Dpt of Food Business, University College Cork, Ireland Farming & the Delivery of Public Goods Prof. Thia Hennessy Dpt of Food Business, University College Cork, Ireland

Overview Agriculture an important sector Economic benefits Non-economic benefits Public goods Policy solutions

Importance of European Agriculture 11 million farms – 22 million workers Another 22 million in related sectors Source of employment in rural areas Output value >€220 billion However – low economic viability of farms

Importance of direct payments

Importance of direct payments

Direct payments not just for farmers Supports production Multiplier effect (agriculture larger) Upstream and down stream effects Regional multiplier Low level of leakage Renwick (2013) Irish case Return to €1 of direct support €2.7 in output and €1.7 in household spending

It’s not all about the money!

Non-Market Value of Farming Non-market goods - public goods Characteristics of a public good Non-excludable Non- rival Subject to a free rider problem Hence a market failure exists State intervenes to guarantee supply

“Collectively ecosystem services” Typical Public Goods Landscape management Biodiversity Climate Action Animal Welfare Cultural and heritage protection Food Security “Collectively ecosystem services”

Supply of public goods Related to types of farming and practice Intensity and land management Farm type and size (pasture based) Many factors negatively affect provision Decreasing and volatile prices Need for intensification Lifestyle choice

Landscape Management

Landscape Management Maintaining original landscape character Land abandonment Spread of scrub and wildfires Soil degradation Appropriate landscape management can Protect soil fertility increase resilience to flooding Carbon sink

Biodiversity

Biodiversity Traditional farming systems protect indigenous flora and fauna Grazing & hedgerows can protect habitats Specific-breed and habitat links Intensification and abandonment contribute to loss of biodiversity Farmland bird numbers down 48% since 1980 – Bird monitoring scheme

300,000 km of hedgerows in Ireland – noticenature.ie 450,000 km of hedgerows in the UK - wildlifetrust

Climate Action

Climate Action Agriculture both a source and a sink for carbon Maintenance & promotion of carbon sinks Forestry Agroforesty Soils (permanent grassland) Market does not reward carbon efficient production Climate smart farming – practices and technologies

Animal Welfare

Animal Welfare Eurobarometer results suggest increasing demand for high animal welfare standards Legislation sets minimum standard – performance above this Declining output prices result in need to intensify to maintain incomes Some intensive practices reduce animal welfare standards Grass based livestock agriculture – natural form Scientific evidence of human health benefits to grass based livestock products

Culture & Heritage Living countryside Countryside management Preventing depopulation Protecting traditional methods Countryside management – important aesthetic role “At least 86% of the open access land in England is found in the uplands, attracting 40 million visitors and making £1.78 billion for local economies every year. Rural Wales attracts 19m day visits and 2.28m overnight stayers in a year, spending a £674m and £367m respectively. The Scottish countryside sees 2.64m overnight stayers and 26m day visitors in a year.” Source: NSA (2016)

Food Security Access to affordable and safe food Is it a concern in a time of global free trade? Pests, diseases, weather and climate change in the context of growing populations Ensure resilient food supply chains globally and locally

“benefits humans derive from ecosystems” Ecosystem Services “benefits humans derive from ecosystems” Millennium Ecosystem Assessment (2006) Provisioning: what is produced – food, fibre & water  Regulating: control of climate & disease  Supporting:  nutrient cycles & crop pollination  Cultural: recreational benefits & human welfare. 

Demand for Public Goods There is no market for public goods Hence difficult to value Willingness to pay studies Large experimental studies (expensive) Subject to criticism – although widely accepted Stated preference V’s revealed preference Value transfer studies

Valuing of Public Goods Valuing landscape aesthetics DG Joint Research Centre (Ciaian and Gomez y Paloma 2011) Reviewed 33 EU studies “valuing agricultural landscape” across 11 EU countries Average value of €142 per hectare

Some relevant examples Valuing ecosystem services in mountainous Spain (Bernues et al 2014) Willingness to pay >50% for prevention of fires 20% for protection of biodiversity 20% for locally produced food Price willing to pay 3 times the current agri-env payment

Supply and demand for public goods Source: Cooper et al 2009

Policy Intervention required

Future design of CAP Greening in Pillar I & Voluntary Agri-environmental programmes in Pillar II Weaknesses Pillar I (low requirements) Pillar II (optional) Public goods need to be protected Pillar I

Future design of CAP Time specific contract New policy to focus on Measureable outcomes “Contract service provision” – Rise Foundation (2017) New policy to focus on Climate change focus essential Maintaining permanent grassland Suite of climate smart technologies Nutrient management plans Manure management

Conclusions Direct payments support farmers & wider economy Farming provides non-economic benefits (public goods) Many trends threaten the delivery of public goods Supply and demand imbalance By definition should be supported by state Priority for CAP reform Central to Pillar I Targeted and measureable outcomes

Thanks for your attention