CAP Reform 2014-2020 Stathis Klonaris

Origins National policies were already in place before the creation of the CAP, inter alia: to increase food production to improve living conditions of farmers After World War II, two major challenges: food production farmers’ incomes

Origins and principles The CAP’s original objectives a) Increase agricultural productivity b) Ensure a fair standard of living for the agricultural community c) Stabilise markets d) Assure the availability of supplies e) Ensure that supplies reach consumers at reasonable prices are maintained in the Lisbon treaty

Price support measures Foundations of the CAP Initial principles Market unity Community preference Financial solidarity Initial measures Price support measures intervention buying Import tariffs Import quotas Export refunds 4

Why do we need market measures ? Agriculture is strongly dependent on natural factors and exposed to unforeseen events such as floods, droughts, animal disease etc. Increasingly volatile markets can threaten the economic viability of farms and make safety-net measures necessary

Why do we need market measures? Many roles and services generated through agriculture are public goods that are imperfectly delivered through markets – policy measures are required to incentivise farmers to deliver these goods demanded by citizens from European agriculture Support is necessary to keep sustainable agriculture in place throughout Europe – without it, production would be concentrated in favourable areas while land may be abandoned in less competitive regions Income in Agriculture is less than average

Why do we need a CAP? Support at European level provides for a coherent agricultural policy framework, guaranteeing a level playing field with common rules for all Member States Common action is needed to address challenges that reach across Member State borders, such as climate change or the decline in biodiversity

Historical development of the CAP Productivity Competitiveness Sustainability The Early Years The Crisis Years The 1992 Reform Agenda 2000 CAP reform 2003 CAP Health Check 2008 Food security Improving productivity Market-stabilisation Product support Over production Exploding expenditure International friction Reduced surpluses Environment Income stabilisation Budget stabilisation Deepening the reform process Competiti-veness Rural development Market orientation Consumer concerns Rural Development Environment Simplification WTO compatibility Reinforcing 2003 Reform New challenges Risk management

Challenges and Objectives Policy Objectives Reform Objectives Economic Viable food production Enhanced competitiveness Improved sustainability Greater Effectiveness Environmental Sustainable management of natural resources and climate action Territorial Balanced territorial development

MFF Ceiling 2014-2020 (in billion EUR) The MFF 2014-2020 (the EU’s seven year spending plan) allocates 38% of its total amount to the CAP to finance expenditure for market measures, direct payments and rural development programmes. Direct payments amount to approximately €41 billion per year 2014-2020 Ceiling (Current Prices) 2014-2020 Ceiling (2011 Prices) Pillar 1 312,74 277,85 Pillar 2 95,58 84,94 Total CAP 408,31 362,79

Evolution of Policy and Spending

Who Gets Direct Payments Minimum requirements: DP are not granted to farmer if : the total amount of payments is between €100 and €500 and the area land eligible for payment is 0.3 ha to 5ha. Active Farmers Having agricultural land at their disposal that is used for an agricultural activity. To apply for aid every year The majority of farmers within the EU benefit from direct payments: there were around 7 million farms benefitting from support in 2015, covering almost 156 million ha of land, or roughly 90% of the land actually farmed (the utilised agricultural area - UAA). Farmers may apply for direct payments every year. In order to be eligible, all of the following conditions need to be complied with each year: Direct payments are operated jointly by the European Commission and the 28 EU member states. National authorities are responsible for administering the scheme in their countries, and have a certain degree of flexibility to adapt the rules to national conditions. Minimum requirements Generally, direct payments are not granted to a farmer if the total amount due and/or the area of land eligible for payment is too small. The exact threshold varies from country to country as it is set by national administrations, but it is generally between €100 and €500 and/or 0.3 ha to 5 ha respectively. Active farmers Only farmers with a holding located in the EU and exercising an agricultural activity can receive direct payments. The requirement of being an ‘active’ farmer means that individuals and companies such as airports, real estate services and sport grounds who may have agricultural land at their disposal but who have no or only a very marginal agricultural activity cannot receive support from the CAP. Have agricultural land at their disposal that is used for an agricultural activity As a general rule, only land suitable for agricultural production is considered as agricultural area (e.g. forests are in principle not eligible). Agricultural areas include arable land, permanent crops and permanent grassland. But it is not enough to simply own or have agricultural land at their disposal: farmers must also show that this land is used for some form of agricultural activity. In general, this means the rearing of animals or growing of agricultural products (for harvesting, milking, breeding, etc). Alternatively, farmers must ensure that the land is maintained in good agricultural condition, i.e suitable for grazing or cultivation. More information: Eligibility criteria for direct payments Farmers have to apply for aid every year in order to receive direct payments, declaring every parcel of their farm holding. National authorities are there to help farmers with their applications, which are increasingly being made in electronic format. Applications include images such as maps or satellite pictures, based on which farmers can indicate the areas declared, using previous year’s information as appropriate.

