and regional level. The report should clarify the 'shift in responsibilities and opportunities' that the new performance-based management system is intended to bring, in particular for Member States, regions and individual beneficiaries.

Specifications were added in the main report and further developed in the new Annex 4, including many charts showing the breakdown of responsibilities across Commission and MS, the changes in linkages with farmers, examples for both pillars.

It should clarify how the performance-based management system works at the stage of strategic planning, implementation, annual checks and results-based checks (timing, procedure).

Annex 4 includes explanations and charts showing key steps in the policy cycle.

Given the key importance of the new system, it is essential to analyse the limits of the system, the risks and potential mitigating measures.

Possible risks include the capacity of Member States to develop appropriate Strategic Plans resulting in possible implementation delays, threats to coherence and lack of appropriate level of ambition at the level of the Member States.

Annex 4 identifies opportunities and risks, as well as potential mitigating measures and safeguards. The implications of the new delivery model were also assessed in the Multi-Criteria Analysis, as well as changes in administrative burden and performance (Annexes 5 and 7). Corresponding results are summarised in the main report.

The report should explain how key overarching objectives (national impact targets) will translate into adequate programming at intervention and regional level. The report should explain safeguards to ensure achievement of the broad and specific EU objectives for environment, climate change, and food security and safety.

Explanations were added in the main report. Annex 4 includes further specifications and charts showing the linkage with objectives, which are the entry point for the new delivery model.

The report should add examples of specific interventions on the application of the new management system over the programming cycle. It should include Pillar 1 examples where linking output to result indicators is challenging

Annex 4 develops illustrations for both pillar I and II. The main report includes an example for environment and climate change.

The report should explain implications for the programme and for the beneficiaries of underperforming on a target. The report should also clarify whether there will realistically be possibilities for the Commission to apply budgetary corrections to Member States that underperform. Is there a risk that the underperformance is identified at a stage where only limited remedial action can be taken?

Annex 4 includes detailed explanations and addresses risks related to underperformance, related elements are included in the main report.

The report should clarify what the administrative burden will be for the different actors, and whether this represents a simplification, the status quo or an increase in comparison to the current system.

A table with estimates was added in the Annex assessing the administrative burden (page 23, Annex 7)

It should explain the new control and audit system

Annex 4 provides explanations and charts.

The detailed annex 5 on simplification indicates that little reduction in administrative burden will happen for Pillar I. It could even become more demanding on conditionality and cross-compliance in some of the scenarios

In addition to the table in Annex 7, explanations on changes between proposed new conditionality and cross-compliance were added in the report.

2) Programme description and options

When describing the new programme, the report should more clearly present the differences from the current programme. It should in particular indicate whether the intention is to keep EARDF scope and types of interventions unchanged.

Annex 4 provides comparisons in various forms. Some explanations were added in the main report.

There is no need to include an option on having no CAP.

This option was removed (however the numbering of options was kept as in the Inception Impact Assessment).

The report should clarify how budgets will be divided between instruments and pillars, and whether flexibility between the pillars will work at national level.

At the time of drafting the initial version of the report, budgetary arrangements considered for the forthcoming MFF were not known to services. Flexibility between pillars is addressed in the options.

3) Assessment of options

The report develops different options reflecting policy responses to the challenges the CAP will face. It shows the main trade-offs between the policy objectives at stake. It should however better clarify whether and under what conditions combining the most performing elements of the options would reconcile economic objectives with objectives of environmental sustainability, climate change and food safety. It should better identify and discuss the necessary safeguards that would accompany such a policy choice

The main criteria for combining the most performing elements were added in the summary of results. Additional references to safeguards were inserted.

Drawing on the Annex on MCA, a section on food-related issues was added.

In this respect, but also more generally, the report should more systematically include stakeholder views, in particular of Member States, farmers and environmental organisations.

Additional elements on stakeholders views were added in Annex 2 (consultation) and in the main report.



RSB recommendations

Adjustments

4) Monitoring and evaluation framework

The report contains a comprehensive and streamlined set of indicators which will make monitoring and evaluation more effective. The evaluation planning should ensure that an interim evaluation will be available in time before political decisions on the successor programme.

A date was added (2025) in section 5 of the report.

5) MFF proposal

The Board notes that this impact assessment will eventually be complemented with specific budgetary arrangements and may be substantially amended in line with the final policy choices of the Commission’s MFF proposal.

At the time of drafting the initial version of the report, budgetary arrangements considered for the forthcoming MFF were not known to services.

Table 2: second opinion of the Board and related adjustments

RSB recommendations

Adjustments

Main considerations

The Board acknowledges improvements to the report, which now better explains the new delivery mechanism of the CAP and better analyses the related risks and challenges.

The report still contains significant shortcomings that need to be addressed. As a result, the Board expresses reservations and gives a positive opinion only on the understanding that the report shall be adjusted in order to integrate the Board's recommendation on the following key aspect:

The report does not specify the precise safeguards for mitigating the identified risks. It does not discuss how and on what basis mitigating measures such as horizontal EU conditionality and budget earmarking will be determined.

References to the requested elements were added in the main report.



RSB recommendations

Adjustments

Further considerations and adjustment requirements

1) The report better explains the main changes linked to the new funding model. Risks are better presented and analysed and a number of mitigation measures are put forward in general terms. However, the report should clearly identify how and on what basis these safeguards for mitigating possible risks will be made operational. This is particularly relevant for the exact content of horizontal EU conditionality and for budget earmarking. To the extent that the legal proposal will define these safeguards, the report should discuss possible alternative solutions, where relevant.

Specifications on mitigation measures were added in section 3.

A chart and explanations on conditionality were added in section 3. Analytical results on conditionality and ring-fencing were better explained in section 4.
As the need to enhance environmental ambition was reiterated in several Commission Communications, extended cross-compliance (i.e. new c
onditionality) was assessed in all options, with different degrees of gradations and combinations with voluntary measures.

2) The report should improve how it presents stakeholders' views. The description of stakeholders' views should not only focus on the performance of the system, but also on environmental sustainability, climate change and food safety issues

Additional references to the outcomes of the public consultation on those topics were added in Box 2, based on Annex 2.

3) The report explains that the level of administrative burden introduced by horizontal EU rules should diminish. However, Member States get significant leeway to introduce specific rules. This might increase administrative burdens, so the overall change in the burden level is uncertain. The report should examine to what extent including elements related to simplification and reduced administrative burden in the CAP plans is likely to result in lower administrative burdens overall. The report could examine additional safeguards to help ensure burden reduction.

More elements were added in section 3 on simplification and administrative burden (in addition to those already included in section 4).

4) The report should clarify when evaluations would take place. It should include an interim evaluation of the programme that would be available in time for the preparation of the following MFF.

Explanation added: the assessment will be carried out when the available evidence permits a meaningful causality link of the policy to results (e.g. after the first 3 years of implementation). The proposal for a mid-term assessment is in line with other programmes for the new MFF. The suggestion to present at the end of 2025 (i.e. ahead of Post 2027 MFF) a report taking into account this mid-term assessment was kept.

A reference to policy cycle and DG AGRI evaluation and study plan was added.

5) There is no need for a no-CAP scenario on food security.

The reference to no-CAP was removed from the paragraph relating to food security.



4.Evidence, sources and quality

Annex 1.1 lists a selection of references focussing on evaluations and other studies carried out for/by the EU Institutions, as well as data emanating from International Organisations and pan-European sources.

Evidence collected through the Common Monitoring and Evaluation and Framework (CMEF) 3 serves for measuring the performance of the CAP. Section 5 of the report includes elements on lessons learnt from the CMEF.

An internet-based Statistical Annex was set up in Mid-2017, and has been updated to support this impact assessment.

https://ec.europa.eu/agriculture/statistics/facts-and-figures_en

This impact assessment benefitted from the support of several services of the Joint Research Centre (JRC), based in Sevilla, Ispra and Brussels.

Commission services (DG AGRI in cooperation with other DGs, including JRC) organised five workshops to share knowledge between Commission officials and external experts, including scientists. Related documents, including summaries, are available on the site of the July 2017 Conference. A synthesis is included in Annex 2.

The European Environmental Agency also participated in workshops and exchanges.

An external consultant analysed and summarised the results of the public consultation, in addition to in-house work.



Main References (Annex 1.1)

While a wealth of information is available, this list focuses on evaluations and other studies carried out for/by EU Institutions, as well as International Organisations.

Relevant evaluations carried for the Commission (DG AGRI)

Evaluation of the Greening of the CAP- (report of the evaluator available since December 2017 staff working document and review by RSB scheduled for March 2018)

https://ec.europa.eu/agriculture/sites/agriculture/files/leaflet_en.pdf

Evaluation of the impact of the CAP measures towards the general objective of viable food production (first findings/overview on CAP impact on farm income, competitiveness and prices available, finalisation of Staff Working Document – SWD by Mid-2018)

http://ec.europa.eu/smart-regulation/roadmaps/docs/plan_2016_526_evaluation_cap_viable_food_production_en.pdf

Ex-Post evaluations on Rural Development Programmes 2007-2013 (individual RDP evaluations carried out in Member States and the synthetic overview are available; finalisation of Staff Working Document by 2nd Quarter 2018)

http://www.eesc.europa.eu/en/our-work/opinions-information-reports/information-reports/ex-post-evaluation-rural-development-programmes-2007-2013-information-report

Synthesis of ex ante evaluations of rural development programmes 2014 - 2020 (2015)

https://ec.europa.eu/agriculture/evaluation/rural-development-reports/ex-ante-rdp-synthesis-2014-2020_en

Evaluation of Article 68 measures - specific support, (Nov 2015)

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/article-68_en

Synthesis of ex ante evaluations of rural development programmes 2014 - 2020 (2015)

https://ec.europa.eu/agriculture/sites/agriculture/files/evaluation/rural-development-reports/2015/ex_ante_rdp_synthesis_2014_2020/fulltext_en.pdf

Forestry in rural development (SWD 2nd quarter 2018)

Horizon 2020 interim evaluation on societal challenges.
Homepage:
http://ec.europa.eu/research/evaluations/index.cfm?pg=h2020evaluation
Societal challenge 2: https://ec.europa.eu/research/evaluations/pdf/ec-rtd_interim_evaluation_studies-and-report.pdf  

Studies carried out for the Commission (DG AGRI)

Study "mapping and first analysis of the CAP implementation" (November 2016)

https://ec.europa.eu/agriculture/external-studies/mapping-analysis-implementation-cap_en

Distribution of the added value in the organic food chain

https://ec.europa.eu/agriculture/external-studies/2016-organic-food-chain_en

"Scenar 2030" (JRC): This study provides the analytical background for the options' assessment (published in December 2017)

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC109053/kjna28883enn.pdf

"Ecampa2 study" on greenhouse gas mitigation policy options for EU agriculture will be used to assess the specific needs of the EU agricultural sector (2016)

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC101396/jrc101396_ecampa2_final_report.pdf

Evaluation study on the implementation of the new European Innovation Partnerships (EIP) in agriculture (Nov 2016)

https://ec.europa.eu/agriculture/external-studies/2016-eip_en

Study on risk management in EU agriculture (Results available, publication 2018)



Studies carried out for the Commission (DG ENV)

Integration of Natura 2000 and biodiversity into EU funding (EAFRD, ERDF, CF, EMFF, ESF)

http://ec.europa.eu/environment/nature/natura2000/financing/docs/Natura2000_integration_into_EU%20funds.pdf

NEC impact assessment
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52013SC0531

Studies on air quality
http://ec.europa.eu/environment/air/clean_air/review.htm .

Commission Staff Working Document SWD(2016) 472 final fitness check of the EU Nature Legislation (Birds and Habitats Directives) (16/12/2016)

http://ec.europa.eu/environment/nature/legislation/fitness_check/docs/nature_fitness_check.pdf

Commission Staff Working Document 'Agriculture and Sustainable Water Management in the EU' SWD(2017) 153 final
https://circabc.europa.eu/sd/a/abff972e-203a-4b4e-b42e-a0f291d3fdf9/SWD_2017_EN_V4_P1_885057.pdf

Key descriptive statistics on the consideration of water issues in the Rural Development Programmes 2014-2020  

Guidance on a "Good Practice" RDP from a water perspective

Mid-term review of the EU Biodiversity Strategy to 2020 ( COM/2015/0478 final)

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52015DC0478

Service contract to support follow-up actions to the mid-term review of the EU biodiversity strategy to 2020 in relation to target 3A – Agriculture

https://publications.europa.eu/en/publication-detail/-/publication/cd1c6a81-969e-11e7-b92d-01aa75ed71a1/language-en

Other relevant documents

Report from the Commission to the EP and Council and accompanying SWD(2017) 121 final on the implementation of the ecological focus area obligation under the direct payment scheme

http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52017SC0121&from=EN

Commission Staff Working Document SWD (2016) 218 final Review of the Greening after one year

http://ec.europa.eu/transparency/regdoc/?fuseaction=list&coteId=10102&year=2016&number=218&language=EN

Report from the Commission to the European Parliament and the Council, Development of the dairy market situation and the operation of the "Milk Package" COM (2016) 724 final.

https://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/COM-2016-724-F1-EN-MAIN.PDF

REFIT Platform Opinions on "Cross Compliance", "Greening", "Overlaps between pillar I and II", "Control and Audit", "Rural Development support" and "EU legislation on the Farm subsidies reform".

REFIT Platform Opinion on the Effectiveness and Efficient of the CAP (20/09/2016).

https://ec.europa.eu/info/law/law-making-process/evaluating-and-improving-existing-laws/refit-making-eu-law-simpler-and-less-costly/refit-platform/refit-platform-recommendations-and-other-work_en

As part of recent reports and/or studies emanating from other EU Institutions

Court of Auditors:

oSpecial Report n°21/2017: "Greening: a more complex income support scheme, not yet environmentally effective"

https://www.eca.europa.eu/Lists/ECADocuments/SR17_21/SR_GREENING_EN.pdf

oSpecial report No 16/2017: "Rural Development Programming: less complexity and more focus on results needed"

https://www.eca.europa.eu/Lists/ECADocuments/SR17_16/SR_RURAL_DEV_EN.pdf

oSpecial report No 10/2017: "EU support to young farmers should be better targeted to foster effective generational renewal"

https://www.eca.europa.eu/Lists/ECADocuments/SR17_10/SR_YOUNG_FARMERS_EN.pdf

oSpecial report 26/2016: "Making crosscompliance more effective and achieving simplification remains challenging"

https://www.eca.europa.eu/Lists/ECADocuments/SR16_26/SR_CROSS_COMPLIANCE_EN.pdf

oSpecial report 1/2016:"Is the Commission's system for performance measurement in relation to farmers' income well designed and based on sound data?"

https://www.eca.europa.eu/Lists/ECADocuments/SR16_01/SR_FARMERS_EN.pdf

oSpecial Report 25/2015, “EU support for rural infrastructure: potential to achieve significantly greater value for money”

https://www.eca.europa.eu/Lists/ECADocuments/SR15_25/SR_RURAL_EN.pdf

oSpecial report N°20/2015 "The cost-effectiveness of EU Rural Development support for non-productive investments in agriculture"

https://www.eca.europa.eu/Lists/ECADocuments/SR15_20/SR15_20_AGRI_INVEST_EN.pdf

oSpecial Report N°12/2015 "The EU priority of promoting a knowledge-based rural economy has been affected by poor management of knowledge-transfer and advisory measures"

https://www.eca.europa.eu/Lists/ECADocuments/SR15_12/SR_RURAL_TRAINING_EN.pdf

oSpecial Report N°04/2014 The Court of Auditors report “Integration of EU water policy objectives with the CAP: a partial success”

European Parliament:

oResearch for AGRI Committee: CAP reform Post 2020 – Challenges in agriculture (2016).

http://www.europarl.europa.eu/RegData/etudes/STUD/2016/585898/IPOL_STU(2016)585898_EN.pdf

oResearch for AGRI Committee: Young farmers – policy implementation after the 2013 CAP reform (2017)

http://www.europarl.europa.eu/RegData/etudes/STUD/2017/602006/IPOL_STU(2017)602006_EN.pdf

o Precision agriculture and the future of farming in Europe , Scientific Foresight Study, European Parliamentary Research Service (2016). 

oFlexibility given to Member States - state of play and perspectives (2017)
http://www.europarl.europa.eu/RegData/etudes/STUD/2017/601975/IPOL_STU(2017)601975_EN.pdf

Other background

Report of the Agricultural Markets Task Force (AMTF) – November 2016

https://ec.europa.eu/agriculture/agri-markets-task-force_en

Public consultation on modernising and simplifying the CAP (published in July 2017)

Homepage: https://ec.europa.eu/agriculture/consultations/cap-modernising/2017_en

Summary of the results (320 pages): https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/summary-public-consul.pdf

Summaries of workshops on Impact Assessment (published in July 2017)

Homepage: https://ec.europa.eu/agriculture/events/cap-have-your-say/workshops_en

"Best practices addressing environmental and climate needs" (23/24 March 2017):  https://ec.europa.eu/agriculture/sites/agriculture/files/events/2017/cap-have-your-say/env-clima-workshop/summ_en.pdf

"Risk management" (18/19 May 2017): https://ec.europa.eu/agriculture/sites/agriculture/files/events/2017/cap-have-your-say/risk-management/summ_en.pdf

"Food related issues" (31 May 2017):

https://ec.europa.eu/agriculture/sites/agriculture/files/events/2017/cap-have-your-say/food-workshop/summ_en.pdf

"Socio-economic issues" (9 June 2017): https://ec.europa.eu/agriculture/sites/agriculture/files/events/2017/cap-have-your-say/soc-eco-workshop/summ_en.pdf

Background documents on challenges facing EU agriculture and rural areas: economic, social, environmental and climate (December 2017)

Homepage: https://ec.europa.eu/agriculture/future-cap_en

Economic challenges for the agricultural sector: https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/eco_background_final_en.pdf

Challenges related to environment and climate change: https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/env_background_final_en.pdf

Broader socio-economic challenges facing agriculture and rural areas:

https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/soc_background_final_en.pdf

EC, DG AGRI, EU Agricultural outlook for the agricultural markets and income 2017-2030 (2017)
https://ec.europa.eu/agriculture/markets-and-prices/medium-term-outlook_en

World Bank, Thinking CAP: Boosting Agricultural Incomes in the EU (2017)

http://pubdocs.worldbank.org/en/369851513586667729/Thinking-CAP-World-Bank-Report-on-the-EU.pdf

"Delivering on EU food safety and Nutrition in 2050 – future challenges and policy preparedness"

https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/delivering-eu-food-safety-and-nutrition-2050-future-challenges-and-policy-preparedness

OECD (2017), Evaluation of Agricultural Policy Reforms in the European Union: The Common Agricultural Policy 2014-20, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264278783-en

Study on the simplification of delivery mechanisms focussing in particular on simplification for beneficiaries through the ESIF High Level group for simplification

http://ec.europa.eu/regional_policy/en/policy/how/improving-investment/high-level-group-simplification/ (factsheet, report, reflection paper)

http://ec.europa.eu/regional_policy/en/information/publications/reports/2017/esif-simplification-hlg-proposal-for-policymakers-for-post-2020  

Existing analysis for the implementation of relevant EU legislation and policies.



Annex 2: Stakeholder consultation

1.Scope of the stakeholder consultation

The Commission Work Programme 2017 established that the Commission would take forward work and consult widely on simplification and modernisation of the Common Agricultural Policy to maximise its contribution to the Commission's ten priorities and to the Sustainable Development Goals. This process focused on specific policy priorities for the future, taking account of the opinion of the REFIT Platform, and without prejudice to the Commission proposal to revise the Multiannual Financial Framework.

Taking into account this mandate, the European Commission designed an ambitious consultation strategy based on the following four objectives:

·collect views on the performance of the current policy and on the challenges facing EU agriculture and rural areas;

·collect and assess ideas on how to adapt the policy to these emerging challenges;

·gather the widest possible range of views and concerns about EU agriculture in an open and transparent manner;

·enlarge the debate on the CAP to the wider public and encourage more people to take part in the policy discussion.

On the basis of the previous consultation exercises and the available evidence, a mapping exercise of the stakeholders confirmed the need to develop a broad and extensive consultation process that would reach a large and heterogeneous community of stakeholders (affected and interested in the future of the CAP). The process would involve, in particular: farmers and their organisations, a wide range of enterprises across the food chain (upstream-downstream), multiple networks of NGO’s and civil society organizations (in particular, environmental NGOs) and all types of public authorities (regional, national, international…).

Taking into account the growing interest that EU citizens show for food, agriculture and rural areas 4 , appropriate mechanisms were introduced to allow the individual citizens and consumers to contribute directly to the consultation process. The consultation process of a policy which concerns 500 million consumers and manages 48% of the EU territory had to go beyond the existing organised interests and the institutionalised channels of dialogue at EU level. At the same time, there was a need to guarantee and facilitate the access across the EU territory and overcome the linguistic and technical barriers.

Thus, the following consultation activities were foreseen:

·An on-line public consultation in 23 languages, aiming to reach all interested citizens across the EU territory;

·Meetings of the “Civil Dialogue Groups”, as an institutionalized channel between the key stakeholders’ associations and the Commission;

·Specialized workshops focused on the most relevant policy areas, to collect the evidence needed from experts.

In parallel, the process incorporated the views from three different institutional platforms:

·A formal input from the two consultative bodies of the EU: the Economic and Social Committee and the Committee of the Regions;

·Specific input on simplification of the policy from the REFIT Platform;

·Contributions from National Parliaments.

Last but not least, a large Conference took place on the 7th July of 2017 to share the outcomes from the different consultation activities and advance on the integration of the evidence collected into the Commission preparatory work.

This process has converged in the Communication "The Future of Food and Farming": based on the results of the different consultation activities, this key policy document aimed to frame the debate and advance in the dialogue with the other EU Institutions before the presentation of the legal proposals.

Graph 1 Timeline and overview of the Stakeholder consultation process on the future Common Agricultural Policy, with the key consultation activities

2.On-line public consultation 

2.1.Basic information

The on-line public consultation took place between the 2nd February and 2nd May 2017. Intensive communication actions via the Commission Representations in the 28 Member States and the social networks were carried out in order to encourage a large participation across the EU territory. The public consultation was available at the Commission site and the questionnaire used the EU survey site.

The questions formulated covered both the assessment of the performance of the current policy as well as the views on future policy design. The 33 questions were structured in 3 sections: a) Agriculture, Rural Areas and the CAP today; b) Objectives and Governance; and c) Agriculture, Rural Areas and the CAP tomorrow

The questionnaire included 28 closed questions (multiple choice) and 5 open questions: these ones included two questions on performance of the current CAP, one on additional objectives (beyond the ones from the closed list suggested) and two on specific ideas for the future (covering both simplification and modernisation). The questionnaire also included the possibility to upload concise documents (up to 5 pages), such as a position paper.

2.2.Description of the participants and coverage

The on-line public consultation collected 322 916 submissions (including large public campaigns) and 1 423 position papers.

The level of participation went beyond expectations and largely exceeded participation of EU citizens in previous consultations on the future of the CAP (the 2010 public debate reached 5700 submissions). Furthermore, there were submissions across the EU territory, from all the 28 Member States.

Graph 2 Distribution of submissions by Member State 5 (with replies > 1%)

After the separate analysis of public campaigns, the overall figure of replies was reduced to 58 520 replies to the on-line questionnaire, which included 21 386 farmers (36.5%); 27 893 other citizens (47.7%); 9 241 organisations (15.8%) covering private companies, public authorities, trade, business or professional organisations, NGOs and platforms, and research and academia.

Graph 3 Replies to the on-line public consultation by type of respondent

The high level of participation of citizens outside the farming community (almost 48%) confirms the growing interest on agriculture and the CAP across the EU society and the awareness that CAP impacts go much beyond the agricultural community.

With this public consultation the European Commission managed to gather the widest possible range of views and concerns about EU agriculture, enlarge the debate on the CAP to the wider public and capture the rich and diverse views which exist across the society.

All submissions to the public consultation via EU Survey are available at the following site: https://ec.europa.eu/eusurvey/publication/FutureCAP

A detailed statistical analysis of the replies to all the closed and open questions can be found at the following site:

https://ec.europa.eu/agriculture/sites/agriculture/files/consultations/cap-modernising/summary-public-consul.pdf

2.3.Most relevant conclusions from the on-line public consultation

2.3.1.Keeping a strong Common Agricultural Policy at EU level 

The outcome of the public consultation shows a high interest in keeping a common EU policy on agriculture and rural development. A consensus emerges on the EU value added of the CAP.

The need to guarantee a level playing field within the single market and the existence of cross-border challenges like food security, environment or climate change (with a positive reply of more than 90% of the respondents) emerge as key reasons that justify an agricultural policy commonly managed at EU level.

Other justifications include the need for a common framework for sharing best practices (91%), the need to maintain economic, social and territorial cohesion across the EU (86%) as well as the need to have a common position at international level (83%). There is also widespread support for a common budget as this is considered more efficient (62%). Furthermore, with a consensus among the different stakeholders, the EU emerges as the appropriate level of government to mitigate and adapt to the impact of climate change (85%), contribute to a high level of environmental protection across the EU (73%), address market uncertainties (67%) and encourage the supply of healthy and quality products (62%).

