CAP Reform Profile - Austria
1 Introduction: Austria’s Position on the Future of the CAP
The Austrian government is in favour of retaining the CAP largely in its current form after 2013. Austria is against a renationalisation of the CAP and is opposed to a complete liberalisation of agricultural markets. In particular, the government is keen to retain a strong Pillar 1, which provides income support for farmers through direct payments and measures intended to stabilise agricultural markets. Austria also has a strong commitment to rural development expenditure which accounts for nearly 60 percent of all CAP expenditure in Austria (high by EU standards) and is mainly directed to agri-environment and less favoured area schemes.
The main agricultural policy priority of the Austrian government is to protect and maintain Austria’s structure of relatively small agricultural holdings, especially in ‘mountain’ and ‘other’ less favoured areas. Such holdings are considered key to maintaining sustainable, multifunctional forms of agricultural production throughout the country. As a means of achieving this, the aim of Austrian policy is thus to ensure the competitive production of high quality food, the protection of the environment, and the maintenance of cultural landscapes, which are especially important for tourism.
2 The Structure of Austria’s Agricultural Sector
Austria’s agriculture is dominated by relatively small family farms. In 2007, approximately 54% of farmers worked part-time (i.e. these farmers spend more than half of their labour hours on non-farming activities). Direct payments constitute an important part of many farmers’ income. In total, 90% of Austria’s surface area (83,871 km²) is used for agriculture and forestry, with about 43% of this area classified as agricultural land. The average Austrian farm size covers less than 19 hectares of agricultural land.
A general consensus in Austria is that its agricultural sector cannot compete on open markets in terms of volume [of production]
66% of all Austrian farms are situated in areas designated as mountain or other less favoured areas. In mountain areas, the average farm size is less than 14 hectares. Compared to other EU Member States, Austrian farm sizes are larger those found, on average, across the EU-27, but smaller than those found in the EU-15 (around 12 hectares and 21 hectares respectively).
A general consensus in Austria is that its agricultural sector cannot compete on open markets in terms of volume (but not the quality) of food production. This is due to the structure of holdings and the physical environmental and climatic handicaps associated with production in the less favoured areas. The strategy of government and of the agricultural sector as a whole has thus been to focus mainly on the production of high quality food.
Austria has one of the highest rates of organic farming in the EU, with about 13.5% of Austrian farms certified as organic compared to an EU average of 1.2% in 2006. In terms of area, organic farming accounts for around 15.8% of Austria’s agricultural land (excluding alpine pastures).
The policy of opposing the cultivation of GMOs is thought to enjoy widespread public support in Austria
An issue which has had a high profile in Austria relates to the cultivation of crops containing genetically modified organisms (GMOs). Historically, there has been a broad consensus amongst Austrian parliamentary parties that the cultivation of GMO plants should not be allowed, a stance which has often resulted in conflict with the European Commission, which authorises the use of certain GMOs for cultivation within the EU. For example, a recent Commission Decision forced Austria to lift a ban on the cultivation of genetically modified maize MON 810 (Monsanto) and T25 (Bayer). The policy of opposing the cultivation of GMOs is thought to enjoy widespread public support in Austria, whilst, in contrast, perceived support for GMO cultivation by the EU is often cited as creating a major source of resentment against the EU institutions.
Agriculture accounts for around 2% of Austria’s GDP but nearly 5% of the national labour force. Despite its relatively small direct contribution, as a proportion of economic output, agriculture nonetheless plays an important role in Austria’s national and cultural identity. 78% of Austria’s population live in areas predominantly classified as rural, and many people have a personal connection to agriculture, although there appears to be little public awareness or understanding of the basis on which CAP payments are made.
there is a general public sympathy for agricultural producers, which can be seen at a political level
Agriculture is considered to be the key activity underpinning the maintenance of rural livelihoods and landscapes, thus attracting tourism. Mountain farming, in particular, is often associated with the production of healthy food and the maintenance of landscapes. In contrast, agricultural production associated with more modern, typically intensive, production methods in the fertile lowlands of Austria is often associated with pollution or damage to nature.
Overall, however, there is a general public sympathy for agricultural producers, which can be seen at a political level. The farming lobby is quite influential and often seems to be stronger than environmental stakeholders. The Federal Ministry of Agriculture, Forestry, Environment and Water Management is responsible for implementing the CAP and related policies linked to agriculture and forestry.
3 A Strong Commitment to Rural Development
In 2007... 59% of total expenditure [on agriculture] was allocated towards rural development [Pillar 2 of the CAP].
A large proportion of Austria’s total agricultural budget (EU, and co-financing at national and Länder level) is allocated to rural development funding. In 2007, 37% of the agricultural budget was dedicated to Pillar 1, whilst 59% of total expenditure was allocated towards rural development (through EAFRD and associated national co-financing). In total, €7,822 million has been allocated to Pillar 2 for the period 2007-2013. In addition, 4% of total expenditure on agriculture is spent on a diverse range of nationally financed measures such as premiums for harvest and risk insurances and petroleum tax refunds.
