Finances
Background and Basics
Since its origin in 1962, the intention of CAP has been to support farmers income and motivate them to achieve a higher production rate, with the ultimate goal of meeting the food demand. The success was so great that at some point the EU started to produce too much of certain products. In addition, people were becoming aware of the potential negative effects of intensive food agriculture. Thus, in 1992 – 30 years after the foundation of CAP – the first major reform took place [17].
An essential part of the reform in 1992 was that the amount of support for certain products was gradually reduced. To prevent a corresponding drop in the income of farmers, the direct payment system was introduced. At the time, direct payments were linked to historical levels of production and were in addition designed to promote environmentally friendly farming practices. Since then there have been multiple reforms providing farmers more freedom to produce according to market demand and thus less focus on historical levels, and applying stricter environmental and animal welfare rules [17].
As much as 72% of the current EU farm budget goes to direct payments. On average, famers receive about €267 per eligible hectare [17].
According to the EU, in 2015, farms benefitting from direct payments covered about 90% of the land actually farmed [17]. Thus, it appears that CAP ensures stability not just for farmers, but for the whole food industry of the EU. However, Jennifer Hauck – a social scientist and an expert on biodiversity and agriculture – states that CAP is not doing as well as intended when it comes to supporting (particularly small) farmers financially. One can clearly see the consequences of CAP in the statistics on the overall decrease of farms and farmers in Germany and the simultaneous increase in farm size, even though the loss of interest in farming and other factors also contributed to this issue.
Ben Haarman – president of LTO Noord Regio Oost in the Netherlands – believes that for CAP to contribute positively and promote more sustainable agriculture the budget needs to change. The farmers need to get enough money when they farm in a sustainable/ circular way because there is a possibility that they will produce less. Currently, there is a high demand for organic products but the budget to support farmers is far too small to meet those demands. Some farmers would like to see a change in CAP regarding this.
We need to realize that the focus on the economy when considering rewilding makes us emphasise the practical utility instead of the essential value of rewilding [1]. Many of the people interviewed for this project argued that measuring the outcome of environmental interventions should be done in terms of long-term outcomes, rather than financial benefits. In the long run, nature preservation is a benefit for both nature and our industries, but these long-term profits are often not considered.
How is Actually Works
In order to receive direct payments, farmers have to annually apply and prove that they meet certain conditions [17]. There have to be images, such as maps and/or satellite pictures, attached to the application. The conditions [17] can be read about in the blue box.
Thus, this implies that the farmers who receive these subsidies are indeed monitored and follow the terms. However, the word ‘alternatively’ in the last condition suggests one of perhaps multiple loopholes for farmers to still receive subsidies even though they don’t perform the exact activities that are expected from them. For instance, we came across an example where a farmer in Romania was using a part of his land only for ploughing purposes. That means that the farmer wasn’t growing any crops there, but was simply ploughing the field, maintaining the agricultural condition. Essentially, the farmer is following the conditions but still does not comply with the outcome which is expected, i.e. producing crops.
Conditions for direct payments
Minimum requirements
Area of land and/or the amount due cannot be smaller than a certain criterion, in general between €100-500 and/or 0.3-5 ha.
Active farmers
They have to exercise agricultural activities.
Have agricultural land which is used for agriculture
Must show that they use the agricultural land for some form of agricultural activity. Alternatively, the land must be maintained in good agricultural condition.
In the EU there are around 11 million farms. Today the food sector in the EU provides about 44 million jobs [17].
Hauck conducted a study with farmers and the factors which influence their decision making. She found that economic factors are clearly present. This is understandable as they are trying to earn a living, which might be the case for the farmer in the example above. Farmers have a lot of economic issues, regardless of the support from CAP, so even though many interviewed farmers care about the environment, their priority is to survive.
According to Trees Robijns – a CAP researcher and EU policy officer – it appears that farmers want to keep the money flowing with as little effort as possible. This leads to opposing goals and views when it comes to climate and biodiversity.
To change the decision-making process we need to change the mentality of farmers and their customers. Somehow we should teach and show both farmers and consumers what is happening to their land due to the long term use of their current practices [9]. Otherwise, farmers will continue trying to find the loopholes to provide for themselves, and it’s their right to do so. Essentially, they are entrepreneurs who are looking for the best practices to support their income. Durable agriculture is especially important in countries where farming is just now starting to become heavily industrialized.
I sometimes get the impression that conservationists think that farmers get up in the morning and think “how can I destroy some biodiversity today”. This is not the reality we found. When interviewing farmers we found that many of them care a great deal about their environment.
-Jennifer Hauck
Payment Schemes
Each member state can combine different payment schemes [17], and in that way adapt the direct payment system to their national context. All member states have to apply the three following schemes: basic payment, green payment, and the young farmers' scheme. Additionally, the member state can choose to apply one or more of the following payment schemes: voluntary coupled support, support for natural constraints, and redistributive payment. Alternatively, the member state can choose to allow small farms to use the small farmers' scheme (SFS) instead of the traditional combination of schemes. To learn more about the schemes and their criteria you can click here. We recommend you to read about the effects of the green payment scheme, as this has the most relevance to our topic, and also take a look at the SFS. You can learn more about these two schemes specifically on the page 'Link to Biodiversity'.
