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Introducing Direct Payments in Central European Countries

EU Modelling Workshop New Challenges in Modelling EU Agriculture and Agricultural Policy. Introducing Direct Payments in Central European Countries. Martin Banse Institute of Agricultural Economics University of Göttingen. Table of Content. How are Direct Payments Modelled in ESIM

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Introducing Direct Payments in Central European Countries

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  1. EU Modelling WorkshopNew Challenges in Modelling EU Agriculture and Agricultural Policy Introducing Direct Payments in Central European Countries Martin Banse Institute of Agricultural EconomicsUniversity of Göttingen

  2. Table of Content • How are Direct Payments Modelled in ESIM • Scenario Assumptions • Results of the Different Accession Scenarios • Conclusions or ‘What needs to be done?’

  3. CAP Policy Instruments in ESIM

  4. CAP Policy Instruments in ESIM

  5. How are Direct Payments Modelled in ESIM: • Supply is modelled by separate herd/area and yield function • For livestock the herd function is affected by direct payments Hlvst,c = f (PPlvst,c, EDPlvst,c, capcc, wagcc) • For crops the yield function is affected by direct payments EAcr,c=f (PPcr,c, EDPcr,c, capcc, wagcc, sac, tac)

  6. Direct Payments in ESIM (Crops): EAcr,c=f (PPcr,c, EDPcr,c, capcc, wagcc, sac, tac) where EDPcereals,c is the direct payment per ton of actual produce per hectare, dpcEU is the direct payment for cereals per ton of base yield, erEU is the exchange rate vs. USD, erc is the exchange rate of country c bycc is the base yield and Ycereals,c is the actual yield.

  7. Direct Payments in ESIM (Crops): • dpc are defined as an amount of € per ton of base yield for cereals (byc), which is the average weighted cereal yield of 1989 to 1991 of the EU-15. • For the CECs the base yield is obtained by averaging the yields of three years prior to accession. • The payment per hectare is the simple product out of these two factors. • For modelling purposes the original formula as applied in the CAP is adjusted for the actual yield, i.e. actual payments per ton of produce are applied

  8. Direct Payments in ESIM (Livestock): Hlvst,c = f (PPlvst,c, EDPlvst,c, capcc, wagcc) EDPlvst adjusts the policy parameter bound to heads to a payment per ton of actual production

  9. Budgetary Calculations: • ESIM generates projections only for net expenditure on trade measures, compensatory and headage payments. • Conversion factors to include expenditure on administration, storage and policy measures not modelled in ESIM • To calculate total FEOGA spending after accession projections on commodities not included in ESIM (goat and sheep, vegetables, tobacco)

  10. Scenarios: • Status Quo EU-15: No Accession • Status Quo EU-27: Accession to the EU in 2005 (Bulgaria and Romania in 2007) under current acquis • Moderate Reform EU-27: Threshold for structural aid (80% of av. GDP) and co-financing direct payments • Substantial Reform EU-27: Threshold for structural aid (90% of av. GDP) and phasing out of de-coupled direct payments

  11. Scenario Results (in Mio. €, 2013)

  12. Further Information:Ecomomic Bulletin # 10-2001 of DIW (German Institue of Economic Research)available under: www.diw.de

  13. Conclusions or Open Questions • Direct payment modelled as component of herd/yield function • Other approaches? • Even under fully de-coupled direct payments production incentive?

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