DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES AGRICULTURE WHAT TOOLS FOR THE EUROPEAN AGRICULTURAL POLICY TO ENCOURAGE THE PROVISION OF PUBLIC GOODS? STUDY This document was requested by the European Parliament's Committee on Agriculture and Rural Development. AUTHORS Ms Kaley Hart, Mr David Baldock, IEEP Mr Peter Weingarten, Mr Bernhard Osterburg, vTI Mr Andrea Povellato, Mr Francesco Vanni, INEA Mr Corrado Pirzio-Biroli, Ms Alison Boyes, RISE Foundation RESPONSIBLE ADMINISTRATOR Mr Albert Massot Policy Department B: Structural and Cohesion Policies European Parliament B-1047 Brussels E-mail: [email protected] EDITORIAL ASSISTANCE Mrs Catherine Morvan LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR To contact the Policy Department or to subscribe to its monthly newsletter please write to: [email protected] Manuscript completed in May 2011. Brussels, © European Parliament, 2011 This document is available on the Internet at: http://www.europarl.europa.eu/studies DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy. DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES AGRICULTURE WHAT TOOLS FOR THE EUROPEAN AGRICULTURAL POLICY TO ENCOURAGE THE PROVISION OF PUBLIC GOODS? STUDY Abstract Agriculture plays an important role in the provision of a wide range of public goods in Europe, particularly regarding the environment and rural vitality. Appropriate policies are required to secure adequate provision in future. The Common Agricultural Policy potentially has a key role. This report examines some of the issues involved in reorienting the CAP for this purpose and proposes how it could be modified to contribute to the provision of public goods more effectively in the future. IP/B/AGRI/IC/2010_094 JUNE 2011 PE 460.053 EN What Tools for the European Agricultural Policy to Encourage the Provision of Public Goods ____________________________________________________________________________________________ CONTENTS Contents 3 LIST OF ABBREVIATIONS 5 LIST OF TABLES 7 LIST OF FIGURES 7 EXECUTIVE SUMMARY 9 1. Background and Context 17 2. Public Goods Associated With Agriculture 19 2.1. Public goods associated with agriculture 19 2.2. Evidence of the undersupply of public goods 22 2.3. Current policy measures delivering public goods 27 3. Developing policy tools for delivering public goods associated with agriculture 37 3.1. Existing proposals for the CAP post 2013 38 3.2. Issues under consideration and assumptions 39 3.3. Clarity on strategic objectives of the future CAP 41 3.4. Effectiveness and efficiency in achieving outcomes 46 3.5. Budgetary/financing issues 58 4. Improved policy structure and tools for the delivery of public goods 65 4.2. Implications of the proposals 77 5. Non CAP measures for the delivery of public goods 81 5.1. Habitat banking 81 5.2. Contracts for water services 83 6. Conclusions and principal Recommendations 87 References 91 List of Communications, Directives, Regulations, Strategies cited in the report 101 Annex 1: Evidence of Undersupply of environmental public goods 105 Annex 2: Acknowledgements 111 3 PE 460.053 Policy Department B: Structural and Cohesion Policies ____________________________________________________________________________________________ 4 PE 460.053 What Tools for the European Agricultural Policy to Encourage the Provision of Public Goods ____________________________________________________________________________________________ LIST OF ABBREVIATIONS 6EAP 6th Environmental Action Plan ADAS Agricultural Development and Advisory Services ADE Analysis for Economic Decisions AGRI European Parliament Agriculture and Rural Development Committee BBOP Business and Biodiversity Offsets Programme CA Cooperative Agreement CAP Common Agricultural Policy CH4 Methane CLA Country Land and Business Association CMEF Common Monitoring and Evaluation Framework CO2 Carbon Dioxide EBCC European Bird Census Council ECA European Court of Auditors EEA European Environment Agency EAFRD European Agricultural Fund for Rural Development EAGGF European Agriculture Guidance and Guarantee Fund ENRD European Network for Rural Development ERDF European Regional Development Fund EU European Union EU-27 All 27 Member States of the European Union EU-15 The 15 Member States of the European Union prior to the 2004 enlargement EU-12 The 12 Member States of the European Union which have joined since 2004 FADN Farm Accountancy Data Network FAS Farm Advisory Service GAEC Good Agriculture and Environmental Condition GHG Greenhouse Gas (emissions) HNV High Nature Value IACS Integrated Administration and