Green Deal & CAP: FE analysis of ComAgri report

Green Deal & CAP: FE analysis of ComAgri report

1st December 2020

The Common Agricultural Policy (CAP) and the Green Deal (GD) are two of the main flagship European policies that define the current state of play of the institutions. They are different policies, both regarding the timing (the former has been a flagship policy of the EU for almost 60 years, the latter has been defined only since December 2019); and their content (the former regarding altogether food security, food production levels, accessible prices of foodstuff, stable incomes for farmers, environment and rural development, the latter climate neutrality and environmental action).

Yet, the agriculture sector has been found to be one of the main contributors to climate and environmental (C&E) changes. Given the links between agriculture and climate, would it be possible for the CAP to become an instrument of the Green Deal?

Considering this context, the European Parliament’s Committee on Agriculture and Rural Development (ComAgri) commissioned a study on these very links conducted by the INRAE and AgroParisTech. Their researchers assess the proposed GD measures and try to picture scenarios where the CAP adopts them, concluding that, even if this exercise is possible[1], it could be a dangerous move for the whole food-chain given the uncertainties on a number of issues and the weak economic assessments. The study is titled “The Green Deal and the CAP: policy implications to adapt farming practices and to preserve the EU’s natural resources” and can be found here.

All in all, the question that this report tries to answer is “will farmers (and consumers) be willing to bear short-term production and price unbalances for a possible greener future?

Main Findings

The study outlines that in order to reach the major objectives of the Green Deal related to climate neutrality, biodiversity, health, and resources, the F2FS and the EU Biodiversity Strategy for 2030 set quantitative targets that concern agriculture as well as downstream levels of the food chain (producers and consumers).

Main quantitative objectives

–       Reduction of use in pesticides, fertilisers, antimicrobials

–       Increase of land under organic farming and protected areas

–       Restoration of semi-natural habitats

Non-quantifiable objectives

–       Greenhouse gas (GHG) emissions for agriculture and food systems

–       Animal welfare

–       Circular bio-economy

–       Reversal of overweight and obesity trend

–       Healthier and more environmentally friendly diets

Assessing the main challenges GD for European agriculture and food

The study highlights and analyses the main GD challenges for European agriculture and food by different areas in order to illustrate to what extent evolutions and projections of key parameters (indicators) are aligned with the Green Deal ambition, objectives and the quantitative targets related to agriculture and food.

            Agriculture and Climate

The study says that GHG emission trends in agriculture have slightly increased over the last few years and that agriculture has barely contributed to overall reductions. Even considering the 2013-2018 trend, GHG emissions will not achieve significant reductions. The researchers stress that the whole carbon footprint needs to be evaluated – from production to consumption and for the whole EU system. Moreover, carbon leakage needs to be addressed as, for instance, a reduction in European livestock will lead to an import of animal products from non-EU countries.

            Agriculture and Environment

In terms of agriculture and environment, the study highlights that there are contrasting evolutions between MS in pesticides and fertiliser use. Moreover, the nitrogen balance is increasing and at odds with 50% reduction targets. On a positive note, the sale of antimicrobials has decreased significantly over the last few years and the target could be reached. Regarding organic farming targets, the increase in organic farming is not sufficient to reach the 25% target by 2030. Organic farming overall has environmental benefits through the reduction of chemical pesticide use, mineral fertiliser and antibiotics. However, the impact of organic farming on GHG emissions remains unclear, according to the study. In relation to biodiversity, the study finds that intensive farming is the primary cause of biodiversity loss and stresses the need for a “major leap” in policies. The researchers also point out that the “EU Biodiversity Strategy for 2030 questions the consistency and completeness of legislative proposals of the future CAP with the high level of ambition displayed by the EC in that domain”.

            Circular Bio-Economy

Although the Circular Bio-Economy Action Plan is not directly linked to agriculture and food systems, there are areas in the sector that will be affected such as packaging and recycling.  However, the potential impact of bio-economy is controversial, as it could lead to more land-use, more intensive land-use and more chemical input. Moreover, the researchers present a “domino effect” scenario in which sustainability criteria imposed on one sector can also have limited overall impacts, as sectors are not constrained.

            Food losses and waste, packaging and recycling

There is a significant potential for the reduction of GHG emissions through the reduction of food losses and waste and the researchers stress the fact that these areas should be encouraged for a transition towards more sustainable food systems. However, the study points out that there are large differences in relation to packaging and recycling in the MS and thus a lack of “harmonised definitions and methodologies among MS”.

