COUNCIL OFBrussels, 18 October 2011
THE EUROPEAN UNION
15640/11 ADD 10
AGRI 701 AGRIFIN 94 AGRIORG 184 CODEC 1701 AGRISTR 61
from: Secretary-General of the European Commission, signed by Mr Jordi AYET PUIGARNAU, Director
date of receipt: 17 October 2011
to: Mr Uwe CORSEPIUS, Secretary-General of the Council of the European Union
No Cion doc.: SEC(2011) 1153 final
Subject: Commission Staff Working Paper Impact Assessment Common Agricultural Policy towards 2020 Annex 4: Rural Development
Brussels, 12.10.2011 SEC(2011) 1153 final
COMMISSION STAFF WORKING PAPER
Common Agricultural Policy towards 2020
TABLE OF CONTENTS [[note: 1.]]BACKGROUND......................................................................................................... 4 [[note: 2.]]ACHIEVEMENTS AND CHALLENGES ................................................................. 5
2.1. Assessment of the current policy framework .................................................... 5
2.1.1. Overall assessment .............................................................................. 6
2.1.2. Farm investments................................................................................. 8
2.1.3. Agri-environment measures................................................................. 9
2.1.4. Key measures in axes 3 and 4.............................................................. 9
2.2. The role of agriculture ..................................................................................... 10
2.3. Challenges and opportunities for rural areas ................................................... 11 [[note: 3.]]FUTURE OBJECTIVES AND POLICY OPTIONS ................................................ 12
3.1. Main issues for the future ................................................................................ 12
3.2. Policy options .................................................................................................. 14
3.3. Alignment with Europe 2020 through priorities and associated targets.......... 16 [[note: 4.]]IMPACT ANALYSIS ............................................................................................... 16
4.1. Impact on the agricultural sector ..................................................................... 16
4.1.1. Adjustment scenario .......................................................................... 17
4.1.2. Integration scenario ........................................................................... 18
5.DISTRIBUTION OF RURAL DEVELOPMENT SUPPORT AMONG MEMBER STATES .................................................................................................. 27
5.1. Criteria for the distribution of support............................................................. 28
5.2. Assessment (for the integration and refocus scenarios) .................................. 30 [[note: 6.]]OTHER ISSUES ....................................................................................................... 30
6.1. EIP "Agricultural Productivity and Sustainability" ......................................... 30
6.2. Future delimitation of intermediate NHA ....................................................... 31
6.3. State aid aspects............................................................................................... 31
6.4. WTO aspects ................................................................................................... 32
Annex 4a Assessment of rural development policy in the current period (2007-2013)
Annex 4b Alignment with Europe 2020 on priorities and targets
Rural development is today Pillar II of the CAP taking up 20% of the CAP budget.1 The
policy has gradually evolved from supporting structural adjustment in agriculture to an integrated policy for the sustainable development of all rural areas in the EU. Moreover, in the Health Check of the CAP (HC), the policy benefited from additional resources earmarked for new challenges (climate change, biodiversity, water management, renewable energy, innovation and dairy restructuring), with broadband added to the list by the European Economic Recovery Package (EERP).
The EU added value of rural development lies in its contribution to the cohesion objective and in the fact that it addresses challenges which are fully or partially cross- border - such as climate change and the need for improved economic / environmental / social co-operation in rural areas. In fulfilling these missions, Pillar II usefully complements Pillar I. It should be noted that rural development policy is the major EU funding instrument for supporting environmental land management. The support for the policy from the EU budget in line with an objective of cohesion - assists Member States in achieving environmental goals that might otherwise be difficult for them to prioritize.
The policy operates on the basis of multi-annual programming where Member States / regions assume responsibility for shaping the policy in their territories. In the framework of strategic guidelines that set out common priorities at EU level, Member States design and co-finance rural development programs (RDPs) tailored to their specific needs; there are 94 national and regional programs operating in the current (2007-2013) period.
