Redesigning the CAP
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Transcript of Redesigning the CAP
Options to redesign the European agricultural policy post 2020
Krijn Poppe LEI Wageningen UR
February 2016
Objective for the meeting / discussion
We carried out a study on the CAP-post-2020, for national discussions (at the time of the NL presidency)
Our objective: a presentation that helps to frame a useful discussion on CAP-post-2020
The judgement of the document should not be based on the question if all ideas are economically or ecologically perfect, but if the document would help a strategic conversation in 2016.
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Can we defend the CAP to the public ?
Governments face budget problems and other big policy challenges, like the Jobs & Growth agenda, the Refugee crisis etc.. Is the budget vulnerable?
Some of the main discussions:
● Budget goes mainly to larger farms, sometimes very large
sums
● Effectiveness and efficiency of Greening is questioned;
simplification is requested. But climate change asks
probably for more intervention
The food chain does not solve environmental / ecological issues and income problems of farmers: these problems and risks are still shifted to the tax payer
● Do we need a food policy to shift incentives (and involves the consumer, on sustainability and health)?
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Article 33 European Treaty
The common agricultural policy shall have as its objectives:
(a) to increase agricultural productivity by developing technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, particularly labour;
(b) to ensure thereby a fair standard of living for the agricultural population, particularly by the increasing of the individual earnings of persons engaged in agriculture;
(c) to stabilise markets;
(d) to guarantee regular supplies; and
(e) to ensure reasonable prices in supplies to consumers.
CAP is often defended with public issues like the environment, landscape,
biodiversity. Although the Treaty does not help us in that respect
Intervention logic DG Agri (pillar I, I+II, II)
(a) to increase agricultural productivity by developing technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, particularly labour;
(b) to ensure thereby a fair standard of living for the agricultural population, particularly by the increasing of the individual earnings of persons engaged in agriculture;
(c) to stabilise markets;
(d) to guarantee regular supplies; and
(e) to ensure reasonable prices in supplies to consumers.
Maintain market stability
Meet consumer expectation
Enhance farm income
Improve ag. competitiveness
Foster innovation
Provide public environmental
goods
Pursue climate change
mitigation and adaptation
Maintain agricultural diversity
Promote socio economic
development of rural areas
Explaining the CAP to outsiders is not so easy
due to historical bundling in two pillars that have no
clear link with the intervention logic
PROFIT, PEOPLE, PLANET: an improvement?
(a) to increase agricultural productivity by developing technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, particularly labour;
(b) to ensure thereby a fair standard of living for the agricultural population, particularly by the increasing of the individual earnings of persons engaged in agriculture;
(c) to stabilise markets;
(d) to guarantee regular supplies; and
(e) to ensure reasonable prices in supplies to consumers.
Food security
Risk management
Innovation
Fair food chains
Employment
Income support farmers
Liveable rural area
Public health
Environment
Climate change
Nature management
How will the farm sector change to 2030?
Farming is already very concentrated
● But we use social arguments based on very small farms to hand out money to large farms and (indirectly) land owners
The food processing sector and retail are also increasingly internationally concentrated
● But have not enough incentives to take responsibility for environmentally sound sourcing at fair prices
ICT has the potential to strengthen these trends in the coming years, or to disrupt it.
It makes sense to look to some future scenario’s, we must prepare agriculture and food for 2030 and later
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Strong concentration in farming: 5 mln farms matter
Source: FADN
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3 Scenario’s to explore the future (©AKIS)
HighTech: strong influence new technology owned by multinationals. Driverless tractors, contract farming and a rural exodus. US of Europe. Rich society with inequality. Sustainability issues solved. Bio-boom scenario.
Self-organisation: Europe of regions where new ICT technologies with disruptive business models lead to self-organisation, bottom-up democracy, short-supply chains, multi-functional agriculture. European institutions are weak, regions and cities rule. Inequalities between regions, depending on endowments.
Collapse: Big climate change effects, mass-migration and political turbulence leads to a collapse of institutions and European integration. Regional and local communities look for self-sufficiency. Bio-scarcity and labour intensive agriculture. Technology development becomes dependent on science in China, India, Brazil.