            Healthy and environmental-friendly food industries and diets

The study stresses that there are currently no quantitative objectives or targets provided for increasing the availability and affordability of healthy and sustainable food options. At the same time, overconsumption and unhealthy diets vs. underconsumption and food insecurity at EU level needs to be addressed, as well as the significant differences in progress and policies among Member States. Similarly, according to the researchers, prices of environmentally-friendly foods and access to environmentally-friendly food items and diets for low-income households have not been sufficiently addressed in the current proposals. Studies outline that EU diets currently show an insufficient fruit and vegetables intake and a high intake of red meat, processed meat and sweet beverages. They warn that any food price increase will have significant impacts on consumers and the composition of diets. At the same time, in terms of climatic and land-use impacts of food diets, the researchers point out that animal-based products are a high source of GHG emissions and agricultural land-use. In terms of food insecurity, the study shows that it is more prevalent among risk groups such as women, older people, out-of-work, people with disabilities, and that it disproportionately affects MS with a high percentage of disadvantaged groups or a lower welfare state.

Impacts of technical solutions of the Green Deal

            Precision farming, Agroecology

The study states that precision farming can be used to reduce the use of pesticides without impacting yields and production levels. This is pointed out as several MS have been found to “overuse” pesticides. Using less pesticides would lead to a reduction of GHG emissions, however, there are currently low levels of adaptation for these new measures among EU farmers due to production risks, investment and new skills needed. Furthermore, the study proposes integrated pest management, nutrient management, organic farming and agroforestry as useful means to protect the environment. Agroecology and organic farming are said to have positive impacts on the environment, but induce a decrease of yields and production levels. On a positive note, the study shows that the sales of veterinary products have dropped significantly (more than 35% between 2011 and 2018) and that the target of a 50% reduction could be reached by 2030.

            Carbon Balance

In relation to carbon balance, the study shows that agroforestry can have significant benefits for carbon sequestration, along with planting hedges, use of cover crops and low or no tillage practices. However, they also state that the implementation costs are high so far. Benefits of food waste reduction are possible lower GHG emissions, as well as the increased use of co-products from agricultural production (e.g. methanisation) which could lead to improved management of nutrients, reduced energy consumption and again, a reduction of GHG emissions. Bio-based products have a high potential for storing carbon, reducing gross GHG emissions and diminishing pollution throughout the production cycle, as waste can be recycled or used as feedstuffs or fertiliser. In terms of food diets, replacing meat with plant-based alternatives would lead to a significant reduction in GHG emissions, land-use and water use. Furthermore, they claim that a food product reformulation as an industry-wide measure (i.e. which does not depend on consumer behaviour) would benefit the entire population.

In relation to the Farm to Fork Strategy, the study stresses the fact that food and nutrition was not or very poorly included in previous proposals, only marginally tackled climate change. In terms of budget, the study highlights that disagreements between council and EP when it comes to budget discussions, make the timeframe of implementation uncertain.

Recommended Policies

The researchers argue that some of the CAP proposals have to be strengthened in order to be “compatible with the GD” and thus would “have the potential to accommodate the GD’s ambitions”. They stress that the June 2018 draft regulations for the next CAP are only marginally consistent with the climate, environmental, nutritional, and health ambitions of the GD.

In order to do that, they claim that the following measures are necessary: enhanced conditionality; compulsory eco-schemes; and the allocation of at least 30% of the Pillar II funds to C&E measures. However, they point out that “much will depend on the actual implementation in National Strategic Plans”.

Researchers found that sound impact assessments of any policy options are crucial in order to identify possible trade-offs between different climatic and environmental objectives. The land issue requires particular attention: the de-intensification of farming practices and systems implicitly included in the Green Deal could require more agricultural land, both in the EU and further abroad, with possible adverse ecological consequences (“pollution leakages”).

That being said, the study reports on three main policy directions that will favour the closing of the gaps between CAP and GD, notably:

–       Efficiency gains policies: where farmers will be incentivised to do technological updates towards digital & precision farming tools and broadband coverage[2]. These measures may reduce C&E impacts (because of reduction of fertilisers and pesticides) while maintaining the yields. The study suggests that while the initial (fixed) investments costs will increase, variable production costs will lower, allowing for a balanced economic outcome.

–       Re-design of the production system: implying the de-intensification of some (conventional) farming practices and the increase of others (notably, organic production). This measure can be beneficial for C&E (in relation to biodiversity, air and water protection), yet, “lower yields induced by less intensive production processes may increase agricultural GHG emissions per product unit”. Overall, this measure will lead to an increase in per-unit production costs that could be repaid in the long-term through productivity gains and restoration of soil fertility. However, that could also lead to diminishing farmers’ incentive to switch towards agro-ecological and organic practices.

