Member State choices on Pillar 1 implementation revealed

The Commission has published details of Member State decisions on aspects of Pillar 1 implementation on their website. An overview document outlines the requirements of the different Pillar 1 measures and a series of slides outline the decisions taken in relation to: the basic payment (or Single Area Payment); the greening measures; the redistributive payment; support in areas with natural constraints; and coupled support. In addition the decisions by Member States on transferring funding between Pillars are outlined. The information provided is a summary of the notifications provided by Member States to the Commission and represents the state of play as at 23 January 2015. The slides make clear that the information is ‘without prejudice to any finding in respect of their compliance with the regulatory framework’. It should be noted that Member States’ decisions on Pillar 1 are not subject to approval by the Commission, with two exceptions, namely: situations where Member States want to allocate more than 13 per cent of the Pillar 1 envelope to voluntary coupled aid; and the proposed equivalence measures for greening.

Flexibility between Pillars

Member States can opt to transfer up to 15 per cent of their Pillar 1 national envelope to Pillar 2 to increase the funding available for their Rural Development Programmes. Equally they can decide to transfer up to 15 per cent of their Pillar 2 budget back to Pillar 1. There are a number of countries which are permitted to transfer up to 25 per cent back to Pillar 1.

Pillar 1 to Pillar 2: Positively, 11 Member States (BE, CZ, DK, DE, EE, EL, FR, LV, NL, RO, UK) have chosen to transfer money away from direct payments into the European Agricultural Fund for Rural Development (EAFRD). This amounts to a total of €6,382.6 million over the programming period. Estonia and the UK (most regions) have opted to transfer the largest proportion, with Estonia choosing to transfer the full 15 percent from 2018 onwards. France will transfer 7.5 per cent each year. Other countries are transferring less than 7 per cent, with a number in the 2-4 per cent range.

Pillar 2 to Pillar 1: Disappointingly, five Member States have chosen to transfer money away from their rural development programmes to top up their direct payments (HR, HU MT, PL, SK). The total funds transferred in this direction amount to €3,358.3 million over the whole period. Hungary and Croatia are transferring the full 15 per cent, Poland transferring the full 25 percent and Slovakia transferring 21.3 per cent. Only Malta is transferring a relatively small proportion (0.8 per cent in 2015 rising to 3.8 per cent by 2020).

The net result of these transfers over the six year period for the EU-28 is a transfer of €3 billion from Pillar 1 to Pillar 2. Member States can review their decisions in 2017 for the years 2018 and 2019).

Greening measures

Despite heated discussions during the reform on the need for flexibility to tailor measures to national circumstances, only five Member States have taken advantage of the ability to do this by using the ‘equivalence’ mechanism (FR, NL, AT, PL, IE). France and the Netherlands are doing so using certification schemes, whereas Austria, Ireland and Poland have introduced equivalent practices in their agri-environment measures. Equivalent measures are mainly used as alternatives for the crop diversification measure, with France introducing a certification scheme permitting winter cover practices (mulching) in maize monocultures and Ireland permitting winter cover on cropped areas. These equivalent practices are still subject to approval by the Commission, due by the end of February.

In terms of the implementation of Ecological Focus Areas, Member States could choose the number of ‘types’ of EFA that farmers could use to make up their five per cent area. Nearly half of Member States opted for as many of the elements as were relevant in their country, with only six Member States (AT, FI, LT, NL, SI, ES) restricting the list significantly (to between 2 and 4 elements). The most popular element to be chosen, unsurprisingly, is nitrogen fixing crops (27 Member States), with land lying fallow and at least one of the list of landscape features the next most popular (26 and 23 Member States respectively). The number of Member States choosing the other elements is as follows: Short rotation coppice (21); Catch crops (20); Buffer strips (19); Afforested areas (13); Agroforestry (12); Strips along forest edges - with production (8) and without production (11); and Terraces (8). Only two countries (NL and PL) are planning to implement EFAs on a collective basis.

There has been considerable controversy over the inclusion of nitrogen fixing crops within EFAs. The regulations state that Member States should lay down rules to avoid increased nitrogen leaching, deterioration in water quality or compromise biodiversity objectives, where this option is used. The detail of these justifications is not available but the Commission imply that the information provided is of varying levels of detail. Very few Member States have specified limits to fertiliser and pesticide inputs for these crops. The number of crops permitted in each Member State varies from between 4 and 19 crops. The most popular crops include: faba bean (all Member States), pea (26), alfalfa (25), lupin (23) and clover (23). Soya is also relatively popular from information seen from other sources, although this is not highlighted in the Commission’s summary.

For the Permanent Grassland measure, 23 Member States are set to implement the general requirements at a national level, the remainder (DE, FR, BE, UK) will maintain the ratio at a regional level. Malta does not have any permanent grassland. Member States also have to designate environmentally sensitive permanent grassland within Natura 2000 areas which may not be ploughed and may designate other areas outside Natura 2000. In terms of the areas within Natura 2000 areas, only eight Member States have designated all permanent grassland within these areas, five have designated between 50% and 100% and six have designated less than half the grassland area. Only four countries will designate grassland outside Natura 2000 areas – so far it is known that Luxembourg will designate permanent pasture and wetlands in environmentally sensitive areas and in the UK, Wales will protect SSSIs where they fall outside Natura 2000 areas – very few in practice.