Policy targets: scenario High Tech
mitigate the effects, regulate industry where needed
Policy Target Relevance in scenario
Food security No problem, perhaps food stamps for low incomes
Risk management No issue, contracts and high tech help
Innovation Carried out by food chain partners
Fair chains Competition policy on contracts in chain
Employment Rural exodus: regional policy needed to mitigate
Income support Social policy for those not in food chains
Liveable rural area See employment: policy needed to mitigate
Public health Regulation on food safety, zoonosis, antibiotics
Environment, climate Solved by precision farming, regulation of industry schemes
Nature, biodiversity Contracts for farmers and food chain partners
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Policy targets: scenario Collapse
concentrate on food production and jobs
Policy Target Relevance in scenario
Food security High priority: Mansholt-type policy to intervene
Risk management Higher risks, hard to manage
Innovation Need for higher productivity
Fair chains Less an issue
Employment New entrants: need for advisory, innovation
Income support Higher prices, less need
Liveable rural area No issue: return to the country side
Public health Less important in times of crisis
Environment, climate Mainly mitigation climate effects, less regulation
Nature, biodiversity Nature is source, less regulation, no contracts
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Policy targets: scenario Self-organisation
CAP as menu for regions, maintain common market
Policy Target Relevance in scenario
Food security Manage common market between regions.
Risk management New market instruments
Innovation Strong and diverse; supported by policy
Fair chain Less issue in short supply chains, new players
Employment Support diversification (nature, care..)
Income support Safety net for those who lose in innovation
Liveable rural area Different needs between regions
Public health Level playing field discussions
Environment, climate Level playing field discussions, contracts
Nature, biodiversity Regional and local contracts for collectives
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Insights from the scenario-analysis
Different futures ask for different types of CAP
As the future is unknown, a resilient CAP:
● maintains instruments for different futures
● is flexible to adjust
● tries out new instruments that are needed in a specific future
Current CAP is not very robust in High Tech scenario: multinationals shift (environmental) risks and low rewards to farmers who ask CAP/tax payer for help and lobby against environmental policies
Nor in Collapse: Current CAP fosters scale increase, not jobs
Insights from the scenario-analysis
Regional diversity plays an important role in EU-28, in Self-Organisation and Collapse and for marginal areas in High Tech. A menu approach like in Pillar 2 would help.
Strengthening industry sustainability schemes by making CAP payments dependent on joining (a producer organisation with) such a scheme would make food chain responsible for sustainability and fair incomes. Reduces administrative burden: only the schemes themselves have to be audited by the government.
Targeting (also with contracting instead of cross-compliance and greening) and capping (e.g. linked to regional labour costs) could improve efficiency and free money for innovation in climate smart agriculture etc.
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PILLAR 1
PILLAR 2
Cross Compliance Greening
Contracts
agri-environ-mental mgt.
Domain
A
Domain
B
Domain C
Capping and Targeting
Align with industry and Public Contracts
Support (social) innovation
DESIGN PRINCIPLES
Future CAP: objectives for the domains
Domain A
• Maintain market stability
• Enhance farm income
• Improve agricultural competitiveness (fair chains)
Domain B
• Provide environmental public goods (incl. nature)
• Pursue climate change adaptation and mitigation
• Ensure public health (farm level and food policy)
Domain C
• Promote socio-economic development of rural areas
• Foster innovation
• Maintain agricultural diversity in EU (employment)
From current CAP to the future
• Towards capping income support per farmer based on real income needs ?
• Disaster relief (safety-net?) and incentives risk management
Domain A
Food security
Risk management
Income support
• Towards payments for greening based on sustainability schemes industry or regional government: contractual relationships (include antibiotics, animal welfare etc.) in addition to regulation. Start food policy
Domain B
Greening
Climate change
Public health
• Foster innovation and competitiveness (EIP, advisory service, producer organisations, investment aid)
• Relocate industries where needed
• Promote socio dynamics rural area
Domain C
Liveable rural area
Innovation
Employment
Target: Food security
European agriculture (and policy) need to change:
Higher yields are needed (for export of products)
Dependency on imported feed should be reduced
Food first, no subsidies for bio-based products
Realistic effective and efficient instruments are:
Innovation and advisory for higher yields
Stimulation protein crops by product-based area payment (although inefficient)? >> With innovation-instruments
(Product based) area payments for marginal land when farmed; no ecological focus areas
Favour plant-based diets / production over animal ones
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Target: Risk management
European agriculture (and policy) need to change:
Income stability (and price stability)
Less animal transport
Reduce plant- and animal diseases
Realistic effective and efficient instruments are:
Market-based risk instruments: advise them, subsidize
Investment aid for hardware (irrigation equipment etc.)