Each program consists of measures taken from a menu established at EU level that groups measures into three thematic and one methodological 'axes':
Axis 1: improving the competitiveness of agriculture and forestry (e.g. farm
investments, support to producer groups, training actions);
B EB GCZDKDEEEIEGRESFRITCYLVLTLUHUM TNLA TP LP TROSISKFISEUKEU-EU-EU-
Axis 1 (inc. Leader)Axis 2 (inc. Leader)Axis 3 (inc. Leader)
Main rural development measures programmed in the EU-27 in the current period
25 00020 00015 00010 0005 000
214 - A gri enviro nment payments (23.1%)
121 - M o dernisatio n o f agricultural ho ldings (11.1%)
212 - P ayments to farmers in a. with handicaps, o ther t. mo unt. a. (7.5%)
211 - Natural handicap payments to farmers in mo untain areas (6.5%)
123 - A dding value to agricultural and fo restry pro ducts (5.9%)
125 - Impro ving and develo ping infrastructure r. to dev. and adapt. (5.3%)
413 - Lo cal develo pment strategies. Quality o f life/diversificatio n (4%)
321 - B asic services fo r the eco no my and rural po pulatio n (3.2%)
322 - Village renewal and develo pment (3.2%)
112 - Setting up o f yo ung farmers (3%)
113 - Early retirement o f farmers and farm wo rkers (3%)
221 - First affo restratio n o f agricultural land (2.4%)
In addition, to ensure that all objectives are addressed in each program, there are minimum spending requirements per axis, while results are assessed under a common monitoring and evaluation framework (CMEF). The European Network for Rural Development (ENRD) brings together national networks, organizations and administrations active in the field of rural development for the purpose of collecting, analyzing and disseminating information and good practices.
provides a brief assessment of the current policy framework on the basis of evaluations and other available information.
See Annex 4a for a more detailed assessment.
2.1.1. Overall assessment
The strategic approach put in place in the current period has had a positive impact, as Member States have made considerable efforts to develop strategies on the basis of a SWOT analysis so as to best tailor their intervention to policy objectives. Still, there has been some evidence of path dependency in programming, as well as of lack of capacity of certain areas and groups to use rural development funding (though final spending amounts for the period 2007-13 are not yet known). Some Member States have struggled to set the right relationship between programmes and national strategy plans.
The economic, environmental and social policy objectives are often mutually supportive, as shown in the examples below:
Use of the farm modernisation measure to deliver environmental benefits - France, Champagne- Ardenne, `Plan Végétal pour l'Environnement' (PVE)
In France, the farm modernisation measure is being used to combat the environmental impact of agriculture by supporting investment in precision farming equipment. At a national level the focus of the PVE is to reduce pollution from pesticides and fertilisers and green house gas emissions; reduce soil erosion; reduce the pressure on the use of water resources; and improve energy efficiency at farm level. Investment in new equipment is intended to address these environmental issues at the same time as helping farmers gain an economic advantage in the market. The government is partly funding this programme in conjunction with local authorities and water agencies. Investments can be between 4 000 and 30 000 (up to 80 000 for cooperative farms). Although the programme has a detailed list of eligibility requirements, some regions found that their financial resources were insufficient to cope with demand. In Champagne-Ardenne, the PVE was so successful in its first year that many applications had to be turned down. A more stringent application system has now been put in place. This prioritises investment in precision equipment for planting hedgerows as the top priority, alongside investments to reduce the use of pesticides.
In this respect, the axis system provides a crude guarantee for the allocation of resources to objectives, which relies on a simplified intervention rationale and may thus at times mislead since a single measure often serves more than one objective. In addition, the ring fencing introduced in the Health Check to match the additional funds made available with the new priorities has considerably increased the administrative burden of the system.
Implementation is well under way and performance is measured using the CMEF. See Annex 4a for more details on financial implementation to date, reasons for low uptake of certain measures, output and result indicators.
Work is under way to improve the CMEF; admittedly, it is a challenge to capture the spill over effects of intervention while keeping the system simple. Selected output and result indicators are shown below:
State of play on selected output indicators -
Measure Indicator Total realised Target % of
2007-2009 2007-2013 target
111 Vocational training and information actions Number of participants in training 1136877 5258036 21,6%
121 Modernisation of Number of farm 105802 592700 17,9%
agricultural holdings holdings supported
211 212 Payments to farmers in areas Number of holdings 2568319 3734832 71,5%
with handicaps supported
(Article 36 (a) (i) and (ii)
of UAA supported (Ha) 49005000 51700000 94,8%
Reg. (EC) N.