Control System IAMO Institute for Agricultural Development in mid and eastern Europe 5 PE 460.053 Policy Department B: Structural and Cohesion Policies ____________________________________________________________________________________________ ILUC Indirect Land Use Change IRENA Indicator Reporting on the Integration of Environmental Concerns into Agricultural Policy JRC Joint Research Council LAG Local Action Group LFA Less Favoured Area LIFE+ EU Financial Instrument for the Environment LUC Land Use Change MFF Multi-annual Financial Framework OECD Organisation for Economic Cooperation and Development PDO Protected Designation of Origin PGI Protected Geographical Indication RED Renewable Energy Directive RDP Rural Development Programme RSPB Royal Society for the Protection of Birds SAC Scottish Agricultural College SAPS Single Area Payment Scheme SEBI Streamlining European 2010 Biodiversity Indicators SER Social and Economic Council of the Netherlands SFP Single Farm Payment SMR Statutory Management Requirement TEEB The Economics of Ecosystems and Biodiversity TSG Traditional Speciality Guaranteed UNFCC United Nations Framework Convention on Climate Change WFD Water Framework Directive WTO World Trade Organization 6 PE 460.053 What Tools for the European Agricultural Policy to Encourage the Provision of Public Goods ____________________________________________________________________________________________ LIST OF TABLES TABLE 1 The main public goods associated with agriculture 21 TABLE 2 EU legislative and Policy Objectives relating to public goods 26 TABLE 3 Member State use of Article 68 for environmental purposes 31 TABLE 4 Pillar 2 measures which can contribute to the provision of public goods 33 TABLE 5 Pros and cons of different approaches to delivering Group 2 measures 73 TABLE 6 Potential revisions to current GAEC Standards 76 LIST OF FIGURES FIGURE 1 Potential siting of public good focused measures within the future CAP 75 7 PE 460.053 Policy Department B: Structural and Cohesion Policies ____________________________________________________________________________________________ 8 PE 460.053 What Tools for the European Agricultural Policy to Encourage the Provision of Public Goods ____________________________________________________________________________________________ EXECUTIVE SUMMARY Background and context Agriculture has an important role in the provision of a wide range of public goods in Europe. This is recognised both in the ‘Lyon Report’ on the future of the CAP after 2013 and the ‘Dess Report’ currently being debated in the European Parliament. The European Commission’s Communication of November 2010 ‘The CAP towards 2020: meeting the food, natural resources and territorial challenges of the future’ (COM (2010) 672 final) sets out three key objectives for the CAP to 2020: viable food production, sustainable management of natural resources and climate action, and balanced territorial development. All three objectives relate to the provision of public goods by land managers in one form or another. The theme was elaborated in an unprecedented joint letter dated 11 March 2011, from Commissioners Cioloş (agriculture), Potočnik (environment) and Hedegaard (climate). They highlight that ‘the CAP is an effective tool which the EU has at its disposal for steering towards more sustainable management of natural resources’, that it ‘should be a tool to help Member States to reach environmental and climate change targets, notably in relation to biodiversity, water and soil’, and that ‘to deliver environmental public goods, agriculture must be a viable and competitive sector.’ However, the proposals for converting these general propositions into more specific policies and tools that could be applied within the CAP remain rather vague. This report, at the request of the European Parliament, sets out to examine some of the issues involved in moving towards a more public goods oriented CAP and puts forward recommendations on how the CAP might be restructured over time to deliver public goods more effectively. Public goods associated with agriculture The principal public goods associated with agriculture in Europe can be summarised as: Environmental, notably farmland biodiversity, water quality and availability, soil functionality, air quality, climate stability (reducing greenhouse gas emissions and increasing carbon storage), resilience to flooding and fire. Culturally valued agricultural landscapes. Rural vitality (the social, economic and cultural viability and vigour of rural societies). Farm animal welfare.