Denis Boutin, Agricultural Economist, M.Sc. Direction des politiques en milieu terrestre

1. Reconciling Farm Support and Environmental Protection:Trends and ProspectsMacdonald Campus; April 5, 2005 Denis Boutin, Agricultural Economist, M.Sc. Direction des politiques en milieu terrestre Service agricole

2. Outline • Evolution of agri-environmental policies • Farm support measures and sustainable development • Environmental impacts • Effects on social equity • Designing agricultural support policies from a sustainable development perspective

3. sustainable development zone social equity environmental integrity Desired situation The Challenge of Sustainable Development in Agriculture economic profitability economic profitability social equity environmental integrity Current situation Reference : Adapted from Jacob, P. & B. Sadler, 1990 & MENV, 2004.

4. Outline • Evolution of agri-environmental policies • Farm support measures and sustainable development • Environmental impacts • Effects on social equity • Designing agricultural support policies from a sustainable development perspective

5. 1980 1985 Water and soil conservation 1990 Sustainable env. in agriculture 1995 2000 APF 2005 Highlights of QuébecAgri-environmental Policies LPTAQ Réseau-Rivières RPPEEPA 1st pork moratorium Degraded soil inventory PAAGF Concept of sustainable agriculture Plant protection strategy Agri-env clubs Sust. Dev. Policy (MAPAQ) Municipalities with a surplus CDAQ PAIA Pork agri-env plan RRPOA (AEFP) Bill 23 UPA agri-env strategy Agriculture conference IRDA Prime-Vert Environnement à valoriser Bill 184 BAPE Pig Commission Pork pause Québec Water Policy RRAO (AEFP & P-budget) ASP BAPE Orientations Support capacity (RRAO) Cross-compliance (FADQ)

6. Characteristics of QuébecAgri-environmental Policies • Main lines of interventions • Regulatory measures • Water protection; management of animal waste • Protection and development/planning of agricultural land • Accompaniment measures • Enhanced knowledge • Technology transfer, education and training • Financial support for farms • Research • Other measures in development • Environmental certification (1999) • Cross-compliance (2001) • Watershed management approach (2002)

7. Trends in Agri-environmental Policiesin Hog Production (2003*) * : measures already in place in 2003 Reference: Adapted from Debailleul & Boutin, 2004.

8. Major Trends inAgri-environmental Policies • Reinforcement of regulations • In intensive agricultural production areas • Production restrictions • Measures to further extensification & low-intensity farming systems • Agri-environmental payments (3 % of support in OECD) • Meeting regulatory requirements • Farming systems with higher environmental performance • Resources retirement (land or livestock) • Uses of economic instruments(cross-compliance, taxes/charges, etc.) • Others (certification, watershed management)

9. Levels of Québec Public Supportin Agri-environment • 70.2 million $ for Québec (2002-2003) • 2/3 of the total support in Canada • Average close to 30 $/ha (1999-2001) • Level of support comparable to that in the US • Manure storage facilities • Québec : 70 to 90 % of the construction costs • Europe : Denmark 30 %; France 65 % • USA : up to 75 % • Costs of agri-environmental policies • Negligible : 1 to 2 % of production costs for pig raising

10. “ To which extend agri-environmental policies are fixing problems created amongst other reasons by agricultural support policies ? ” OCDE, 2003

11. Outline • Evolution of agri-environmental policies • Farm support measures and sustainable development • Environment impacts • Effects on social equity • Designing agricultural support policies from a sustainable development perspective

12. Main support measuresfor Québec producers • Market price support • Tariff barriers (Supply control) • Payments based on output • ASRA (Québec Income stabilization insurance) • Payments based on input use • Refund of property taxes • Payments based on cultivated area / animal number • Crop insurances • Payments based on historical entitlements / overall farming income • CAIS program, CSRN, CSRA • Payments based on inputs / resources constraints • None

13. Some Considerations on the Link between Agricultural Support & Environment • Support that varies by production scale is more damaging to the environment • Support that uncouples payments from quantity produced is less damaging • Decreasing market price support measures generates a less intensive agriculture • Support will be more damaging if there is a “ lock-in ” effect : • based on the use of specific inputs or the use of specific technologies • offered only for specific productions

14. 69,1 53,6 Payments based on input use 8,5 8,5 Payments based on cropped areas / animal number 12,6 10,5 Payments based on historical entitlements / overall farming income 6,8 27,4 Payments based on input / resource constraints 2,9 0 Ranking of Farm Support Policiesaccording to their Environmental Impact Market price support Most harmful Payments based on output More neutral Beneficial * : data 2001 References : AAC, 2003b; Unisféra, 2003; Portugal, 2002.

