The dubious greening of European agriculture

7 April 2014

Over the last four years, the EU has busied itself with a reform of the bloc's Common Agricultural Policy (CAP), which broadly speaking, governs food production across the membership. In the inaugural issue of Bridges Trade BioRes in 2007, we argued that solving the grave environmental problems linked to farming and land management in the EU required deep reforms to both the bloc's CAP and to the definition of WTO green box subsidies. While negotiations in Doha round have yet to change the international governance of farm subsidies, the EU sealed a political agreement for a new 2014-2020 CAP in June 2013, formally adopted in December of the same year.

Originally touted as the most significant overhaul of the CAP since the Fischler reform of 2003, the two main goals of the most recent reform round were equity and the promotion of public goods delivery. These ambitions translated into a Commission proposal that included relevant elements for improving the sustainability of European farming and making way towards a more equal distribution of farm payments. In this article we will focus mainly on the environmental aspects of this reform.

Significantly, it was suggested that 30 percent of direct payments - namely the untargeted income support that forms the bulk of the CAP - would be linked to three greening commitments. First, maintaining seven percent of the farm surface as "ecological focus areas," targeting ecologically valuable landscape elements such as hedgerows, wildflower covered field margins, and small wetlands. Secondly, the diversification of crops, to avoid monoculture across a given farm's entire area, and finally a requirement to protect permanent pasture - essentially grasslands - from being converted to arable or permanent crops.

Although the Commission's "greening package" fell short of what was both needed and feasible, it at least would have been a start towards improving the agro-ecological performance of a large set of EU farmers. The proposal also included a continuation of cross compliance, introduced with the 2003 reform, which makes relevant environmental legislation and some basic good practices a condition for receiving subsidies. Specifically a suggestion was included to expand the scope of cross compliance to cover EU water and pesticides legislation.

Reform outcome

From the start, the reform was met with huge resistance from the farm lobby and became bogged down in the complex legislative bargaining process between the 27 - and then 28 - member states and the European Parliament. During negotiations, seemingly every bit of the reform was watered down and a mind-boggling array of exemptions and loopholes were introduced.

The process was also overridden by the 2014-2020 EU budget negotiations, which ended up dealing out a disproportionate cut to the CAP's more progressive rural development pillar that includes agri-environment schemes. Furthermore, almost complete freedom has been given to member states to shift money around between the direct payments and rural development pillars. In some countries, rural development is now being eroded as money is transferred to beef up income payments. In other countries, however, funds are being moved the other way round.

Other major results include the weakening of cross compliance, which has not been expanded to cover the pesticide and water legislation. Existing standards have actually been watered down by removing elements such as legislation against the persecution of wildlife. Controls and sanctions have been reined in, making it even easier for farmers to receive subsidies while breaking the rules. The greening intentions have been retained, but their content can only be characterised as a mess, with a hollowing out of the requirements. For example, a bizarre weighting system allows landscape elements to be counted as twice as large as they really are so that reaching the requirement of now- five percent ecological focus areas is made much easier. Another striking loophole allows intensively managed cropland to be counted as an ecological focus area.

And in a bid to give member states even more greening flexibility, countries can substitute greening obligations with the enrolment of farmers in agri-environment schemes, or in private certification schemes that could make monoculture maize growers replace crop diversification with winter soil cover. Small farmers are exempted from any greening commitments, as are organic farmers.

Specific loopholes are also created for farmers with significant grassland areas and farmers that are close to forests. No greening commitments are required on rice fields, olive plantations, and all other permanent crops. The list goes on, such that it is clear at this stage that many farmers will be exempted from changing their behaviour. To give one example, BirdLife estimates that up to half of EU farmland and almost 90 percent of EU farmers would be exempted from the obligation to have ecological focus areas.

Overall, it is unlikely that the new complex CAP will improve public goods delivery by incentivising subsidies beneficiaries to switch to sounder agronomic and ecological practices, as was originally intended. Worse still, the reform also seems to have brought about alarming steps backward that are likely to harm the environment, distort trade, and throw up serious questions on the WTO green box compatibility of some CAP subsidies. Particular issues include the introduction of an "active farmer" definition and the return to "coupled" production payments, namely those that are linked to production.

Active farmer challenge

Reacting to past criticism over farm subsidies going to airports, golf courses, and absentee landowners, EU decision makers sought to bring in new rules on subsidies. Certain types of beneficiaries have been ruled out from CAP disbursements altogether. Furthermore, beneficiaries of most CAP payments are now required to prove "minimum activity" as well as keeping land in "good agronomic and environmental conditions," as per previous stipulations. The list of banned beneficiaries can be completed by member states, which also hold the right to decide on minimum activity stipulations. Agriculture ministries are currently drafting both the list of banned beneficiaries and the minimum activities.

It remains to be seen how this will be implemented across the bloc, but these requirements could raise serious question marks over the claim that subsidies are decoupled from production. If minimum activities turn out to broadly overlap with agricultural production, CAP direct payments will likely be open to a WTO challenge. It is worth noticing that the EU now reports almost the entire CAP as being green box compatible.

Anecdotal evidence is also starting to appear, suggesting that agriculture ministries are using the new active farmer clause to exclude from payments many categories that are crucial for public goods delivery, but do not conform to the standard of commercial intensive farmer. Examples include NGOs that manage agricultural land, part time farmers, as well as traditional farmers that graze livestock extensively on semi-natural habitats.

Coupled payments creep back

The reform also marks a potential break from the CAP reform trajectory that started in the mid-80s, which saw a progressive move away from subsidising production towards income support and rewarding environmental stewardship.

The new CAP increases member states' leeway to introduce coupled payments that directly push farmers to produce politically favoured commodities, listed in the Direct payments legislative text, Title IV, Chapter 1, Article 52 onwards. While such payments register under the WTO amber box, further serious uncertainties hang over the decoupled nature - and hence green box compatibility - of income payments when these are combined with coupled production support, and on top of that are linked to the active farmer test.

On the environmental side, it remains to be seen which sectors will end up harvesting the expanded subsidies. These subsidies could play a positive role by propping up beneficial practices such as certain extensive grazing systems, but could also end up supporting polluting and destructive practices that push for further intensification.

The new complex agricultural policies

A last remark is that the two most salient characteristics of the new CAP are its fragmentation and its complexity. Every member state, and in many countries every region, will end up with their own significantly different CAP, riddled with exemptions and loopholes, each giving preferential treatment to different crops and farming systems.

In a sense we can now change the wording of the Common Agricultural Policy to the Complex Agricultural Policies - note the plural. The ability of the Commission to control, monitor, and assess this whirlpool of contradictory policies will be seriously tested. And the risk of a lack of any real scrutiny over both environmental and green box claims may well further undermine the credibility of the EU as an honest player in the international trade and sustainability scenes.

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