www.ieep.eu

SFER seminar 22nd May 2013AgroParisTech

The CAP and public goodsAllan Buckwell, abuckwell@ieep.eu

The CAP and public goods

• The changing purpose and methods of the CAP

• Where did the public goods story come from?

• What are the rural, land-based, public goods?

• Current attempt to integrate them into the CAP

• Is it succeeding? Why not?

• Future options for securing public goods?

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Changing purpose & methods of the CAP

• A39 – the five objectives – subsequently tempered by Goteberg (sustainable development) and Lisbon (smart inclusive green growth).

• Initial method was high and stable prices: intervention, variable import levies & export subsidies (1968-late ‘80s).

• Agricultural policy was for farmers narrowly defined.

• Start of switch from price to income support (1992)

• Creation of two pillar CAP with Rural Development (2000)

• Decoupling & consolidation to Single Payment System (2004 & 2007), shifting resources P1 P2

• Now fragmenting & diversifying P1, diminishing P2 (2014)3

Where did the public goods story come from?

• Ideology, observed problems: over supply – trade tensions and emerging evidence of the environmental market failures

• From environmentalists, not farmers, supply or food industry• Refinement of the unsuccessful ‘multifunctionality’ as a

motive for farmer support• Growing awareness of the pervasive market failures

surrounding land management– Scale of negative externalities: water, air & soil pollution – & positive externalities: biodiversity & cultural landscape

• EU agriculture is currently unsustainable

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The usage of the concept

• Formal economic definition of public goods: non-excludability and non-rivalness in consumption

• These concepts are elastic, – degrees and costs of exclusion, – degrees of jointness between the public & private goods

• Groping for the right language: PGs, externalities, depletion of natural capital, non-provisioning ecosystem services

• Most examples are environmental. Some social public goods, e.g. rural vitality, & avoiding land abandonment

• Controversy whether food security is a public good• Strong temptation amongst interest groups to widen still

further: public good becomes public benefit5

Degree of publicness in Public Goods

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DG Agri Study on Public Goods from EU Agriculture (IEEP)

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From identification to action

• Existence of PGs implies some kind of collective action for their optimal delivery

• Reluctance to concede taxpayer responsibility– Because PGs become an excuse to continue subsidies– Incidental delivery– Marketised delivery

• PES – payment for environmental service• Public payment for public goods a last resort?• Principles for the payments? Direct costs + income

forgone.8

Environmental target, reference levels and farmers’ optimum

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Integrating public goods into the CAP

• Cross compliance• Agri-environment schemes• Less favoured area supports and A68• The Ciolos proposals:

– Big stress on Greening; public goods, more sustainable agriculture, soil, water, climate and biodiversity protection

– Is this pure cynicism?– Key strategic choice was to green P1 Why?– 30% of P1 is a big statement

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Environmental services expand into the CAP

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The greening proposals

• Greening principles: – compulsory, all farmers, simple, generalised, non-

contractual, annual.

• Greening actions– Cross compliance– Crop diversity (3 crops)– Maintaining permanent grassland– Ecological Focus Area (7%)– Strengthening P2, raising the threshold, 25% of exp.– Innovation and knowledge exchange

• Payment principles are crude12

Proposals are being substantially diluted

• Note the narrowing definitions of agriculture; agricultural activity & active farmer

• Watering down of the greening– Non inclusion of soil carbon protection in XC– CD – thresholds changing, more exemptions– PP – farm level or not? 2014 base– EFA – 3 or 5%, some non-ecological, 80% farms exempt– Permitting double funding of same actions in both pillars– Proposal to allow 25% P2 funds to switch to P1 (in nMS)– Status of the 25% of RDR for agri-env related measures– The European Council’s larger cut to P2 funds

• Conclusion: small political appetite for Public Goods (?)13

Why is this happening?

• The global food crisis and resurrection of food insecurity

• First reform with nMS – redistribution dominates

• Farmers’ organisations: rhetoric vs. reality

• Inhibitions really to grasp ecosystems service logic

• Reluctance to accept environmental limits

• Reluctance to accept Pillar 2 logic (multi-annual, programmed, regionally defined, menu driven, co-financed)

• Institutional structures: DG Agri + COMAGRI + Ag Council is incapable of widening the remit of agriculture

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Future options for securing PGs

• Political realities– Farmer power within the CAP has increased with nMS– Co-decision: weakened ability of Commission to steer

rational reform, EP plenary ineffective on technical matters.– Austerity and the limits of the EU budget– Lost decade; environment downgraded in priorities

• Balance of competences review (UK) – should agricultural policy stay with the EU? 1 CAP or 28 APs?– Fragmentation of SPS, regionalisation subsidiarity– Transboundary nature of nature + jointness commonality

• Wider landscape delivery? How to integrate given individual farmer contracts?

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The 2020 reform of the CAP?

• Food insecurity implies stronger demand for PGs – and higher cost of delivering them.

• But is the CAP the right vehicle? • Make Pillar 1 greening work? Co-finance Pillar 1?• Resurrect shift to Pillar 2?• Abolish the distinction between the pillars – there is no

clear principled distinction anyway• Change the institutional structure: merge DG Agri and

DG Enviro, COMAGRI and COMENV and the two councils

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Beyond the CAP

• Private provision of public goods, privately paid

• Marketed provision linked to food, organic, integrated, welfare friendly

• Willing voluntary provision

• Habitat markets, flood protection, C sequestration

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In short

• Two decade build-up of strong rhetoric of the CAP switching from the marketed private goods to non-market public goods.

• But reality does not match the rhetoric

• The task is genuinely complex and place and farming system specific

• If the CAP cannot deliver, what can?

• No answer implies continued degradation of EU natural environment

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Thank you

Abuckwell@ieep.eu

www.ieep.euIEEP is an independent not for profit institute dedicated to advancing an environmentally sustainable Europe through

policy analysis, development and dissemination.