This measure is open to controversy, as on one hand C&E objectives could be facilitated, on the other hand public support measure will be essential as the study points out that “subsidies play a key role in sustaining the income of organic farms” and that organic farms are on average less productive (- 9%) than conventional ones, yet they receive + 66% of direct aids. With these numbers, the researchers assume that total payments to organic farmers would have to increase by about €20 billion over the 2021-27 period Pillar I (considering an increase of 517 100 organic farms in the EU).

–       Change in diets and consumption behaviours: the researchers assume that consumers will change consumption habits (without specifying how) towards more environmentally friendly food products. This potential change in purchasing patterns should mean that the consumer is willing to pay a higher price for foodstuff (considering the previous point and the consequent increase in final prices due to more organic farming). Nonetheless, the researchers counterbalance this scenario by foreseeing that, in this context, EU meat production will decrease and will shift more towards import, while the increase of domestic production of fruit and vegetables could lead to negative consequences on C&E and quality of soil given the higher yield productivity.

The study stresses that the higher cost of lower caloric and more balanced diets is a potential obstacle, especially for low-income households. Public policies that increase consumers’ awareness of the health, climatic and environmental impacts of food choices, as well as the modulation of consumption prices, are required in order for consumers to adopt healthier and more plant-based diets.

In a globalised economy, there is as a risk that the more “virtuous” European behaviour would displace the various issues through higher imports and would be worsened by distortions of competition. From this point of view, the elusive “border adjustment” tax and the (barely enforceable) environmental and social clauses in recent trade agreements show little guarantee against a loss of competitiveness. Land use shifts and imported deforestation, biodiversity loss or water depletion would do little to help the planet.

Recommended Measures

The researchers from INRAE and AgriTechParis raise three main questions based on which they make some more concrete recommendations for possible changes in the current CAP negotiations. They question if the GD objectives will actually become binding or if they will remain “aspirational”; they question what will determine the extra payments, and if the proposed indicators will be able to monitor and control the GD.

The researchers stress the introduction of the “polluter-pays and provider-gets” principle proposing a taxation/subsidies system that “requires taxing the main determinants of agricultural GHG emissions and biodiversity loss” and remunerates the actors who will do the opposite; or alternatively by increasing conditionality.

A tool to implement these fiscal incentive/deterrent systems will be eco-schemes, for which the authors suggest eight measures as possible concrete options for this tool.

These are:

–       Option n°1: permanent grassland – to remunerate farmers who do not plough any grassland and de facto turn them into permanent pastures.

–       Option n°2: wetland and peatland – to remunerate farmers who manage/maintain and restore/create wetlands and peatlands.

–       Option n°3: crop rotation – to remunerate farmers who include nitrogen-fixing and/or catch crops in the crop rotation.

–       Option n°4: payments to remunerate higher landscape diversity features on farming soil.

–       Option n°5: pesticides – to remunerate the best performances in the pesticide use for each type of crop.

–       Option n°6: antimicrobials – to remunerate the best performances in the antimicrobials use.

–       Option n°7: livestock – incentives for farmers to report on their emissions related to nitrogen fertilisation practices and cattle herds. They also suggest removing coupled support for ruminant livestock.

–       Option n°8: animal welfare – to compensate farmers who decide to go beyond the law (SMR).

These proposed measures, however, lack economic assessment and precise numbers (i.e. percentages or budget recommendations) and do not seem to consider the impact on small-scale farmers. Moreover, they could help farmers who, despite the loss in productivity, will be compensated by public measures, but not by the market. In fact, a consequence that does not seem to be taken too much into consideration is the lower production that these measures will lead to: will there be enough supply to respond to the increasing demand?

On the topic of governance, specifically on indicators and Strategic Plans, the study expresses criticism on the fact that these measures could be easily dodged due to lax formulation of current proposals. In particular, the fact that “in duly justified cases, the Member States may ask the Commission to approve a CAP Strategic Plan which does not contain all elements” is underlined as a lax formulation that will allow MS too much flexibility and that could lead MS to “cherry picking” CAP instruments. Moreover, “the actual governance scheme […] does not allow the EC to impose MS to suspend payments if there is a lack of actual results”.

On this point, the researchers point out several unresolved issues for making CAP National Strategic Plans (NSP) more consistent with the Green Deal roadmap. In fact, the main issues concerning the Green Deal targets are: first, their legal status must be clarified; second, the ways in which they are calculated are not detailed enough and should be more precisely defined; third, the methods used to define the corresponding national targets are unknown. They also concern the CAP. The performance indicators currently proposed do not make it possible to monitor progress made towards the targets. More generally, the CAP does not allow progress to be sufficiently enforced, reported and monitored, nor does it impose an effective corrective action plan if progress does not occur.