Within the Austrian rural development programme, the majority of expenditure (€5,661 million, equivalent to 72% of Pillar 2 expenditure for 2007-2013) is on Axis 2 measures linked to environment and land management objectives. The main measures within Axis 2 in Austria are:
- compensatory payments for farmers in ‘mountain’ and ‘other’ less favoured areas; and
- the national agri-environment programme, known as ÖPUL .
Approximately 75% of all Austrian farms take part in the [national agri-environment] programme
The new ÖPUL programme began in 2007 and consists of 29 measures which aim to promote ecologically sensitive and extensive forms agriculture as well as maintaining endangered cultural landscapes and supporting organic production. The programme is open to all farmers throughout the whole country on a non-competitive basis and farmers are able to choose measures suited to their particular situation, although uptake of some basic measures is not optional.
ÖPUL has one of the highest participation rates for an agri-environment scheme in the EU. Approximately 75% of all Austrian farms take part in the programme, which means that 87% of Austria’s farmland is subject to some form of agri-environment management.
In 2007, around 65% of Austria’s agricultural area was supported by LFA compensatory payments. More than 70% of farms in receipt of LFA compensatory payments were located in mountain areas.
Expenditure on Axis 1 rural development measures is intended to improve competiveness in the agriculture and forestry sectors and accounts for 13.8% of rural development expenditure. Within Axis 1, the focus is on investments for farm modernisation, support for young farmers and the promotion of marketing.
The budget allocated to Axis 3 (dedicated to quality of life and diversification in rural areas) and Axis 4 (Leader) are relatively small: 8.7% and 5.5 % respectively. A significant programme intended to promote local agricultural products typical of certain regions in Austria - the so called “Genussregionen” – is financed partly through Axis 3 measures and partly through national funds.
4 Views on the CAP Budget
The retention of a strong Pillar 1... is viewed as important for the delivery of multifunctional agriculture.
Austria is a net contributor to the EU budget and has a relatively conservative outlook with respect to reforming the CAP budget. The government’s position is that the total budget for the CAP should be maintained based on the current two pillar system.
The Austrian Ministry of Agriculture takes the view that farmers, especially farmers in less favoured areas, cannot compete effectively in a fully liberalised market. The retention of a strong Pillar 1, which guarantees a balanced, long-lasting and secure source of funding for agricultural producers, is viewed as important for the delivery of multifunctional agriculture. The Austrian government is wary of the effects of a movement towards further liberalisation of agricultural markets, and, in particular, reduction of support for market control measures and for direct payments. The potential for increased price volatility to impact negatively on the agriculture sector is of concern, especially in terms of impacts on future planning at farm level. This is often thought to have implications for the production of high quality food, the protection of the environment, animal welfare and the maintenance of landscapes. “Planning reliability” is a key phrase constantly used in the public debate.
In addition to the emphasis on maintaining a viable multifunctional agricultural sector, particularly in the less favoured areas, the government is broadly supportive of maintaining agricultural production throughout the country irrespective of farm size or type of production.
Whilst Austria’s position [in budgetary terms] towards Pillar 1 is quite clear, the government’s position towards Pillar 2 appears to be relatively ambiguous.
The role of cross compliance in ensuring a minimum level of benefit linked to the environment, biodiversity, animal welfare and food security is often cited as a justification for the maintenance of direct payments. Austria is very much in favour of simplifying the administrative burden of cross compliance regulations at farm level.
Whilst Austria’s position towards Pillar 1 is quite clear, the government’s position towards Pillar 2 appears to be relatively ambiguous. For example, Austria has opposed the introduction of higher rates of compulsory modulation whilst at the same time calling for an increase in rural development expenditure. The principle reason for this apparent contradiction appears to relate to national co-financing requirements for rural development expenditure. In Austria, this accounts for a relatively large proportion of CAP expenditure. The Austrian government is, therefore, in favour of a higher degree of EU co-financing for rural development, in order to reduce the financial burden on national budgets.
Nonetheless, Austria retains a strong commitment to a Pillar 2 which supports sustainable agricultural management and delivers environmental, social, economic and cultural benefits linked to the maintenance of traditional farming activities.
5 The CAP Health Check – Austria’s Reactions
Austria did not support the Commission’s original proposals for an increase in the rate of compulsory modulation. However, the final (lower) rates of modulation agreed were viewed as an “acceptable compromise” – not least because Austria has a low proportion of large farms and thus compulsory modulation only concerns the 36% of Austrian farmers who receive more than the €5,000 threshold for direct payments above which modulation applies.
Austria also intends to continue using historic reference periods, based on levels of production prior to decoupling, as the basis for calculating direct payments at farm level. It is argued that a transition towards a regional flat rate payment method, as advocated by the European Commission, would unnecessarily complicate matters and increase bureaucracy. In addition, it is likely that the application of a regional model would result in some redistribution of direct payments between farm types and regions. The Austrian Court of Auditors has suggested that small and extensive farms could, on average, experience noticeable losses of income as a result.