214 Agri-environment payments Physical area 21528712,65 50000000 43,1%
Number of contracts 1675447 2931033,14 57,2%
225 Forest-environment payments Physical area 187256,52 919762 20,4%
Gross number of jobs created 307.000
313 Encouragement of tourism activities 108.000
Population in rural areas benefiting from improved services (unique number of persons) 71.000.000
321 Basic services 21.048.000
322 Village renewal 25.939.000
Increase in internet penetration in rural areas (unique nbr of persons) 47.060.000
As regards the possibilities to facilitate implementation of rural development measures, and in this context ease the access to finance of rural development beneficiaries, 9 Member States (IT, LV, LT, RO, BE, DE, FR, NL, EL) have set up guarantee and/or loan funds as part of the financial engineering actions under rural development, or provided for these options in their rural development programmes. Total EAFRD commitment amounts at present to more than EUR 540 million. However, these funds are operational for the moment in only 4 of these Member States (IT, LV, LT and RO) and the Greek modifications covering EUR 107 million of EAFRD were just recently approved. By end of 2010, a total amount of EUR 274 million of EAFRD has been paid out to the active funds in these 4 Member States (the total amount paid by Member States to these funds, including national/regional contributions, amounts to EUR 371 million).
As far as renewable energy development is concerned, most of the Member States indicated in their National Renewable Energy Action Plans that they make use (and plan to continue to make use) of existing rural development measures in order to reach their renewable energy legally binding target.
Member States have generally been successful in setting demarcation lines and ensuring coordination between rural development and other policies; however, synergies have not always been fully exploited to allow the different policies to work together towards common objectives. In other words, in some cases the authorities have satisfied themselves with avoiding overlaps between policies instead of actively attempting to use the policies in such a way that they strengthen each other. Furthermore, synergies have sometimes been asserted without being demonstrated.
productive farms undertaking 'traditional' investments, and support for farms with significant asset value which could invest without public assistance.
2.1.3. Agri-environment measures
Agri-environment payments are a key EU policy measure on which depend many aspects of environmental protection. As a result, agri-environment payments have for many years been the sole rural development measure (leaving aside the Leader approach) which Member States must make available throughout their territory (though its use is voluntary for farmers).
Agri-environment measures support the provision of a wide range of environmental public goods, from biodiversity, water, soil, to climate change and genetic resources, by encouraging farmers and land managers to apply practices delivering environmental outcomes going beyond legal obligations, while leaving flexibility to Member States and regions to optimize their design to address national, regional and sub-regional needs. The measures often allow for simultaneously addressing a number of environmental objectives, e.g. reduction in chemical inputs has a positive impact on water quality while also contributing to preservation of biodiversity. At the same time, they may contribute to generating additional employment (especially in tourism - by contributing to the preservation of natural heritage and landscape elements) and enhancing quality of life in rural areas.
Some agri-environmental measures are inherently complex. Such complexity is often necessary to achieve high quality environmental results. These are often measures that consist of multiple obligations to be implemented in a spatially differentiated manner and where compliance must be continuous or at different points in time. Although this complexity can imply an increased error rate, the rate still remains acceptable compared to that of other policy areas and is justifiable in view of the public good outcomes. Finally, the focus is necessarily on management requirements rather than results, partly because of WTO rules that require payments to be based on costs incurred and income foregone to benefit from green box classification and partly because the latter are subject to multiple drivers that are only partly under the control of beneficiaries.
compromised, due to narrowing the scope to pre-defined measures and to the lack of clear distinction of roles between managing authorities, paying agencies and LAGs.
In connection with Leader-related difficulties it is worth noting that, in response to feedback from various sources including Special Report No. 5/2010 from the European Court of Auditors - the Commission has already improved the implementing rules related to the Leader approach and revised guidance to Member States, thus clarifying the requirement that Leader be implemented in a flexible way.
2.2. The role of agriculture
The economic structure of rural areas is changing with the importance of the primary sector declining. Still, agriculture remains important for the rural economy in many parts of Europe. This is particularly the case in predominantly rural areas where the primary sector represents around 5% of added value and 16% of employment, as well as in the new Member States where structural adjustment is still under way.
In addition, agriculture has strong links with other economic activities in rural areas, notably food processing, tourism and trade, while one third of farmers have other gainful activities outside of agriculture. Beyond economic aspects, farmers contribute considerably to the provision of public goods, both environmental and non- environmental, valued by society and not remunerated on the market.
The table below summarizes the work of the thematic group 2 of the ENRD5 pointing to
important forward linkages between agriculture and the rural economy, especially with the food processing, hotel, catering and trade sectors.
Agriculture and the wider rural economy
The aim of TWG2 was to identify and describe the relationships, and potential synergies/conflicts, between agriculture and the wider rural economy in various types of EU rural areas.