The CAP proposals contain some useful elements in that regard, but so far, mostly on the innovation side. However, the level of ambition of the Pillar 1 eco-schemes and the Pillar 2 agri-environmental and climatic measures is left to Member States, and not all States seem to grant priority to climate issues in their strategic plans.

One main discrepancy between the Green Deal objectives and the CAP proposals is the proposed system of governance. The targets are frequently too loosely defined, allowing an opportunity for Member States to circumvent them, plus there is often a lack of legal basis on which to enforce them. In addition, the indicators proposed by the Commission seem highly ineffective, as do the provisions for withholding payments, with the proposed bonus scheme disproportionate to the challenges at stake. In brief, much of the Green Deal ambition is left to the goodwill of the Member States.

Scenarios

All in all, the study tries to define a possible scenario in which the described measures will be implemented. The researchers assume that the total number of farms remains constant, and that the number of organic farms increases threefold, while the conventional farms decrease proportionally.

A decrease of 15% in the use of fertilisers and of 30% in the use of pesticides is also considered. The authors suggest that the reduction in chemical input use generates a drop in plant yields of 10% and thus resulting in a reduction of the animal production as well (-12% for ruminant meat, – 8% for milk, and -4% for pig and poultry meat as well as for eggs). Moreover, these assumptions will represent a drop by – 4% of the production value, – 10% of the gross operating surplus, and – 15% of the family farm income. Overall, an estimated – €12.9 billion impact on the sector is suggested.

Following these possible changes in the farming sector, while assuming that prices and trade are constant, the study argues that the new organic farms could increase their profit, not because the price premium for organic products will offset the decrease in physical yields, but if the CAP public support is sufficient, i.e. resulting in an increase of €20 billion CAP payments for 2021-27.

At the same time, the average income for conventional farms, which remain conventional, would decrease by 25% per farm (€ -5.740, favourable scenario) or by 42% (€ -9.500, unfavourable scenario).

The study calculates the product price increases that would allow the compensation of farm income drops. In the central scenario, farm-gate price increases required to maintain constant the income of farms that were and remained conventional would range from +4.6 % for farms specialised in Cereals, Oilseeds and Protein Crops (COP) to around +11% for livestock farms specialised either in sheep and goats or in pigs, poultry and eggs.

At the same time, GHG emission reductions are estimated to reach -33.9 MtCO2eq, which is far from the target of a 35% decrease in 2030. These -33.9 MtCO2eq would lead to a 8.7% reduction of agricultural GHG emission (-34 MtCO2eq), mainly thanks to farms that were and remained conventional (-25 MtCO2eq).

Remarks:

  • The suggestions made by the researchers on the tools that the CAP could provide to the GD’s objectives implicitly assume the creation of unnatural market situations, notably by subsidising with high amounts of public support activities that would not be able to survive otherwise.
  • In order to conduct their study, researchers based their scenarios on some assumptions that might not be verified without increase of public support. This might be the case of the number of farms, prices and trade outcomes that the study proposes.
  • In terms of trade, a sharp decrease of exports due to lower production in the EU and higher domestic prices could lead to a higher demand of products produced outside of the EU which could have a heavier impact on the environment. Additionally, a major farm restructuration with less, but bigger farms, could lead to increasing negative impacts on the environment due to the intensification of agriculture.
  • Another important issue is the question of the ability of consumers to pay higher prices for more environmentally friendly food products as part of a change in consumers’ behaviour and dietary patterns. Higher prices of EU products could then encourage the promotion of indirectly imported cheap products. These in turn, could have a negative impact on the nutrition of EU citizens, especially those with lower incomes. This essentially creates a notion of “noble” nutrition targeted at a small group of EU citizens who are able to adopt it – a discriminatory scenario, which could lead to a further divide within EU society.
  • In conclusion, FE underlines the call of the researchers for the strong need of serious impact assessments on the strategies of the GD concerning agriculture (notably, the Farm to Fork Strategy and the Biodiversity Strategy). These should be based on figures and strong scientific evidence. These, eventually, will help stakeholders understand the changes they are asked to do and will give these strategies serious and concrete legal basis to proceed. All in all, the Commission is in need of a change in paradigm. Its approach should be more based on science and effectiveness so that objective and credible paths should be designed to deliver.

[1] According to the study, in order for the CAP to adapt to the GD objectives, some features of the current negotiation positions at the institutional level should not be changed, namely: the enhanced conditionality, the compulsory eco-schemes, the allocation of at least 30% of the Pillar II to C&E measures.

[2] A policy in this sense can be found in the already agreed (in the ComAgri) Recovery fund for Rural Development, where at least 55% of the funds will be dedicated to investments of this kind.

O artigo foi publicado originalmente em Farm Europe.

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