Graph 4 Key replies on the EU Added Value of the CAP by type of respondent

Views differ between farmers and the other citizens as regards ensuring a fair standard of living for farmers, securing food supply at reasonable prices and the development of rural areas. While there is a consensus on the need for EU action (and a clear opposition to the renationalisation of the policy), the positions provided by organised stakeholders differ as regards the specific allocation of responsibilities between the EU and the Member States: while some stakeholders call for more flexibility at national/regional level in order to adapt the policy implementation to their specific local needs, other organisations ask for a stronger action at EU level in order to guarantee a level playing field.

This debate on the future governance of the policy and, in particular, the rebalancing of powers among the different levels of government has been addressed by the new delivery model outlined at the Communication The Future of Food and Farming” 6 .

2.3.2.Confirming challenges ahead 

The public consultation highlights the fair standard of living for farmers, the pressures on the environment and climate change (both mitigation and adaptation) as the three most pressing challenges that EU agriculture and rural areas have to face. As regards the specific environmental challenges, clear priority is given by respondents (both farmers and non-farmers) to the protection of biodiversity, reduction of soil degradation and a more sustainable use of pesticides and fertilisers.

At the same time, it shows a strong public awareness of the lower level of farm income as compared to the EU average (88%), of the fact that farmers get a limited share of prices consumers pay (97%) as well as of the existence of stricter production requirements in the EU than outside the EU (87%). Access to land and low profitability are clearly identified as the most relevant barriers to becoming a farmer.

Graph 5 Key challenges identified at the public consultation by type of respondent

2.3.3.Need for a simpler and more effective policy 

The participants consider that the current CAP successfully addresses the existing challenges to some extent only (57%). This view is shared among different types of respondents (farmers, other citizens and organisations). All types of respondents (farmers, other citizens and organisations) also share a negative reply when assessing to what extent the current CAP addresses the environmental challenges (63%).

The excess of bureaucracy and lack of attention to sustainability are often highlighted as the main problems/obstacles preventing the current policy from successfully delivering on its objectives. At the same time, “greening”, aid applications and controls are identified as the most burdensome and complex elements. The call for a reduction of administrative burden is a generalised demand in the papers submitted by farmers and public administrations.

In line with this conclusion from the public consultation, the future CAP will increase the environmental ambition and address the environmental challenges in a more efficient way. As indicated in the Communication "The Future of Food and Farming", any new CAP should reflect higher ambition and focus more on results as regards resource efficiency, environmental care and climate action. Taking this into account, the current green architecture of the CAP will be replaced and all operations integrated into a more targeted, more ambitious yet flexible approach.

Graph 6 Word cloud based on the replies to the open question “Which elements of the current CAP are the most burdensome or complex and why?”
The size of the words is weighted relative to number of times mentioned

2.3.4.Different perceptions on the economy and environment

Asked about the contributions of farmers to our society, contrasting views emerge: farmers see themselves as responsible for supplying healthy, safe and diversified products as well as ensuring that enough food is available; the other citizens also see farmers as suppliers of healthy and safe products but this productive role goes hand in hand with the responsibility to protect the environment and ensure animal health and welfare. These different views also emerge in the definition of the objectives of the CAP: while farmers put the focus on ensuring their fair standard of living, other citizens pay greater attention to the supply of healthy and quality products and contributing to a high level of environmental protection.

Respondents also differ when examining the role of the CAP vis-à-vis the 10 Commission priorities for 2014-2020: while farmers consider that the CAP should do more on boosting investment, growth and employment as well as strengthening the EU single market, the other citizens focus the attention on mitigating and adapting to the impact of climate change and providing renewable energy.

Graph 7 Key replies on objectives of the CAP by type of respondent (farmer v. other citizens)

2.3.5.Emergence of new societal demands 

However, beyond the already known economic and environmental objectives, the public consultation confirms the call to pay greater attention to new societal demands within the scope of the CAP. Animal welfare, organic farming and quality products emerge in the demands for new objectives of the CAP. Consumer protection and the incorporation of health standards appear also in the written contributions submitted by the non-farmer participants and certain stakeholders.

The Communication “The Future of Food and Farming” has recognized this need. Thus, the CAP will continue to respond to these concerns, for instance by modernising organic rules, supporting the objectives of the Sustainable Use of Pesticides directive and address critical health issues such as those related to antimicrobial resistance (AMR) caused by inappropriate use of antibiotics.

2.3.6.Agreement on the call for a modern and simpler CAP 

Respondents to the public consultation agree with the need to improve farmers’ position in value chains (96%) as well as with the need to support targeted investments (81%), the need to deliver more benefits for environment and climate (77%) and the need to provide income support for farmers (66%). When asking which criteria should be used for allocating direct support, farmers give a clear preference to compensating farming activities in Areas with Natural Constraints/High Natural Value Areas, establishing limits in the support for large beneficiaries (capping) and supporting young farmers. The other citizens consider that practices with the highest environmental benefits as well as small producers deserve attention when allocating direct support. Water (quality and quantity), soil protection and biodiversity clearly emerge as the most relevant environmental objectives under the CAP.

Graph 8 Key replies for future policy design (by type of respondent when differences existed)

In parallel, the most relevant actions considered to better address climate change are the reduction of GHG emissions, carbon storage and sequestration, climate change adaptation as well as diversification of the farming systems. In this domain, farmers largely agree on the idea that the CAP would be simpler if more choice was given in terms of environmental measures.

Graph 9 summarises replies to the open question on further ideas for modernisation. Sustainability appears as the catch word. "Pillars" are also often quoted, however there is no consensus on whether to keep two pillars or to end that differentiation. Reducing bureaucracy comes out high, in both open questions on modernisation and on simplification.

Graph 9 Word cloud based on answers to the open question on modernisation

Finally, in terms of specific suggestions for simplification, there is a clear agreement among stakeholders on the positive effects of reducing the overlaps between Rural Development and other CAP measures (69%), the better use of databases and technologies (remote sensing, smartphones) to reduce farms inspections (62%) as well as the use of a more extensive use of e-government tools (63%).

2.4.Overview of the position papers

In parallel to the replies to the 33 questions foreseen in the on-line questionnaire, more than 1423 respondents complemented their replies with the submission of short documents. In order to capture this qualitative information Commission services carried out a specific analysis.

The analysis of the 1423 contributions showed the existence of 693 different papers which included 426 submissions from organisations and 267 submissions from individuals. The submissions from the organisations included mainly NGOs or networks (148), business or professional organisations (124) and public authorities (58); the individual contributions included 117 submissions from farmers and 150 from other citizens.

The papers sent by farmers put emphasis on the reduction of administrative burden, the need to address market challenges (price volatility) and ensuring a fair standard of living for farmers (highlighting income and profitability). A large share of these contributions made reference to specific sectorial concerns, in particular to the situation of the livestock sector and dairy. A clear preference was seen on the need to improve the targeting of the support towards real and small farmers. The individual papers from other citizens put a strong focus on the need to improve sustainability, with a clear general preference for improving animal welfare and consumer standards. These contributions called for a stronger action to support organic and local production and for a redesign of the policy in favour of small and environmentally-friendly farms.

The analysis of the papers from the organisations showed a clear difference between the position from the economic stakeholders (business and professional organisations, enterprises…) and the non-economic stakeholders (all types of NGOs and civil society networks).

The economic stakeholders showed a consensus for improving the current CAP (rather than an overhaul) and highlighted the need to preserve the common market and the level-playing field. For this reason they called for a strong CAP at EU level and opposed any attempt of renationalisation. They also insisted on the need to protect farmers from emerging risks, keep income support as a key instrument of the policy and enhance research and innovation.

On the other hand, the non-economic actors showed a clear preference to redefine the policy under the approach “public money for public goods” by calling for a more environmentally and climate-friendly CAP. These organisations called for the inclusion of health and nutritional objectives in the future policy and showed a clear preference for the 2nd pillar type of instruments. Among these actors, two opposing groups were detected concerning the organisation of the policy: those calling for a stronger EU-action at EU level and the ones calling for more flexibility for the Member States in the design of the policy.

These two opposed views as regards the future governance of the policy were also detected among the wide range of public authorities (including 19 national authorities). Despite the difference on this aspect, the public authorities converged in their insistence on reducing the administrative burden and improve the programming and the targeting of the support. The public authorities also shared the view of the need to support areas and regions in difficulty and to pay a greater attention to risk management tools as well as a focus on food in all its dimensions (from food supply to consumer concerns).

An overview of these written contributions can be seen at the following presentation: https://ec.europa.eu/agriculture/sites/agriculture/files/events/2017/cap-have-your-say/170702-coturni.pdf

The positions reflected across these position papers confirmed the existence of two tensions:

·On the one hand the tension between the short-term trade-off between the economic and the environmental/climate challenges: The general awareness on the need to improve simultaneously both the economic and the environmental/climate is translated into two opposing views depending on the type of stakeholder. The analytical work of the Impact Assessment pays special attention to this tension.

·On the other hand, the general consensus on the need to reduce of the administrative burden is accompanied by strong calls for better targeting (either to certain farming models, specific sectors or new concerns…). The capacity to address type of demands at the same time (simplification and targeting) will be one of the key challenges of the future policy design. The new delivery model aims at providing an answer to this.

3.Civil dialogue groups: organised dialogue with the key stakeholders 

3.1.Basic information 

A key consultation activity has been the three meetings of the Civil Dialogue Group (CDG) of the CAP. This group is the institutionalised channel of dialogue between the Commission and the representatives from 30 EU-wide organisations (professional associations and other non-governmental organisations which are involved in farming, rural economy, food production, food processing, agricultural trade, environment, consumer protection and other related matters). Thus, participants in this group cover the whole range of economic, social and environmental aspects of EU agriculture and the CAP 7 . 

3.2.Main messages from the meetings

The consultation process was presented to Members of the CDG in December 2016. In particular, participants in the CAP CDG (16 December 2016) provided first views on the "modernization and simplification of the CAP". Broad questions were asked on that occasion, enabling to test the relevance of some of the questions foreseen for the on-line public consultation.

The meeting of the 3rd May 2017 consisted of two parts: on the one hand an organised debate on simplification on the potential for simplification of the policy, taking into account the most recent discussions around the Omnibus regulation and based on the questions foreseen in the on-line public consultation; on the other hand, the Commission provided a first presentation of the factual summary on the participation to the on-line public consultation (closed the day before). A general exchange of views also took place among the stakeholders on the most relevant issues highlighted in the public consultation.

The meeting of the 11th December 2017 provided for a first organised exchange of views around the Communication “The future of food and farming”.

The different discussions of this CDG highlighted the important differences among the organised stakeholders, as seen in the analysis of the on-line public consultation. As platform of representation of the EU-wide organisations, discussions at the CDG reflected the positions that the same organisations transmitted through the on-line public consultation (see section 2).

The views expressed at the CDG CAP confirmed the tension between the economic and the environmental challenges and the different views across the stakeholders to address this tension. On the other hand, as representatives from organisations at EU level, the views expressed shared special attention on the need for a strong CAP at EU level, the EU added value and the level-playing field. Furthermore, discussions confirmed a general demand for a better targeting of the CAP support and the need to better address price volatility.

All documents of the meetings of the Civil Dialogue Group on the CAP can be found at: https://ec.europa.eu/agriculture/civil-dialogue-groups/cap_en

4.Specialised workshops to collect evidence

In order to gather evidence/knowledge from experts on CAP-related issues a set of specialised workshops were organised between March 2017 and February 2018. These workshops allowed exchanging views between experts and Commission officials and advancing in the formulation of the key conclusions/key issues to take into account in the modernisation and simplification process.

The five issues to be tackled by workshops were selected in order to cover the most relevant areas where gaps on knowledge and disagreements on policy approaches had been detected. The workshops were designed according to a similar methodology based on the following: 1) collection of the latest evidence available at the level of experts/academics/practitioners/international institutions; 2) focus on practical experiences on the ground; 3) assessment on the potential of new technologies/approaches to improve future policy design in the specific area covered.

The summaries of the workshops and presentations are available at:

https://ec.europa.eu/agriculture/events/cap-have-your-say/workshops_en

4.1.Workshop 1: Best practices addressing environmental and climate needs  

This two-day workshop (23/24 March 2017) involved a wide range of experts on the environmental and climate challenges. It started by examining the tools available for assessing the environmental needs at EU level and, in particular, the modelling practices and technologies (with the experience in climate mitigation and the potential for environmental provided by CAPRI and IFM-CAP). Second, it explored the experiences from the environmental analysis by MS: this included specific practices, like the use of the EFA calculator to target areas for biodiversity measures (in Italy), the lessons from NL on the implementation of greening, the specific issue of the landscape features and buffer zones for biodiversity, and specific management practices (like the Integrated Pest Management, nutrient management plans, soil organic carbon management, manure techniques, agroforestry actions and beef genomics).

The workshop also examined in detail how to improve the uptake of the measures (with a focus on the role of behavioural approaches) and the use of new technologies as well as their potential for policy design and control.

The workshop highlighted that one-size-fits-all solutions on environmental challenges are rarely efficient, thus a need to focus on the EU objectives and allow MS/regions to adapt actions to their local needs. At the same time, it confirmed that no consensus exists on the best combination of mandatory and voluntary approaches for the first environmental layer of the CAP: the dilemma between a compulsory and more prescriptive approach and a voluntary approach was confirmed as the most relevant dilemma to be faced in the design of the environmental architecture of the future CAP. Options 3, 4 and 5 assessed in the impact assessment develop in detail these different conceptions/approaches to enhance the environmental performance of the policy.

Last but not least, it was confirmed that research, innovation and advice is at the heart of the future implementation of agri-environmental policy. In order to advance towards a more performance-oriented policy in this domain, important efforts need to be done at the level of data collection.

4.2.Workshop 2: Risk management 

This two-day workshop (18/19 May 2017) tried to advance in the collection of evidence in the debate on the tools to support the farming community to better face the production, price and income risks.

After examining the challenges of the EU market safety net and the recent developments in the risk management system in force in the US, this workshop focused on practices from the ground: the case of future markets in the EU, the EU agricultural insurance and reinsurance sector, the case of a public-private partnership (Spain) and the crop insurance scheme in Poland. The workshop also advanced the discussion concerning behavioural aspects of risk management, including facilitation via the farming community.

The workshop confirmed a consensus around the idea that farmers' capacities to deal with risks need to be strengthened and the potential for market-based risk management tools should be improved. It also confirmed the need to encourage risk sharing along the food chain.

As regards future policy design, the workshop highlighted the importance of risk management tools as a complement to the main mechanism of income support (direct payments) as well as the need to expand the use of these tools while keeping the current market orientation of the policy and empowering the farming community to use them.

Any action in this domain will certainly need to allow for flexibility for both MS and farmers, since evidence confirms that a single model of risk management cannot be generalised across the EU.

These ideas have been incorporated in the Communication “The Future of Food and Farming”. Furthermore, the impact assessment has analysed a scenario with a transfer of expenditure from direct payments to risk management actions (option 3).

4.3.Workshop 3: Food and related issues 

Food consumption is influenced by series of factors, which require a mix of interventions. The workshop on food and related issues (31 May 2017) confirmed that, despite the multiplicity of factors, the CAP can help. It is well aligned with food safety requirements; it already includes schemes that promote healthy diets (e.g. school schemes) as well as specific instruments to develop quality products and short supply chains.

However, to what extent can the CAP further facilitate farmers' adaptation to changes in consumption patterns? Anti-Microbial Resistance warrants increased attention: recording of anti-microbial use on farms should be improved, awareness should be raised via farm advisory services, and synergies with action plans should be developed. While there is no consensus for developing a Common Food and Agricultural Policy at EU level, the governance of food systems requires a coordinated approach across policy domains.

4.4.Workshop 4: Socio-economic issues

The workshop on socio-economic issues (9 June 2017) focused on the analysis of the dynamics of growth and jobs in EU agri-food sector. Starting from the evidence that CAP payments reduce the outflow of labour in EU-15 (but no impact found in EU-13), this workshop examined the links between global agriculture and food value chains in the EU from both a conceptual perspective and a practical perspective, based on case-studies.

The workshop confirmed, as indicated by the World Bank study “Thinking CAP. Supporting Agricultural Jobs and Incomes in the EU” (discussed at the workshop and finalised by the end of 2017), that agricultural jobs and income help reduce poverty across EU: structural transformation is well underway and relatively successful; the gap between agricultural incomes and incomes in other sectors is closing and, across the EU, agricultural incomes are converging. As labour moved out of agriculture, the CAP supports the creation of reasonably remunerative jobs for the workers who remained behind in agriculture, while poverty in agricultural areas was reduced.

The workshop also examined the links with upstream sectors, the territorial dimension of the CAP (CAP support, despite its correlation with higher regional GDP growth, benefits mainly poorer regions) and highlighted the need to improve the number as well as the quality of jobs/invest in human capital. It confirmed the job-productivity paradox in agriculture and stressed the challenges for a future policy design: need for not only retain jobs, but promote productive jobs and identify win-win solutions.

4.5.Workshop 5: Measuring the CAP environmental and climate performance

The adoption of the Communication "The Future of Food and Farming" has stimulated a lively debate on which basic policy objectives can be set at EU level, how they can be implemented at Member State level, and whether they can be monitored, controlled and evaluated. This is particularly relevant for environmental and climate performance, as related indicators are often more difficult to measure (e.g. biodiversity) and/or take time to have a measurable impact (e.g. soil fertility).

At the same time, the Impact Assessment process has shown that there is a growing amount of information and expertise (e.g. Member States notifications on environment/climate legislation, scientific expertise in the Joint Research Centre, satellite information, etc.) that can set the basis for informed EU policy decisions, robust Member States implementation and efficient monitoring, control and evaluation.

This additional workshop (26 February 2018) was an opportunity to exchange views on how the performance of the new CAP can be measured and what indicators can be used. It was organised around five sessions: water, biodiversity, soil, air and climate change.

While there are still diverging views about how much some of the potential results indicators can assess policy performance and policy coherence, the analysis that was presented at the workshop showed that result and impact indicators in certain environmental domains are in reach but often need further technical developments and data availability/analysis. In particular for biodiversity, more groundwork, data collection and coordination are needed.

It also became clear that analysis and support of the Joint Research Centre will even be more needed in the future in supporting MS in providing scientific evidence to identify their challenges to be addressed in the CAP plans, to help assess those plans and to support in their monitoring and evaluation.

5.Institutional consultative bodies: active role of the EESC and CoR

In order to guarantee an adequate involvement of all the stakeholders, the Commission has worked in close cooperation with the two consultative bodies.

The First Vice-President of the Commission formally asked the EESC and CoR to provide their exploratory opinions to the consultation process on the modernisation and simplification. Both institutions have been very proactive in providing specific opinions, involving the Commission in their works and participating in the different platforms of discussion (as the case of the Conference “The CAP: Have your say” of the 7/7/2017).

Furthermore, on the 11th January 2018, a specific session took place at the Committee for Agriculture and Rural Development of the European Parliament to exchange views on the opinions adopted by the EESC and CoR regarding the future CAP.

5.1.European Economic and Social Committee (EESC)

The EESC adopted two specific opinions on the future of the CAP:

·Opinion of the EESC "The main underlying factors that influence the Common Agricultural Policy post-2020” (own initiative opinion, Rapporteur: Tiainen SIMO) adopted on the 15th December 2016. Opinion and hearings available at: http://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/factors-influence-cap-post-2020-own-initiative-opinion

·Opinion of the EESC “A possible reshaping of the Common Agricultural Policy” (Exploratory opinion, rapporteur: John BRYAN), adopted on the 1st June 2017. Opinion and hearings available at: http://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/possible-reshaping-cap

In these reports, the EESC calls for a budget of the CAP adequate to address existing and new demands as well as additional financial demands resulting from Brexit. The EESC supports the retention of the two-pillar model of the CAP and key role for direct payments in order to support farm incomes as well as a rural development policy based on the objectives set down in Cork 2.0. Specific attention is paid to the role of the CAP as a provider for public goods.

The most relevant elements highlighted by the EESC reports have been incorporated in the design of the future CAP: this is the case of the two-pillar structure, the maintenance of direct support as the main policy tools, a new environmental architecture (replacing greening) and the principles of Cork 2.0. Furthermore, specific ideas stressed by this consultative body, such as the incorporation of programming elements into the Pillar I or the extension of the use of nutrient management plans will be present in the new policy design of the CAP.

5.2.Committee of the Regions

The Committee of the Regions (CoR) has taken a different approach, by adopting several specific opinions which addressed their most urgent concerns (such as price volatility, the future of rural areas or young farmers, together with a general broad opinion on the future of the CAP:

·Opinion of the CoR "The CAP post-2020”; Rapporteur: Guillaume CROS (FR/PSE), Vice-president of the Regional Council of Occitanie. In this report, the CoR calls for a fair, sustainable and supportive agricultural policy for the benefit of farmers, areas, consumers and citizens.

·Opinion of the CoR "Regulating price volatility of agricultural products”; Rapporteur: Jacques BLANC (FR/PPE), Mayor of La Canourgue. According to this report, the mechanisms to safeguard farmers’ incomes need to be strengthened significantly to reduce the negative impact of the high volatility of prices of agricultural products and inputs, in order to make European agri-food sectors more competitive, maintain agriculture throughout the different areas, encourage modernisation and innovation, and preserve vibrant rural communities.

·Opinion of the CoR on “Supporting young European farmers”; Rapporteur: Arnold HATCH (UK/ECR), Member of Craigavon Borough Council. According to this report, the shortage of young people pursuing careers in farming is jeopardising the economic and social sustainability of rural areas. Supporting young farmers is a prerequisite for maintaining agriculture throughout the EU and for keeping rural areas alive, in order to meet the territorial cohesion objective mentioned in the Lisbon Treaty.

·Opinion of the CoR "Revitalisation of rural areas through Smart Villages”; Rapporteur: Enda STENSON (IE/AE), Council Member of the County of Leitrim). According to this report, the rehabilitation of rural areas has to try to meet the long-term challenge of depopulation, through actions to encourage and support sustainability, generational renewal and the ability of rural areas to attract newcomers.

These reports are available at the following site:

http://cor.europa.eu/en/activities/opinions/Pages/opinions-and-resolutions.aspx#

The most relevant elements highlighted by the CoR have been incorporated in the design of the future CAP: this includes, for example, a strong system of direct support, the movement towards a fairer distribution of the support, an enhanced focus on generational renewal or the support to digitalization of rural areas.

6.Listening on simplification: REFIT Platform opinions on the future CAP

6.1.Basic information and submissions received

Commission Work Programme 2017 explicitly mentioned that the Commission would take into account the opinion of the REFIT Platform in the upcoming work on the simplification and modernization of the CAP.

The Commission has set up the REFIT Platform 8 to receive advice from Member States and stakeholders on how EU laws can be made more effective and efficient. The REFIT Platform collects suggestions from external stakeholders and has to assess and respond to all. Due to the administrative burden of the CAP, ‘Agriculture and Rural Development’ was identified by the Stakeholder Group of the REFIT Platform as one of three priority policy areas for Platform to address.

To this date, 289 relevant suggestions have been received by the REFIT Platform. Agriculture is the policy area which has attracted the highest input from stakeholders with 44 submissions (i.e. 15 %). Those submissions have been made by a variety of stakeholders – ranging from NGOs (EEB – European Environment Bureau), to businesses (DBF – Danish Business Forum, NNR - Board of Swedish industry and commerce for Better Regulation), governmental organizations (Finnish government via its stakeholder survey, Freistaat Sachsen) or citizens.

In total, 10 opinions 9 have been adopted by the Platform in the field of agriculture, covering 30 submissions (28% of the total number of submissions followed by an opinion). These opinions touch upon the following topics: Effectiveness and efficiency of the CAP (EEB); Cross Compliance (DBF, NNR); overlaps between pillar I and II (Freistaat Sachsen); Control and Audit (NNR); Greening (NNR); Marketing Fresh fruit and Vegetables (DBF); relations between ESI and EAFRD (Freistaat Sachsen); rural development support (NNR); and farm subsidies reforms (Finnish Survey for Better Regulation).

6.2.Key messages from the REFIT Platform

The stakeholder group of the REFIT Platform called for a strategic review of the CAP, with a view to reduce the regulatory burden of the CAP, improve its value for money while ensuring the achievement of the objectives and increase its integration with other policy areas 10 . At the same time, the different opinions approved by the Platform put the focus on the excessive administrative burden and lack of effectiveness of the current environmental architecture, with particular attention to the greening and cross compliance.

In general terms, the submissions of the REFIT Platform show a critical approach to the changes introduced in the last CAP reform: This is the case of the mandatory requirements associated to the greening payment, which, according to the REFIT Platform, require a fundamental review (due to the high costs associated to a limited benefit) 11 . At the same time, the Platform criticizes the introduction of policy elements under the two pillars of the CAP (environmental actions, young farmers, ANC support): this is seen as a source of risk of additional compensation and further administrative burden in managing consistently the respective measures 12 .

The Commission has examined in detail all the contributions of the REFIT Platform and has been directly associated to its works. Some technical aspects related to the implementation of the current legislative framework have already been taken on board in the different simplification exercises carried out since 2015 (including the Omnibus Regulation adopted in 2017).

