Elsevier

Agricultural Systems

Volume 104, Issue 2, February 2011, Pages 110-121
Agricultural Systems

Regional impacts of abolishing direct payments: An integrated analysis in four European regions

https://doi.org/10.1016/j.agsy.2010.07.003Get rights and content

Abstract

The direct payment system of the Common Agricultural Policy (CAP) provides income transfers to European farmers. Recently, several countries including England and Sweden have advocated the elimination of direct payments after 2013. The extent to which an elimination of direct payments would affect the land use dynamics in Europe including impacts on structural change and the environment has not been addressed in the existing literature. In this paper, we combine participatory methods, to analyze regional preferences for functions and effects of agriculture, and farm-level modeling, to assess the impacts of such a policy change on farm structures and land use intensities in four European regions located in Germany, Denmark, Italy and Poland, each with different socio-economic and biophysical characteristics. In each region, the entire farm population consisting of different farm types with different production orientations and land management types was modeled under the presence and absence of direct payments using a combination of agent-based and bio-economic modeling. We found that the initial characteristics of the regions, such as the historical farm structure and regional site conditions, greatly influence the impact of direct support elimination and cause regionally different development trends. The results for the four regions were summarized in four specific storylines that emphasize how much the diversity of European regions matters for future policy decisions. An explicitly regional focus is, therefore, argued to be crucial to complement future policy analysis.

Introduction

In recent decades traditional farming systems in many European regions have been replaced by modern and intensive production systems with associated negative impacts on the environment (Berger et al., 2006). In addition, the number of farms in Europe has continuously declined (Glauben et al., 2006, Breustedt and Glauben, 2007). Farm exits accelerate the growth of the remaining farms by redistribution of production factors. The declining number of farms not only has consequences for the agricultural sector but also for rural areas as a whole (Zimmermann et al., 2009). The loss of farms may lead to a depopulation of the countryside, which in turn affects the demand for services and the infrastructure of local communities (Ballas et al., 2006, Piorr et al., 2009).

The direct payment system of the Common Agricultural Policy (CAP) provides income transfers to European farmers. The existence of direct payments is justified by the need to provide income stability and compensation for higher production standards with regard to consumer protection, animal welfare, and environmental conservation compared to many non-European countries.1 Breustedt and Glauben (2007) provided empirical evidence that the CAP has reduced the structural change in agriculture during the last decades of the previous century through its price support and subsidy payment programs. Ongoing pressures from the WTO negotiations, criticism of its trade-distorting effects and also consumer concerns regarding the safety and quality of agricultural goods, however, have induced a continual reform process of the CAP (Beard and Swinbank, 2001, Potter and Burney, 2002, Mann, 2005). Changes based on the Luxembourg Agreement in 2003 and the most recent reform package (the “Health Check”) approved in November 2008 are underway, stimulating new discussions about the future of the CAP. Some EU countries, including the United Kingdom2 and Sweden, have, in the meantime, considered abandoning large parts of the CAP, including the direct payment scheme, which currently accounts for the largest share of the CAP budget (COM, 2006).

Several studies have analyzed the consequences of switching the CAP regime from coupled to decoupled direct payments (e.g., Beard and Swinbank, 2001, Matthews et al., 2006, Onate et al., 2007, Tranter et al., 2007, Uthes et al., 2008, Happe et al., 2008). However, the extent to which a possible elimination of direct payments would affect the land use dynamics in Europe on a regional scale including impacts on structural change and the environment has not been addressed in the existing literature. We refer here to farm structural change which is defined as the change of the number of farms within certain farm types over time (Zimmermann et al., 2009).

The aim of this paper is to analyze the consequences of such a proposal on the farming sector in four European case study regions. To achieve this aim, an integrated approach based on interdisciplinary work was developed within the EU research project MEA-Scope (2004–2007). The project analyzed the structural development and associated environmental effects of rural European regions in response to different policy scenarios (Piorr and Müller, 2009). Integrated assessment generally attempts to provide a systematic way to integrate knowledge across disciplines, scales, resolutions and degrees of certainty (Scrase and Sheate, 2002). Our proposed framework can be understood as integrated from a methodological point of view as it combines participatory methods identifying the regional demand for agricultural functions and effects, scenario techniques and analytical tools into one approach, as was recommended by Rotmans (1998). Conceptually, it seeks to integrate the economic, environmental and social dimensions of policy changes into a single analysis (see also Uthes et al., 2010a).

Section snippets

Methodological framework

The developed methodological framework was strongly influenced by the concept of multifunctionality (OECD, 2001). Multifunctionality has become a paradigm in EU policy and science (Van Huylenbroeck and Durand, 2003). A number of interpretations of multifunctionality exist that have been shaped by many different disciplines and institutions coming from e.g. agricultural economics, landscape ecology, or forestry. In its very narrow meaning, multifunctionality (latin: multi – many) means being

Relative importance of agricultural functions and effects

Table 3 shows the regional preferences for different agricultural functions and effects, as expressed by the mean budget allocated to each of the functions/effects. Regional differences for some functions/effects show great differences while other functions/effects are almost equally important in all four regions.

Social functions/effects, particularly related to the provision of jobs had the highest importance in the German region as a result of the very high unemployment rate (Table 3).

Discussion

In the German region, the total farm area and the number of farms decreased starkly in the absence of payments. Farms became larger, more intensive and abandoned particularly extensive livestock production. Livestock production, in general, is usually more labor intensive than the large scale arable production in this area and labor is an important cost factor. Therefore, these branches are generally the most sensitive ones, when direct payments are removed from the modeling system. These

Conclusions

The objective of this study was to analyze the impacts of abolishing direct payments on four European regions, in terms of a number of model-based indicators that were reflected against a number of regionally relevant agricultural functions and effects. To do so, we adopted a framework that combined participatory and analytical methods. The four regions are expected to behave quite differently in the absence of direct payments (cf. Table 6). Based on the four examples, it can be concluded that

Acknowledgement

This work was carried out as part of the EU funded project MEA-Scope (Micro-economic instruments for impact assessment of multifunctional agriculture to implement the Model of European Agriculture, Project Reference SSPE-CT-2004-501516) and is based on deliverables prepared for the project (www.mea-scope.org). The opinions expressed herein are the sole responsibility of the authors. The authors wish to thank the MEA-Scope consortium for helpful comments, provision of data and additional

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