The new design of Direct Payments Cross Compliance ** Coupled Support ** Natural Constraint support OR ** Small Farmer Scheme up to 10% Max 1250 EUR simplified up to 10% or 15% Up to 5% ** Redistributive Payment Up to 30% Max 65% of average direct payments (max 5 years * Young Farmers Scheme Up to 2% +25% payments (max 5 years) * Green Payment Mandatory 30% Greening practices or equivalent * Basic Payment Scheme No fixed percentage 5% degressivity over 150.000 EUR Direct payments are granted to farmers in the form of a basic income support based on the number of hectares farmed. This so-called ‘basic payment’ is complemented by a series of other support schemes targeting specific objectives or types of farmers: a ‘green’ direct payment for agricultural practices beneficial for the climate and the environment, a payment to young farmers, (where applied) a redistributive payment to provide improved support to small and middle-size farms, (where applied) payments for areas with natural constraints, where farming conditions are particularly difficult, such as mountain areas, (where applied) a small farmers scheme, a simplified scheme for small farmers replacing the other schemes, and (where applied) voluntary Support coupled to production to help certain sectors undergoing difficulties. On average, the payment is €266 per hectare eligible for payment. * Compulsory measures. ** Voluntary measures

Basic Payment Scheme (BSP) With the 2013 CAP reform the Basic Payment Scheme (BPS), replacing the Single Payment Scheme (SPS), was created. The BPS offers a basic layer of income support to farmers, to be topped-up by other direct payments targeting specific issues or specific types of beneficiaries. The BPS is a compulsory scheme for all Member States. However, the Member States having applied the single area payment scheme (SAPS) under Regulation (EC) No 73/2009 have been allowed to continue applying the SAPS for the purpose of granting the Basic Payment for a transitional period until 2020. All Member States previously applying SAPS3 have decided to maintain this scheme.

Who is entitled to receive payments Support under the Basic Payment Scheme is granted to farmers that have payment entitlements upon "activation" of such entitlements. This activation is done annually by declaring eligible hectares with an accompanying number of payment entitlements. With the introduction of BPS, the payment entitlements allocated to farmers under the SPS have expired on 31 December 2014 and Member States had to allocate new payment entitlements in 2015. However, under specific conditions, Member States had the option to allocate BPS entitlements by keeping the existing entitlements. Denmark, UK-England, Sweden and Finland) decided to use this option. There are three ways for farmers to obtain BPS payment entitlements: First allocation of entitlements in 2015 National reserve Transfer

National/Regional Reserve All Member States shall establish a national reserve by applying a linear reduction (max. 3%) to the Basic Payment Scheme ceiling. Member States applying the BPS at regional level are allowed to establish regional reserves. The national reserve shall be used as a priority to grant payment entitlements to young farmers and farmers commencing their agricultural activity. Member States can set additional eligibility criteria relating to appropriate skills, education or experience applicable to new entrants claiming for the reserve (such as ES,PL, IE, UK-North Ireland and BE- Flanders) In order to limit the amount of unspent funds in the reserve, the national reserve can also be used to linearly increase the value of all payment entitlements at national or regional level and/or to cover the financing needs for the young farmers scheme and the small farmers scheme.

Entitlements Transfer Entitlements may transfer his entitlements (with or without land) to a farmer, under the condition that this farmer is an "Active Farmer Where payment entitlements are transferred without land, Member States may decide that: either a part of the transferred payment entitlements are to revert to the national or regional reserve or that the value of the transferred payment entitlements is to be reduced in favour of the national reserve. (IE, EL, ES, FR, HR, IT, AT and UK-Scotland )

The Green Payment The three greening obligations are: Member states must allocate 30% of their direct payment allocation to this greening payment The three greening obligations are: 1.Crop diversification >10 ha 2 crops, more than 30ha 3 crops The main crop may not cover 75% of arable land 2. Maintenance of permanent grassland 3. Ecological Focus Area When arable land is > 15ha must ensure at least 5% of their land is an ecological focus area 1 Crop diversification Growing a greater variety of crops helps make soil and ecosystems more resilient. It helps to halt degradation of soils and soil erosion and therefore also helps production capacity. In concrete terms, the rules stipulate that farms with more than 10 ha of arable land have to grow at least two crops, while at least three crops are required on farms with more than 30 ha of arable land. Furthermore, the main crop may not cover more than 75% of the arable land. Several exemptions to these rules take account of the individual situation of farmers, notably farmers with a large proportion of grassland which in itself is very beneficial for the environment. 2 Maintenance of permanent grassland Permanent pasture is a very effective means of locking carbon away and thus helps to reduce global warming. Preserving environmentally sensitive grassland conserves soil carbon and protects grassland habitats. A ratio of permanent grassland to agricultural land is set by member states at national or regional level (with a 5% margin of flexibility). Moreover, farmers cannot plough or convert permanent grassland in designated sensitive areas. More than a third of EU farmland is permanent grassland subject to protection aimed in particular at carbon sequestration; a fifth of this grassland is classified as environmentally sensitive with a view to protecting biodiversity and carbon storage. 3 Ecological focus areas Farmers with arable land exceeding 15 ha must ensure that at least 5% of their land is an ecological focus area with a view to safeguarding and improving biodiversity on farms. Ecological focus areas may include, for example, fallow land, landscape features, afforested areas, terraces, hedges/wooded strips or nitrogen fixing crops such as clover and alfalfa which help to improve soil organic matter. Hedges, trees, ponds, ditches, terraces, stone walls and other landscape features are important habitats for birds and other species and help protect biodiversity, including pollinators.

Young Farmer Payment (YFP) It is granted for a maximum of five years from the moment a young farmer takes over as the head of a farm holding. The YFP can account for up to 2% of total direct payment national allocations. Encouraging new entrants to take up farming is vital for the future of agriculture and rural communities, especially as the EU farming population is ageing. In 2013, for every farmer under 35, there were nine over the age of 55. Indeed, more than half of all farm managers are over 55, while only 6.9 % of farmers are under 35.

Voluntary Crop Support MS may continue to link (or couple) a limited amount of direct payments to certain products. The aim of this type of support is to maintain the level of production in regions or in sectors undergoing difficulties and that are particularly important for economic, social or environmental reasons.

Distributions of Funds amongst the direct payments schemes