As regards the more fundamental comments from the REFIT Platform (such as the effectiveness and efficiency of the policy, the design of the environmental architecture and the overlaps between pillars), the inputs from the Platform have confirmed the need for a change in the delivery model of the CAP: the submissions from this Platform confirm the difficulties of the last CAP reform to increase the effectiveness of the policy under a model strictly based on compliance of rules defined in detail at EU level.

The introduction of a strategic approach covering both pillars and the lack of pre-defined eligibility rules at EU level (by providing larger subsidiarity for the Member States in the design of the specific actions) will provide the framework for a policy more focused on performance rather than on compliance. The new delivery model of the CAP (with a policy more focused on results) replies to a large extent to the main concerns of the REFIT Platform.

7.National Parliaments

The following National Parliaments have contributed to the consultation process:

7.1.Assemblée Nationale and Sénat (FR) 

On the 10th March 2017, the French Assemblée Nationale (first chamber of the French Parliament), adopted a Resolution on the Future of the Common Agricultural Policy after 2020. In this opinion, the French Chamber calls for a refocus of the policy, which should evolve towards a “Common Food and Agricultural Policy”; the future policy should focus the support on holdings which create employment, in particular small and medium and the most fragile ones (such as the young or the most vulnerable sectors). While asking for a rebalance within the food chain, the Assemblée Nationale asks for support to the most environmentally-friendly holdings, with a focus on the challenges related to biodiversity, soils, emissions and climate change. The French Assembly also calls for a more inclusive engagement of the national and local authorities in the design of the future policy.

On the 20th July 2017, the Committee of European Affairs of the French Senate also contributed to the consultation process. The Sénat calls for a strong CAP with appropriate budget that should protect the farmers from the volatility of the markets and support their resilience. The French Senate also asks for the implementation of the recommendations of the Agricultural Market Task Force, for the appropriate incentives to support the diversification of income and the establishment of reciprocity in the future international agreements. Finally, this chamber insists on the need to reinforce the support to the installation of young farmers, as a key tool to guarantee generational renewal.

7.2.Oireachtas (IE) 

The Joint Committee on Agriculture, Food and the Marine of the Oireachtas (first chamber of the Irish Parliament) sent an Opinion in April 2017.

In this opinion, the Irish chamber considers necessary to maintain the CAP as the fundamental policy of the European Union providing basic income support for farmers, protecting the environment and supporting rural communities. Key issues are raised, like the need to support farm incomes and employment, particularly among young farmers, to strengthen the position of farmers in the food chain, to support environmentally friendly agricultural practices and to contribute to the fight against climate change. 

7.3.Joint Parliamentary Declaration by chambers from France, Italy, Poland and Ireland 

On the 11th April 2017, a Joint Declaration was agreed by the French Senate’s European Affairs Committee, the Italian Senate’s European Affairs Committee, the Polish Senate’s Agriculture and Rural Development Committee and the Committee of Agriculture, Food and Marine of the Oireachtas (Irish Parliament).

This Joint Parliamentary Declaration considers that the CAP remains a strategic priority for the Union which should be allocated, for the 2020-2026 period, a budget which matches its ambitions, based on maximum effectiveness. According to this Joint Declaration, a properly resourced CAP is integral to a Union-wide response to the challenges of the coming years. The future policy should keep the market orientation, advance on the simplification agenda, advance on the integration of the food chain and keep the unity of the internal market.

8.Integrating opinions and evidence: Conference 7th July 2017 “Have your say”

The ambitious stakeholder consultation process on the CAP post-2020 involved several consultation activities that were done simultaneously during the first part of the year 2017.

The important messages that emerged from the on-line public consultation could not be assessed in isolation; at the same time, the process of collection of evidence (carried out in the first 4 workshops) needed the broader perspective of the debate which was taken place in the public sphere thanks to the public consultation.

Evidence collected from experts had to be compared with the outcomes of the public opinion and stakeholders: this process is particularly relevant in the domain of the CAP, where public opinion does not necessarily correspond to the technical evidence.

The Conference “The CAP: Have your say” of the 7th July 2017 gathered more than 500 stakeholders and experts with the goal of taking stock of the results of the consultation and inform all interested parties on the scientific evidence compiled by the Commission. Participants to the Conference included the members of the Civil Dialogue Group of the CAP, members of the REFIT Platform, EESC and CoR, representatives of Member States and of the European Parliament, as well as experts. The Conference was also web streamed, hence open to all interested citizens.

The debates of the Conference allowed the Commission to advance in the definition of the key priority areas to be covered in the Communication “The Future of Food and Farming”: environmental and climate action; risk management; new societal demands; and the socio-economic dimensions. The debate between stakeholders and experts highlighted the different perceptions between public opinion and experts in some domains such as the distribution of the support of the CAP. It also confirmed the important differences between economic and non-economic stakeholders in addressing the environmental and economic challenges ahead (as explained in section 2).

Last but not least, the Conference showed the growing consensus among a wide range of stakeholders on the need to keep a strong CAP at EU level and, at the same time, improve the targeting of the policy and design a more flexible approach for its implementation with a view to increase its effectiveness.

All the presentations and information related to this conference is available at:  https://ec.europa.eu/agriculture/events/cap-have-your-say_en

9.Communication "Future of food and farming". Public debate on the new delivery model of the CAP.

The outcome of the whole consultation process converged at the Communication adopted on 29 November 2017 and entitled "the Future of Food and Farming". This policy document outlined challenges, objectives and possible avenues for a "future-proof" CAP that needs to be simpler, smarter and modern, and lead the transition to a more sustainable agriculture.

Public debate on the ideas presented in the Communication focused on the new delivery model of the CAP: while there is a general support to a movement towards a more result-based policy and more flexibility in its implementation, concerns have been raised regarding the need to preserve the common dimension of the policy with the appropriate safeguards at EU level that could guarantee a level-playing field as well as the adequate ambition in reaching the new objectives.

9.1.Council of the European Union

On the 19th March, the Council of Ministers adopted Presidency Conclusions on the Communication, supported by 23 Member States 13 . In these conclusions 14 , the Council endorsed the view that Member States should enjoy more subsidiarity and flexibility to take account of their national and regional specificities and to contribute to a more efficient delivery of the policy. Furthermore, the Council also agreed with the shift towards a more result-oriented policy. However, it highlighted a potential risk of fragmentation of the CAP and called on the Commission to continue ensuring a level playing field among Member States and the integrity of the internal market through basic common rules at EU level.

The Council also stressed that the new delivery model should bring substantial and tangible simplification and reduction of administrative burden for both beneficiaries and national/regional administrations and called for simple CAP Strategic Plans. According to the Presidency conclusions, these plans should allow flexibility in their design and subsequent amendments, taking into account the division of competences within each Member State.

9.2.European Parliament

The European Parliament is currently drafting its own initiative report (Dorfmann report) to react to the Communication. It will be voted at plenary session in May.

In the draft report, the European Parliament shows support towards the willingness of the Commission to advance towards a more result-oriented policy and providing more flexibility to the Member States in the final design of the actions. However, it insists on keeping the integrity of the single market and keeping the 'C' in the CAP, avoiding the renationalisation of the policy. The draft report of the European Parliament stresses the fact that Member states should follow a uniform approach to programming and eligibility as to avoid distorting competition. The new approach should also respect the distribution of powers within each Member State, notably respecting the legal competences of the EU's regions when implementing policies (for example in the 2nd pillar).

9.3.European Court of Auditors

The European Court of Auditors (ECA) published in March 2018 a "Briefing paper" on the future CAP. This Briefing paper 15 , the ECA pays a special attention to the new delivery model: in their view, the success of the new model will require measures based on sound scientific and statistical evidence (that will clearly deliver the desired results); relevant, ambitious and verifiable targets for the new “CAP strategic plans”, aligned with EU objectives; a robust performance monitoring and evaluation framework; and a solid accountability and audit chain, providing assurance on both compliance and performance. 

9.4. Stakeholders

Two meetings of the CDG CAP took place on December 2017 and April 2018. These meetings allowed for an institutionalised dialogue among the European Commission and the most relevant stakeholders organisations around the content of the Communication and, in particular, on the implications of the new delivery model proposed.

The reactions form the agricultural community showed an agreement with the willingness to reduce the rules at EU level and reinforce the performance of the policy. The main concerns focused on the need to well preserve the level-playing field.

Environmental organisations also showed a positive reaction to a more result-based policy but show particular concerns on the safeguards to guarantee a high ambition in the environmental and climate action. A specific study of the Institute of European Environmental Policy (IEEP) assessed the implications of the new delivery model on the environmental and climate actions, with a particular attention to the indicators to use 16 . At the CDG of the 20th April 2018, this study was presented and discussed among stakeholders and the Commission representatives.



Annex 3: Relevant Evaluations

Evaluations and studies already carried out that served as input for the impact assessment: a synthesis

Alongside with evaluations that remain to be finalised, evaluations carried out in the past years can serve as valuable input.

In particular the following evaluations are relevant:

The evaluation of income effects of direct support (2011) pointed to the important role of direct support for farm income and maintaining viability of farms.

The evaluation of structural effects of direct support (2013) highlighted the role that decoupling might have played in accelerating reduction of labour use intensity in the farm sector as well as an increase in specialisation.

The Economic analyses carried out in the context of the evaluation of Article 68 measures (2015) showed that optional support for specific needs helped reduce disadvantages in terms of viability in a number of sectors such as sheep and goat, cotton or durum wheat but had a very limited effect on competitiveness and sustainability of primary production and industries. Coupled support sometimes generated competition distortion. Concerning environment, varied measures were designed and results were uneven. Arable crops rotation and diversification were the most significantly implemented type of measures, with some positive impacts.

The study Mapping and analysis of the implementation of the CAP (2016) reveals that the Member States' strategy to reach the objectives of the 2013 CAP is not sufficiently documented: the implementation choices are more influenced by the consideration to “maintain the status quo” than by a long-term strategy that takes into account the general CAP objectives. The degree to which funds have been targeted to certain needs might not be sufficient to have a significant impact.

The synthesis of ex ante evaluations of rural development programmes (RDPs) 2014-2020 concludes that the process of the ex-ante evaluations and the external coherence of the RDPs are well documented and satisfactory, while the internal coherence, in terms of needs’ prioritisation and description of links between the planned actions - outputs and expected outputs - results, needs to be further enhanced.

The Synthesis of ex-post evaluations of Rural Development Programmes 2007-2013 (forthcoming) covers effectiveness, causal analysis, efficiency, coherence and EU value added. Full aggregation of results is not possible due to missing data or differences in approaches. Replies to evaluation questions are predominantly positive about the contribution of RDPs to environment and climate action as well as for growth and jobs. Outcomes for the quality of life and diversification are less straightforward, due to unclear interrelation and measuring standards. Lack of priority and budget seem to have had a limiting effect on innovative approaches, and improvement in broadband access was delayed due to processes (amongst other late implementation).

The SWD accompanying this synthesis will to be submitted to the RSB in 2018.

The evaluation report (2017) on the payment for agricultural practices beneficial for the climate and the environment found that the greening measures have led to only small changes in management practices, except in a few specific areas. As a result, their environmental and climate impacts have been limited and locally specific. They have had a negligible effect on production or economic viability of farms and the additional administrative costs associated with them have been relatively low. (Staff Working Document covering this evaluation is presented to the Regulatory Scrutiny Board in March 2018).

Evaluation of the impact of CAP measures towards the general objective of "viable food production" (forthcoming). Initial findings confirm the impact of direct payments on enhancing and stabilising income. So far coupled support appears to have limited effects on the level playing field between MS, but this depends on sectors and aid intensity. The effectiveness of exceptional market measures varied depending on sectors and conditions. The administrative and management costs of the current CAP are considered to be generally higher than in the previous one. The coherence with other objectives and policies is found to be good.

All evaluations relating to the CAP are available on the site of DG AGRI

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports_en

https://ec.europa.eu/agriculture/evaluation/rural-development-reports_en

Summary of relevant evaluations /studies carried out in the past years (chronological order)

Evaluation of income effects of direct support (2011)

The evaluation concluded that direct payments have contributed to enhancing the income of farmers and have played an important role in generating farm income. The study underlined the role of direct payments in strengthening the cohesion between regions, in particular Less Favoured Areas (LFAs). It also showed that direct payments have contributed to reducing the existing gap between the average farm income per labour unit of small and large farms.

The analysis indicated that direct payments have reduced the existing differences between farmers’ income in non-LFA areas and, respectively, in LFA areas and the subgroup of mountain LFA areas. The analysis carried out among the farms in LFA areas confirmed the general conclusion that direct payments contributed also to reducing the gap between farmers' income and the regional GDP/employee.

In terms of income stability, direct payments have had larger effects on farmers’ income stability in LFA areas in comparison to non-LFA areas.

The conclusions of the evaluation indicate that direct payments have been crucial in ensuring the economic viability of farms, in particular those specialised in field crops, grazing livestock, mixed farming and, partly, dairy farming.

The results of the statistical analysis pointed out that direct payments have been coherent with the measures under the single Common Market Organisation and Rural Development measures in relation to the objective of enhancing and stabilising farmers’ income.

The evaluation showed also that direct payments have been coherent with the compensatory allowance given to specific farms in LFA areas. Moreover, in the regions having implemented the hybrid and the regional Single Payment Scheme (SPS) model, the coherence between direct payments and compensatory allowance has increased. However, the analysis by type of farming and by groups of regions based on the SPS model identified also cases where farmers receiving both the compensatory allowance and direct payments have higher income than other farmers (i.e. farmers not located in LFA areas and farmers located in LFA areas but not receiving the compensatory allowance).

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/2011-income_en

Evaluation of the structural effects of direct support (2013)

The evaluation examined the effects on farm structural changes of all direct support schemes governed by Council Regulation (EC) 1782/2003 : decoupled and coupled payments and all implementation Single Farm Payment (SFP) models: Single Payment Scheme (SPS) with historical, regional and hybrid models and Single Area Payment Scheme (SAPS).

While the decline in the number of farms has been a long-term trend, the 2003 reform has contributed either to speeding up the exit of smaller-sized farms from the agricultural sector or to the growth in size of part of these farms. Farm concentration increased slightly in the EU-15 Member States (applying the SPS historical and hybrid models) and in a more pronounced way in the EU-12 (applying SAPS and regional models). However, greater concentration in the Member States applying the SAPS model may have been influenced also by other factors, such as the end of the centrally planned economy and subsequent land reforms.

The evaluation concluded that direct payments did not have an impact on land use changes after 2005 nor they affected the legal status of agricultural holdings. On the other hand, holdings' organisational form seems to be indirectly affected by the policy change.

The reform and in particular decoupling of support may have contributed, together with other factors, to accelerate reduction of labour use intensity in the farm sector. However, in the Member States applying SAPS model, this decrease appears to be related more to the reduction of excess labour force from former large cooperatives and state farms, existing in the pre-reform years.

Both coupled and decoupled payments have had a rather limited effect on increasing farm capital. Nevertheless, direct payments have induced some incentives to substitute capital for labour.

Decoupling of support from production has contributed to an increase in the number of specialised farms. This is caused by the greater freedom of production decisions brought about by decoupling which has stimulated part of the holdings to focus more on production activities from which market conditions allowed higher profitability.

The policy change has had a differentiated effect on farm investment in the regions implementing SPS historical and hybrid models (the EU-15) and those implementing the SAPS (the EU-10): decreasing farm investments in the former and increasing farm investments in the latter. This suggests that investment decisions could have been facilitated by the additional financial resources from direct payments, especially in the regions where direct support was introduced following EU accession.

The direct payments have not played a role in influencing marketing strategies at farm level such as membership in producer organisations, direct relationship with processing industry/retailers or direct sale of farm products from farm.

Finally, the analysis showed that farm diversification activities concerned a limited number of holdings (generally below 10%). There was only a limited increase in the number of farms with diversified activities after the reform. The only marked increase was observed in the regions of EU-10 in the case of 'contract work for others' in the regions applying SAPS and 'processing of farm products' in the regions applying regional model. However, these diversification choices may have been supported also by other factors, such as rural development aids and other national policies.

http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/structural-effects-direct-support-2013_en.htm

Evaluation of the EU legislation on organic farming (2013)

The evaluation examined the relevance, effectiveness and European added value of Council Regulation (EC) No 834/2007 (hereunder 'the Regulation') and its implementing rules

The evaluation concluded that the scope of the Regulation is mostly adequate to match the current needs of the organic supply chain but not fully adequate to meet the need of consumers of organic products.

The underlying principles of organic production are made operational in the Regulation by a number of production rules. The evaluation concluded that the production rules are generally adequate to achieve the global objectives of the Regulation and the objectives of organic production. Sound scientific evidence exists that the Regulation has established a framework which guides farmers to adopt practices supporting the objectives of organic farming of higher levels of biodiversity, increase soil fertility and minimising water and air pollution. The system of exceptional rules was considered not fully adequate. For the sectors examined, covering the use of non-organic young poultry, feed and seeds, the evaluation noted that the current system of exceptional rules appears rather to hinder than support the development of organic supplies.

The overall control system of organic farming was considered largely adequate in terms of achieving the global objectives of the Regulation but with some shortcomings in implementation. Some elements of the control system were not consistently implemented across the Member States, such as the evaluation of organic products with respect to residues or the application of different sanctions for the same infringement. As regards the national systems of supervision over control bodies, in some Member States competent authorities may not fulfil their supervisory role fully due to inappropriate procedures for supervision and limited resources.

Currently, three import procedures are operational for assessing equivalence of production and control rules of third countries. The evaluation concluded that the import rules are largely adequate in terms of achieving the global objectives of the Regulation but with some shortcomings in implementation. The import procedure based on the recognition of third countries led in general to an adequate assessment of equivalence but following up on the equivalence assessment of third countries entails a heavy workload for the Commission services. As regards the expiring procedure based on import authorization, there is a clear risk of different interpretations of equivalence by control bodies and various approaches adopted for issuing import authorizations by Member States. The import procedure based on the recognition of control bodies addressed those risks by shifting the responsibilities from the Member States authorities to the Commission and to control bodies. This shift however requires significant administrative input from the Commission services as well as from the control bodies which in turn need strict instructions to assess the equivalence in a more uniform manner.

http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/organic-farming-2013_en.htm

Synthesis of Mid-Term Evaluations of Rural Development Programmes 2007-2013 (2012)

The synthesis of Mid-Term Evaluations (MTEs) was based on the MTE reports of the 92 national, regional and network Rural Development Programmes (RDPs) 2007-2013. Overall, uptake of the RDP measures was observed to have been slower than expected; measures with less technical requirements and most continuity from the last period were the quickest to be implemented. Economic, Environmental and Social/Quality-of-life impacts were assessed, however a large proportion of MTE conclude that it is too early to judge overall impact. In terms of economic impacts, roughly two thirds of the reports state a net positive impact on growth and employment creation. However, calculation methods were not always found to be sound. While some promising examples for assessment of Quality-of-life and environmental impacts could be extracted, these impacts were generally not convincingly assessed. The synthesis therefore recommends that the future monitoring and evaluation framework could invest more into methods to gain more effective information on these topics.

The MTEs assessed the monitoring and evaluation system as good overall and as ensuring a relevant set of data. However, the system was often regarded as too complex. In terms of the indicators analysed, output indicators displayed a high level of availability and quality of quantitative information. On average 38% of the target values were achieved with differences between the axes (axis 1 on average 30%, axis 2 on average 40%, axis 3 divergent and LEADER below anticipated numbers at 20%). However, only about 30% of the reports report on both target and achieved values for result indicators. Achievements vary greatly between indicators and axes (axis 1: 24%, axis 2: 90% and axis 3: 48%). Overachievement of targets occurred mainly in axis 2.

Concerning the menu of RDP measures, the evaluation concludes that a more limited number of measures seems to be desirable, and the cost effectiveness ratio of some measures should be examined for return on investment. However, it is underlined that it will be necessary to observe the full programming period in order to judge whether measures should be dropped altogether. It is pointed out that LEADER principles were not well incorporated in RDPs and LEADER lags behind in implementation.

https://ec.europa.eu/agriculture/evaluation/rural-development-reports/synthesis-mte-2007-2013_en

Synthesis of sapard ex-post evaluations – update: Bulgaria, Croatia, Romania (2013)

The evaluation assessed the impacts of the SAPARD programme and the extent to which it has been successful in reaching its general objectives as defined in article 1 of Regulation (EC) No 1268/1999 in the three countries concerned. The main findings of the evaluation are:

SAPARD made a clear contribution to the implementation of the acquis communautaire concerning CAP and related policies, by requiring the set-up of structures and procedures, which simulated the RDP implementation framework, and by promoting compliance to EU standards and by fostering participation, subsidiarity and communication. In BG and RO it was less successful in solving priority issues and specific problems for the sustainable adaptation of the agricultural sector and rural areas at a large scale; in HR this result was similar but much more limited given the programme’s limited dimension and extremely short implementation time.

By its dimension SAPARD interventions had to remain limited. Moreover, the already limed budgets were further reduced due to the payment interruption and funds recovery in BG and RO following audit findings. The situation of final beneficiaries improved, but they were few in number and usually larger and more dynamic enterprises, i.e. not characteristic for the holdings structure.

The administrative procedures designed by the national SAPARD Agencies and authorities rendered participation in the programme difficult. They were driven by the urge of the authorities to achieve absorption, but also to avoid complications during controls and to manage workload by keeping the number of applications within the range of available administrative resources Eligibility requirements changed often, thus creating confusion among applicants, became increasingly demanding, hence excluding potential final beneficiaries. These problems were accentuated by the lack of consulting services, financing opportunities and overall poor level of documentation at the holding level. In addition, the need to ensure high absorption of funds led to the reallocation among measures on an “absorption capacity” rather than a “need” base.

SAPARD Agencies and authorities were quick in setting up the administrative and delivery systems according to the EU requirements, but these systems were hampered by the lack of experience of the personnel and by the need to develop all the detailed operating rules, procedures and manuals in a step by step, “learning by doing” manner. While this situation influenced negatively the implementation of SAPARD, the performance of the system in the delivery of the RDP 2007-2013 improved through SAPARD.

https://ec.europa.eu/agriculture/evaluation/rural-development-reports/sapard-update-2013_en]

Evaluation of the market implications of veal and young cattle meat standards (2014)

The evaluation examined the relevance and effectiveness of the veal and young cattle meat marketing and labelling rules established by Regulation (EC) No 700/2007 (hereunder ‘the Regulation’) with respect to achieving the objectives laid down in this regulation , as well as its coherence with other relevant measures applied under the CAP. The eight key veal producing Member States were covered.

The evaluation showed that the main impact of the Regulation was to lead Dutch producers to reduce the fattening cycle from twelve to eight months, for part of the veal calf production. Other market trends remained unchanged: national consumption, internal trade and breeders’ income. Overall, the Regulation led to a clarification of the situation on the market caused by a previous lack of definition of 'veal' and improved functioning of the veal market.

The evaluation also showed that consumers were little aware of these labelling rules and that the existence of different sales descriptions depending on the country, even when they share the same language, could be confusing.

The information available through control systems implemented by National Authorities, under the European Commission supervision, did not allow drawing a judgement on adequacy of the control system. However, the reporting of the Member States to the Commission was considered not sufficient to allow a proper monitoring of the controls.

Three recommendations were proposed: seek consistency between sales descriptions from one Member State to another, increase consumer awareness about the standards, and improve the reporting quality of the control system.

http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/veal-marketing-standards-2014_en.htm

Evaluation of CAP measures for the cotton sector (2014)

The evaluation covered the cotton-growing EU countries: Spain, Greece and Bulgaria. It examined the effectiveness, efficiency, coherence and relevance of the measures applied to the cotton sector under the CAP

In 2004, the coupled support regime for the cotton sector was overhauled to improve its coherence with the 2003 CAP reform: decoupling of 65% of the aid and coupled support of 35% for the planted area (crop-specific aid for the sector). Decoupling led to a relative drop in the profitability of cotton compared to alternative crops. Crop-specific aid remains essential: total decoupling would have reduced the planted areas by nearly 65%. The combined effects of the reform on the planted areas and yields, as well as on the evolution of the market, led to a net reduction in the production volume of ginned cotton. Between 2005 and 2008 production decreased with 49%. The introduction of the obligation to harvest and price increases led to a recovery.

