SFER seminar 22nd May 2013
AgroParisTech
The CAP and public goods
Allan Buckwell,
[email protected]
www.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)
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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 benefit
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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.
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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, noncontractual, 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 crude
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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 nonmarket 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
[email protected]
www.ieep.eu
IEEP is an independent not for profit institute dedicated to
advancing an environmentally sustainable Europe through
policy analysis, development and dissemination.
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