Analytical activities were undertaken in order to provide a better understanding of the relationship between agriculture and rural economy at the local level; identify the key factors that determine the potential of different types of regions; assess the contribution of current policies and institutional arrangements to
successful outcomes; present the main findings that could be relevant for the development of policy;
consider what further issues warrant investigation or development. This involved a series of in-depth analyses , using a mixture of techniques: input-output analyses, general economic assessments, and case
forward linkages the extent to which changes in output in the agricultural sector result in increased sales to the rest of the local economy.
The estimated effects of changes in agricultural output on suppliers (backward linkages) were found to be generally low or average, in line with estimates from other studies. In numerical terms, the typical coefficient is around 1.5 indicating that an increase in agricultural output of (indicatively) 1 million EUR will produce an additional output of 0.5 million EUR in other sectors in the local economy, due to the fact that local sectors provide inputs to agriculture.
The effects on the local economy of sales of increased farm output to other sectors in the region (forward linkages) were found to be high in most areas, with a typical coefficient of around 2.5; this indicates that an increase in agricultural output of 1 million EUR will produce an additional output of 1.5 million EUR in the
In terms of forward linkages, agriculture was identified as a `key sector' in 14 out of 18 regions studied, in the sense that increases in output in the sector result in above-average increases in output elsewhere in the region, compared with the average results for all sectors in the region. Agriculture has
especially high forward linkages with food processing, hotels and catering and trade, all sectors that, in turn, have further high linkages with the rest of the rural economy.
2.3. Challenges and opportunities for rural areas
Rural areas span more than 90% of territory and more than 50% of population in the EU. The picture is increasingly diverse, especially following successive enlargements: some regions are facing decline with young people leaving and land abandoned, while others are among the most dynamic in the EU. See Section 2.6 of Annex 1 for a more detailed picture of rural areas across the EU.
A recent study on employment and growth in rural areas6 identified the following key
drivers for rural economies: natural resources and environmental quality, the sectoral structure of the economy, quality of life and cultural capital, infrastructure and accessibility. The analysis also identified the following key barriers to growth: demographic developments, infrastructure and accessibility and the sectoral nature of the economy.
Notwithstanding this diverse picture, all rural areas face today important economic, environmental and territorial challenges. And they have been severely hit by the economic crisis against the backdrop of an already fragile economic situation with income in rural areas 50% lower than in urban areas.
The European Environmental Agency also indicates that the trend in common farmland bird populations is negative (decline by 20-25% since 1990).
As regards forests in particular, it should be noted that forest cover is roughly equal to agricultural area and hence important for land management and rural development. A great diversity of natural forest types, forest covers, and forest ownership structures exist in the EU, and with enlargement the importance of forests has increased considerably. Forests are one of Europe's most important renewable resources and provide multiple benefits to the economy but also public goods for the environment. As a result of afforestation programmes and due to natural regeneration on marginal lands, forest cover in the EU has increased over the past few decades.
In addition, there are growing expectations from consumers for quality and diversity of food and rural amenities that open up new possibilities to give value to the assets of rural areas, for instance in developing quality products and local markets.
All in all, there are important challenges for agriculture, forestry and rural areas ahead that are further exacerbated by the economic crisis and climate change, as well as opportunities to be seized. As regards the role of agriculture, on the one hand agriculture relies on dynamic rural areas (in terms of human capital, infrastructure and basic services),
9 on the other hand, agriculture has an important role to play in
maintaining rural vitality, a public good that is recognized as an objective for the vast majority of measures included in the RDPs.
3. FUTURE OBJECTIVES AND POLICY OPTIONS
3.1. Main issues for the future
The future rural development policy should continue to enhance agricultural competitiveness, improve the sustainable management of natural resources (including climate change mitigation) and promote a balanced territorial development across the EU.
1st pillar measures. The consultation also identified concerns on Member States' ability to
co-finance, draw good programmes and reach out to farmers, as well as the need to improve delivery and reduce administrative burden.
