Estimating the Environmental Impacts of Pillar I Reform and the Potential Implications for Axis II Funding

Client:  Department for the Environment, Food and Rural Affairs (Defra)

Date:   2008

Partners:  ADAS and SAC Commercial

ADAS and SAC were commissioned by Defra and Natural England to assess the environmental impacts of reform to funding for farmers under the Common Agricultural Policy (CAP) ‘Health Check’. The context for this work is the Government paper ‘A Vision for the Common Agricultural Policy’, which considers what a sustainable model of European agriculture might look like. 

As part of the study, RPA analysed the potential impacts on flood risks and the implications for agri-environmental schemes.

Scope of the Study

The study involved three tasks:

• Economic Modelling: estimate the likely effects of Pillar I reform on agricultural production, including land use intensity and farm practices;

• Environmental Impacts: estimate the likely impact of these changes in agriculture on environmental objectives, including landscape, biodiversity, water quality, greenhouse gas (nitrous oxide and methane) and ammonia emissions, flooding etc.; and

• Agri-environment Measures: advise on the potential budgetary requirements for delivering a specified level of environmental quality through agri-environment measures under Pillar II.

The analysis addressed four scenarios for reform of the CAP:

• A) Business as usual (baseline);
• B) Removal of decoupled support;
• C) Removal of tariff barriers and other trade restrictions; and
• D) Combination of B and C. 

 

Impacts on Land Use

Significant changes in land use are forecast under all three policy reform scenarios. Even where forecast land use change is modest, there are likely to be marked changes in who is farming the land and under what business structure.

Significant areas of land will be ‘out of production’ under scenarios B and D, due to the loss of cross-subsidisation from Pillar I. In practice, it is likely that large areas of upland will only be farmed under environmental agreements. Forestry may be a viable option in an era of high energy prices.

Impacts on Flood Risk

 

The potential for significant impacts in terms of changes in flood risk is related to the area of land predicted to move out of agricultural production.  Since the end use of this land is not known, it is difficult to determine what the actual change in flood risk may be.

If land out of production was converted to high run-off risk uses, such as for instance developments without proper Sustainable Urban Drainage Systems (SUDS), then the flood risk is likely to increase.  If it was converted to moderate risk land uses, then flood risk would probably stay roughly the same.  If the land was put into low run-off risk use, such as grassland or forests, then flood risk could be reduced. 

Implications for Agri-Environmental Schemes

The cost of Pillar II is likely to increase under all reform scenarios:

Under scenario B, while the prices of many farm commodities is predicted to increase, the loss of the Single Payment would lead to extensive restructuring and a significant increase in ‘land out of production’, with a resulting increase in the need for targeted Higher Level Stewardship uptake.

Under scenario C, retention of the Single Payment limits the extent of restructuring with less ‘land moving out of production’ than under Scenario B. However, the overall impact is still expected to be an increase in the Pillar II budget.

Under scenario D, loss of the Single Payment and lower commodity prices will lead to substantial restructuring with a significant increase in ‘land out of production’ (15% in the lowlands and perhaps more in the LFA). The overall impact is expected to be a significant increase in the Pillar II budget, despite the lower unit cost of options.

Reform will also lead to spatial impacts, with an increase in ‘low input’ schemes in intensively farmed lowland areas. Pillar II budgets are likely to be concentrated in the areas of greatest need, notably the uplands and less productive lowland.  However, the main impact will be the loss of net income from farming activity across all rural areas.

 

Further Developments

The study informed discussions on the next round of reform of the Common Agricultural Policy (CAP), the ‘Health Check’.  These discussions are scheduled to be completed before the end of 2008.

Links

To access the report, click here.

The Defra website on CAP reform.

European Commission website on the CAP Health Check.