Voluntary Coupled Support

All Member States apart from Germany have chosen to use voluntary coupled support in one form or another. In the UK, only Scotland has opted to do so. The total value of such support averaged across the EU-28 is approximately €3.8 billion in 2015 or 10 per cent of the total direct payment envelope for the EU 28.

Eleven Member States have chosen to allocation the maximum percentage of 13 percent to coupled support, with nine of these also using all or part of the additional 2 per cent to support the protein crop sector. Nine countries have chosen to allocate less than 8% of their direct payment envelope to coupled support: (IE - 0.2%, NL -0.5%, LU -0.5%, UK (Sc) – 1.7%, AT – 2.1%, DK – 2.8% , EE – 4.2% , EL – 7.4%, CY- 7.9%). 11 MSs to allocate 13%. Four countries have been given special allowances to allocate more than the 15 per cent permitted in the regulations. These are Belgium (17%), Finland (20%), Portugal (21%) and Malta, with a massive 57%.

Most coupled support is being provided to the beef and veal sector (24 MS, 42% of total , €1.7 billon in 2015); followed by milk and dairy products (19 MS, 20% of total, €0.8 billion), sheep and goatmeat (22 MS, 12% of total, €0.5 billion), protein crops (16 MS, 10% of total, €0.4 billion), fruit and vegetables (19 MS, 5% of total, €0.2 billion) and sugar beet (10 MS, 4% of total, €0.15 billion). No support has been allocated for cane and chicory, short rotation coppice or dried fodder.

Areas of Natural Constraints

Member States (or regions) are permitted to grant an additional payment for areas with natural constraints (as defined under Rural Development rules) using up to 5 per cent of their national envelope. In practice only Denmark has chosen to do so, to provide support to the Danish islands.

Basic Payment Scheme

The 10 countries currently applying the Single Area Payment Scheme (SAPS) intend to continue to do so until 2020. Of the remaining 18 countries, only six have decided to move to a regionalised means of operating their basic payments (DE, EL, ES, FR, FI, UK (all regions except NI)). Only two countries have decided to provide their farm payment in the form of a lump-sum equal for all farmers (Latvia and Portugal). In terms of the speed at which Member States will converge towards a national or regional flat rate payment, four countries/regions are planning to do so by 2015 (DE, FR-Corsica, MT and UK-EN), five by 2019 (NL, AT, FI, UK (Scotland and Wales) and Sweden by 2020. The other Member States have opted for ‘partial convergence’ by 2020. Eight of these have opted to limit the reduction in the value of payment entitlements that are above average to 30 per cent of their initial unit value (EL, ES, FR-except Corsica, HR, IT, PT, SI, BE).

Reduction of payments

Member States are required to reduce basic payments above €150,000 by at least 5%, unless at least 5% of the national envelope has been allocated to the voluntary redistributive payment. This is where Member States can use up to 30 percent of their national envelope to redistribute it to farmers on their first 30 hectares (or up to the average farm size if higher than 30 ha). Eight countries have chosen to apply this redistributive payment (BE, BG, DE, FR, HR, LT, PL, RO) of which six have decided therefore not to apply a reduction on payments (all except Bulgaria and Poland). In total 15 countries chose to apply only the minimum reduction of 5% on receipts above €150,000. Four Member States have introduced a tiered system of payment reductions (BG, IT, HU and the UK (Scotland and Wales). Nine Member States have applied a 100% reduction on payments (i.e. capped payment receipts) at different levels between €150,000 and €600,000. Of these, BE (Fl), IE, EL, AT, PL and UK (Northern Ireland) will cap payments at €150,000. In other countries a higher cap has been imposed as follows: above €176,000 (HU), €300,000 (BG, UK (Wales)), €500,000 (IT); and €600,000 (UK (Scotland)). These reductions are estimated to equate to approximately €558 million for the 5 years 2015-2019 around €112 million/year). This funding is intended to remain in the Member States where it has been generated and be made available as support for measures funded under the EAFRD. The details of what the implications of this are for Rural Development Programmes in the countries concerned is not yet available.

Conclusions

This summary serves to reinforce what commentators had already anticipated, namely that the environmental potential of the CAP reform, insofar as Pillar 1 is concerned, is extremely limited. Member States’ choices for implementing greening are particularly disappointing and unlikely to bring about much added value for the environment. The scale of use of voluntary coupled payments is concerning. Although this measure may be environmentally beneficial where it is maintaining extensive forms of production that are of High Nature Value, in other cases there is less evidence as to its benefits and it may contribute to environmental pressures in some circumstances. Finally, although there is a net shift in resources to Pillar2 the fact that five Member States have chosen to shift funding from their rural development budgets to prop up their direct payments is a retrograde step, particularly given that the majority of these have chosen to shift the maximum possible. Close attention will need to be paid to the rural development programmes in these countries to ensure that the remaining funding is delivering maximum added value.

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PUBLICATION DATE

13 Feb 2015

AUTHOR

Kaley Hart