The new CAP reform can deliver much more green action in the agricultural sector

CONCITO has analyzed the effects of the new CAP reform in Denmark, focusing on innovations like the voluntary subsidy schemes for on-farm measures, known as eco-schemes, and enhanced green requirements (GAECs). These are green measures that farmers must adhere to receive full direct payments.

The Common Agricultural Policy (CAP) is a cornerstone of the EU's efforts to support and regulate the agriculture sector, and it has been renegotiated multiple times to address new challenges. The latest reform, covering the period from 2023 to 2027, aims to enhance environmental, climate, and biodiversity action in the agricultural sector. However, these improvements have not yet occurred on a large scale.

"The EU has established ambitious targets for biodiversity, the environment, and climate. The new agricultural policy should assist the agriculture sector in contributing to Europe's overall green transition. However, the current outlook is discouraging, and there is a pressing need for policymakers in the new European Parliament to commit fully to a green effort to align agricultural policy with the green agenda," says Simone Højte, project manager and author of the report at CONCITO.

Limited impact of eco-schemes

The study shows that the design and implementation of the eco-schemes have been problematic. Only 60% of the eco-scheme funding has been applied for, and approximately 60%, corresponding to €37 million, of that has been allocated to finance existing practices, thus failing to produce additional environmental effects in the sector.

The first year of implementation yielded only a 1% reduction in agricultural greenhouse gas emissions and contributed 9-14% to the target set by the Water Framework Directive. Moreover, the biodiversity measures implemented could have as many negative impacts as positive ones.

This minimal effect underscores a significant need for the European Commission to enhance the governance framework of the CAP. Additionally, the Commission should assess and evaluate the impact and quality of these CSPs on climate and the environment annually, rather than waiting until the planned ex-post review in 2031.

“The way the European Commission is planning to monitor and evaluate the implementation of the CAP poses a significant risk, as it allows for an extended period of undetected inefficiency, unaddressed environmental impacts, and misallocation of resources,” says Simone Højte.

Strong economy in the agricultural sector alongside new green measures

Denmark was one of only three countries that fully implemented all the GAECs, including GAEC 8—a conditionality that requires farmers to set aside 4% of their land as non-productive. In response to widespread protests by farmers across the EU, the European Commission proposed the removal of this conditionality by March. However, CONCITO's analysis shows that the Danish agricultural economy significantly improved in 2023, despite the full implementation of GAECs and eco-schemes. Both crop and land prices have been steadily increasing, while farmers' debts have decreased.

“The example from Denmark shows that implementing enhanced conditionality (GAEC 8) does not prevent improvements in the agricultural economy. This raises questions about the necessity of removing the enhanced GAEC 8,” says Simone Højte, project manager at CONCITO.

The need for new innovative solutions

The analysis highlights significant structural issues within the CAP, such as insufficient environmental ambition, complex implementation, and the presence of conflicting interests and competing objectives. In response, CONCITO stresses the necessity for a more comprehensive and effective agricultural policy mix in the EU. This policy mix should include substantial reforms of the CAP, such as phasing out direct payments and coupled support, and introducing an agricultural emissions trading system, among other initiatives.

“There is a pressing need for innovative solutions, both within and beyond the CAP, to address the numerous challenges facing the agricultural sector. The upcoming European Parliament elections present a prime opportunity to place these reforms on the agenda and ensure a more sustainable future for European agriculture,” states Simone Højte.