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Common agricultural policy with ‘green architecture’

Common agricultural policy with ‘green architecture’

After several years of negotiations, the European Council reached an agreement on its negotiating position on the post-2020 reform package for the Common Agricultural Policy (CAP) on 20 October 2020. Consequently, the present agreement marks a significant milestone for the whole of European agricultural policy. 

In line with the Commission’s original proposal, ‘green architecture’ is the basis of the new financial framework. The resolutions of the EU Agricultural Council stipulate that environmental services are to become mandatory for all Member States and that a greater commitment to climate protection and biodiversity is to be rewarded accordingly. While smaller farms will receive a higher level of support, EU farmers have more security in terms of planning and financial compensation for their additional expenditure, compared to competitors from third countries. 

EU Common Agricultural Policy 

Negotiations on the EU’s Common Agricultural Policy (CAP) after 2020 had already started as far back as May 2016, at an informal meeting under the Dutch presidency. The original idea behind the creation of a common CAP was to provide the people of Europe with sufficient food at reasonable prices by establishing uniform subsidies. Before the common market was established by the Treaty of Rome in 1958, Member States were able to operate in the agricultural sector through various national intervention mechanisms. They created the CAP so they could abolish them and thereby bring agricultural products into free circulation. 

Since 1999, the CAP has been based on two pillars. The first pillar covers direct payments to farmers, while the main elements of the second pillar encompass various support programmes for management and rural development. Instead of the initial price support policy, the current EU support model is primarily based on a direct payment system. The strategic importance of the CAP is also reflected in the fact that almost forty percent of the EU’s budget (around 58 billion each year) is devoted to supporting agriculture. In addition, the CAP is enshrined in primary law at European level in Articles 38 to 44 of the Treaty on the Functioning of the European Union (TFEU). 

Focus & goals from 2020 

In principle, the financial framework of the CAP is reformed and reorganised every seven years. The last general regulations in this respect were published in December 2013. With regard to the new CAP, the European Commission set up the Working Group on Agricultural Markets as early as 2016 to consider the EU’s future agricultural policy. The EU Commission presented a first draft for the multi-year financial framework for the years 2021 to 2027 in 2018 (COM 2018/322 of 2 May 2018). This proposal included ‘green architecture’ as a central element, which involves ensuring that the design and interaction of all regulations, requirements and support measures contribute to agriculture offering higher environmental and climate protection. This issue was also a hotly debated topic at Council level. After several years of negotiations between the Member States, the 27 EU agriculture ministers finally agreed on the reform of the CAP on 20 October 2020. In particular, this agreement revolved around its future financial framework, largely taking into account the ‘green architecture’ preferred by the Commission. 

One important change is the introduction of climate protection requirements. These requirements will make certain climate and environmental protection standards mandatory for agriculture in the future. The Agricultural Council’s decision that land ownership alone no longer entitles farmers to direct payments also marks a significant change in the system. In the future, farmers will always have to disclose their farming practices to be allowed to receive direct payments at all. Anyone who does not meet the prescribed criteria in this regard will see their funds cancelled or not paid out at all. 

New ecological standards 

In addition, at least 20 % of the direct payments (first pillar) will be linked to even higher climate protection requirements. To receive money from this pot, farmers will have to implement additional ecological regulations. Each country is required to submit a national strategy plan, which is to be approved by the EU Commission, along with a catalogue of specific ecological regulations. The essential progress offered by this regulation is that these eco-regulations are mandatory. Other changes mainly affect smaller farms. These enterprises will receive increasing support over the course of the new CAP, including in the form of the redistribution premium. The aim of the redistribution premium is to ensure that part of the direct payments is shifted away from large enterprises and towards small and medium-sized farms. As the arrangements outlined above involve far-reaching changes to the current CAP, the Agriculture Council’s proposal provides for a transition period of two years for certain arrangements, meaning that the rules will not apply until 2023. 

The decisions of the Agriculture Council form the basis for the forthcoming negotiations between the Council and the EU Commission and the European Parliament in their ‘trialogue’. Only when these three stakeholders have reached an agreement will the European legal framework for the new CAP be established. Therefore, it remains to be seen whether the decisions of the Agriculture Council will be accepted in this form. Nevertheless, we already recommend that our clients analyse the decisions of the Agricultural Council more closely and proactively adapt their farms to align with ‘green architecture’. 

Author:

Dr. LEVENTE NAGY, Associate at LANSKY, GANZGER + partner

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