Intro: Evolution of the CAP
Ladies and gentlemen, thank you for inviting me here this morning. I commend CEPS for dedicating an event to this important question, which affects every European citizen.
The Common Agricultural Policy has governed European farming and rural development for over 60 years.
As a case study in public policy, I believe the CAP has much to offer academics and policymakers alike, reflecting the fact that it is constantly evolving – both philosophically and practically – to reflect the changing dynamics of European society.
The genesis of the policy is deeply rooted in the post-war era, a time of food shortages and rapid rural depopulation. The founding mission of the policy was quite simple: to guarantee European food security by financially incentivising farmers to stay on the land.
It might interest you to know that this contract between citizens and farmers is still explicitly written into the EU treaties, spelled out in black and white. It is an approach that continues to bear fruit – literally.
Polls show strong public support for maintaining agricultural policy at European level, due to the clear advantages for guaranteeing food security and ensuring a level playing field within the single market. Our citizens recognise that when it comes to this area of policy, the EU adds value to their lives in a way that national policies alone could not achieve.
But of course it is right and proper that the CAP evolves. After all, it accounts for a significant proportion of the European budget, and it must be critically assessed from the perspective of taxpayer value for money.
The question driving the evolution of the policy can therefore be condensed into the following:
“As well as adequate food supply, which additional public goods should the CAP provide in exchange for its privileged position in the EU budget?”
The answer to this question varies from decade to decade. The emphasis has shifted from producing food quantity, to incorporating challenges posed by the concerns of consumers and taxpayers; in other words, an emphasis on quality, food safety, animal welfare, and traceability.
The BSE crisis of the 1990s provoked an existential challenge for the CAP: could the policy respond and adapt? The answer was that, yes, it could, and that crisis led to a huge leap forward in the monitoring and control mechanisms governing European food production.
As a result, European citizens today enjoy unhindered access to safe and affordable food and drink products made to the highest standards in the world. To say that we take our food security for granted is an understatement: we take it for granted on a continental scale.
At the same time, the CAP has expanded its scope to cover the broader rural economy. The so-called second pillar is a testament to the intrinsic value that Europe places on rural areas and the communities that live in them.
It is sometimes forgotten that the economic rationale of the policy has increased significantly. By reducing market-distorting instruments and increasing the emphasis on the provision of public goods, the CAP has enhanced its value added in a major way.
Some economists continue to question the rationale of the CAP, ignoring the fact that the policy has evolved incrementally over time, rather than being designed from scratch. As I will explain later, the Commission’s proposal for the next evolution will enhance the economic rationale even further.
Climate & Environment
In recent years, a new imperative has come into the picture. This is of course the harsh reality of climate change and environmental degradation. In many regions of Europe, food security and a thriving agri-food economy came at the cost of increasing soil, water and air pollution. The agri-food sector accounts for 10 per cent of total greenhouse gas emissions in the EU.
Our citizens demand action: our extensive public consultation in 2015 and 2016 showed strong support for enhanced climate action in the agri-food sector.
To address this problem, the most recent reform of the CAP in 2013 brought in a new system called “greening”. The logic was simple: farm payments would henceforth be tied to good environmental practices.
Now, 5 years on, we can say that while some elements of greening had a positive impact, other elements did not deliver the results that our citizens want and our climate so desperately needs.
Greening was quite simply too prescriptive, attempting to impose a one-size-fits-all approach based on compliance with pre-determined “good” practices. This worked fine in theory, but less well in practice.
In the meantime, the EU has ramped up its climate ambition, through the Paris Climate Agreement and Sustainable Development Goals.
The Union and its MS are not only signatories to these critically important global agreements; we are the best hope for making sure they are delivered.
We have committed to ambitious 2030 targets, where all sectors, including agriculture, have to contribute. Our specific targets are:
- to reduce GHG emissions by 40% by 2030, based on 1990 levels;
- to have 32% of renewable energy in our energy mix;
- and to improve energy efficiency by 32,5%.
The Commission will shortly adopt a long-term EU strategy to achieve zero-emissions by 2050. And of course, the UN Special Climate Report last month outlined the severity of the situation.
A truly modern policy for food, farming and rural development therefore has to deliver results more effectively and clearly. The CAP is the only EU policy with a grass-roots implementation mechanism in every rural area, therefore it is very well placed to deliver more value added.
So we went back to the drawing board, working our way backwards from the desired policy outcome of improved results, based on existing measurement metrics, in relation to air, water and soil.
New Delivery Model
Our solution is a new delivery model, which redesigns not only the tools to achieve better climate and environment outcomes, but also, crucially, the designation of responsibility.
This new model will allow national and regional administrations to better design how direct payments are made.
Brussels will no longer prescribe the width of a hedge, or dictate the distance from a water body a farmer must respect to fertilise his fields.