Single payment and coupled aid have contributed effectively to maintaining family income for farms specialised in cotton production. The aid represents an essential proportion of producers’ income. Nearly 15 000 jobs (“Full-Time Equivalents”) in the agricultural and more than 1 100 in the industrial sector have been maintained by the CAP measures applied to the cotton sector; these jobs remain heavily dependent on the continuation of EU aid. The efficiency of the support system for the sector has been improved. The partial decoupling in particular reduced the extent of checks and red tape, as the delivery controls linked to price support became redundant.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/cotton2014_fr

Evaluation of the Investment support under rural development policy (2014)

This evaluation analyses three questions in relation to the evaluation of investment support in Rural Development Programmes (RDP) of the Common Agricultural Policy (CAP). Different evaluation methods are classified according to their appropriateness and suitability to measure efficiency, effectiveness and impact of investment support measures. In order to evaluate the causality between policy interventions and outcomes a number of specific econometric methods or experiments are necessary. Theory-based assessments and qualitative participatory approaches cannot be used to derive quantitative results. In order to obtain such results, economic modelling approaches like input-output analyses or econometric methods must be used. A further element of the analysis is to estimate efficiency, effectiveness and impact of investment support measures in eleven programme areas of the EU. The quantitative analysis shows a wide range of results that depend on structural aspects of the regions under consideration and programme-specific factors. With the data available, a causal statistical link between efficiency and targeting was not found. However, a case study demonstrated that targeting via eligibility criteria is more transparent than selection through ranking while aid intensity differentiation does not always have statistically significant effects on targeting.

https://ec.europa.eu/agriculture/evaluation/rural-development-reports/investment-support-rdp-2014_en

Evaluation of Preferential Agricultural Trade Regimes, in particular the Economic Partnership Agreements (2014)

The evaluation concluded that there is evidence that the EU Preferential Trade Agreements (PTA) have been positive and effective at promoting agricultural trade of the countries from Africa, Caribbean and Pacific (ACP). The implementation of EU preferential agricultural trade regimes was found to be relevant, coherent and efficient with regards to their objectives:

A high level of relevance between PTA objectives and needs and priorities of target countries and beneficiaries, as well as enhancement of supply capacity and achievement of high economic growth was found in all case studies.

In almost all case studies, coherence was judged by respondents as particularly high, primarily in the cases of the enhancement of supply capacity, the increase of competitiveness and poverty reduction, and secondarily in the promotion of investment, and trade creation.

Case studies led to the conclusion that preferential market access is regarded as the most efficient and main driving force behind the expansion of exports to both the EU and other international markets and the development of the sectors investigated in this study.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/epas-2014_en

Evaluation of Article 68-measures (2014)

This evaluation assesses the possibility of granting optional support for specific needs, under the Article 68 of the Health Check Regulation, within a limit of 10% of direct payments. It draws on standard statistical approaches as well as on the analysis of the measures’ notifications to the EC and on information collected during ten National Studies. The scheme was implemented between 2009 and 2014 by 26 Member States. However, few Member States implemented it in a significant way. Measures most frequently implemented aimed at supporting competitiveness or enhancing the environment. Extensive livestock sectors were the most supported. Economic analyses showed that Article 68 helped reduce disadvantages in terms of viability in sheep and goat, cotton, durum wheat and tobacco sectors but had a very limited effect on competitiveness and sustainability of primary production and industries. It sometimes generated competition distortion. Concerning environment, varied measures were designed and results were uneven. The most significantly implemented type of measures was arable crops rotation and diversification, with some positive impacts. National control arrangements were effective but monitoring and evaluation systems were weak. Relevance issues arose from competitiveness measures. Optionality was relevant but Rural Development measures would have been more adapted for several cases.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/article-68_en

Evaluation of EU beef labelling rules (2015)

The evaluation of the EU beef labelling rules (Title II of Regulation (EC) No 1760/2000 of the European Parliament and of the Council) shows that the compulsory labelling rules, among other measures, had a positive influence on the restoration of consumer confidence following the BSE crises. However they were not sufficient to alleviate the structural decline in demand for beef which started in 2008. A renationalisation of the markets has occurred in the retail sector coupled with an internationalisation of the markets in the catering sector. This has led to an increase in the consumption of imported beef in most of the Member States. According to a theoretical approach, the cost of compulsory labelling represents around 6% of the beef processing costs.

Consumer demand for beef of national origin was met through the retail channel. Compulsory labelling fulfils the expectations of consumers. Yet, consumers do not know or understand batch and plant reference numbers displayed on labels. The market share represented by products sold under voluntary labelling is significant. Voluntary labelling can also sometimes be confusing. The design of control systems complies with EU legislation. Audits conducted by the Commission have highlighted shortcomings in the implementation of traceability and labelling. It is impossible to make any firm judgement on the adequacy of the exchange of information between the Commission and the Member States. The estimates of control costs suggest that they are limited. Nevertheless, as the functioning of control systems is not fully effective, its efficiency could be improved. Beef labelling rules are coherent with all related European food labelling rules. Three recommendations are proposed: simplify beef labelling by replacing all the compulsory reference codes by a single ‘traceability number’, assess the effect of Regulation (EU) No. 653/2014, and enhance control procedures.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/eu-beef-labelling-rules_en

Evaluation of the Information Policy on the CAP (2015)

This evaluation examines the information policy on the CAP implemented in the period 2006-2013, focusing primarily on assessment of more recent information actions, i.e. direct and indirect actions implemented as part of the external communication strategy on the CAP for the period 2010-2015. All evaluation findings presented in the report are based on evidence obtained from interviews with EU officials, key EU- and national-level stakeholders and beneficiaries of analysed information actions, findings of 16 case studies and three different surveys, as well as outcomes of extensive desk research. All relevant data for making judgements and drawing of evaluation conclusions and recommendations were either collected by the research team or provided by officials of the Directorate-General for Agriculture and Rural Development of the European Commission. The evaluation concludes that implementation of the information policy on the CAP was useful and generated positive results, despite the limited budget available for its implementation. At the same time, areas where planning and implementation of the information policy on the CAP should be improved are pointed out.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/information-policy-2015_en ]

Synthesis of ex ante evaluations of rural development programmes 2014-2020: Final report (2015)

This evaluation study concerns the analysis and synthesis of the ex-ante evaluations of Rural Development Programmes and National Rural Network Programmes 2014-2020, with a focus on four evaluation themes: a) process of the ex-ante evaluations, b) intervention logic and internal coherence, c) external coherence and added value and d) six thematic clusters including (i) investments, (ii) knowledge transfer, advisory services and European Innovation Partnership, (iii) agri-environment-climate, (iv) forestry, (v) young farmers, small farmers and areas with natural constraints, and (vi) risk management. The findings incorporated in the study are based on evidence obtained by geographic experts through a) desk research, b) interviews with representatives from the Managing Authorities and c) a survey addressed to Managing Authorities and key stakeholders. The study concludes that the process of the ex-ante evaluations and the external coherence of the RDPs are well documented and satisfactory, while the internal coherence, in terms of needs’ prioritisation and description of links between the planned actions - outputs and expected outputs - results, needs to be further enhanced. The dissemination of good practices, especially regarding new measures and co-ordination mechanisms, is highlighted as the key recommendation.

https://ec.europa.eu/agriculture/evaluation/rural-development-reports/ex-ante-rdp-synthesis-2014-2020_en

Evaluation of measures for agriculture carried out for the outermost regions (POSEI) and the smaller Aegean islands (2016)

The evaluation assessed the impact of measures carried out for the Outermost Regions (ORs), and, given the similarities in terms of objectives and measures, those for the Smaller Aegean Islands (SAI). The overall performance of POSEI/SAI programmes is assessed positively as regards their ability to address the particular agriculture-related problems associated with the specific geographical location of the OR. The evaluator found that the programmes are effective in covering most specific needs.

Production levels have been maintained (except for tomatoes for export and olives in the Small Aegean Islands) but are not necessarily secured for the long-term future.  Efficiency levels are diverging in the main traditional sectors. The OR/SAI increasingly face price competition from EU imports due to liberalization of several production activities at EU level, further intensified by external factors (wide availability of pork and milk powder due respectively to the Russian embargo and to the end of milk quotas).

The evaluation also found that the specific supply arrangements and support to local productions are implemented coherently, and that the POSEI/SAI programmes are coherent with the second pillar of the CAP and national support. While the POSEI programmes contribute to the 3 general CAP objectives, the capacity of current CAP measures and instruments (e.g. direct payments) to cover the specific needs of the ORs/SAI has not been demonstrated.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/outermost-regions-smaller-aegean-islands_en

Evaluation on the payment for agricultural practices beneficial for the climate and the environment (2018)

The report of the evaluator assesses the Pillar 1 greening measures with respect to the general objective ‘sustainable use of natural resources and climate action’. It reviews the implementation of the measures between 2015 and 2017 in the EU28, with a specific focus in 10 Member States (Austria, Czech Republic, France, Germany, Latvia, Netherlands, Poland, Romania, Spain and the UK). It examines the drivers influencing Member State and farmers’ implementation choices; the effects of the measures on farming practices, production, the environment and climate; administrative costs and efficiency; coherence with CAP objectives and measures, as well as broader environmental and climate legislation; their relevance in addressing EU, national and regional needs and their EU added value. The study found that overall the greening measures have led to only small changes in management practices, except in a few specific areas. As a result, their environmental and climate impacts have been limited and locally specific. They have had a negligible effect on production or economic viability of farms and the additional administrative costs associated with them have been relatively low. The report includes series of recommendations, in particular to encourage the uptake of Ecological Focus Areas (EFAs) and to ensure that the measure for Environmentally Sensitive Permanent Grassland (ESPG) is implemented more widely, both within and outside Natura 2000 areas. MS are invited to better design greening measures according to specific conditions.

https://ec.europa.eu/agriculture/evaluation/market-and-income-reports/greening-of-direct-payments_en

Evaluation of forestry measures under rural development (forthcoming)

The report found that the forest measures available to Managing Authorities under Rural development provide a coherent set of measures capable of covering the needs of the forest sector and fostering sustainable forest management in rural areas. The flexibility of the Rural Development Programmes enables the Managing Authorities to adapt the measures to local needs and peculiarities, and to provide highly targeted support. However, the effectiveness of the forest measures remains highly dependent on the detail of the measure design at RDP level, and where, when and for how long it is implemented by the beneficiaries.

Synthesis of ex-post evaluations of Rural Development Programmes 2007-2013 (forthcoming)

This synthesis, based on ex-post evaluation carried out in Member States for Rural Development Plans (RDP), strategies and frameworks, covers effectiveness, causal analysis, efficiency, coherence and EU value added. Full aggregation of results is not possible due to missing data or differences in approaches. Replies to evaluation questions are predominantly positive about the contribution of RDPs to environment and climate action (50% to 70% of answers are positive), as well as for growth and jobs (40%). On the latter, the economic crisis was part of the limiting factors. Outcomes for the quality of life and diversification are less straightforward (30% of positive answers), due to unclear interrelation and measuring standards. Lack of priority and budget seem to have had a limiting effect on innovative approaches, and improvement in broadband access was delayed due to processes (amongst other late implementation). The SWD accompanying this synthesis will to be submitted to the RSB in 2018.

Evaluation of the impact of CAP measures towards the general objective of "viable food production" (forthcoming - 2018)

The purpose is to evaluate the impacts of CAP measures towards the general objective of viable food production with a focus on the specific objectives of supporting agricultural income, competitiveness and market stability. The evaluation covers all relevant CAP measures, markets, direct payments and rural development, with specific questions on the usual dimensions of evaluation. This analysis faces specific challenges, as the implementation of the latest CAP reform started in 2015, in the midst of market turbulences. First intermediate results are available on the effects on markets, income and competitiveness. Initial findings confirm the impact of direct payments on enhancing and stabilising income. So far coupled support appears to have limited effects on the level playing field between MS, but this depends on sectors and aid intensity. The effectiveness of exceptional market measures varied depending on sectors and conditions: support for private storage enabled some market relief in the pigmeat sector, exceptional measures for fruit and vegetables were effective (despite some issues on timeliness); while measures included in the dairy package were popular, the evaluation points to the risk of problems being moved forward.

The administrative and management costs of the current CAP are considered to be generally higher than in the previous one. In most of the measures, in particular greening measures and voluntary coupled support, the increased costs are connected with the high complexity of rules and required controls. Considering this, they lower the value of generated benefits. The Active Farmer Clause measure is found to be inefficient as costs are higher than benefits.

The level of coherence with the other CAP objectives varies and depends strongly on the level by which particular CAP measures are implemented in MS. The coherence with other EU policies is found to be good.

Selected Studies

Evaluation Study on European Innovation Partnership – AGRI (2016)

This report is an evaluation study of the European Innovation Partnership for Agricultural Productivity and Sustainability (EIP), as implemented in 96 out of 111 Rural Development Programmes across 26 Member States.

The evaluation found that the EIP’s premise on incentivising innovative farming practices to foster a competitive and sustainable agriculture and forestry sector is seen as valid and important. Innovation actors, especially farmers and forest managers, emphasised a need for projects linking research and practice. The EIP is found to be a flexible tool that is addressing this in in a way that can be adapted to divergent circumstances and policy contexts. Farmers are more likely to become involved in the innovation process under the EIP as compared with other funding streams for innovation in the agricultural sector.

To help improve EIP implementation over time, the evaluation made recommendations. The EIP's effectiveness could be enhanced by: making better use of multiplication actors; by simplifying national and regional administrative implementation and by adapting rules at European level to incentivise participation (e.g. enabling advance payments). By reducing fragmentation and improving knowledge flows, the EIP provides a crucial opportunity to build coherent national / regional agricultural knowledge and innovation systems (AKISs). These should be interlinked into an integrated EU-wide AKIS.

https://ec.europa.eu/agriculture/external-studies/2016-eip_en

Study Mapping and analysis of the implementation of the CAP (2016)

This study provides a review of the choices that have been made by the 28 Member States in the two Pillars as well as a qualitative analysis of the potential impact of these choices. The study confirms that the CAP became more complex: the new flexibilities resulted in a more diversified implementation, with measures being used in many different ways and in wide array of combinations. The study reveals that the Member States' strategy to reach the 3 CAP objectives is not sufficiently documented: the implementation choices are more influenced by the consideration to “maintain the status quo” than by a long-term strategy that takes into account the general CAP objectives. The study also raises concerns about the potential impact of the CAP: the degree to which funds have been targeted to certain needs might not be sufficient to have a significant impact. In the short term, it is recommended to encourage the exchange of good practices between countries to promote smart simplification and reduce administrative burden. For the CAP post 2020, Member States should be encouraged to establish a long term strategy that takes into account the CAP objectives.

https://ec.europa.eu/agriculture/external-studies/mapping-analysis-implementation-cap_en

Study on the impact of EU trade agreements on the EU agricultural sector (2016)

The study on the impact of EU trade agreements on the agricultural sector shows that the agreements with South Korea, Mexico and Switzerland have increased EU agri-food exports by more than 1 billion Euro and raised value added in the agri-food sector by 600 million Euro. The increased exports have supported almost 20 000 jobs in the agri-food sector, of which 13 700 jobs are in primary agriculture, and have also generated around 7 700 jobs in other sectors. Imports from the partner countries have likewise increased, giving EU consumers and processors better access to agri-food products. The study highlights the importance of activities that allow EU exporters to make full use of trade opportunities, such as promotion and information actions and resolving Sanitary and Phytosanitary (SPS) barriers.

https://ec.europa.eu/agriculture/external-studies/2016-bilateral-trade-agreements_en

Study on risk management in EU agriculture (forthcoming)

This study provides a mapping of relevant risks in EU agriculture. Information on availability and use of risk management instruments was collected in all Member States though consultations with public authorities, farmers’ associations and insurance companies. The final report is complemented by eight case studies: six on specific risk management instruments in selected Member States and two on risk management in agriculture in the United States and Canada. The study finds that European farmers are increasingly exposed to a wide range of risks while the availability of risk management instruments lags behind. Insurance remains the most commonly used instrument, while both availability and uptake of other instruments such as mutual funds and contractual price agreements (including futures) is more limited. There is a need to strengthen capacity to design and implement risk management instruments. The report elaborates several recommendations, including on how to gain experience on the ground.



Annex 4: A New Delivery Model for the CAP

Glossary 17

Term or acronym

Meaning or definition

AECM

Agro Environment and Climate Measures

AKIS

Agricultural Knowledge and Innovation Systems

ANC

Areas facing Natural Constraints

CAP

Common Agricultural Policy

CB

Certification Bodies

CMO

Common Market Organisation

DP

Direct Payments

EAFRD

European Agricultural Fund for Rural Development

EAGF

European Agricultural Guarantee Fund

ESIF

European Structural and Investment Funds

FAS

Farm Advisory System

GAEC

Good Agricultural and Environmental Conditions

IACS

Integrated Administration and Control System

ICT

Information and Communications Technology

LPIS

Land-parcel identification system

MCA

Multi Criteria Analysis

MFF

Multiannual Financial Framework

PA

Paying Agencies

RD

Rural Development

REFIT

Regulatory Fitness and Performance

SMR

Statutory Management Requirements

SWOT

Strengths, Weaknesses, Opportunities, and Threats

VCS

Voluntary Coupled Support



1.introduction

The current CAP is based on an implementation concept focusing on Member States' compliance with detailed EU rules. This leads to the perception that the CAP is essentially a policy that, instead of being driven by objectives, relies almost exclusively on the enforcement of rules through controls, penalties and audit. As a consequence, whether in the form of the potential loss of funds for farmers and Member States or in the form of pressure on the Commission to keep a low error rate and thus get assurance and discharge of the European Parliament, the present system leads at all levels to a strong focus on ensuring and enforcing compliance.

This has a number of tangible effects: on the administrative burden, on very tight controls and on requests at all levels for more and more precise rules and interpretative assistance from the Commission (e.g. through interpretation notes and guidelines). Against this background, the current system is entangled in a vicious circle that inevitably leads to increasing complexity.

The assessments of the performance of the CAP show the difficulties to apply the same detailed rules throughout the current EU, taking into account the very diverse agricultural and socio-economic conditions. The experience of the last CAP reform confirmed the strong difficulties and contradictions on having a common set of detailed rules which required, in order to be implemented, a large set of choices and exceptions across many policy tools.

The limitations of a "one-size-fits-all" approach, due to the different impact that the same measure could have in different territories, have also been highlighted by analyses, both in the environmental and the economic domain. The experience of the current CAP also showed limited coordination between the implementation of the two pillars of the CAP and the need to strengthen the synergies between policy instruments, in a context of growing calls for a more targeted policy design based on needs assessments that would increase the effectiveness and the efficiency of the policy.

Taking all these elements into account, and based on the input of the public consultation on "modernising and simplifying the CAP", the Communication "The Future of Food and Farming" confirmed the need for the CAP to streamline its governance and improve its delivery on the EU objectives and to significantly decrease bureaucracy and focus on results and the EU added value.

This Annex describes the new delivery model of the CAP, its feasibility and it shows how it would function in practice using specific examples (sections 2 and 3). Beyond the presentation of the model proposed, sections 4 and 5 will summarise the opportunities, risks and challenges attached to it and will present the proposed safeguards to mitigate the identified risks.

2.the new delivery model explained

The new delivery model for the CAP will involve a shift from compliance towards results and performance and a new distribution of responsibilities between the EU and Member States, involving substantial changes at three different levels:

1.A multi-annual programming approach that will cover the two pillars of the CAP (direct payments, rural development and sectorial strategies under the current CMO), based on a common set of objectives, indicators and a common catalogue of broad types of intervention

2.A new system of monitoring and steering policy implementation

3.An adapted approach to get assurance and perform audit

Chart 1. The new relation between Commission, Member States and beneficiaries

2.1.Programming approach based on a common set of objectives and indicators

The EU will set the legal framework needed to ensure fund implementation in line with common CAP objectives. The EU framework which will apply to Member States will define:

·Common objectives (general and specific ones)

·Types of interventions and their basic requirements; and

·Set of general rules for the performance assessment (e.g. common indicators)

Member States will design their CAP plans and set the terms for implementation towards individual beneficiaries so that these will:

1.assess their needs against the specific objectives of the CAP based on a territorial and sectorial SWOT analysis,

2.design and develop the interventions together with corresponding budget allocations and specific requirements (e.g. eligibility criteria, support rate) to address their needs and to contribute to the common specific objectives, and

3.establish, in line with these objectives, quantifiable targets, based on result indicators, to steer implementation and to allow the assessment performance and ambition of the CAP Strategic Plans.

Member States will submit a single strategic document for both CAP pillars (CAP Strategic Plans) for their entire territory. However, where elements of the CAP Strategic Plan are established at regional level, the Member State will ensure the coherence and the consistency with the elements of the CAP Strategic Plan established at national level.

Targets are defined in the CAP Strategic Plan. The assessment on progress towards these targets (reflected in the annual performance report) and corrective mechanisms to steer policy implementation where necessary, will have no implications at the level of beneficiary (for details see below)

Chart 2. From objectives to interventions

2.1.1.Content of the CAP Strategic Plan

The CAP Strategic Plans will be the central programming tool for both pillars (EAGF and EAFRD): they will be drafted by Member States, stakeholders will be consulted according to the partnership principle and they will be subject to formal approval by the European Commission.

The CAP Strategic Plans will contain the following elements: a) an assessment of needs vis a vis the specific objectives based on a SWOT analysis; b) an intervention strategy; c) a description of elements common to several interventions; d) a description of the direct payments and rural development interventions specified in the strategy; e) a description of the sectoral programmes and their interventions; f) target and financial plans; g) a description of the governance and coordination structures including an assessment of the enabling conditions (ex-ante conditionalities); h) a description of the elements that ensure modernisation of the CAP and the digitization of agriculture and rural economy; i) a description of the elements related to simplification and reduced administrative burden for final beneficiaries.

At the same time, the CAP Strategic Plans will contain Annexes regarding: a) the ex-ante evaluation and the Strategic Environmental Assessment (SEA); the full analysis of strengths, weaknesses, opportunities and threats (SWOT); information on the mandatory consultation of the partners; additional national financing provided within the scope of the Plan.

2.1.2.Types of interventions, funds allocations and basic requirements

In the CAP Strategic plans Member States will choose and configure the interventions to be implemented both under the 1st and 2nd pillar from the types of interventions set out by the EU basic act.

In that context, Member States will be bound by basic EU requirements concerning key fundamental aspects: a) compliance to the rules of the World Trade Organisation concerning domestic support; b) "conditionality" applicable to beneficiaries receiving direct payments and area-based payments under rural development; c) minimum requirements for the Farm Advisory System. The following types of interventions will be provided for at basic act level:

EAGF (Pillar I)

EAFRD (Pillar II)

Basic income support for sustainability

Payments for environment, climate and other management commitments

Complementary Redistributive income support for sustainability

Payments for natural constraints or other region-specific constraints

Complementary Income Support for Young Farmer

Investments

Voluntary schemes for the climate and the environment "eco-schemes"

Support to young farmers installation and rural business start-up

Coupled income support

Risk management tools

Sectorial interventions (CMO)

Cooperation

Knowledge exchange and information

For each of these types of interventions, the EU legislation will establish general principles. Member States will be responsible for developing schemes and interventions based on this list, by determining their specific design, including all the requirements that can ensure an effective contribution of the intervention to the specific objectives. This will include the eligibility rules (currently defined at EU level). Member States will also detail in the CAP Strategic Plans the annual planned outputs for the intervention, and where relevant, the applicable support rates.

Furthermore, Member States will fix in their CAP Strategic Plans the allocation of budgetary resources for each intervention. The level of this allocation should reflect both the needs assessment and the CAP objectives.

2.1.3.Approval of the CAP Strategic Plans

The Commission will assess and approve the CAP Strategic Plans. The assessment of the Plans will be done on the basis of:

a)the completeness of the plans;

b)the consistency and coherence with the general principles of Union law and the requirements defined at EU level;

c)their effective contribution to CAP specific objectives and identified needs;

d)the impact on the proper functioning of the internal market and distortion of competition;

e)the level and proportionality of administrative burden on beneficiaries and administration.

In its assessment, the Commission will pay particular attention to the adequacy of the CAP plan strategy, the corresponding specific objectives, targets, interventions and the allocation of budgetary resources to meet the specific objectives of the CAP Strategic Plan. The proposed set of interventions will be assessed on the basis of the analysis of the situation in terms of strengths, weaknesses, opportunities and threats ("the SWOT") and the ex-ante evaluation.

In the current CAP, only the Member States' Rural Development Programmes (EAFRD) are subject to Commission approval. By contrast, as regards direct payments (EAGF), Member States' choices among numerous options made available by the relevant basic regulation are only subject to notification and not subject to formal approval by the European Commission.

Chart 3. The current CAP and future CAP.
Key notifications (by implementation stage)

2.2.Monitoring progress and steering policy implementation 

2.2.1.Annual performance review

An annual performance review is foreseen as a key element of the ongoing monitoring and steering of policy implementation. In order to make an annual performance review operational, Member States will submit an Annual Performance Report with information about realised output and expenditure as well as progress towards the targets set for the whole period which have been set using common result indicators.

In cases of slow or insufficient progress towards achieving the targets set for the CAP Strategic Plan, MS will be required to carry out an analysis of shortcomings and will include in the report proposals for remedial actions (Chart 4 illustrates a fictive example of reporting from two Member States).

Chart 4. Annual Performance review. Monitoring progress towards target (results)

The assessment of those reports would trigger interaction with MS in view of helping them to implement the planned policy in an efficient way. This exercise would involve a continuous exchange between MS and the Commission including in a regular Annual Review and Monitoring Committee meetings, on the state of play of the evolution of programme implementation towards the targets. The Commission will play a supporting role by facilitating the exchange on good practice and providing pertinent recommendations to MS. If needed, the Commission would request Member State to submit a formal action plan to remedy the situation.

