Enhanced conditionality: is it worth payment?

Under the European Commission’s Common Agricultural Policy (CAP), farmers can receive basic payments for each hectare of their land if they fulfil certain requirements. These requirements, or conditions, are being tightened up and member states have some discretion in how far they go with this. Researchers at Wageningen Economic Research have looked at several scenarios under this so-called enhanced conditionality to see what it would mean for the running costs of a number of representative agricultural enterprises in the Netherlands. The report provides a picture of the reach and effectiveness of the requirements. “If the cost of compliance for farmers is too great, it’s likely they will opt out, ” says researcher Petra Berkhout.

The European Commission’s proposals for the Common Agricultural Policy (CAP) for 2021-2027 include a new element whereby member states create a National Strategic Plan (NSP) for implementing both the first and second pillar of the CAP. Another new element contained in the proposals is something known as enhanced conditionality, which comprises all of the current greening requirements and “good agricultural and environmental conditions” (GAEC). To qualify for direct payments linked to their land, farmers have to comply to this enhanced conditionality. Non-compliance also hampers access of farmers to eco-schemes, that aim to stimulate agricultural practices that go beyond the requirements embedded in the enhanced conditionality. Member states now have to propose the details of this conditionality in relation to environmental and climate objectives.

Researching various scenarios

The researchers were commissioned by the Ministry of Agriculture, Nature and Food Quality to analyse the impact of a range of possible options for enhanced conditionality on the running costs of several representative types of agricultural enterprises in the Netherlands. “We considered the points at which requirements become so onerous that there’s no financial incentive to comply,” says Berkhout. “If the cost of compliance for farmers exceeds the benefits, there’s a chance they’ll opt out. You then lose some of the environmental benefits you’re trying to achieve through enhanced conditionality, and the farmer loses out on the payments.”

Significant expenses

The report concluded that four GAEC standards can have a strong influence on willingness to participate. These relate to standard (2) appropriate protection of wetlands and peatlands, standard (4) the creation of buffer strips along watercourses, standard (8) crop rotation and standard (9) minimal allocation of agricultural land for non-productive purposes. A good example, according to Berkhout, is starch cultivation. “Our research found that for farmers growing potatoes for starch production, complying with the conditionality removes the incentive to take the payment. This could have an impact on the area of starch potatoes and hence on the AVEBE starch processing cooperative.”

Under certain options, around 90 dairy cattle businesses based on peatlands would also be faced with relatively high costs, averaging around 120 euros per hectare. Organic farmers are currently exempt from the requirement to establish an ecological zone, but could face a significant cost under a scenario where they too are required to establish a buffer strip. The same applies to vegetable growers and any field crop businesses with less than 15 hectares. If these businesses can grow cover crops or protein crops, then that will probably be a more cost-effective form of compliance.

Considering other approaches

It’s useful to consider the ultimate objective behind a standard and look at whether there are other ways of achieving that objective at a potentially lower cost. Some of the options in the report have very significant economic impacts, which creates the risk of businesses not participating. The question is whether this is balanced out by the benefits of achieving environmental and climate objectives. “The research options are pretty complicated,” says Berkhout. “You might wonder whether they would actually deliver any impact. Make it less complicated, with simpler measures, and think about ease of implementation. If complexity is built in from the start, there’s a good chance you’ll miss your target.”

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