Instead, ambitious environmental and climate-related objectives will be set at EU level, including a requirement for nutrient management planning and incentives for precision farming.
To meet these objectives, each Member State will have to design a “CAP Strategic Plan” to be approved by the European Commission.
The current green architecture of the CAP – which relies on cross-compliance, green direct payments and voluntary agri-environmental and climate measures – would be replaced by a streamlined system of conditionality.
The two pillar approach will be retained but Member States will define targets and devise a mixture of mandatory and voluntary measures in Pillar I and Pillar II. The granting of income support to farmers will be conditioned to their undertaking of environmental and climate practices.
In this way, the CAP would make a much higher contribution to our environment and climate ambition.
New satellite technology will reduce the need for on farm controls and checks – increasing the performance of the CAP while relieving stress for farmers: a clear win-win. It will also cut down on costs for control and compliance – a win for national administrations.
Climate mitigation in the agriculture, forestry and other land use sectors can be achieved by reducing GHG emissions per unit of output, and by conserving or enhancing carbon stocks in vegetation and soils.
The EU Joint Research Centre estimates that 45% of soils in Europe have a very low organic matter content of between 0 and 2%. Reversing this process to build up soil carbon stocks has the potential to sequester a lot of carbon.
Practices like the use of winter cover, catch crops, crop rotation, adding legumes, reduced or nil tillage can contribute to soil carbon stocks.
The future CAP will encourage increased investment in knowledge and innovation, and enable farmers and rural communities to benefit from it. €10 billion under Horizon Europe funding is dedicated to the support of specific research and innovation in food, agriculture, rural development and the bioeconomy.
CAP Strategic Plan
Of course, the new delivery model is not confined to climate action – it is a vehicle for delivering better results across the CAP’s policy spectrum.
The CAP Strategic Plan can be thought of a business plan, spelling out clear objectives and an overall strategy for achieving them. It places the onus on each MS to design an investment plan for agriculture and rural development in their regions. Every intervention has to be clearly explained and its economic rationale elaborated.
Each CAP Strategic Plan must address 9 key objectives:
- to ensure a fair income to farmers
- to increase competiveness
- to rebalance the power in the food chain
- to enhance climate change action
- to enhance environmental care
- to preserve landscapes and biodiversity
- to support generational renewal
- to support vibrant rural areas
- and to protect food and health quality
For each of these policy areas, MS must:
explain their specific needs; spell out the targets they want to achieve with CAP support; develop adequate tailor-made support schemes chosen from a menu of measures; and monitor progress in view of reaching the targets, based on common indicators defined at EU level.
Take the objective of generational renewal. This is an escalating problem that successive CAP reforms have failed to resolve, in part because there is a limit to what EU measures to support young farmers can achieve.
Many of the relevant policy tools are controlled at national level, including taxation and land policy.
That is why giving MS a stronger role in shaping their own policy is so significant: for the first time, they can balance national policy interventions with EU-wide tools.
Each country must therefore include in their national Strategic Plan a specific strategy for attracting and supporting young farmers, including taxation and land law.
Young farmers should benefit from a wide range of instruments, through a combination of mandatory and voluntary aspects:
At least 2% of the national direct payments envelope will have to be devoted to generational renewal. Spending today amounts to 0.8%.
We believe that the new delivery model, if correctly implemented, can be a game-changer. Success, in my view, will depend on two factors: the commitment of MS and the watchdog role of the Commission.
In order to prepare the CAP plan, Member States will be asked to organise a partnership which involves at least the following partners: relevant public authorities, economic and social partners, relevant bodies representing civil society, and key sectorial stakeholders.
Member States will have to take a more hands-on approach to delivering predetermined results, and in particular they will have to make sure they have their house in order in relation to governance and payments systems.
The legal architecture underlying the New Delivery Model is spelled-out clearly in the Commission’s proposals, including the fact that the role of EU law should be to guide Member States in setting up, through national provisions, the legal framework applicable to beneficiaries.
The same goes for the role of Certification Bodies, for example in relation to checking whether Member States’ governance systems function properly.
Meanwhile, the Commission will have to maintain a level playing field, providing a strong and common EU framework to achieve the common objectives including several safeguards and corrective action where necessary.
I want to assure you that the European Commission takes the issue of assurance, governance and eligibility very seriously. We are very conscious of our responsibility to protect taxpayers’ money.
In conclusion, ladies and gentlemen, I believe we have designed a modern, progressive policy platform suitable for the “needs and wants” of Europe in the 2020.
I encourage you to study our proposal in greater detail, and I hope you will agree that we have gone beyond “business as usual,” outlining a solid foundation for achieving the results that our farmers, our citizens, and our planet so badly needs.