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The CAP and public goods

SFER seminar 22 nd May 2013 AgroParisTech The CAP and public goods Allan Buckwell, abuckwell@ieep.eu. The CAP and public goods. The changing purpose and methods of the CAP Where did the public goods story come from? What are the rural, land-based, public goods?

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The CAP and public goods

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  1. SFER seminar 22nd May 2013AgroParisTechThe CAP and public goodsAllan Buckwell, abuckwell@ieep.eu

  2. The CAP and public goods • The changing purpose and methods of the CAP • Where did the public goods story come from? • What are the rural, land-based, public goods? • Current attempt to integrate them into the CAP • Is it succeeding? Why not? • Future options for securing public goods?

  3. Changing purpose & methods of the CAP • A39 – the five objectives – subsequently tempered by Goteberg (sustainable development) and Lisbon (smart inclusive green growth). • Initial method was high and stable prices: intervention, variable import levies & export subsidies (1968-late ‘80s). • Agricultural policy was for farmers narrowly defined. • Start of switch from price to income support (1992) • Creation of two pillar CAP with Rural Development (2000) • Decoupling & consolidation to Single Payment System (2004 & 2007), shifting resources P1  P2 • Now fragmenting & diversifying P1, diminishing P2 (2014)

  4. Where did the public goods story come from? • Ideology,observed problems: over supply – trade tensions and emerging evidence of the environmental market failures • From environmentalists, not farmers, supply or food industry • Refinement of the unsuccessful ‘multifunctionality’ as a motive for farmer support • Growing awareness of the pervasive market failures surrounding land management • Scale of negative externalities: water, air & soil pollution • & positive externalities: biodiversity & cultural landscape • EU agriculture is currently unsustainable

  5. The usage of the concept • Formal economic definition of public goods: non-excludability and non-rivalness in consumption • These concepts are elastic, • degrees and costs of exclusion, • degrees of jointness between the public & private goods • Groping for the right language: PGs, externalities, depletion of natural capital, non-provisioning ecosystem services • Most examples are environmental. Some social public goods, e.g. rural vitality, & avoiding land abandonment • Controversy whether food security is a public good • Strong temptation amongst interest groups to widen still further: public good becomes public benefit

  6. Degree of publicness in Public Goods

  7. DG Agri Study on Public Goods from EU Agriculture (IEEP)

  8. From identification to action • Existence of PGs implies some kind of collective action for their optimal delivery • Reluctance to concede taxpayer responsibility • Because PGs become an excuse to continue subsidies • Incidental delivery • Marketised delivery • PES – payment for environmental service • Public payment for public goods a last resort? • Principles for the payments? Direct costs + income forgone.

  9. Environmental target, reference levels and farmers’ optimum

  10. Integrating public goods into the CAP • Cross compliance • Agri-environment schemes • Less favoured area supports and A68 • The Ciolos proposals: • Big stress on Greening; public goods, more sustainable agriculture, soil, water, climate and biodiversity protection • Is this pure cynicism? • Key strategic choice was to green P1 Why? • 30% of P1 is a big statement

  11. Environmental services expand into the CAP

  12. The greening proposals • Greening principles: • compulsory, all farmers, simple, generalised, non-contractual, annual. • Greening actions • Cross compliance • Crop diversity (3 crops) • Maintaining permanent grassland • Ecological Focus Area (7%) • Strengthening P2, raising the threshold, 25% of exp. • Innovation and knowledge exchange • Payment principles are crude

  13. Proposals are being substantially diluted • Note the narrowing definitions of agriculture; agricultural activity & active farmer • Watering down of the greening • Non inclusion of soil carbon protection in XC • CD – thresholds changing, more exemptions • PP – farm level or not? 2014 base • EFA – 3 or 5%, some non-ecological, 80% farms exempt • Permitting double funding of same actions in both pillars • Proposal to allow 25% P2 funds to switch to P1 (in nMS) • Status of the 25% of RDR for agri-env related measures • The European Council’s larger cut to P2 funds • Conclusion: small political appetite for Public Goods (?)

  14. Why is this happening? • The global food crisis and resurrection of food insecurity • First reform with nMS – redistribution dominates • Farmers’ organisations: rhetoric vs. reality • Inhibitions really to grasp ecosystems service logic • Reluctance to accept environmental limits • Reluctance to accept Pillar 2 logic (multi-annual, programmed, regionally defined, menu driven, co-financed) • Institutional structures: DG Agri + COMAGRI + Ag Council is incapable of widening the remit of agriculture

  15. Future options for securing PGs • Political realities • Farmer power within the CAP has increased with nMS • Co-decision: weakened ability of Commission to steer rational reform, EP plenary ineffective on technical matters. • Austerity and the limits of the EU budget • Lost decade; environment downgraded in priorities • Balance of competences review (UK) – should agricultural policy stay with the EU? 1 CAP or 28 APs? • Fragmentation of SPS, regionalisation  subsidiarity • Transboundary nature of nature + jointness  commonality • Wider landscape delivery? How to integrate given individual farmer contracts?

  16. The 2020 reform of the CAP? • Food insecurity implies stronger demand for PGs – and higher cost of delivering them. • But is the CAP the right vehicle? • Make Pillar 1 greening work? Co-finance Pillar 1? • Resurrect shift to Pillar 2? • Abolish the distinction between the pillars – there is no clear principled distinction anyway • Change the institutional structure: merge DG Agri and DG Enviro, COMAGRI and COMENV and the two councils

  17. Beyond the CAP • Private provision of public goods, privately paid • Marketed provision linked to food, organic, integrated, welfare friendly • Willing voluntary provision • Habitat markets, flood protection, C sequestration

  18. In short • Two decade build-up of strong rhetoric of the CAP switching from the marketed private goods to non-market public goods. • But reality does not match the rhetoric • The task is genuinely complex and place and farming system specific • If the CAP cannot deliver, what can? • No answer implies continued degradation of EU natural environment

  19. Thank youAbuckwell@ieep.eu www.ieep.eu IEEP is an independent not for profit institute dedicated to advancing an environmentally sustainable Europe through policy analysis, development and dissemination.

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