In the light of the achievements and challenges discussed above, the following issues are particularly important for the future:
how to ensure the best fit with the EU priorities, notably the Europe 2020
strategy for smart, sustainable and inclusive growth, especially given the broad scope of rural development policy: A lot of attention in the debate on the future of the policy revolves around the policy's contribution to enhancing resource efficiency for the purpose of helping rural economies exit from the crisis while addressing climate change and other pressures on resources, as well as its contribution to preserving habitats and biodiversity and to the bio-based economy.
how to make the policy more efficient and effective: This is particularly
important for a policy that operates on many levels, from defining a strategic framework at EU level to drawing national / regional programs to implementation by local administrations, and seeking to promote bottom-up approaches (such as initiatives taken by local groups). A related issue is how to improve cooperation with other EU funds that operate in rural areas to maximize synergies without losing the important synergies with Pillar I of the CAP. In the end, effective policy delivery should result in more flexibility and better targeting the policy response to the challenges while at the same time reducing the administrative burden for administrations and beneficiaries. Moreover, consideration should be given to offering incentives to Member States / regions to make their rural development programmes perform as well as possible.
how to ensure that the policy is backed by adequate funding. It may be
envisaged to use criteria based on the future policy objectives for the distribution of support between Member States with a view to ensuring a better fit between policy objectives and the budgetary means available, thus making a better use of the EU budget. And to increase the leverage of EU spending, existing possibilities to provide support in a form other than grants should be further explored (for instance, to subsidize interest rates on loans or contributions to venture capital funds, guarantee funds and loan funds).
3.2. Policy options
This table below elaborates in relation to the rural development policy instruments the three broad policy options set out in the Communication (adjustment, integration and
Budget Objectives Instruments Management
Adjustment Moderate increase in funding
Same distribution between MS Additional resources go
towards: Same Same
option 1: competitiveness / innovation, or
option 2: environment ('new challenges')
Integration Same funding
Redistribution between MS Policy better aligned with Europe 2020: Streamlined toolkit
Common Strategic Framework (CSF)
priorities Strengthened strategic targeting
No axis system
Enhanced possibilities to combine measures
Refocus Funding doubled
Redistribution between MS Focus on the environment and climate change
Limited temporary measures to ease the impact of phasing out direct payments Significantly reduced toolkit Simplified management system
As regards the policy objectives, the analysis of future challenges for agriculture, forestry and rural areas has made clear the need to put further emphasis on climate change and innovation. The adjustment scenario includes two options for channeling the additional resources made available either 1) towards the environment ('new challenges' of climate change, water, biodiversity, renewable energy and innovation, as in the Health Check) or 2) towards competitiveness / innovation. Innovation, climate change and the environment in general are explicitly recognized as guiding considerations that cut across all three objectives in the integration scenario. The refocus scenario has a single objective: the environment (including climate change, which in turn includes the sustainable production of renewable energy and of biomass for bio-based products) with the continuation of axis-3 type measures possibly left to cohesion policy.
On this basis, the current toolkit of around 40 measures is streamlined into approximately 20 measures in the integration scenario and significantly reduced in the refocus scenario. The latter consists mainly of environmental measures also including limited temporary measures to ease the phasing out of direct payments. In all cases, measures are reviewed to address issues with current implementation, to make them more effective and relevant and to facilitate uptake - in particular in relation to measures that are very important from the perspective of Europe 2020 and that have not been fully used to date (such as support for co-operation for the development of new products, processes and technologies).
With respect to the management system, the adjustment scenario maintains the status quo while the refocus scenario aims at further simplification given the reduced policy remit. Building on the positive experience in the current period, the integration scenario proposes to reinforce the strategic approach in two respects:
first, to improve coordination with the other funds by placing the European
Agricultural Fund for Rural Development (EAFRD), the European Regional Development Fund (ERDF), the Cohesion Fund, the European Social Fund (ESF) and the European Fisheries Fund (EFF) under a Common Strategic Framework (CSF) in the service of the Europe 2020 strategy for smart, sustainable and inclusive growth (in this context, the EU targets concerning climate change and biodiversity are particularly relevant) and also under corresponding national framework documents of some form; and
and to include rural development policy within a Common Strategic Framework with all structural funds as well as within Partnership Contracts with Member States. Moreover, the policy should be subject to ex-ante "conditionalities" (i.e. preconditions for the approval of programmes and / or the disbursement of payments through programmes) and a performance reserve, like the structural funds.
3.3. Alignment with Europe 2020 through priorities and associated targets
An important aspect of the integration scenario is the use of "priorities" and associated targets (see Annex 4b) - with a view to ensuring the best fit with the Europe 2020 strategy for smart, sustainable and inclusive growth, and notably the resource efficiency flagship with the associated climate and biodiversity targets.