Austria has a special interest in dairy production, which relies, to a significant extent, on small family farms in ‘mountain’ and ‘other’ less favoured areas (there are about 43,000 dairy farmers in Austria). In many cases, there is little alternative to small scale animal husbandry and dairy in particular, due to the geographical and climatic conditions.
Austria lobbied intensely for accompanying measures to soften the impact of the abolition of milk quotas
As a result, the decision to phase out the milk quota system from 2015 has provoked emotional reactions. The government, as well as the farmers’ lobby, fear that the liberalisation of the EU dairy market will lead to a collapse in Austria’s milk production due to competition from producers in other EU Member States countries which are not subject to the same physical environmental and structural constraints on production.
It was argued that a large number of farms, especially those in the less favoured areas, would not be able to survive and that this would have consequences for the economy, employment, and the capacity to maintain current levels of food production (particularly in relation to quality, products of ‘origin’ and variety of products), as well as for tourism, linked to the maintenance of attractive agricultural landscapes. As a result, Austria lobbied intensely for accompanying measures to soften the impact of the abolition of milk quotas. Alongside the lobbying of other Member States, this resulted in the restructuring of the dairy sector being added to the list of “new challenges” to be addressed by Pillar 2 in future. In Austria, this has allowed the establishment of a new “milk fund” which includes a Dairy Cow Premium to be made available to farmers from 2010 onwards. Prior to this, the dairy sector in Austria will be supported by national measures funded through the CAP, such as the promotion of investments, indicating the importance attached to the dairy sector in Austria. The decision to allow Member States to retain the “Suckler Cow Premium”, linked mainly to beef production in mountainous areas, was also seen as another positive outcome of the Health Check negotiations.
6 Future Challenges for Agriculture in Austria
In addition to support for the dairy sector, addressing climate change is also viewed as a key “new challenge” from Austria’s point of view.
According to EU targets for production of renewable energy, by 2020 Austria will need to source 34% of its entire energy supply from renewable sources (compared to a target of 20% averaged across the EU). However, there is no concrete strategic plan on the table as to how Austria will be able to meet this target, although some sectoral approaches (including agriculture) have been drawn up by interest groups and taken forward by the government. The government is expected to elaborate a comprehensive plan in the coming months for climate and energy which addresses the challenges posed by climate change, lowers overall demand for energy and dependency on energy imports.
The production and use of biofuels plays a key role within the Austrian bio-energy sector. The Austrian government has set a target for biofuels (bio-ethanol and bio-diesel) to constitute 20% of all transport fuels by 2020 - double the EU target. However, at the moment domestic production of bio-ethanol is not sufficient to meet demand and thus imports from countries such as Hungary and Germany have been necessary to meet the shortfall.
the Austrian government is currently considering the options for reducing the impacts of the set-aside abolition on biodiversity
With this target in mind, the abolition of set aside, which has brought back about 95,000 hectares of agricultural land into production (2.5% of set-aside in the EU-27), may allow Austria to increase domestic biomass production. However, the abolition of compulsory set aside has been heavily criticised by some NGOs (especially BirdLife) on environmental grounds. In response the Austrian government is currently considering the options for reducing the impacts of the set-aside abolition on biodiversity through the promotion of uptake for certain agri-environment measures. Whilst the government has acknowledged the potential for competition between food and bio-energy production, it has repeatedly emphasised that food security (i.e. maintenance of Austria’s current agricultural production capacity) and sufficient production of high quality food and fodder remain the main priority.
Austria is also keen to develop further crisis management instruments for agriculture in addition to those already in existence, in order to address future risks and extreme situations linked to climate change as well as other challenges. It is envisaged that such a system could be co-financed by farmers, the state and EU funds in a public-private partnership.
Climate change mitigation is also used as an argument to support local food production chains, particularly those based in mountainous farming areas. This is justified on the basis that promoting strong regional markets, which add value to agricultural product chains, can reduce the need for transport and associated greenhouse gas emissions, as well as contribute to sustainable local economies. According to the Austrian government, the prevention and mitigation of climate change needs to be integrated into EU cohesion policy along with measures which provide added socio-economic value at the European level.
Darnhofer, Ika (2006) Organic farming at the heart of the rural development policy. The example of Austria [Organic farming at the heart of the rural development policy. The example of Austria]. Beitrag präsentiert bei der Konferenz: Organic farming and European rural development, Odense, Denmark, 30-31 May 2006; Veröffentlicht in Proceedings, Seite(n) pp. 712-713.
For anyone who is interested in Austrian agriculture: a lot of information and statistics can be found in the so called “Grüner Bericht”, i.e. “Green Report”, which characterises Austria’s agriculture from a statistical point of view.
OECD (2008) Environmental Performance of Agriculture in OECD Countries since 1990
27 Apr 2009
Hemma Burger-Scheidlin & Michael Proschek-Hauptmann
Hemma Burger-Scheidlin & Michael Proschek-Hauptmann are based at the Umweltdachverband in Vienna.