Where the intended remedial actions have not been implemented by Member States or the Member State is not willing to engage with the Commission to fix the problem the Commission may suspend payments. Should the problem not be solved, the suspended amounts would definitively lost by the Member State (see below for more details on possible corrective actions).



Chart 5. Case of an action plan agreed by EC and MS and implemented by the MS. Potential scenarios

2.2.2.Incentive system for environmental and climate performance

At a certain stage of the policy implementation (2026), a performance bonus may be assigned to Member States to reward satisfactory performance in relation to the environmental and climate targets.

The performance bonus will correspond to a specific % of Member States allocations of the EAFRD. Based on the performance review of the year (2026), the performance bonus may be attributed to this Member State if the respective environment and climate targets have been achieved at a level of at least 90% of their target value for the year [2025].

Where the target values are not achieved, the performance bonus shall not be allocated to the respective Member State.

2.3.Assurance framework

2.3.1.Principles of the new approach to assurance and audit 

The CAP is implemented in shared management by the EU and the Member States. The existing CAP governance bodies set up in the Member States, notably the paying agencies (PA) and certification bodies (CB), have shown their effectiveness in protecting the EU budget and ensuring sound financial management and reasonable assurance.

The new CAP delivery model acknowledges this situation by keeping the CAP governance bodies in place while conferring more flexibility on Member States in deciding and managing the control systems. In this context, EU legislation will provide for a general set of rules addressed to Member States which will have to create the legal arrangements applicable to individual beneficiaries. In line with the budget focused on results approach, CAP strategic plans will be assessed in relation to their expected performance; payments will be granted on the basis of outputs, realised in order to reach the pre-established result targets. Thus, the CAP will link the eligibility of EU financing to the actual achievements on the ground.

The Commission will ensure that the governance structures set up in the Member States are functioning effectively, will reimburse the payments incurred by the accredited paying agencies and will clear the accounts assessing the achieved outputs reported by the Member States.

Chart 6. Elements of the new EU assurance framework

Therefore, the assurance framework for the post-2020 CAP would focus on governance structures, which covers the following areas:

·Governance bodies: this will cover accredited Paying Agencies and where applicable, Coordinating Bodies, Certification Bodies, Competent Authorities, the Bodies responsible for the CAP plan. No major changes are foreseen in this domain.

·EU requirements, as defined in the CAP legislation and further developed in the CAP plan (Integrated Administration and Control System -IACS, conditionality, genuine farmer, WTO requirements, public procurement…etc.). As compared to the current situation, the EU-level rules will be substantially reduced, since the eligibility criteria and all detailed implementing decisions are left to the Member States.

·Reporting systems, in particular the reliability of data reported.

The new delivery model will make full use of the single audit approach will be fully in place, with regard to both compliance and performance. This means that Certification Bodies (CBs) should provide the necessary assurance that the governance structures are in place, the EU rules have been respected at Member States level and the reporting systems are reliable. The Commission will then assess the work of the CBs. The focus of Commission audits will shift from checking compliance with rules at the level of beneficiary to assessing the delivery of outputs with the necessary governance structures in place. Therefore, the audit would take place at system level, following the current experience in auditing the internal control system of the paying agency and the fulfilment of the accreditation criteria. Some procedures and controls which are part of the internal control testing may not be tested on an annual basis (but their testing could be rotated on a 3-year rolling basis).



Chart 7. Assurance framework: single Audit principle

In addition to this framework, assurance is also built on the delivery of outputs (performance) which will determine the eligibility of the expenditure, as explained below.

A key novelty of the new system is the two-tier approach concerning the clearance:

·Annual financial clearance – would, as the existing system, solely concern the accuracy, veracity and correctness of the accounts in financial terms. No changes are proposed in this respect; some simplification in reporting would come automatically from the new delivery model and the fewer EU requirements.

·Annual performance clearance – would relate to the eligibility of expenditure (as newly defined, in relation to the outputs) and would:

·Review the reporting on the outputs;

·Check that the certification body's opinion on the reliability of the performance reporting for the annual performance clearance can be accepted; the opinion would cover the outputs obtained on the basis of the fixed output indicators (and not anymore the legality and regularity of expenditure in relation to the eligibility rules set for the beneficiaries, as today);

·Determine if the outputs have been achieved, according to planned output and related expenditure.

The assurance package, as laid down in the Financial Regulation, will continue to be submitted by the 15 February year n+1 with the same elements as currently, adding the annual performance report. It will hence include:

·Annual accounts;

·Management declaration;

·Annual performance report, including outputs (new);

·CB audit opinions.

Taking this timing into account, the reporting should always refer to the financial year n (16/10/n-1 – 15/10/n) that is subject to the annual performance clearance.

2.3.2.The annual performance report in the context of the annual performance clearance

The annual performance report will not only be used to monitor and assess the progress towards targets at result level, it should also cover the outputs achieved and the expenditure declared for each intervention approved in the CAP strategic plan.

The CAP strategic plan would include the annual planned expenditure for each intervention, identifying the planned annual outputs to be obtained and, where possible, a planned average cost per output, meaning the ratio between planned expenditure and planned outputs.

For instance:

CAP strategic plan

Intervention

Output year n

Expenditure year n

Average cost per output

Scheme for preserving biodiversity

5 000 ha

2 000 000€

400€

Annual performance report

Intervention

Output (achieved) year n

Expenditure (paid) year n

Average cost per output (actual)

Scheme for preserving biodiversity

4 000 ha

1 600 000€

400€

In order to tackle situations where the planned outputs are not obtained with the expenditure declared and MS cannot provide a duly justified reason for this deviation (using a contradictory procedure, if requested), the Commission should have appropriate mechanisms to protect EU financial interests. In the framework of this annual performance clearance, for such a situation, a mechanism of reduction in payments should be put in place. If the expenditure declared corresponds to the output achieved, the expenditure is cleared without reduction.

Moreover, where the Commission establishes that the difference between the expenditure declared and the relevant output indicators reported is more than 50% and the Member State cannot provide a duly justified reason, the Commission may suspend payment for that given intervention(s).

As explained above, the annual performance clearance will assess the expenditure paid and the outputs achieved by the Member State and therefore, payments to individual beneficiaries are not affected by this procedure. Similarly, reaching or not the result targets agreed will have no impact on the individual payments to beneficiaries.



Chart 8. Annual performance clearance

2.3.3.Possible corrective mechanisms for cases of serious non-compliance with governance structures, including EU basic requirements

The Commission needs to have adequate corrective mechanisms that can be triggered when deficiencies in the governance structures are found. The gravity of the deficiency and the expenditure affected would normally define the type of corrective mechanism to be applied. There are 3 types of corrective mechanisms:

·Action Plans: An action plan is a corrective tool by which the Member State and the Commission agree to remedy a specific deficiency in the governance structures. The action plans normally have an effect in correcting the situation in the planned expenditure but not the previously incurred one.

 

·Suspension of payments: The suspension mechanism should be triggered to protect the EU budget in cases of deficiencies identified in the governance structures or reliability of reporting.

 

·Financial correction (only for serious deficiencies): The financial correction after a conformity procedure recovers the expenditure incurred and paid to the Member State which is considered to be non-eligible or not in compliance with the applicable law,

Chart 9. Managing the new CAP in practice

3.the new delivery model illustrated: examples

This section aims to illustrate with practical examples what the consequences of the application of the new governance model/management system would be.

It is important to underline that this change will imply an important shift in the way the CAP is managed. From a highly prescriptive policy, with extensive basic regulations, delegated and implementing acts and guidance documents, it will become a performance-oriented policy focussing on results rather than EU controls of the compliance with detailed eligibility rules.

Three examples are presented to cover environmental and socio-economic objectives. The examples encompass interventions under both pillars and put the focus on the differences between the current framework and the new proposed approach.

3.1.Example 1: Rewarding practices beneficial for the environment and the climate under pillar I (Greening/eco-schemes)

Today, the CAP, in particular its first pillar, is made of a long list of very detailed rules defined at EU level which apply in a uniform way throughout the EU. This approach may not always take into account the very diverse agricultural, climatic, environmental and socio-economic conditions around the EU and has led to a considerable degree of complexity (driven by the paradoxical combination of an increasing volume of implementing rules, guidance documents and legal interpretations needed to meet requests for legal certainty and the number of exemptions needed to address this diversity).

Since 2015, 30% of the direct payments are associated with the mandatory implementation of a set of practices beneficial to the environment and the climate ("greening"). These practices are governed by a set of very detailed and prescriptive EU rules, which do not only indicate the number and types of practice, but also regulate aspects directly linked to the farm/beneficiary level. Such aspects include, for example:

·The requirement to dedicate a set percentage of arable land per farm to areas beneficial to biodiversity (ecological focus areas – EFAs)

·A list of 13 types of features or areas that can be qualified as EFA for which the eligibility conditions are detailed (e.g. maximum size of gaps in hedgerows, maximum width of the space between two adjacent features) accompanied with a set of weighting and conversion factors to acknowledge their differences in terms of importance for biodiversity and standardise their measurement;

·Four types of exemption according to the size of the farm, the presence of grassland and the ratio of forest to agricultural land;

·Two alternative options framed by several conditions relating to collective or regional implementation of this requirement;

·Creation of an additional layer in the Land Parcel Identification System (LPIS) established by all Member States for control purposes (so-called “EFA layer”).

Chart 10. Greening versus eco-scheme under the new delivery model

For the CAP under the new MFF, it is proposed that the new delivery model of the CAP introduces a new division of responsibilities for defining and implementing the rules between the EU and the national (regional) level. In practical terms, this would mean the following:

·The EU will set the framework needed to ensure common achievements and veil over it: It will:

1.define common objectives (general and specific ones) on environment and climate (e.g. under the general objective of bolstering environmental care and climate action and contributing to the achievement of EU environmental and climate objectives, to preserve nature and landscapes) as well as the relevant key result indicators for monitoring progress towards targets

2.define types of interventions, such as new voluntary schemes for the climate and the environment, also called “eco-schemes”, which are specific funding streams in Pillar I to meet environmental and climate objectives without any pre-established requirements (in addition to conditionality rules and Pillar II interventions beneficial to the climate and the environment);

3.set general rules for assessing performance based on impact indicators (e.g. Farmland Birds Index and share of agricultural land covered with landscape features)

·Member States will further break down the common framework and ensure implementation: They will:

1.assess their needs against the common environmental and climate objectives based on a SWOT and an ex-ante evaluation including the SEA;

2.fix the details of the types of interventions and the basic requirements (e.g. eligibility criteria, support rate) and devise a suitable mix of mandatory and voluntary measures for farmers in a way so as to contribute to the environmental and climate objectives (e.g. allocate X% of the Pillar I envelope to a voluntary eco-scheme aiming at rewarding a high density of landscape features on farms or specific management practices for landscape features beneficial to biodiversity but also develop a wider range of supporting tools and schemes under EAFRD such as knowledge and innovation, investments and management commitments);

3.set targets for result indicators to assess performance against the objectives (e.g. Y% of agricultural land managed for supporting biodiversity conservation and restoration, including landscape features supported by the voluntary eco-scheme above-mentioned).

3.2.Example 2: Supporting fairly farmers’ income through decoupled direct payments under pillar I 

In addition to enhancing the sustainable management of natural resources (through the greening payment, see section 3.1), the current structure of direct payments contributes to achieving the two other main objectives of the 2013 CAP reform, namely ensuring viable food production and encouraging territorial balance. It also aims to improve the distribution of the income support, e.g. to the benefit of smaller farms. Therefore, the Regulation currently provides as decoupled area-based payments, in particular:

·A basic payment for farmers (BPS/SAPS 18 );

·A voluntary redistributive payment (RP) that MSs can use to grant farmers an extra payment for the first hectares, thus increasing the income support of smaller farms;

·A voluntary simplified scheme for small farmers (SFS);

Besides the distinction of these various support schemes, which allows Member States to intervene on the distribution of direct payments, the set-up of the BPS by use of certain options plays an important role to target decoupled direct payments:

·internal convergence (i.e. degree of homogenisation of the value of entitlements);

·regionalisation, allowing Member States to define regions in accordance with "objective and non-discriminatory criteria" and to allocate differentiated budgetary envelopes which could be used in a way to differentiate these levels of payments according to support needs;

·limitation in the number of payment entitlements and reduction coefficients applied to the least productive areas.

Finally, the current EU legislation provides for an obligation to reduce basic payments (BPS/SAPS) received by the largest beneficiaries if a Member State decides not to implement the redistributive payment scheme. Thus, at least 5% of the amount exceeding EUR 150 000 of basic payments received by beneficiaries must be withdrawn. Steeper reductions and capping can be implemented, but they are not compulsory.

Chart 11. Decoupled payments under the new delivery model

Under the proposal for the CAP Post 2020, the new delivery model will establish the following division of responsibilities for defining and implementing the rules on decoupled direct payments between EU and Member States levels:

·The EU will set the framework needed to ensure common achievements e.g. on redistribution of decoupled payments towards smaller farms. It will:

1.define specific objectives to the CAP objective of fostering a smart and resilient agricultural sector (e.g. support viable farm income and resilience across the EU territory to enhance food security)

2.define various types of interventions belonging to decoupled direct payments to meet the income support objectives, such as:

§the Basic Income Support for Sustainability (to which a minimum share of the direct payments envelope should be allocated);

§the mandatory Complementary Redistributive Income Support for Sustainability;

set the EU basic requirements in the form of a framework in which the Member States have to establish the eligibility conditions for receiving the decoupled direct payments (e.g. definitions a genuine farmer who could benefit from direct payments or eligible agricultural land, etc.);

established a mandatory reduction (degressivity) and capping on all direct payments, including decoupled direct payments.

3.set general rules for performance assessment based on impact indicators (e.g. agriculture income compared to general economy, evolution of agricultural income)

·Member States will further break down the common framework and ensure implementation: They will:

1.assess their needs against the income support objectives, in particular;

2.fix the details of the types of interventions and the basic requirements (e.g. eligibility criteria, support rate) and devise a suitable mix of interventions (basic income support and complementary redistributive income support or replace them by a lump-sum for small farms) in a way so as to contribute to the income support objectives (e.g. allocate X% of the Pillar I envelope to a redistributive income support aiming at increasing the income support towards smaller farms);

3.set targets for result indicators to assess performance against the objectives, thus making explicit the degree of improvement expected from the targeting of decoupled direct payments towards smaller farms (e.g. X% of additional support per hectare for eligible farms below average size farm compared to average support per hectare).

3.3.Example 3: Supporting investments under pillar II

The current Rural Development Regulation defines 68 measures and sub-measures that can be supported, as well as related eligibility criteria. The degree of detail in those prescriptions can be illustrated in relation to investment support, which includes:

·Investments to improve the overall performance and sustainability of agricultural holdings, including precision farming;

·Investments for processing, marketing and/or development of agricultural products;

·Investment in infrastructure related to the development, modernisation or adaptation of agriculture and forestry;

·Non-productive investments linked to environment-climate objectives;

·Investments in preventive and restoration actions linked to natural disasters and catastrophic events;

·Investment in the creation and development of non-agricultural activities;

·Investments in the creation, improvement or expansion of all types of small scale infrastructure, including investments in renewable energy and energy saving;

·Broadband infrastructure, including its creation, improvement and expansion, passive broadband infrastructure and provision of access to broadband and public e-government;

·Investments in the setting-up, improvement or expansion of local basic services for the rural population including leisure and culture, and the related infrastructure;

·Investments for public use in recreational infrastructure, tourist information and small scale tourism infrastructure;

·Investments targeting the relocation of activities and conversion of buildings or other facilities located inside or close to rural settlements, with a view to improving the quality of life or increasing the environmental performance of the settlement;

·Afforestation/creation of woodland;

·Establishment and maintenance of agro- forestry systems;

·Restoration of damage to forests from forest fires and natural disasters and catastrophic events;

·Investments improving the resilience and environmental value of forest ecosystems;

·Investments in forestry technologies and in processing, mobilising and marketing of forest products.

Each of those forms of support corresponds to a given measure (or sub-measure), each of them subject to a number of specific or general eligibility conditions. Different aid intensities for the different types of investments and types of beneficiaries or projects are listed in an Annex to the RD Regulation. Some of the rules for investment support through rural development are currently given in the Common Provisions Regulation (use of financial instruments, simplified cost options, some eligibility conditions).

Chart 12. Supporting investments under the new delivery model

Under the new delivery model,

·The EU will set the basic rules needed to ensure common achievements 

It is proposed to define in the CAP Regulation a unique broad type of interventions (“Investments”) encompassing (without explicitly listing) at least the currently available forms of support and not matched by detailed eligibility conditions.

The basic act will also include a negative list of investment fields and specific conditions to ensure the sustainability of investments (e.g. in relation to irrigation, environmental ex-ante assessment, etc.) This to ensure the coherence and consistency of CAP plans with EU objectives. A ceiling for the maximum support rates will be established to safeguard a level-playing field between farmers in different Member States but also to ensure effective and efficient use of CAP funds and good project management.

The general principles for providing support will be defined at EU level (e.g., respect of state aid, support of working capital),

·Member States will develop the specific interventions and allocate budgetary resources:

Member States will have ample discretion to define specific conditions and target the use of the investment support to specific needs. The definition of specific intervention, together with eligibility criteria for investment operations (such as definition of eligible expenditure, payment of advances, working capital linked to investments, durability of operations, etc.), will be left to Member States/regions and therefore not included in EU legislation.

Furthermore, it will be up to the Member States to decide the allocation of budgetary resources to the specific interventions, in line with their needs assessment, and in view of maximising its contribution to the CAP specific objectives.

4.opportunities and challenges/risks

4.1.Opportunities 

The setting up of a new delivery model for the two pillars of the CAP based on the principles of strategic programming, assessments of the needs and result-orientation, has the potential to result in higher effectiveness and efficiency in the policy design if Member States make full use of the new possibilities offered. The new model will shift all actors' attention away from how the CAP is managed to what it should and actually has achieved.

The new model will improve the complementarity and synergies among all the interventions of the two pillars of the CAP: the unified strategic policy design, with a single set of objectives covering both pillars, will force Member States to carry out the assessment of the needs and the design of the intervention logic in a holistic way, thus avoiding the inconsistencies and overlaps of the current policy which leads to inefficient use of funds. The opportunities in this domain are particularly relevant in:

·the challenge to achieve balance between the economic, social and environmental objectives;

·the areas where different tools across the pillars currently address the same objective (environmental actions, young farmers, areas under natural constraints);

·tools with potential off-setting effects, especially with respect to environmental and climate effects.

Opportunities are also identified concerning the better targeting of the tools to the needs of local realities: the shift from a "one-size-fits-all" approach in the design of most of the tools of the CAP can be used by Member States to develop interventions that can contribute to the defined EU objectives in a much more efficient way than in the current model. This flexibility in the design of interventions within EU broad interventions provides an opportunity for Member States to take into account national and regional policies and thus enhance the effectiveness of CAP interventions.

The new delivery model also presents opportunities concerning the reduction of administrative burden: number and depth of EU rules are substantially reduced, incentivising Member States to establish simpler rules and apply them in a more pragmatic way than today. This is likely to pave the way to achieving a much higher degree of simplification of the CAP than this was possible in the last 15 years under the current system.

As explained in Annex 7, while the streamlining of the CAP and the shift towards performance provide for a significant potential for administrative burden reduction, the tools which Member States will take up in their national strategies as well as national requirements and criteria will be key. Despite the risk that Member States continue focusing on compliance by setting complex, additional and unnecessary national requirements, a considerable reduction in the number and depth of EU requirements will limit the fear of non-compliance with them by Member States, reducing therefore the incentives for gold-plating and for establishing additional national requirements. The new delivery model will also open a new chapter of transparency – beneficiaries will have clarity about where cumbersome rules stem from and whom to address to improve the situation. Likewise, the uptake of new technologies by Member States, such as digitisation and use of satellites, will have an important impact on administrative burden 19 .

As compared to the current situation (in which decisions taken by the Member States regarding implementation of direct support are not subject to approval by the European Commission), the new model reinforces the supervisory role of the European Commission in the policy design and implementation by Member States. With the approval process of the CAP Strategic Plans, the European Commission will play an important role in steering Member State decisions towards maximization of the EU objectives. This role of the Commission is particularly relevant in domains like coupled support or the environmental architecture, where the decisions adopted by the Member States could have important impacts on the level playing field. The supervisory role of the European Commission also provides important benefits concerning the early identification of potential implementation problems.

The Commission would also play an increasingly important role in providing assistance and facilitating exchange on best practices and mutual learning amongst Member States.

The shift towards a performance-based model has huge potential in terms of promoting more integrated approaches as well as more innovative ways of rewarding farmers for public goods. It has proven cumbersome and administratively burdensome to mainstream successful environmental pilot projects (for example collective approaches or result based schemes under LIFE) because of the predefined rules at EU level. The new delivery model will make it fully possible for MS to embrace these new approaches.

A similar conclusion applies to innovation support. In the current period, inflexible rules have made it impossible to give high support rates to high risk-low return projects developed under the EIP-AGRI. In a similar way, the pre-established rules on advance payments and durability of operations have hampered the effectiveness of the EIP-AGRI in terms of getting innovation projects off the ground.

Finally, the new delivery model is an opportunity to substantially enlarge the role of evidence in the policy design of the CAP, since both the analysis presented by the Member States (in the CAP Plans) and the Commission assessment will need to be based on the latest available evidence. In that context, monitoring of indicators will play a central role: An adequately planned assessment of data needs can allow data collection at time of applications, so limiting additional reporting effort from beneficiaries at a later stage. Other opportunities include linkage with other existing data sources and automatic generation of data for reporting.

This is also the case for the monitoring of indicators. An adequately planned assessment of data needs can allow data collection at time of applications, so limiting additional reporting effort from beneficiaries at a later stage.

4.2.Challenges and risks

While the new delivery model sets a flexible framework allowing tailored interventions which could result in higher effectiveness and efficiency, the main challenge lies in how Member States will grasp the opportunities. These risks have been raised in the public debate following the Communication "The Future of Food and Farming", and are being discussed below.

As already mentioned, planning is designed to be as simple as possible in terms of content and format. Nevertheless, significant analysis is required for the design and justification of an appropriate strategy. A similar assessment is already required for drafting of current rural development programmes, though the approach is new for interventions under pillar I. Member States may therefore need to extend or develop the appropriate capacity. Thus, the novelty of the plan can lead to delays in their finalisation and approval, which would result in delays in payments to beneficiaries and it is therefore essential that the Commission develops support capacity to help such MS.

The analysis of challenges under the current CAP identified key issues under all three main challenges, i.e. economic, environmental and socio-economic. The SWOT analysis required under the new CAP plan should cover all three dimensions. However, the tensions between these, as highlighted in the assessment of impacts of the options, translate in a clear risk that strategies may excessively favour one of these. This could lead to undesired imbalances and underachievement of some of the CAP objectives. For example, the tension between environmental ambition and economic strength of the sector can result in insufficient environmental requirements set on farmers. It is hence essential that CAP plans propose a balanced national strategy between objectives.

Similarly, an adequate targeting of beneficiaries in terms of farm size, sectors and areas is needed. Here again, imbalances can be created and some beneficiaries can be significantly harmed. For example, setting too high requirements to identify genuine farmers can exclude too many beneficiaries from payments. The combination of interventions should also be well designed to avoid offsetting effects and the CAP plans should contain sufficient information to detect such unintended consequences.

Furthermore, while the shift towards performance and fewer EU requirements offers a real opportunity to lower the burden associated with the control of compliance, it is uncertain how the new approach will be put in place at national level, including of the eligibility criteria for beneficiaries, evidence to be submitted and national controls of compliance with nationally established rules.

This includes a risk with respect to the level playing field, in both directions: some MS might have lower eligibility requirements, others might add layers. Although the lower EU requirements reduces incentives for gold-plating, a risk remains that uneven national requirements are put in place, leading to unnecessary administrative burden for administrations, for checking these requirements, and beneficiaries, for complying with the requirements. There is also still scope for more cooperation between national administration and better use of information which has already been submitted by beneficiaries elsewhere.

Finally, while CAP plans also require an approach towards modernisation, there is a risk of insufficient means allocated towards innovation. Indeed, modernisation could require significant investment costs. On the other side, the significant opportunities for higher effectiveness and fewer administrative burdens over time would not be reached without this investment.

5.Mitigating measures/safeguards

In order to be effective and efficient, the new delivery model should include a number of safeguards and mitigating measures at different stages of the process to prevent and early on detect risks and issues.

The framework which will be set up by EU legislation needs to be sound. While a zero risk scenario cannot be ensured, legislation will nevertheless include a number of safeguards to anticipate possible risks. This includes the common EU objectives, the basic EU requirements, the degressivity and capping of all direct payments, the requirements for conditionality, some degree of budget earmarking and the no back-sliding rule on certain policy objectives. These basic principles are meant to give a common direction to the CAP and can help preventing imbalances in national strategies.

Furthermore, the requirements of CAP Strategic Plan content will further mitigate risks: A sound assessment is required to justify the national strategy and choice of interventions; the mandatory consultation of partners will act as a supplementary safeguard for an appropriate strategy targeting national needs. The request to also cover administrative burden in the assessment is expected to have a positive role on the effectiveness and the proportionality of the interventions. It is important to remind in the basic act that the general principles of Union Law apply (objective and non-discriminatory criteria, compatibility with internal market, no distortion of competition). The same applies for the protection of EU financial interests.