15. “ Filtering the Policies ”and Evaluation of Environmental Impacts • Evaluate in conjunction with other elements of agricultural policies • Market price support accompanied by measures that limit production (e.g. dairy quotas) • “ Lock-in effect ” if the control favours certain crops or particular technologies (e.g. crop insurance) • Validation of the initial classification of the programs (e.g. refund of property taxes) • Other constraints resulting from agri-environmental policies and their application

16. Harmful Rather neutral Beneficial Classification of Agricultural Support Programs in Québec CAIS CSRN CSRA ASRA Prime-Vert Supply control Refund of property taxes Crop insurance

17. Report of the BAPE Commissionon Pig Production Recommendation 25 “ The Committee recommends that, in the pork production sector, the current agricultural income-stabilization insurance program (ASRA) be replaced by a global revenue protection regime for agricultural producers, that a maximum net revenue be protected and that this protection is applied regardless of volume, type or cost of production.” (translation)

18. Outline • Evolution of agri-environmental policies • Farm support measures and sustainable development (SD) • Environmental impacts • Effects on social equity • Designing agricultural support policies from a sustainable development perspective

19. Equity of the Distributionof Farm Support • Social equity: one of the 3 aspects of SD • Agricultural policies • Income support for farm households • A large part of the support does not reach farmers who need it • Most often the largest farming operations benefit the most from the subsidies

20. 23 % of subsidies go to 0.8 % of farms 44% of subsidies go to 6.4% of farms Lorenz Curve for Pork Production Cumulative % of the number of insured hogs produced cumulative % of number of farms raising hogs * Data 2002-2003

21. Recommendations of the BAPE Commission on Pig Production “ The Commission recommends that all agricultural income support programs … 26. Target people who work in a family farm or a farm of human dimensions. ” 27. Be available only to individuals, even for people who exercise agricultural activities by intermediary of a corporation. ” (translation)

22. The Objectives ofQuébec Agricultural Policy • 1960s and 1970s Socio-economic progress of farm households and development of agriculture • Early 1980 Nourrir le Québec • 1990s À la conquête des marchés • 2000+ Inclusion of agriculture in sustainable development

23. Outline • Evolution of agri-environmental policies • Farm support measures and sustainable development • Environmental impacts • Effects on social equity • Designing agricultural support policies from a sustainable development perspective

24. To Favour the Sustainable Developmentof Agriculture… “ One of the most important challenges will be the direct integration of the environmental aspect at the conception of the policies and programs. In agriculture, this involves eliminating or modifying agricultural policies that bring about incentives to not respect our natural capital […] and to integrate the environmental dimension as conditions to financing. ” (translation) Jacques Proulx, President of UPA Seminar on Sustainable Agriculture, 1990

25. Few Challenges to Meet • Better understand the relation between the environment and farm support policies • Develop an integrated vision of policies influencing the agricultural sector • “ The groups of farmers most favoured by the current farm support measures are those who most highly oppose their removal ” (OCDE, 2003)

26. To Favour the “ Sustainability ” of Agricultural Policies • Resort to several means • Diversify measures • BAPE Report : 58 recommendations • Leaders must be proactive • To mobilize the participants • Farm support reform • Necessary to reduce environmental impactsand improve social equity

27. Towards a “ Greening ”of Agricultural Support • Review of farm support programsby an environmental evaluation procedure • integration of the environmental aspectswhen designing policies • Progressive re-orientationof the most damaging support measures • towards less damaging support measures • towards agri-environmental programs • Anticipated benefits : • efficiency of agri-environmental measures • of costs to attain agri-environmental objectives

28. Thank you!