Financial support in case of disasters (catastrophic risk)
Regulate animal transport or help to build up industries for breeding young animals or fattening calves elsewhere (move production east to reduce animal transport)
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Target: Innovation
European agriculture (and policy) need to change:
More innovation needed for better yields, lower production costs, product quality, market orientation, more sustainability
Support new technology trends (ICT-precision farming)
Develop new chain concepts like short supply chains
Realistic effective and efficient instruments are:
Support for interactive innovation, advisory service
Guarantee fund / venture capital for risky investments and new business models
ICT: paying agencies involved in data exchange (Internet of things), provide open data
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Target: Fair chains
European agriculture (and policy) need to change:
Position of farmers in food chains has to be strengthened
Realistic effective and efficient instruments are:
Support for producer groups and cooperatives.
Safety-net (temporary extra income support?) in case of extremely low prices
Make food chains responsible for fair incomes (support conditional on being in a fair trade scheme?)
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Target: Employment - jobs and growth
European agriculture (and policy) need to change:
More (multifunctional) employment on farms
Support new entrants, including young farmers
More employment in rural food industries (value added)
Realistic effective and efficient instruments are:
Innovation support for value added product chains, including short supply chains
Financial support for new entrants (subsidized loans etc.)
Link direct payments (if any) to employment, not to land (in which it is capitalised).
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Target: Income support for farmers
European agriculture (and policy) need to change:
Many farmers have a (very) low income (although we do not know their non-farm income and wealth), due to uncompetitive farm size and due to farm management
Direct payments are not very efficient (go to large farms and are capitalised into land)
Realistic effective and efficient instruments are:
Cap direct payments (with e.g. the regional labour cost in industry as a maximum)
Take fiscal data of farmer in account in capping (targeting): only support for farmers with a low overall income
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Target: Liveable rural area
European agriculture (and policy) need to change:
Stimulate farmers to maintain attractive landscape
Employ farmers in public works (maintenance water-networks, snow clearing etc).
Link (regional) consumers to (modern) farming
Realistic effective and efficient instruments are:
Subsidize / make contracts for landscape maintenance
Stimulate local government to procure ‘farm services’
Advise / subsidy on diversification into agri-tourism, care-farming etc.
Subsidize operational groups and Leader-activities
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Target: Public health
European agriculture (and policy) need to change:
More transparency / tracing & tracking food safety
Reduce risks of zoonosis
Reduce use antibiotics (animal production), pesticides
Promote plant-based diets
Realistic effective and efficient instruments are:
Stimulate ICT for tracing and tracking, smart farming
Support for re-location of livestock industry
Subsidise (conversion to) organic farming
Subsidise environmental schemes that pay attention to reduction of antibiotics, pesticides (or regulate use)
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Target: Environment
European agriculture (and policy) need to change:
Reduce pollution of agriculture (nutrients in water, pesticides, manure)
Maintain production capacity soils (organic matter)
Adopt circular economy, livestock-manure-soils-feed cycle
Realistic effective and efficient instruments are:
Stronger regulation in cross compliance (e.g.max l.u./ha; green cover)
Oblige sustainability accounting; link payments to sustainability schemes food industry (changes incentives)
Support for groups of farmers who deliver ecosystem services
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Target: Climate change
European agriculture (and policy) need to change:
Mitigation: Reduce CO2 and other GHG emissions
Adaptation: Adapt to climate change (risk management)
Realistic effective and efficient instruments are:
Oblige sustainability accounting on GHG; link payments to sustainability schemes food industry (changes incentives)
Incentivize certain production methods (no tillage, permanent grassland)
Emission trading for (larger) farms
Support innovation climate smart agriculture
See risk management / innovation for adaptation strategies
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Target: Nature management + biodiversity
European agriculture (and policy) need to change:
Towards more nature-inclusive agriculture
Extra attention for low-intensity / marginal grasslands
Farmers should pay more attention to soil management
Realistic effective and efficient instruments are:
Contracts with (collectives of) farmers to produce public goods
Incentives for farmers in contracts or cross-compliance regulation for real crop rotation (not: grow 3 crops).
Support innovation (advise, interactive innovation groups, link to sustainability schemes food brands) on nature-inclusive agriculture
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Challenges for policy makers
This is fuel for a strategic conversation – not more
Is there agreement on a market-based approach?
What choice in the relative importance of different policy targets and trade-offs?
Are some futures desirable or unavoidable: adjust CAP in that direction? (but keep it robust for others)
Even more attention to Food Policy ? Or Jobs & Growth?
Which speed of change to choose ?
And later: details on instruments and consequences.
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