The approach for modernisation and the condition put on Agricultural Knowledge and Innovation Systems (AKIS) can act as an incentive to consider sufficient means towards knowledge and innovation in the national strategy.

Member States will be supported by the European Commission in the preparation of CAP plans. A continuous support throughout this process can help for a better understanding of EU requirements in terms of planning and so avoiding delays at time of approval. Based on objective criteria to ensure an equal treatment of each plan, the approval process itself is an essential safeguard, as it consists in a thorough assessment on the completeness, consistency and coherence and effective contribution to the CAP objectives of the national strategy.

It is at this stage that possible issues can be first detected, such as imbalances, incoherencies, lack of ambition and gold plating. Furthermore, technical assistance will need to play a more important role: in that context, the scope of the current European Network for Rural Development (ENRD) will be extended to the first pillar, in order to cover the whole CAP Plan thus promoting best practices and networking across all the whole policy.

Annual performance reporting constitutes a further basis for detecting upcoming risks. Issues with data quality or first signs of underperformance can be detected during the review process. Identified problems in the progress towards targets can result in changes in the CAP Strategic Plan and, if persist, in corrective actions. At this stage, Member States should draw up an action plan for remedial actions, informing on their strategy to correct the course. The review will be supplemented by bilateral annual review meetings and by monitoring committee meetings, also involving stakeholders. A framework is foreseen to protect the EU budget in case of gross negligence by Member States.

EU audits will cover and be able to detect issues of non-compliance with basic EU requirements, including governance structures. For unresolved or more serious cases of deficiencies, the European Commission will be able to take further corrective actions during the performance and assurance stage. These include suspension of payments and financial correction. On the contrary, good performance on environmental objectives is incentivised through bonuses.

Last but not least, appropriate evaluation requirements have to be designed to allow a timing assessment of the performance of the policy as well as take on board lessons for the next programming period. In that context, Member States will be responsible for evaluating the CAP Strategic Plans and the Commission will be bound to present a mid-term assessment of the policy performance. Based on the evidence provided by the evaluations of the CAP, including the evaluations on CAP Strategic Plans, the Commission will present a report on the first results on the performance of the CAP before the end of 2025.

Chart 13. Stages for addressing risks



Chart 14. Mitigating measures and safeguards across the policy cycle

 

(1)      European Commission (2017) The Future Of Food And Farming , Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM 713 final of 29 November.
(2)      AGRI, BUDG, CLIMA, CNECT, COMM, COMP, DEVCO, DIGIT, ECFIN, ECHO, EMPL, ENER, ENV, ESTAT, FISMA, GROW, HR, IAS, JRC, MARE, MOVE, NEAR, OLAF, REGIO, RTD, SANTE, SG, SJ, TAXUD, TRADE.
(3)      Established in art. 110 of European Parliament and Council Regulation (EU) No 1306/2013 of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations  and the Commission Implementing Regulation (EU) No 834/2014 of 22 July 2014 laying down rules for the application of the common monitoring and evaluation framework of the common agricultural policy.
(4)      See European Commission (2017) Eurobarometers on the Common Agricultural Policy , website.
(5)    Based on submissions by country of residence.
(6)      European Commission (2017) The Future Of Food And Farming , Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM 713 final of 29 November.
(7)      The composition of the Civil Dialogue Group is available at: https://ec.europa.eu/agriculture/sites/agriculture/files/civil-dialogue-groups/composition-cap_en.pdf
(8)      Decision C(2015)3261 of 19/05/2015, following the Communication Better Regulation for Better Results — An EU Agenda, COM(2015)2015 of 19/05/2015.
(9)      REFIT Platform opinions are available at: https://ec.europa.eu/info/law/law-making-process/overview-law-making-process/evaluating-and-improving-existing-laws/reducing-burdens-and-simplifying-law/refit-platform/refit-platform-recommendations_en .
(10)       REFIT Platform Opinion on the submission by the European Environmental Bureau on Effectiveness and Efficiency of the Common Agricultural Policy
(11)      REFIT Platform Opinion on the submission by the Swedish Industry and Commerce for Better Regulation (NNR) on 'Greening'.
(12)      REFIT Platform Opinion on the submission by the Freistaat Saachsen on the overlaps between Pillar I and II of the Common Agricultural Policy (CAP).
(13)      Belgium, Bulgaria, Czech Republic, Denmark, Germany, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Luxembourg, Hungary, Malta, Netherlands, Austria, Portugal, Romania, Slovenia, Finland, Sweden and United Kingdom. The five remaining Member States did not support the conclusions, due to differences on the specific references to the external convergence.
(14)    Available at: http://data.consilium.europa.eu/doc/document/ST-7324-2018-INIT/en/pdf
(15)      Available at:     https://www.eca.europa.eu/Lists/ECADocuments/Briefing_paper_CAP/Briefing_paper_CAP_EN.pdf
(16)      Study "Measuring the CAP’s environmental and climate performance" from the Institute of European Environmental Policy. Available at:  https://ieep.eu/publications/measuring-the-cap-s-environmental-and-climate-performance
(17)      A full-fledged glossary including definitions on the CAP can be found on the internet page of the Directorate General for Agriculture and Rural Development (DG AGRI):
https://ec.europa.eu/agriculture/sites/agriculture/files/glossary/pdf/index_en.pdf
(18)      This refers to the Basic Payment Scheme based on payment entitlements and the Single Area Payment Scheme without entitlements dedicated to some EU-13 Member States.
(19)      For a detailed analysis on the impact of the new delivery model on the reduction of administrative burden, see Annex 7 "Simplification of the CAP".
Top

Brussels,1.6.2018

SWD(2018) 301 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposals for a

- Regulation of the European Parliament and of the Council establishing rules on support for strategic plans to be drawn up by Member States under the Common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulation (EU) No 1305/2013 of the European Parliament and of the Council and Regulation (EU) No 1307/2013 of the European Parliament and of the Council

- Regulation of the European Parliament and of the Council on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013

- Regulation of the European Parliament and of the Council amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, (EU) No 1151/2012 on quality schemes for agricultural products and foodstuffs, (EU) No 251/2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products, (EU) No 228/2013 laying down specific measures for agriculture in the outermost regions of the Union and (EU) No 229/2013 laying down specific measures for agriculture in favour of the smaller Aegean islands

{COM(2018) 392 final}

{COM(2018) 393 final}
{COM(2018) 394 final}
{SEC(2018) 305 final}


Annexes

Table of contents

Annex 5: Results of quantitative and Multi Criteria Analysis    

1.    Introduction    

2.    Results of quantitative analysis    

2.1.    Support viable farm income and resilience across the EU territory    

2.2.    Increasing the environmental and climatic benefits of the CAP    

3.    Multi Criteria Analysis    

3.1.    Introduction    

3.2.    Effectiveness of policy options    

3.3.    Efficiency of the policy options: simplification    

3.4.    Promoting knowledge and innovation in agriculture and rural areas: Modernisation    

3.5.    Policy coherence    

3.6.    Cross cutting: Improving sustainable development for farming, food and rural areas    

Annex 5.1 Policy options for the IA    

1.    Elements common to all options    

1.1.    Budgetary framework    

1.2.    Delivery model and planning    

1.3.    Knowledge, innovation and technology    

1.4.    Market-related measures    

1.5.    Conditionality and green architecture of the CAP    

2.    Options description    

2.1.    Option 1: Updated baseline    

2.2.    Option 3: Incentives for environment, climate action and health    

2.3.    Option 4: Jointly address environmental and economic sustainability    

2.4.    Option 5: Focus on small farms and the environment    

Annex 5.2 Methods and tools    

1.    Introduction    

2.    Brief description of the main models and tools used in the IA    

2.1.    MAGNET    

2.2.    Aglink-Cosimo    

2.3.    CAPRI    

2.4.    IFM-CAP     88

2.5.    AIDSK    

2.6.    RUSLE 2015    

2.7.    Century model    

2.8.    Standard Cost Model    

2.9.    Workshops with experts    

2.10.    Intervention logic based on expert judgement    

2.11.    Multi-criteria-analysis    

3.    Description of tools used in the different phases    

3.1.    Evaluation of baseline    

3.2.    Assessing the impact of options    

3.3.    Addressing uncertainties    

3.4.    Comparing the baseline and the options    

Annex 5.3: Objectives used in the MCA    

Annex 5.4 – Non-productive elements in the EU    

Annex 5.5: Capping    

Annex 5.6: Share of direct payments received by biggest beneficiaries and biggest farms    

Annex 5.7 – Income variability    

Annex 6: Promoting Modernisation    

1.    Enhancing Agricultural Knowledge and Innovation Systems (AKIS) and strengthening links with research    

2.    Strengthening of farm advisory services within the Agricultural Knowledge and Innovation Systems    

3.    Enhancing interactive innovation    

4.    Supporting digital transition in agriculture    

Annex 7: Simplifying the CAP    120

1.    Administrative burden under the CAP    121

2.    CAP simplification and modernisation: changes considered for post-2020    125

2.1.    The new delivery model    125

2.2.    Changes under the Common Market Organisation    126

3.    A CAP oriented towards performance    129

4.    Scope for reducing administrative burden    129

4.1.    Simplification under the new delivery model    129

4.2.    Strategic design and delivery for administrative burden reduction    132

4.3.    Assessing administrative burden reduction    135

5.    Towards efficient CAP design and delivery    140

Annex 8 - Behavioural evidence from focus groups with European farmers on approaches to encourage more environmental-friendly practices    141

Annex 9 – Bibliography    148

Annex 10 – Glossary    163

Annex 5: Results of quantitative and Multi Criteria Analysis

Acknowledgments

DG AGRI would like to thank colleagues in JRC for the support and close collaboration on the modelling of the impacts (JRC Seville) and the environmental aspects (JRC Ispra). Also for the qualitative assessment on environmental aspects, JRC Ispra was involved.



Glossary 1

Term or acronym

Meaning or definition

AECH

Agro Environment, Climate and Health measures

AKIS

Agricultural Knowledge and Innovation Systems

AMR

Antimicrobial Resistance

ANC

Areas facing Natural Constraints

AWU

Annual Work Unit

BAS

Baseline

BP

Basic Payment

BPS

Basic Payment Scheme

CAP

Common Agricultural Policy

CATS

Clearance Audit Trail System

CO2

Carbon dioxide

COP

Cereal, Oilseed and Protein crops

DG

Directorate-General

DP

Direct Payments

EBA

Everything but arms

ECO

Economic Challenges Working Group

EEA

European Environment Agency

EIP

European Innovation Partnership

ELS

Entry-Level Scheme

ENV

Environmental and Climate Challenges Working Group

ES

Economic Size

FADN

Farm Accountancy Data Network

FAS

Farm Advisory System

FNVA

Farm net value added

GAEC

Good Agricultural and Environmental Conditions

GGE

Greenhouse Gas Emission

GHG

Greenhouse Gas

GI

Geographical Indication

GNB

Gross-Nitrogen Balance

H2020

Horizon 2020

ha

hectare

IA

Impact Assessment

IPM

Integrated Pest Management

IST

Income Stabilisation Tool

JRC

Joint Research Centre

kg

kilogramme

km

kilometre

LDC

Least Developed Countries

LFA

Less Favoured Areas

MCA

Multi Criteria Analysis

MO

Main (Policy) Objective

MS

Member States

N

Nitrogen

NMP

Nutrient Management Plans/Tools

NUTS

Nomenclature of Territorial Units for Statistics

Mt

Million tonnes

OO

Operational Objective

PCD

Policy Coherence for Development

PO

Producer Organisation

pp

percentage point

RD

Rural Development

RM

Risk Management

SAPS

Single Area Payment Scheme

SDG

Sustainable Development Goals

SME

Small and medium-sized enterprise

SO

Specific Objective

SOC

Socio-economic Challenges Working Group

SPS

Single Payment Scheme

T

Tonne

TAMS

Total Aggregate Measurement of Support

UAA

Utilised agricultural area

VA

Value Added

VCS

Voluntary Coupled Support

YF

Young Farmer

Yr

Year



1.Introduction

This annex first summarizes the quantitative results of the option comparison. The second part merges these results with qualitative results from a group expert judgement in a Multi Criteria Analysis (MCA). In annex a detailed description of the options (annex 5.1), the analytical tools and methods used (annex 5.2) and the objectives (annex 5.3) can be found. Annex 5.2 also details how the MCA was organized and which experts participated in the process. The qualitative assessment was organized to complement the modelling exercise as the applied models are not capable of capturing all effects of the tested instruments. Especially on the social (and to a lesser extend the environmental) dimension of the policy, expert judgement offers an important contribution to the analysis. The qualitative assessment also allows unveiling the reasons behind differences in option scores.

On some occasions the modelling and expert judgement diverge, which can be linked on the one hand to the fact that the models cannot capture all intended policy effects and on the other hand the under- (or over-) estimation of some effects by the experts. For these reasons it is fruitful to combine both approaches. Where appropriate, these differences are highlighted and discussed.

The following two tables highlight the assumptions for key CAP interventions.

Note: Baseline with the post-Brexit budget cut is referred to as Option 1 in Annex 5.

Table 1.1 Income support and redistribution in the options

Option 1

Option 3a

Option3b

Option 4***

Option 5

Decoupled payments*

High

Very small

MS flat rate

Medium

Strong

flat rate by land type

Medium

degressive with size

Voluntary coupled support

High

0

High

targeted to EU goals and improving competitiveness

Small

targeted to extensive livestock

Potentially high targeted to EU goals

Areas with natural constraints

Lower further to Brexit

Maintained

in pillar II

Maintained in pillar II (higher national funds)

Maintained in pillar II (higher national funds)

Increased

top up in pillar I

Payment redistribution

Top up to first ha in 8 MS.

Degressivity in 14 MS from 150 000 EUR, % cut vary by MS from 5 to 50%**

0

To small-medium farms via a top up to first 30 ha

To farmers with lower income

via an increase in support to permanent grassland

To small-medium farms

via the modulation of support by size

Capping per farm (with salaries correction)

Limited,

in 8 MS

threshold from 150 000 to 500 000 EUR

100 000 EUR

100 000 EUR

100 000 EUR

60 000 EUR

Capping per ha

1 000 EUR

Minimum requirements

Threshold in EUR or ha varies from 0.5 to 4 ha and from 100 to 500 EUR

2 ha

2 ha

2% of ag. income (varies by MS, from 100 to 1 000 EUR)

Status quo

* includes the basic payment scheme, the single area payment scheme and greening

** e.g. amounts above 150 000 EUR per farm (with salaries correction) are cut by 5% in BG and by 50% in IT.

*** options 4a and 4b are similar in terms of direct payments implementation.

Table 1.2 The green architecture in the options

Option 1

Option 3a

Option3b

Option 4a

Option 4b

Option 5

Conditionality

+

++

++

++++

++

++

Other interventions

Support redistribution to permanent grassland and targeted coupled support to extensive livestock

Targeted coupled support to extensive livestock

Eco-scheme (voluntary)

++

+

Top ups

++

AECH

+

+

+

+

+

++

2.Results of quantitative analysis

The findings are presented according to the corresponding objectives

2.1.Support viable farm income and resilience across the EU territory

2.1.1.Provide income support in a targeted way

Negative impact of policy changes on average EU income level

Farm income is negatively affected in all options compared to baseline and option 1 for three main reasons:

1.The budget cut and redistribution of support (notably to small and medium size farms).

2.The reduction in direct payments because of re-allocation of funds to risk management (options 3 and 4): this leads to a decrease of the EU average income level in 'normal 2 ' years assessed here 3 . In years of strong yield or price drops, risk management tools can help farmers to mitigate negative impacts on income.

3.The changes in farm practises to increase the environmental and climatic performance of the CAP: the land re-allocation to fulfil crop rotation restriction, the costs to comply with the other green requirements and the obligation to dedicate more land to non-productive elements lead to a significant decline in cereal area in favour of set aside and fallow land, and thus a decline in market revenue.

Note of caution: farm income decline is overestimated, as the model used does not account for structural change, price feedback 4 and longer term benefits due to changes in production systems. Nonetheless, the analysis gives an accurate indication of the relative performance of the various options in the short-term, as well as of the expected impact on different farm types and sectors.

This modelling exercise does not account for structural change, i.e. it assumes the same number and size of farms in all simulations. However, large income decreases such as those expected for certain sectors/options might push less efficient farmers out of business.

The largest income 5 drop is in option 3a (-10% relative to option 1), where the switch of priority to risk management is the strongest and then in option 4a (-8%), the two options with the highest environmental ambition. The income decline is smaller and of a similar range in option 3b, 4b and 5 (around -5% compared to option 1). A linear cut (option 1) would drive a smaller drop on average (-2%) but without addressing the challenges ahead and certain sectors and MS would be more strongly hit.

In option 3, the uptake of the voluntary eco-scheme is simulated at EU level at 98%, varying from less than 90% in Portugal to 100% in MS with large areas of permanent grassland. It means that in view of the eco-scheme adoption costs and the unit payment level simulated here, only a small number of farmers chose to opt out from the eco-scheme. It shows that the unit payment level, which was set assuming a 100% uptake, is a significant incentive for farmers to adopt the changes in practises, all the more because of the importance of support in farmers’ income. It highlights also the difficulty that MS will face in maximising environmental-climatic-health benefits and budget allocation at the same time on an annual basis. Said differently, it highlights the difficulty to predict in advance the level of uptake and the most appropriate aid level in view of the requirements.

Table 2.1 Impact of policy options on EU average farm income

Relative to baseline

Relative to option 1 (baseline with cuts)

1

3a

3b

4a

4b

5

Direct payments

-10%

-75%

-40%

-6%

-6%

-26%

Total support

-10%

-11%

-7%

-4%

-4%

-6%

Income

-2%

-10%

-5%

-8%

-5%

-5%

Source: JRC, IFM-CAP

The impact of policy options varies strongly by type of farming

Cattle and sheep producers are strongly affected in options where support is significantly cut (option 1 and 3) and where coupled support is removed (option 3a). In option 1, the income of cattle producers is reduced by around 10%, an additional 25% cut compared to option 1 occurs in option 3a (Graph 2.2), where the number of cattle heads declines by 3% relative to option 1. The drop in income of sheep producers reaches 4% on average in option 1 and an additional 6% drop is implied in option 3a.

The drop in income is attenuated when these sectors benefit from re-allocation of support for their contribution to environmental sustainability via coupled support (options 3b, 4 and 5). The redistribution of support to permanent grassland (options 4 and 5) also contributes positively to the income of these farmers. In option 5, the redistribution of direct payments to smaller farms benefits to sheep farmers but affects negatively the income of cattle producers (on average 50% larger than the EU average professional farm). However, thanks to the redistribution of support to permanent grassland and to the coupled support to extensive livestock the fall in income is less drastic.

Graph 2.1 Impact of a 10% linear cut in support relative to baseline on EU income by type of farming

Graph 2.2 Impact of a shift in priorities applying on top of a support cut on EU income by type of farming

Source: JRC, IFM-CAP

Source: JRC, IFM-CAP, changes relative to option 1

For milk producers, the average impact is relatively lower; though it hides significant differences between production systems. Very extensive systems grass-fed have high income drops in options 3a and 5 and the reduction in income of most intensive farmers varies between 8% in option 3b and 14% in option 5. The income effects assessed in this analysis for pigmeat and poultry producers derive mainly from the changes in support and practises for arable land. 70% of pigs and 45% of poultry are produced on farms with more than 10 ha.

The income of olive producers, largely depending on direct payments and often granted higher per hectare payments 6 , drops significantly in all options, except in option 5 because olive growers are on average 65% smaller than the average EU farm. Changes in income of wine and fruits (orchards) producers are smaller, because, first, the share of direct payments in income is lower and, second, the simulated changes in farm practises related to permanent crops are less constraining (i.e. the adoption costs of permanent cover crop is relatively low compared to income.

The reduction and redistribution of direct payments, as well as the higher requirements to increase environmental benefits affect COP (cereal, oilseed and protein crop) producers in all options in 'normal' years 7 . The negative impact on producers of other field crops is amplified by the crop rotation obligation and by the removal of coupled support to sugar beet in almost all options.

The cut in direct support (options 1 and 3) has a strong effect on crop producers because direct payments represent a large share of their income 8 , 10% lower direct payments imply an income drop by 6% for specialised COP producers. In addition, in all options (except option 3b), direct payments are regionalised. It implies that in MS where the per hectare direct payment level still varies between farmers (mainly in relation to historic references 9 ), the income of COP farmers which traditionally received higher per ha payments is negatively affected by the introduction of flat rates (whether at MS level or by land type). In option 4, the redistribution of support to permanent grassland (with the unitary level increased by 20%) implies little changes in per hectare payment for arable crops in MS with arable area significantly larger than grassland in DK, while in DE and FR it leads to a drop by more than 5% and in the Netherlands by 20%.

Significant changes in land allocation to be expected

Conditionality requirements have a significant impact on crop producers notably in MS with a lower share of fallow land (12 MS have less than 2% of UAA with fallow land, see Annex 5.4). On average in the EU, in option 4b and 5 where only minimum requirements (3% of UAA with non-productive elements) apply, the share of fallow land and set aside in UAA increases by around 1 percentage point (pp) and by more than 2 pp in option 3a and 4a, where MS implement more ambitious green requirements. However, this effect is overestimated because of the lack of knowledge on landscape elements 10 . To limit this overestimation, the requirement was modelled as the obligation to keep non-productive elements on 3% of the arable and permanent crop area (assuming that more linear elements are present on permanent grassland). This is one of the explanatory factors of the significant increase in permanent grassland simulated by the model (up to +4.5% in option 3a and 4a). Though overestimated, it shows that increased requirements could be an incentive for farmers not to plough temporary grassland.

The crop rotation obligation implies a switch from more remunerative activities such as horticulture and others field crops to less remunerative activities such as soft wheat, oilseeds and set aside. The difference in income drop between option 4a and option 4b can be directly interpreted as the effect of enhanced conditionality (modelled here as winter soil cover with catch crops, 3 year rotation and the obligation to have 2% more of UAA with non-productive elements). The simulated income drop is above 15% for potato and sugar beet producers and close to 10% for COP producers. The crop rotation 11 obligation leads more particularly to a decline in grain maize, durum wheat, sugar beet and potato areas. In this simulation, the income drop is also high for horticulture because in the model farmers producing only vegetables in open field can rotate only between tomatoes and other vegetables, while in reality the diversity of vegetables at hand of farmers is wider. The 2-year rotation does not lead to a decline in soft wheat area; on the contrary it increases in option 3b (+2% relative to option 1). For soft wheat, the 3-year rotation might play a role but a stronger factor is the drop in support; it can be seen in option 5 where the redistribution of direct payments to smaller farms (while COP producers are on average more than twice larger than the average EU farm) and to other production systems (organic, permanent grassland, hedges and areas with natural constraints - ANCs) leads to a 5% wheat area decline and contributes strongly to the 14% drop in income of COP producers relative to option 1.

The fact that COP farms tend to be larger explains also why farms subject to capping of support are mainly specialised in crop production.

The increase in oilseeds area derives mainly from the 3-year rotation obligation (options 3a and 4a), while the decline in protein crops derives from the removal of coupled support (option 3a, 4a and 4b) as well as the fact that nitrogen-fixing crops do not qualify either to fulfil conditionality requirements nor for the ecological focus area requirements set by MS with high green ambition (option 3a and 4a). The top-up simulated in option 5 (80 EUR/ha) implies an increase of pulses area by 44% relative to option 1, which is quite significant even though protein area is still small in the EU. It shows the positive effect on production of coupled payments for this crop with lower economic profitability.

Table 2.2 Changes in land allocation due to changes in support and green requirements (%)

 

Cereals

Oilseeds

Protein crops

Sugar beet

Potato

Set aside and fallow land

Permanent grassland

Relative to baseline

1

0.1%

-0.1%

0.3%

-0.6%

0.0%

0.1%

0.0%

Relative to option 1

3a

-6%

5%

-23%

-23%

-10%

37%

4.5%

3b

-2%

1%

-12%

-8%

-2%

10%

3.7%

4a

-7%

6%

-9%

-23%

-10%

34%

4.5%

4b

-3%

-2%

-17%

-12%

-2%

19%

3.7%

5

-7%

6%

44%

-13%

-3%

15%

3.7%

Source: JRC, IFM-CAP, % changes based on FADN data covering 90% of EU land.

Table 2.3 Changes in land allocation applied to the 2030 EU agricultural outlook (1 000 ha)

 

Cereals

Oilseeds

Pulses

Sugar beet

Potato

Set aside and fallow land

Permanent grassland

1

100

0

0

0

0

0

0

3a

-3 400

600

-300

-400

-100

2 000

3 400

3b

-1 100

100

-200

-100

0

600

2 800

4a

-4 000

700

-100

-400

-100

1 900

3 400

4b

-1 700

-200

-300

-200

0

1 000

2 800

5

-4 000

700

700

-200

0

800

2 800

Source: DG AGRI

The changes in land allocation resulting from the other model used in this analysis (CAPRI 12 ) are smaller, especially for cereals, but indicate broadly the same trends. In addition, in CAPRI contrary to IFM-CAP, land abandonment is accounted for 13 . All options result in a small reduction in UAA: 300 000 ha because of the budget cut and on top around 500 000 ha less in option 4a (-0.3% compared to option 1) and 400 000 ha in option 3a where more requirements apply. The decline is smaller in options 3b and 4b (260 000 ha and 200 000 ha respectively), while in option 5, the UAA remains almost stable compared to option 1. In IFM-CAP, the UAA is assumed to be fixed in all scenarios.

