Leaked EU Texts Reveal Greener Farm Policy, ‘Recoupling’ Plans

14 September 2011

Leaked EU draft texts confirm expectations that the 27-member bloc is likely to seek to ‘green' farm subsidy payments after 2013 by adding new rules on protecting the environment. Controversially, though, the drafts also reveal new plans to allow some countries to re-allocate more direct payments to the production of particular crops - reversing prior attempts to ‘decouple' farm support from production and thus reduce the trade distortions that this support might cause.

The texts, which are due to be shared with EU member states on 12 October, propose maintaining the two ‘pillars' that currently structure EU farm support. "Annual mandatory measures of general application" would be covered by pillar one, and multi-annual "voluntary measures better tailored to national and regional specificities" by pillar two, the drafts indicate.

A new basic payment scheme

The texts outline plans to replace existing direct payments to farmers with a new basic payment scheme, as well as a ‘green' payment that would be conditional on farmers respecting the following three criteria: crop diversification, maintaining permanent grassland, and setting aside seven percent of arable land in the form of ‘ecological focus areas.'

Organic farmers would automatically qualify for the ‘green' payments, due to represent 30 percent of member states' annual ‘national ceilings.' Farmland covered by the ‘Natura 2000' ecological scheme would also need to comply with the special requirements under that programme.

Voluntary extra payments, worth five percent of countries' national ceilings, would be available for farmers in areas "facing specific natural constraints," the drafts say. Additional payments would also be made available to help young farmers entering the business, and a simplified lump sum payment would be made to small farmers in a bid to cut costs and bureaucracy.

‘Recoupling' support and production?

One proposal that is likely to elicit controversy is the plan to make it easier for some EU member states to re-establish coupled support schemes, if they wish to do so, for specific types of farming or agricultural systems that "are experiencing certain difficulties" and that are "particularly important for economic and/or social reasons."

According to the leaked texts, coupled support could be granted to any of the following products: arable crops, beef and veal, dried fodder, durum wheat, energy crops, flax and hemp, fruits and vegetables, grain legumes, hops, milk and milk products, nuts, olive oil, protein crops, rice, seeds, sheepmeat and goatmeat, starch potato, silk worms, and sugar beet, cane and chicory.

The list dramatically expands the range of products that could benefit from production incentives. It also includes explicit mention of ‘energy crops' - which would include crops such as vegetable oil used in biodiesel production. The subsidies for energy crops have generated controversy both amongst the EU's trading partners and from environmental groups that have questioned whether these products actually deliver greenhouse gas reductions.

Although the draft states that coupled support should not normally exceed five percent of an EU member's ‘national envelope,' an additional clause allows some countries to raise this limit to 10 percent - or even to go above this, for specified reasons, if the Commission approves. No upper limit in this case is specified in the draft.

The proposal is an apparent reversal of existing policy, which requires EU member states to shift a share of support from existing ‘pillar one' funds towards rural development objectives in pillar two. Allowing countries to do the opposite is likely to increase the production effects of the subsidies provided.

The leaked proposals also maintain current arrangements for support to cotton, including the coupled crop-specific payment, and detail specific subsidy arrangements for Bulgaria, Greece, Portugal, and Spain.

The proposals are likely to draw criticism from the EU's trading partners, who have welcomed in recent years the long-term shift to reform the bloc's farm support away from trade-distorting payments that are linked to production, and towards more ‘decoupled' support that is generally seen as causing less damage to producers in other parts of the world.

‘Active farmer' defined in new rules

EU countries should refrain from granting direct payments to beneficiaries whose business was largely unrelated to agriculture, the draft says, warning that "airports, railway companies, real estate companies, and companies managing sport grounds" should be avoided in particular.

For the first time, the European Commission set out a definition of who would be eligible to receive payments as an "active farmer." Farmers whose farm income represents less than five percent of their total revenue - excluding subsidies - would no longer qualify, according to the leaked plans.

However, farmers who received less than €5000 of direct payments would be exempt from the new requirement.

Cuts and an upper ceiling for large direct payments

A new absolute ceiling on the size of direct payments would be set at €300,000, the text reveals, with progressively greater cuts to subsidies €150,000 upwards.