The targeting of direct payments is significantly improved in options 4 and 5

The options test various ways of targeting direct payments and CAP support:

·to smaller and medium size farms via a payment level modulated by size (option 5), a redistributive payment (option 3b) and a capping system which all allow accounting for the economies of scale in larger farms.

·to farmers most in need via the support to areas with natural constraints, coupled support to extensive livestock, the redistribution of support to permanent grassland (allowing indirectly to target farmers with lower income in option 5).

·to incentivise farm practices more beneficial to the environment, climate and health, via conditionality, the eco-scheme and environmental top ups.

Targeting support to small and medium size farms

Note: This assessment was carried out with the IFM-CAP model, based on FADN representing commercial farms. These farms are on average larger than the whole farm population. In FADN, EU farms have on average 30 ha, accounting for all farms, the average farm size drops to 16 ha (farm structure survey 2013).

The modulation of the basic decoupled payment by size is an efficient way to redistribute support from larger to smaller and medium size farms in physical and economic terms currently receiving less support (option 5) and can almost fully offset the effect of budget cuts on farms with between 5 and 30 ha. However, the modulation simulated here implies a close to 30% reduction in support to farms with more than 500 ha and an income drop above 10%, while these farms employ more people (20 AWU on average, 13 times more than the EU average). The redistributive payment simulated in option 3b (80 EUR/ha from 2 to 30 ha) allows also a shift of support to smaller farms, with lower income drops for larger farms though.

Importantly, the increase in minimum requirements to be eligible to decoupled payments leads to a lower support granted to farms with less than 5 ha in option 3 and 4 (see also chapter 2.1.3). This percentage is particularly high (between -25% and -33%) because the support granted to these farms in absolute value is small (around 1 000 EUR/farm in option 1). In addition, farms below 5 ha can have a large economic size and higher income than average (wine, horticulture). Therefore, in terms of economic size, the change in support for smallest farms is lower (-15% in option 3a to -6% in option 4).

Graph 2.3 Change in support relative to option 1 by area size class (ha)

Graph 2.4 Change in support relative to option 1 by economic size class (1 000 EUR)

Source: JRC, IFM-CAP

Source: JRC, IFM-CAP

Note: direct payments include the basic decoupled payment, the redistributive payment and coupled support. Total support includes the eco-scheme, the environmental top ups, the ANC payment and the agri-environment-climate measures.

The redistribution simulated in option 4 implies higher support to farms above 150 ha, because of the increased support to permanent grassland. However, this regionalisation by land type is efficient in shifting direct payments from more intensive farms to more extensive ones ( Graph 2.6 ). In option 5, the higher direct payments granted to first hectares imply a relatively lower decline in basic payment to most intensive farms (smaller on average 14 ) and a decline to most extensive ones. The latter effect is compensated with coupled support to extensive livestock and top ups to permanent grassland.

Targeting support to farmers most in need (with lower income)

The current policy is granting higher support to farms with higher income but also to the 10% farms with the lowest income ( Graph 2.5 ): the latter receive 8 000 EUR/AWU, the 50% farms with the highest income receives around 12 000 EUR/AWU relative to between 2 000 and 6 000 EUR/AWU for the other farmers.

None of the options perform better than the baseline, because redistributive effects do not offset cuts and some support is re-allocated to risk management. Option 5 (decoupled payment modulation by size, coupled support for extensive livestock and top-up to permanent grassland and ANC) performs as well as option 1 to redistribute support from farms with higher income per AWU to those with lower income level. Option 4 (regionalisation by land type and redistribution to permanent grassland) performs slightly less. Provided farmers will largely adopt the voluntary eco-scheme to catch the premium, option 3b (redistributive payment) would perform as well as option 4. In any case, mainly because of the reallocation of support to risk management option 3a performs the least.

Graph 2.5 Support per AWU by class of income (Q1 = lower to Q10 = higher income)

Graph 2.6 Change in support relative to option 1 by class of production intensity 15  
(Q1 = more extensive to Q10 = more intensive income)

Source: JRC, IFM-CAP

Source: JRC, IFM-CAP

In option 3a this shift in priorities affects negatively almost equally farmers of all economic classes. Option 3b with the redistributive payment allows maintaining the income of medium economic size farms (from 8 to 100 000 EUR) while support drops is higher for larger farms. In addition, would the uptake of eco-scheme be lower, support drops could be larger.

It is a well-known phenomenon that some years the farm net value added of farms is negative (market revenue + subsidies – total costs – depreciation), it does not mean that the cash flow is negative but that accounting for the loss of capital value the farm income is negative. If this situation lasts for several years it is threatening strongly the viability of the farm.

Table 2.4 Share of farms with negative income

Baseline

1

3a

3b

4a

4b

5

14%

15%

17%

15%

16%

15%

15%

Source: JRC, IFM-CAP

In the baseline, the share of farms with a negative farm net value added reaches 14%, this share increases to 15% in option 1 with the budget cut. In option 3a, with the shift of priority to risk management tools and the increased environmental-climatic ambition this percentage increases to 17%. In option 4b, the loss in revenue due to the same environment-climate ambition leads to 16% of farms with negative income. In the other options (3b, 4b and 5), the share is the same as in option 1.

It is important to note once more that structural change is not accounted here. But in a situation of income deterioration an increase of the number of farmers leaving the agricultural business might be expected. In addition, in this modelling exercise only intermediate costs vary with the changes in farming practices but fixed costs (labour, machinery, energy…) remain constant, while some adaptation might take place too.

A fairer distribution of support

Capping the level of DP farmers can be granted is seen as one way to reach a fairer distribution of support. In this simulation, two levels of capping per farm were tested: 100 000 EUR (options 3 and 4) and 60 000 EUR (option 5). In this impact assessment, only the capping of the basic payment and the redistributive payment were simulated. Elements changing across options (the eco-scheme, the environmental top-ups and the coupled support implemented to address EU concerns and sectors in difficulty) were not part of capping, to facilitate comparison across options.

Currently, only 8 MS 16 apply a capping from a threshold of 150 000 EUR to 500 000 EUR. In addition, direct payments are cut (by 5% to 50%) from 150 000 EUR per farm in 14 MS. It raises a capping product of 120 million EUR, coming mainly from HU, PL and BG. The capped farms have close to 50 employees on average (see Annex 5.5). It means that the current capping penalises farms providing numerous jobs. Despite the possibility to apply a correction for salaries HU, PL, SK and CZ do not apply it, because it is deemed too complicated. Lowering the capping threshold to 100 000 EUR or even 60 000 EUR could convince these MS to apply this correction, even to possibly consider family labour. It could also be looked at a simpler solution to deduct salaries, possibly based on MS average wage. In addition, with a capping level at 60 000 EUR the possibility to deduct opportunity costs for family labour could as well be considered.

Applying a capping of 100 000 EUR (with salaries correction) to the current basic decoupled payments (BPS/SAPS and greening) ceteris paribus would raise a capping product of 350 million EUR. Applied to all direct payments the capping amount could reach 920 million EUR. However, the budget cut and the shift in priorities could lead to much lower capping products: 0 EUR in option 3a (where the basic payment represents only 25% of pillar I envelope), 10 million EUR in option 3b, 50 million EUR in option 5 (despite a capping at 60 000 EUR).

In addition, in all capping scenarios, BG and RO are the 2 MS where most of the direct payments are capped, despite the correction of salaries. In HU, CZ and SK the salaries correction implies a strong drop in capped amounts. Would capped amounts be cut from MS envelopes it would raise a serious issue of cohesion, knowing that these two MS grant among the lowest support per ha and belong to the poorest MS of the EU.

This is why, in option 4, the capping is used as an actual tool of redistribution. Meaning that instead of cutting the envelope (by potentially more than 300 million EUR, out of which more than 60% in BG and RO), the budget is redistributed to smaller farmers by increasing the per hectare payment (by around 10% in BG and 6% in RO). It is not a simple budgetary mechanism but it addresses citizen concerns without damaging cohesion.

In the option where the link to historic payment levels is kept (option 3b), on top of the capping per farm, a capping per ha was introduced (1 000 EUR/ha of basic payment and redistributive payment in this simulation). The number of farmers affected is relatively low compared to how many farmers would have been affected if that capping would have applied in 2015. The main reasons are: the increasing convergence of direct payments per ha to take place in the coming years and accounted for in the baseline, the reduction of direct payments simulated in option 3b and the potential lack of representativeness of these farms in FADN. An assessment carried out on the 2015 payments (CATS database) showed that a capping per ha of the basic payment scheme, the single area payment scheme and the greening at 1 000 EUR/ha would have led to cut direct payments to more than 200 000 beneficiaries and to a capped amount of 1.5 billion EUR. The farms capped are mainly located in EL, IT and ES. They have an average of 4 hectares and received around 7 400 EUR per farm in 2015. Most of these farmers are olive growers but there are also some intensive livestock producers (cattle and sheep). With a capping at 600 EUR/ha, the number of beneficiaries capped would have raised to 600 000 and PT would be hit too. A capping level relative to the average direct payment per MS was tested too and revealed more proportionate.

Table 2.5 Capped amounts by option

Baseline

Baseline+capping

3a

3b

4

5

Level of capping

various

100 000

100 000

100 000

100 000

100 000

60 000

Scope

BPS/SAPS

BPS/SAPS + greening

all DP

BP

BP and redistributive payment

BP

BP

Product of capping (MEUR)

120

350

920

0

10

0

50

Source: JRC, IFM-CAP

Capping is not the most efficient way to reduce the concentration of direct payments, when the funding no longer paid to large farms is removed from the direct payments budget altogether instead of being redistributed to smaller farms. Modulation of direct payments by size is more effective to reduce the share of direct payments received by the 20% biggest CAP beneficiaries as illustrated in the graphic below. In option 5, these beneficiaries capture 67% of direct payments, relative to 73% in the baseline 17 . This reduction might seem small in view of the huge redistribution to small and medium farms operated in option 5, however it highlights that support concentration derives from land distribution in the EU. Option 3b, allows for a drop in concentration of 2 pp only thanks to the redistributive payment. By contrast, options 3a and 4 imply a small increase in concentration of DP.

However, some of the large beneficiaries employ a lot of people, looking at the concentration of direct payments not by beneficiary but by worker, the level of concentration reduces to 66% for the 20% of farm labour employed on farms with largest direct payments per AWU in the baseline. In option 5, this concentration is 3 pp below.

Graph 2.7 Share of direct payments received by 20% farms 18

 

Source: JRC, IFM-CAP

Another measurement of support concentration is the Gini coefficient, varying between 0 and 1: the closer to 0 the lower the concentration. In the EU, the Gini coefficient of land concentration (again measured using the FADN sample) is 0.58, not surprisingly very close but slightly below the concentration of support in the baseline at 0.57. As concluded based on the measurement of the share of direct payments granted to 20% of biggest beneficiaries, option 5 allows for a reduction in support concentration (Gini coefficient of 0.55), while the concentration increases slightly in option 3b and 4 and more significantly in option 3a (0.61) due to the flat rate payments. In terms of income, the budget cut leads to a higher concentration of income (option 1, 0.735) relative to baseline (0.729). None of the tested options allows correcting this; on the contrary, as for support, options 4a and 3a imply a higher concentration of income in the hand of more efficient farmers in terms of income generation. The difference in Gini coefficient between option 4a and 4b shows the effect of the higher environmental-climatic ambition simulated here: the losses in market revenue implied by changes in farm practices slightly increases income concentration.

Table 2.6 Concentration of land, direct payments and income measured with a Gini coefficient

 

UAA

Direct payments

Income

Baseline

0.579

0.570

0.729

1

0.570

0.735

3a

0.609

0.750

3b

0.575

0.739

4a

0.581

0.745

4b

0.581

0.738

5

0.552

0.739

Source: JRC, IFM-CAP, based on professional farms (FADN data)

2.1.2.Reduce inequalities between territories by supporting farms across the whole territory

Historically, direct payments granted to areas with natural constraints were lower and this gap was compensated by a specific aid to ANCs, programmed in rural development. The area in ANCs represents around 50% of EU area and 30% of the eligible area. In the baseline, farms in mountain areas are granted around 6 500 EUR of direct payments per farm while outside ANCs 19 farms are granted around 8 400 EUR. Accounting for ANC support but also agri-environmental payments the average support increases to more than 10 000 EUR granted in mountain areas and around 9 000 EUR outside ANCs.

The share of pillar II envelope dedicated to ANCs is 17% in the current programming period. In all options, support to ANCs is maintained given the importance to keep farms on the whole EU territory to support employment in rural areas and also for the environmental benefits associated with farming activity. However, some MS dedicate a very large share of their rural development envelope, (especially France 37%, Ireland and Finland 32% and 29% in Luxembourg ), meaning that in a context of reduced EU budget and of gaining importance of other priorities, to continue supporting farms in ANCs at the same level, MS might need to use additional national funds (as simulated here in option 3b for all MS and in option 4 where a maximum of 25% of pillar II envelope for ANC is tested implying a reduction in EU funds for ANCs in FR, IE, LU, CZ, SK, SI and SE).

In option 1, the budget cut implies a 10% reduction in support in ANCs. In option 3, provided ANC payments are maintained, total support in ANCs could remain equivalent to option 1, but support in less favoured areas not mountain would decrease further.

By contrast, option 4 by redistributing support to permanent grassland re-directs support to mountain areas but the most efficient way to support mountain areas is a specific top up granted in pillar I to ANC as in option 5 (provided farmers could keep the same level of aid in MS granting large national support to ANCs). However, in both options ANCs not located in mountain areas do not benefit from reallocation of support.

Graph 2.8 Change in support relative to option 1 by ANC zone 

Graph 2.9 Income per AWU by ANC zone

 

Source: JRC, IFM-CAP

Source: JRC, IFM-CAP

2.1.3.Simplify increasing thresholds to receive decoupled payments

In order to reduce the number of beneficiaries of very small amounts of aid, deemed not contributing significantly to farmers’ income, thresholds apply currently. MS fix them in euros (varying from 100 to 500 EUR) and/or in hectares (varying from 0.5 to 5 ha). In this analysis, the introduction of a 2 hectares threshold is tested (option 3). This option would exclude from the direct payment system more farmers than the current system (options 1 and 5) and then a system based on thresholds in EUR accounting for the differences in standard of living (option 4).

An analysis based on the 2016 CAP beneficiaries shows that a 2 hectares threshold would have reduced the number of beneficiaries by than 1.5 million (24%) for a reduction in hectares paid by 1.3% only, 3% of the amount of basic payment, single area payment and small farmer scheme granted and 2% of total direct payments paid. These beneficiaries were granted on average 420 EUR in 2016. This amount varies between 85 EUR in LT to close to 3 300 EUR in NL (where the flat rate will apply from 2019 only).

A threshold at 2 ha might be too high in MT and CY where around 70% of beneficiaries fall under the threshold and are granted more than 40% of basic decoupled payments in MT and around 15% in CY. Similarly, large share of payments were granted to beneficiaries with less than 2 ha in 2016 in EL (15%), RO (10%), IT and PT (7%). However, this threshold could represent a real simplification in MS such as BG, SK, HU and LT where more than 15% of beneficiaries are granted less than 1% of the payments. A question remains about the importance of the aid contribution (around 80 EUR in LT, 200 in BG and in SK, 400 in HU) to these farmers’ income.

Option 4 is testing a threshold in EUR, above the current thresholds applied, and corresponding to the equivalent of 2% of agricultural income. It means that to receive basic decoupled payments, farmers need to be eligible to a minimum of basic decoupled payment varying between 100 EUR (in RO, BG, PL, HR, SI) and 1 000 EUR in DK. Applied in 2016, such a system would have reduced the number of beneficiaries by 10% (0.6 million) and the amount of aid paid by 0.7% only and an average amount of 240 EUR granted per beneficiary. With a threshold at 200 EUR more than 60% of Maltese farmers would fall out of the direct payment system for a 33% share of basic decoupled payments. In the other MS, the share of payments granted to beneficiaries below the thresholds is smaller: 5% in CY, 4% in LT and 3% in IT.

A threshold in euros, can avoid excluding from the system potential beneficiaries of amounts of aid important for the living of farmers. However, a threshold in hectares is much simpler to manage than a threshold in euros, for which the calculation of payments needs to be done before beneficiaries can be excluded. MS could explore further the most adequate threshold level. In addition, in context of reduced direct payments the amounts of aid granted to beneficiaries below 2 ha would be smaller.

Table 2.7 Beneficiaries below tested thresholds in 2016

million

Beneficiaries

Area paid

Amount paid

Total in 2016

6.5

154

23 069

of which below 2 ha

1.5

1.9

640

 

24%

1.3%

2.8%

of which below 2% of ag. Income

0.6

1.2

152

 

10%

0.8%

0.7%

Source: DG AGRI, CATS, based on BPS, SAPS and SFS

To assess better who are the beneficiaries potentially excluded from direct payments with various thresholds, the analysis was run with the IFM-CAP model. Given it is based on FADN surveying only professional farms, the number of beneficiaries below thresholds is smaller.

In the baseline, farmers below threshold are many involved in wine production and horticulture, they are located at more than 30% in ES and also in RO, IT and FR. Some of them have a very large economic size (12% with more than 100 000 EUR of size). Would these farms have been granted direct payments their income would have increased by less than 1% for most types of farming.

As shown based on the 2016 payments, option 3 leads to a higher number of farmers excluded from the direct payments system. The reduction by half of the number of farmers below thresholds in option 5 compared to baseline, highlights the impact of the reduction in direct payments and at the same time the increased payments to smaller farms. This is why the number (and share) of farms below threshold from the lower economic class increases in this option.

In option 3, farms below thresholds are mainly mixed farms, located in RO and IT and of the smallest economic size. In option 4, the distribution of farms below thresholds by type is close to the baseline situation, with a higher share of sheep and dairy farms and RO though. In option 4, the number of farms below thresholds is lower than in option 3 but the impact on farms income is slightly higher, though rather low (estimated at 1% against 0.7% in option 3b). These thresholds would weigh more cattle producers with low income in option 4 and on olive producers in options 3 and 4.

Table 2.8 Identification of professional farms below thresholds

Baseline

Option 3

Option 4

Option 5

Total number of farms

285 800

506 000

322 100

134 000

Change/baseline

 

77%

13%

-53%

Share by specialisation

100%

100%

100%

100%

Horticulture

25%

19%

22%

29%

Wine

21%

12%

15%

16%

Mixed

19%

27%

24%

26%

Orchards

15%

10%

10%

7%

Sheep&Goat

4%

9%

8%

6%

Milk

2%

8%

7%

4%

Other

14%

16%

14%

13%

Share by MS

100%

100%

100%

100%

ES

34%

6%

12%

14%

RO

20%

40%

36%

29%

IT

18%

22%

24%

16%

FR

12%

6%

11%

16%

BG

6%

6%

3%

4%

EL

2%

8%

1%

3%

Other

9%

12%

13%

19%

LFA

42%

40%

42%

42%

Not LFA

58%

60%

58%

58%

Share by size

100%

100%

100%

100%

2 - 8 000 EUR

37%

62%

53%

47%

8 - 25 000 EUR

31%

22%

23%

23%

25 - 100 000 EUR

20%

12%

16%

21%

> 100 000 EUR

12%

5%

8%

9%

Source: JRC, IFM-CAP

The small farmer scheme, which was introduced in the last reform as a simplified way to grant direct payments to smaller beneficiaries is not retained in the options because it is simpler for beneficiaries (thanks to the greening exemption notably) but not for the administrations.

2.1.4.Cope with price volatility and improve risk management

The 2014 US Farm Bill introduced a system with risk-based (countercyclical) payments. In the public debate this system was sometimes referred to as being more adequate compared to the EU system with direct payments complemented by risk management schemes. In order to evaluate its impact, an analysis with the Aglink-Cosimo model 20 was performed assuming the CAP to adopt some of the programs of the US Farm Bill 2014. For a comprehensive description of the US Farm Bill 2014 we refer to the USDA Farm Service Agency 21 . Specifically, two of the US Farm Bill 2014 programs were considered: the acreage risk coverage (ARC), which is substantially a revenue-risk insurance, and the price loss coverage (PLC), which is an insurance against prices dropping below certain levels. The analysis solely focused on maize, barley and soft wheat. For the PLC program, payments are triggered when the market price is lower than an arbitrarily chosen reference price level. For the ARC program, payments are triggered when the farm revenue goes below a specific revenue of reference, which in the US can be farm- or county-specific.

Graph 2.10 Deterministic results for baseline and three scenarios for EU total ARC and PLC payments (in 1 000 EUR)

Source: JRC, AGLINK-COSIMO

The analysis shows ARC payments in the order of approximately half a billion € in the worst years for the average set of reference prices. For the highest set of reference price levels the payments are in all 10 years above 1 billion €. A similar picture but with much higher absolute levels in monetary terms is shown for the PLC program payments at the EU-wide level. In this case there is a one-to-one correspondence between market prices being below the reference levels and the payments. Every time the market price is below the reference level, the PLC payments are triggered. This is not the same as in the ARC payments, where there is a simulated distribution of farmers' revenues and the benchmark revenue to trigger payments is the multiplication of Olympic averages of market price and yield. No PLC payments are expected if the low reference prices are chosen and medium reference prices trigger payments up to 5 billion € in the year 2019 when lowest prices are projected in the Outlook for the three crops considered under the ARC and PLC programs. High reference prices trigger PLC payments of 14 billion € for the 3 crops considered. For the ARC and PLC combined, with high reference prices, payments in the worst case scenario exceed 15 billion €.

The main conclusions are hence that a system based on risk-based payments creates significant budget uncertainty and presents a real danger for budget overshoot, depending on the chosen reference prices in relation to market developments. Note that the presented analysis only covers three crops. Furthermore, a system based on risk-based payments also does not sufficiently transmit market signals to farmers, as downward price pressure is cushioned, removing the incentive to adapt production to changing demand and can lead to overproduction.

The market orientation of the CAP has significantly increased over time and at the same time the exposure to world markets. In a context of climate change and higher occurrence of extreme events, farmers’ exposure to yield, price and income variability will increase. Thus, the proposed increase in financial means dedicated to risk management tools in option 3a (10% of pillar I 22 ) and options 3b and 4 (5% of pillar I), while option 5 remains status quo. Currently the uptake of risk management tools is rather low 23 also because farmers count on direct payments to buffer income changes, but simulated budget cuts and the shift in priorities towards less income support (option 3) might increase farmers’ willingness to adopt these tools.

Based on FADN data, between 2007 and 2015, on average annually 30% farmers had a 20% or larger drop in sector income compared to the three previous years and 25% of EU farmers had a 30% drop in gross farm income (see Annex 5.7). Would an income stabilisation tool be available for all farmers, an EU budget between 13 and 15 billion EUR would have been necessary annually to compensate farmers. It is far more than the budget foreseen in options 3 and 4. Anyhow, the level of organisation required to set up a mutual fund to manage an IST imply that most probably only larger farmers would opt for that solution (also because for smaller farmers the main preoccupation might be their income level – better addressed with direct payments – rather than its variability). If only farmers with an economic size above 50 000 EUR would opt for an IST, the budget need could be almost divided by two. This would require nevertheless a larger budget than available.

MS are given the possibility to set up the IST for specific sectors, in the framework of the strategic plan. This provides an opportunity for MS to target sectors facing some years huge drops in income and for which other risk management tools are less available. For example, risk management tools are less developed in the livestock sector than for crops. Crop futures are well functioning and available to farmers but also to insurers to cover/hedge their risks, thus the wider availability of insurance products (which can be supported with EU funds too). By contrast, in the dairy sector, the volume traded on futures is still small (though increasing 24 ) and an IST could be of interest to farmers to protect themselves against market uncertainty. In other sectors, where the first issue in income level (beef and sheep for example), direct payments (included coupled support) can be best suited to support farmers.

Table 2.9 Estimation of annual compensation needs for an IST in the EU

MEUR

Envelope made available for risk management tools

Option 3a

3 400

Option 3b&4

1 700

EU compensation required if IST for all farmers

Farm income, 30% drop

13 300

Sector income, 20% drop

14 900

Compensation required if IST for larger farmers (> 50 000 EUR of size)

Farm income, 30% drop

7 200

Compensation required if IST for selected sectors (Sector income, 20% drop)

Milk

1 300

COP

2 600

Sugar beet

200

Olive

600

Pig&poultry

1 400

Source: DG AGRI, AidsK, FADN data

2.1.5.Competitiveness

The options assessed here imply little change in the competitive position of the EU in terms of price competitiveness. Farmers opt for reducing production in view of lower expected returns and higher costs and the increase in production prices is very small. Therefore in all options, the relationship between costs and revenue remains more or less constant and farmers reduce their livestock (especially cattle, see above) and cereal area (grain maize and wheat).

Therefore a deterioration of the EU trade balance is to be expected, with increased imports of beef, sheep and poultry meat as well maize in almost all options and reduced exports of beef and wheat mainly. The trade of dairy products is not affected. The EU trade balance reduces most in option 4a and 3a, and then 3b and the lowest decline is simulated in options 4b and 5.

Table 2.10 Changes in trade by main commodity

Beef

Sheep meat

Poultry meat

Pigmeat

Cereals

Oilseeds

Oilcakes

Exports

Imports

Imports

Exports

Imports

Exports

Exports

Imports

Imports

Imports

3a

-13%

20%

8%

-2%

2%

-3%

0%

1%

1%

-2%

3b

-3%

4%

3%

-1%

1%

-2%

-3%

6%

0%

0%

4a

-9%

13%

2%

-2%

3%

-4%

-1%

3%

1%

-1%

4b

-7%

9%

1%

-1%

1%

-1%

0%

-1%

0%

-1%

5

-9%

13%

-6%

-1%

1%

-1%

-1%

1%

0%

-1%

Source: JRC, CAPRI

2.1.6.Coupled support and competitiveness

Where the market fails to remunerate farmers for all the services they provide and where the lack of support could lead to land abandonment and closed landscapes (e.g. for extensive livestock in grassland areas) a coupled payment can be justified to help maintaining production in territories and sectors at risk.

The table below highlights the impact on production, productivity and prices of removing coupled support (in isolation from other changes) compared to the baseline: a decrease in area and herd, an increase in productivity (dairy and sugar beet) mitigating production effects, as well as a price increases.

Table 2.11 Changes in price and production would coupled support be fully removed

Hectares or herd size

Yield

Supply

Price

Dairy

-0.7%

1.5%

0.7%

1.4%

Beef

-2.5%

0.2%

-2.4%

3.2%

Sugar Beet

-4.9%

2.2%

-2.8%

3.9%

Source: JRC, CAPRI

Coupled support has implications on the level playing field in the EU, because of the differences in implementation between MS, it might lead to unfair competition and to an increase in production. In addition, the World Bank in a recently published study, points out that coupled support prevents productivity increases contrary to decoupled and pillar II payments. The results also show that yield gains would have been higher without support for milk and sugar beet.

The voluntary coupled support, as currently implemented, addresses only in part EU concerns: close to 70% of the support is granted to the sheep, cattle and protein crop sectors. The targeting could be further improved by limiting support to extensive livestock providing positive amenities as proposed in options 4 and 5. For the rest of the coupled support currently granted, several issues can be pointed out:

·A lack of targeting: in the dairy sector for example, in several MS a large share of dairy cows are eligible, sometimes to small amounts (like in FR and BE, below 30 EUR/head) questioning the usefulness of the scheme and sometimes to large amounts (like in CZ and HU) questioning in this case the proportionality of the scheme and the competitive advantage given to these producers. Similarly, in MS granting a coupled payment to sugar beet, generally all the area is eligible.

·An impact on production.

·A contradiction with a market oriented policy. The use of coupled support can be questioned when it is used, like in the sugar sector, to compensate for the lack of competitiveness of a whole country (and not a specific territory). Clearly, in such cases MS have put forward the social dimension of the support which helps keeping employment in the related processing industry, however without addressing the structural issue.

·Competition issues. Coupled support introduces elements of unfair competition between MS. This can be illustrated with the coupled support granted to the sugar sector, where the aid granted in 2015 reached from 100 EUR/ha in FI to 800 EUR/ha in RO. In other words, in RO sugar beet growers received a coupled support of 20 EUR/t, while e.g. in BE where no VCS was granted, sugar beet growers signed contracts at 23 EUR/t. In addition, the CAPRI analysis shows that without support, RO would have produced 53% less.

·Disproportionate unit amounts may be paid: this happens, in absence of any 'safeguard', when to avoid unspent funds MS increase the unitary level of aid when there is a drastically smaller number of applicants than planned.

However, coupled support can address specific issues that the decoupled payment would otherwise leave unresolved. Coupled support could be limited and granted to sectors identified by MS as undergoing certain difficulties. This is why in options 4 and 5, coupled support was introduced to address some EU concerns. In option 3b, the possibility to grant coupled support was extended to sectors identified by MS as particularly important for social, economic, or environmental reasons, undergoing certain difficulties with the view to overcome these difficulties after a certain number of years.

2.2.Increasing the environmental and climatic benefits of the CAP

It is proposed in the new green architecture to remove EU exemptions and thresholds. It implies that all the potentially eligible area will be under minimum conditionality. In addition, in the options where entitlements can be removed (all except option 3b), the area covered by payments could increase and thus the area under conditionality (currently the area granted an aid is below 90% of the UAA). However, in this modelling exercise some exemptions were introduced to avoid overestimating effects of some requirements.

2.2.1.Contribute to climate change mitigation & adaptation

Reduce GHG emissions

Previous analysis shows that there is a need to give a dedicated incentive to farmers in order to reduce GHG emissions. The ECAMPA project (see Box 1) showed that, in the absence of a compulsory emission reduction target for agriculture, a subsidy covering 80% of the costs of mitigation technologies, could deliver significant non-CO2 emission reductions, with little negative impact on EU production. However, this measure would come along with considerable budgetary and unitary costs if farmers are projected to widely adopt the technologies, estimated at around the current total pillar II envelope. The fact that such incentives are not explicitly included in the present analysis 25 (also because of its budget-neutral assumption) explains why only small reductions in non CO2 emissions compared to baseline are reached in this assessment.

In addition, this assessment is an underestimation of potential GHG emissions reduction because the impacts of land use change and carbon sequestration are not fully captured in the CAPRI model. However, the model accounts for changes in livestock diets and for the adoption of some mitigation technologies. The potential impact of targeted measures and other effects to reduce GHG emissions that could not be covered by quantitative modelling were taken on board in the different options of the MCA analysis (section 3.2.4.1).

The budget cut (Post Brexit) implies a 0.1% reduction of GHG emissions compared to baseline. In addition, all options show a small decrease of non-CO2 GHG emissions, ranging between 0.6% and 1.6%. Between 34% (4b) and 50% (4a) of the reduction comes from direct N20 emissions from the application of mineral fertilisers, followed by 22% (4a) to 36% (4b) from methane emissions from enteric fermentation. Even though the difference in impact between the options in terms of non-CO2 GHG mitigation is a factor of three, this represents only between 2.6 and 7 million t CO2 eq/year.

The main drivers for the reduction in non-CO2 emissions are the introduction of a tool for nutrient management with reduction targets of N-surplus. As the reduction target of the NMP is higher in option 3a and 4a compared to the other options, it is quite logical that these scenarios show the biggest reductions in terms of GHG emissions.

Farmers may react to these reduction targets via production changes but also via the implementation of mitigation technologies. Around 56% of the total reduction in GHG emissions is achieved via mitigation technologies in option 4a, while it is around 25%-45% in the other options. The major part of the reduction is due to precision farming and the use of nitrification inhibitors out of four farming practices. The results show as well that there is no adoption of other mitigation technologies in absence of any other incentive directly targeting non-CO2 mitigation technologies. It should be noted that in the ECAMPA2 study 26 (see also Box 1), a scenario with a subsidy covering 80% of the costs of mitigation technologies but no compulsory emission reduction target for agriculture, delivered about 13.5% of non-CO2 emission reductions by 2030 compared to 2005, with little negative impact on EU production.

Box 1: What's the potential of GHG emission mitigation in agriculture?

The options considered in this impact assessment do not include specific GHG emission reduction targets or policy obligations to mitigate GHG emissions from EU agriculture 27 . While the possibility for uptake of emission mitigation technologies is considered in the quantitative analysis, adoption by farmers is low (see section 2.2.1), which explains why the GHG emissions reduction achieved in the different policy options is limited. This is in line with the main findings of the EcAMPA 2 study (Pérez Domínguez et al., 2016 28 ), which shows that adoption of mitigation technologies in the agricultural sector is unlikely to happen at a large scale without additional incentives.

In the EcAMPA 2 study, the role of emission targets and subsidies for the uptake of technological (i.e. technical and management-based) mitigation options was specifically addressed with the CAPRI model for year 2030. The study examined the impacts of policy instruments directly targeting non-CO2 GHG emission reductions in the EU agricultural sector, concluding that without further policy incentives, EU-28 agricultural GHG emissions would decrease by about 2.3 % by 2030 compared with 2005. EU agricultural production would be significantly reduced if the sector was to deliver a -20% emission reduction without including subsidies for the adoption of mitigation technologies. Livestock herds would be substantially affected, especially cattle for beef production. Negative production impacts of a mitigation target would be more limited if the implementation of emission mitigation technologies by farmers would be subsidised. Furthermore, the study showed that considerable emission reductions could also be achieved when including subsidies for emission technologies without a specific emission target. In this case, emissions would decrease by about 13.5% compared to 2005, without negative impacts for EU agricultural production. However, EcAMPA 2 showed that the subsidies payed in the scenarios would lead to additional budgetary costs between 12.7 and 15.6 billion EUR (188 - 278 EUR/t CO2 eq mitigated) depending on the scenario setting (i.e. voluntary vs. mandatory adoption modalities, cost and number of technologies available, etc.).

Graph 2.11: Contribution of each technology to total mitigation (EU-28, 2030)

Source: Pérez Domínguez et al. (2016). HET20 = Compulsory 20% mitigation target for EU-28 agriculture, cost-effective allocation by MS; SUB80V_20 = same as HET20, but with 80% subsidy for the voluntary application of mitigation

The positive effect of a reduction in GHG emissions is partly offset by emission leakage, meaning increased emissions outside the EU, to produce agricultural products to be imported into the EU or to replace EU exports. Between 35% and 75% of the GHG emission savings are substituted by additional emissions outside the EU (the so-called leakage). This effect is the strongest in option 3a due to the strong decline of EU beef production replaced by imports from less efficient regions in terms of GHG emissions/kg of product 29 based on the historical emissions efficiency trends as the exact impact of the Paris Agreement in different parts of the world is yet unclear. In general, all measures that lead to production drops imply a reduction in gross GHG emissions. However, only a change in human consumption will translate into an actual reduction of GHG emissions worldwide (i.e. to avoid leakage).

These average results hide diverging impacts at national and regional level due to the prevailing farming systems in the baseline. Another explanatory element is the implementation of the tool for nutrient management assuming that regions with a high livestock density need to reduce the nitrogen surplus with a higher percentage than regions with a lower nitrogen surplus.

Table 2.12: Relative contribution of emission categories to total emission reduction (%) in the different options

3A

3B

4A

4B

5

N2O from application of manure

3

4

3

4

4

N2O from grazing animals

7

3

5

9

8

N2O from manure management

3

3

2

3

3

N2O from application of mineral fertilisers

40

43

50

34

36

N2O from organic soils

0

1

1

0

4

N2O from crop residues

4

12

4

6

6

Indirect N2O from runoff and leaching

5

4

6

4

4

Indirect N2O from volatilised ammonia

3

3

3

2

3

Total N2O

65

73

75

62

67

CH4 from enteric fermentation

33

24

22

36

31

CH4 from manure management

2

3

3

2

2

Total CH4

35

27

25

38

33

Source: JRC, CAPRI model

Increase carbon sequestration

The maintenance of permanent grassland – i.e. obligation not to convert permanent grassland to other land uses - is key for carbon sequestration and preservation, thus the obligation to maintain the share of permanent grassland in UAA in conditionality requirements. In addition, other policy instruments can contribute to maintain or even extend permanent grassland area: support to permanent grassland (option 4 and 5), support to ANC and support to extensive livestock. It is worth noting that any scheme granting lower payments to large farms (as simulated in option 5) is damaging for extensive farms with permanent grassland; thus the need to compensate these systems with targeted support. In addition, the increase in green requirements might lead to an increase in permanent grassland by reducing economic returns from arable land.

Certain farming practices have also beneficial effects on soil organic carbon. There is substantial scientific evidence that cover crops reduce nitrate and phosphate leaching (water quality), increase the soil organic carbon content and reduce soil loss by improving soil structure and increasing infiltration. 30 Experimental results have shown that cover crops can reduce soil erosion by 20% (conservative estimation); thus, the proposal for more environmentally ambitious MS to specify an obligation of winter soil cover with cover crops (meaning that mulching would not be enough). Cover crops are applied currently on 6.5% of the EU-28 arable land, but large differences between MS exist. 31 The use of green coverage between tree rows of permanent crops ranges between 5 and 10% in the EU.

For this impact assessment, 3 scenarios were developed and run by the JRC, using the Century model and RUSLE 2015 32 , to see the potential effect of cover crops on carbon sequestration and soil erosion, separately from the non-CO2 modelling with CAPRI described above:

·Scenario 1: introducing a minimum rate of cover crops in the whole EU territory, several levels were tested: 25%, 50% and 75% of arable land and permanent crops. In areas were the cover crops application was larger no change was implemented ("Flat rate 25%, 50%, 75%").

·Scenario 2: introducing minimum cover rates of 10% everywhere, but with higher levels depending on the erosion status of the zone: 25% if soil erosion is above 2t/ha per year and 50% if soil erosion is above 5t/ha ("Minimum + target").

·Scenario 3: introducing targeted cover rates only where erosion rate are above 1t/ha: 25% if soil erosion is above 1t/ha per year, 50% if soil erosion is above 2t/ha and 75% if soil erosion is above 5t/ha ("Target").

Cover crops application on arable land improves carbon sequestration in all scenarios. Between 37 and 138 million t of additional carbon can be accumulated into the soil over a period of 15 years. The impact by MS is mainly driven by the number of hectares of arable land and the potential erosion risk. On a yearly basis, the impact represents between 0.5% and 2% of total agricultural non-CO2 emissions (437 million t in 2015, EEA).

Table 2.13: Change in carbon sequestration cumulated over a period of 15 years due to different implementation strategies of cover crops on arable land

MS

Carbon sequestration (Mt)

Scenario 1 "Flat rate"

Scenario 2 "Minimum + target"

Scenario 3 "Target"

25%

50%

75%

AT

1.0

0.0

0.4

1.1

0.1

0.3

BE

0.2

0.0

0.3

0.6

0.0

0.1

BG

0.0

1.5

2.9

4.4

1.1

1.8

CY

0.0

0.0

0.0

0.0

0.0

0.0

DE

2.4

6.2

14.8

23.3

3.4

5.9

CZ

0.6

1.7

3.9

6.2

1.1

2.4

DK

0.0

0.7

1.4

2.1

0.3

0.1

EE

0.1

0.3

0.6

1.0

0.1

0.0

EL

0.0

0.4

0.8

1.2

0.3

0.5

ES

0.5

2.1

4.7

7.4

2.0

3.7

FI

0.1

0.8

1.7

2.6

0.3

0.1

FR

6.0

6.4

18.6

30.8

3.1

7.2

IE

0.1

0.4

0.8

1.3

0.1

0.1

HU

0.2

2.9

5.9

9.0

1.8

2.6

HR

0.0

0.0

0.0

0.1

0.0

0.0

IT

0.4

2.5

5.4

8.4

3.1

5.4

LT

0.1

1.3

2.7

4.0

0.5

0.4

LU

0.0

0.0

0.0

0.1

0.0

0.0

LV

0.1

0.4

1.0

1.5

0.1

0.1

NL

0.2

0.1

0.4

0.7

0.0

0.0

PL

1.6

4.2

9.9

15.6

1.8

3.2

PT

0.0

0.2

0.3

0.5

0.1

0.2

RO

0.2

3.2

6.7

10.1

2.4

3.8

SE

0.4

0.8

2.0

3.2

0.3

0.4

SI

0.1

0.0

0.1

0.2

0.0

0.1

SK

0.2

0.9

1.9

2.9

0.8

1.3

Total

14.4

36.9

87.3

138.2

22.9

39.8

Source: JRC, Century model

2.2.2.Foster sustainable and efficient management of resources

Reduce N surplus and improve water quality

This assessment explores how the introduction of Nutrient Management Plans (NMP) could contribute to improve water quality. Nitrogen and phosphorus loads are big issues for water quality. However, since the balance of phosphorus is not complete in CAPRI, the assessment concentrates on nitrogen.

Two nitrogen-restricting measures are tested:

1.The obligation for all farms to elaborate a Nutrient Management Plan (NMP) (i.e. not only in nitrate vulnerable zones, as it currently applies) as minimum requirement, this scenario with a tool for nutrient management is called 'NMP'.

2.A reduction target of nitrogen balance, as proposed in options 3a and 4a, this scenario is called 'NMP+'.

The JRC used the CAPRI model for the simulation. CAPRI approximates farm-level N-surplus with the Gross Nitrogen Balance (GNB). The GNB includes all N losses from housing, manure storage and management and soils. The two measures are mimicked as reduction targets of the GNB. The targets are defined relative to the level of the GNB per hectare of UAA in the baseline. EU regions are categorised according to their baseline N-surplus per hectare, and different reduction targets are applied for each category. For EU regions with already significant manure trade, lower reduction targets are applied. Reduction targets simulated are summarised in the table below.

Table 2.14: Relative N-surplus reduction targets in both scenarios

Number of NUTS2-regions

Target NMP

Target NPM+

GNB < 40 kg N ha-1 yr-1

93

0%

0%

40 N ha-1 yr-1 < GNB < 80 kg N ha-1 yr-1

95

0.6%

2%

80 N ha-1 yr-1 < GNB < 120 kg N ha-1 yr-1

37

1.5%

5%

120 N ha-1 yr-1 < GNB < 160 kg N ha-1 yr-1

17

3%

10%

GNB > 160 kg N ha-1 yr-1Manure trading

BE, NL, DE

12

1.5%

5%

GNB > 160 kg N ha-1 yr-1 - No manure trading

BE, IT, PT, ES

7

3%

10%

Source: JRC

Map 2.1: Reduction in N-surplus per ha of UAA (relative to baseline), NMP+ scenario

Source: JRC, CAPRI

Farms in CAPRI have two main options to reduce their N-surplus; they either adjust their current production structure (by e.g. reducing the number of animals, changing land allocation to crops or adjusting input use) or they can opt for more N-efficient farming practices. The latter effect is captured by a limited set of optional production technologies 33 : precision farming, variable rate technology, a better timing of fertilising, nitrification inhibitors and low N-feeding. The adoption of these technological options comes at a cost for farmers.

The imposed reduction targets are met in the scenarios, with an average reduction for the EU of 1% in the NPM scenario and close to 4% in the NPM+. Farmers take advantage of more N-efficient technologies, such as precision farming. Overall, the mineral fertiliser use is decreasing by 1.5% (option 3b) to 5.1% (option 3a) at EU level (see e.g. the mineral N use for cereals in the map below decreasing by more than 8% in the regions in dark green). The impact on agricultural income is very small, only about 0.2% in both scenarios for the EU. In the NPM+ scenario a small adjustment in the regional allocation of land use and animal production can be observed.

Map 2.2: Mineral N (fertiliser) use for cereals, relative change in kg of N use/ha, NMP+ scenario

Source: JRC, CAPRI

Reduce soil erosion

As illustrated in the map below, the regions requiring intervention to reduce soil erosion (regions in red and orange with a mean soil erosion above 2 t/ha) are numerous and located mainly in the southern part of Europe.

The same scenarios as for carbon sequestration were run for cover crops on arable land and on permanent crops to see its impact on soil erosion. The analysis shows that cover crops can potentially reduce average annual erosion on arable land by up to 15% and on permanent crops by up to 37% with a flat rate at 75% in the EU. Low requirement rates (below 10% of coverage of arable land and below 25% on permanent crops) would have little effect because MS apply already cover crops.

Map 2.3: Mean annual soil erosion
Green colours indicate regions without soil erosion issues, while regions in orange and red need to reduce erosion.

An implementation taking into account the on-site erosion risk would lead to similar reduction rates of soil erosion in the most vulnerable areas than a flat rate. However, it would have the advantage to be much better targeted to areas/countries with an erosion problem and would limit as well the additional burden to farmers.

Cover crops are clearly beneficial to reduce erosion but not enough: certain MS would still record erosion rates above 5t/ha per year for permanent crops and above 2t/ha per year on arable land in all scenarios. Therefore, the winter soil cover requirement would need to be combined with other measures, such as plant residues after crop harvesting, the increase of grass margins, contour farming in sloppy areas and reduced tillage, in order to reduce erosion to acceptable levels in all MS. Although it was not covered in the scenarios, several studies indicate that the type of cover crop (leguminous for example) and the duration of the vegetation cover are two factors that influence to a large extent the effectiveness of this farming practice.

Another way to reduce soil erosion is to develop and improve crop rotation. According to the H2020 Smartsoil project, improved crop rotations refer to specially tailored crop rotation regimes, such as alternating deep-rooted and shallow-rooted plants or alternating a series of crops with a period of grassland (grass-ley) and introducing catch or cover crops. These improved rotations can benefit farm soil by building soil organic matter, enhancing soil fertility and improving (deep) soil structure. Crop rotation has multiple benefits: it can help replenish nitrogen in the soil, reduce erosion, and increase the water infiltration capacity of the soil. Practicing crop rotation can also provide a simple technique for managing and preventing weeds, pests and diseases from building up when land is continuously planted with the same crop (monoculture) and thus contribute to the objective of reducing pesticide use. The simulation carried out by JRC showed that the rotation obligations proposed in the options imply indeed a reduction in grain maize and durum wheat areas more often cultivated in monoculture.



Table 2.15: Change in erosion due to different implementation strategies of cover crops on arable land

MS

Erosion rate in baseline (t/ha) 34

Share of cover crops

Minimum + target

Target

25%

50%

75%

AT

4.0

-4.5%

-9.6%

-14.2%

-1.9%

-4.8%

BE

2.1

0.0%

-3.1%

-8.5%

-1.6%

-6.1%

BG

2.5

-5.0%

-10.1%

-15.1%

-4.1%

-8.9%

CY

1.8

-5.0%

-10.0%

-15.0%

-1.0%

-5.0%

DE

1.8

-3.5%

-8.7%

-13.8%

-2.6%

-6.5%

CZ

2.5

-3.8%

-8.9%

-14.0%

-3.6%

-8.6%

DK

0.6

-5.0%

-10.0%

-15.0%

-0.9%

0.0%

EE

0.7

-3.8%

-9.0%

-14.2%

0.0%

0.0%

EL

2.8

-4.7%

-9.8%

-14.9%

-4.9%

-9.8%

ES

4.3

-3.5%

-8.7%

-13.9%

-5.3%

-10.4%

FI

0.5

-4.9%

-7.4%

-10.7%

-0.6%

0.0%

FR

2.0

-3.1%

-8.2%

-13.2%

-1.8%

-5.5%

IE

1.3

-4.3%

-6.1%

-8.2%

0.0%

-3.7%

HU

2.1

-4.8%

-9.8%

-14.9%

-3.9%

-8.2%

HR

1.7

-4.6%

-9.6%

-14.7%

-1.7%

-5.8%

IT

8.4

-4.3%

-9.4%

-14.2%

-8.6%

-13.6%

LT

1.0

-4.8%

-9.9%

-14.9%

-0.8%

0.0%

LU

4.5

-3.1%

-8.3%

-13.4%

-3.1%

-8.3%

LV

1.0

-4.0%

-9.1%

-14.2%

0.0%

-4.0%

MT

15.9

-5.0%

-10.0%

-15.0%

-10.0%

-15.0%

NL

0.5

-1.9%

-5.9%

-11.2%

0.0%

0.0%

PL

1.6

-3.7%

-8.8%

-13.9%

-3.1%

-6.7%

PT

2.9

-5.1%

-10.4%

-13.3%

-6.7%

-11.8%

RO

3.4

-4.7%

-9.8%

-14.8%

-7.5%

-12.5%

SE

1.1

-3.5%

-8.7%

-13.8%

-0.5%

-2.2%

SI

4.6

-1.3%

-6.5%

-11.7%

-2.4%

-7.6%

SK

3.5

-4.2%

-9.3%

-14.4%

-5.6%

-10.6%

Source: JRC, RUSLE 2015



Table 2.16: Change in erosion due to different implementation strategies of cover crops on permanent crops

MS

Erosion rate (t/ha) 35

Flat rate

Minimum + target

Target

25%

50%

75%

AT

6.6

0.0%

-8%

-29%

-7%

-25%

BE

1.5

0.0%

-3%

-25%

0%

-1%

BG

5.9

-1.7%

-17%

-37%

-11%

-30%

CY

5.4

-1.0%

-15%

-36%

-15%

-36%

DE

6.1

0.0%

-4%

-24%

-3%

-19%

CZ

4.4

-0.3%

-11%

-32%

-1%

-14%

DK

0.8

0.0%

-5%

-27%

0%

0%

EE

0.6

0.0%

-1%

-14%

0%

0%

EL

7.9

-0.1%

-5%

-27%

-4%

-25%

ES

8.8

-1.7%

-16%

-37%

-14%

-34%

FR

5.5

-0.5%

-10%

-31%

-9%

-27%

HU

4.9

-0.7%

-14%

-35%

-12%

-31%

HR

10.2

-0.3%

-5%

-26%

-5%

-26%