Between €150,000 - 200,000, direct payments would be subject to a 20 percent cut. Amounts between €200,000 - 250,000 would be cut by 40 percent, and amounts from there up to the €300,000 ceiling would be cut by 70 percent.

However, because farmers would be allowed to subtract salaries and other employment costs from these thresholds, it remains unclear how many firms would be affected in practice by the new rules.

New environmental conditions: crop diversification, grassland, set-aside

The text appears to require that farmers cultivate three different crops on their land under new crop diversification rules, in order to receive the ‘green' payment. None of these crops would be allowed to cover less than five percent of arable farmland, or more than 70 percent.

They would also need to declare and maintain areas of permanent grassland, which could not normally be reduced by more than five percent. If this threshold was exceeded, the European Commission would be able to require the land to be reconverted back into grassland.

They would also have to set aside seven percent of eligible hectares as ‘ecological focus areas' - to include "land left fallow, terraces, landscape features, buffer strips, and afforested areas."

A total budget of €435.6 billion

The leaked documents reveal that the Commission expects the bloc's Common Agricultural Policy to cost over €418.2 billion over the 2014-2020 period: €317 billion in spending on pillar one, and €101.2 billion in spending on pillar two.

In addition to this, €17.1 billion would be made available to cover research and innovation, food safety, and food support for ‘deprived persons' (due to cost €5.1 billion, €2.5 billion and €2.8 billion, respectively).

This €17.1 billion would also include a new reserve of €3.9 billion to cover "crises in the agricultural sector," along with another €2.8 billion provided through a European Globalization Fund.

Despite the austerity measures being introduced by European governments in the wake of the economic downturn and debt-related problems in the eurozone, the proposal is expected to maintain EU farm spending at levels that are similar to those that have prevailed in the past, rather than making the cuts that many observers had expected.

Environmentalists condemn "underwhelming" proposals

Despite the Commission's efforts to accommodate the concerns of farm groups and environmentalist organisations, the leaked documents have been criticised by both constituencies.

The plans were condemned in a communiqué issued on Monday by a coalition of environmental groups, which included Birdlife International, the European Environmental Bureau, the International Federation of Organic Agriculture Movements (IFOAM) and WWF.

The environmental groups criticise the lack of additional support for farmers maintaining protected natural habitats in the Natura 2000 network, or managing extensive grasslands that they say are important for biodiversity and the climate.

The signatories argue that all farmers will continue to receive subsidies, "even those that practice highly unsustainable farming methods, provoke soil erosion or pollute and over exploit water resources."

Ariel Brunner, head of EU policy at BirdLife Europe, warned that "the environmental movement has been supporting a significant budget allocation for a reformed CAP but will not go along with a window dressing exercise that keeps pumping money into Europe's most environmentally harmful farms."

Farmers: ‘greening' subsidies could undermine competitiveness

While the main EU farm group, COPA-COGECA, has yet to issue a formal reaction to the leaked proposals, press officer Amanda Cheesley told Bridges that the organisation was concerned about a number of elements that these contain.

"We're concerned about threatening farmers' competitiveness and economic viability," she said, singling out the proposed capping of large subsidy payments and ‘greening' as two of the group's major concerns. She also noted that the farm body was concerned about how "active farmers" were to be defined under the new plans.

"The greening measures will increase farmers' costs," she warned.

She also argued that the Commission's proposals on coupled support would be unlikely to lead to a significant increase in these payments. "It wouldn't really change that much on the current situation," Cheesley said.

In contrast, NFU spokesperson William Surman argued that the re-coupling of payments "looks like a huge backward step." The NFU office in Brussels represents a number of farmers' organisations from around the UK.

"We're pretty concerned about moving money from pillar two to pillar one," Surman said. "The whole point of reform is competitiveness".

Consultation

The proposals, which have been drafted by the European Commission's Directorate-General for Agriculture and Rural Development, are being shared with other departments ahead of a deadline for comments tomorrow. They will then be revised further and shared with EU member states on 12 October.

ICTSD reporting.

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