In sum, the following priorities may be set at EU level to steer the policy:
(1) Transfer of knowledge;
(2) Competitiveness and farm viability;
(3) Food chain organisation and risk management;
(4) Preserving and enhancing ecosystems dependant on agriculture and forestry;
(5) Low carbon economy and resource efficiency
(6) Job potential and development of rural areas.
The expected contribution and the actual performance of the policy in relation to the different priorities could then be measured by making use of specific "target" indicators to be defined for each of these priorities. As an example, indicators such as "total energy savings in the agriculture and agri-food sectors in supported projects by 2020" and "total water savings in supported projects by 2020" may be used among others - to quantify ex ante target levels for the programmes in relation to priority 5 ("Low carbon economy and resource efficiency") and to regularly assess the contribution of the programmes to this priority during the implementation phase.
EU Rural Development support per farmer or per agricultural area is small in comparison to the regional GVA in the agricultural sector in most EU regions"
See also the table below for a broad indication of the magnitude of EAFRD support involved for the entire programming period 2007-2013, which translates on a yearly basis on average to EUR 100/farm for investments under the farm modernization measure (121), EUR 17/ha for agri-environment measures, and EUR 14/rural inhabitant for axis 3 measures.
Table 2 - Allocation of resources to farm investments (/farm), to agri-environment measures (/ha) and to axis 3 (/rural population) for the entire period 2007-2013
Member Measure MeasAXIS 3 - Member Measure MeasuAXIS 3 -
State 121 ure /rural State 121 re 214 /rural
/farm 214 population /farm - /ha populatio
Belgium 2.367 90 38 Hungary 1.787 207 104
Bulgaria 928 117 235 Malta 916 815
Czech Republic 5.494 239 138 the 465 57 1.350
Denmark 608 77 10 Austria 1.599 565 78
Germany 2.266 120 137 Poland 558 119 178
Estonia 6.097 186 138 Portugal 1.044 117 4
Ireland 195 278 0 Romania 202 57 200
Greece 354 165 106 Slovenia 820 500 112
Spain 543 41 44 Slovakia 4.488 138 98
France 1.309 42 23 Finland 891 287 86
Italy 664 150 58 Sweden 1.841 315 71
Cyprus 822 271 United Kingdom 567 148 221
Latvia 2.218 72 223 EU-27 706 119 104
Lithuania 1.307 110 140 EU-15 822 118 67
same level as the moderate increase in the RD budget under the adjustment scenario, with most impact resulting from the decrease in direct payments.
Under option 1 (additional resources for competitiveness/innovation), an increase
in the support for farm investments should result in an increase in income, better use of production factors and improvement in quality of farm products. Investment in physical and human capital may also accelerate existing trends towards fewer, larger farms.
Under option 2 (additional resources for the environment/climate change), a small
positive effect on agricultural employment may result from supporting more labor intensive extensive production systems. Increased support for NHA and agri- environment payments may help maintain the economic viability of farms that would otherwise disappear.
Of course, within an overall moderate impact across the EU, regional impacts could be more pronounced (Scenar 2020).
4.1.2. Integration scenario
In a context of greater demands on the agricultural sector to contribute to the provision of public goods, the quality of the design of RDPs should be considerably higher under this scenario with Member States under a reinforced strategic approach putting the resources to the best use to meet the Europe 2020 priorities. If the right balance is struck, there is considerable potential to improve resource efficiency that is a win-win situation for both farmers and the environment.
In addition, support possibilities for NHAs in Pillar II will be further reinforced by the Specific Natural Constraints component of direct payments (see Annex 3).
4.1.3. Refocus scenario
Clearly, the additional employment and income opportunities for farmers as land managers under Pillar II cannot make up for the significant impact on farm income of the phasing out of direct payments (see annex on direct payments). The temporary axis 1- type measures foreseen under this scenario should alleviate to some extent this pressure on farm income by opening possibilities for the farmers concerned to either leave the sector or to modernize.
of Pillar II delivering public goods in particular with respect to environment and climate change. See also Annex 2.
As regards in particular the impact of the changes in rural development:
4.2.1. Adjustment scenario
The moderate increase of the available funds will positively benefit measures that aim to improve environmental conditions. The effects of this are difficult to quantify since it depends on how Member States use the available funds. As an indication, see the relevant target indicators corresponding to the CAP Health Check / European Economic Recovery Package budget in the table below:
Selection of main relevant target indicators 2007-2013 (outputs) per priority for the
HC/EERP budget defined in the Rural Development Programmes -
Priority/indicators Unit of measure Value
Improvement of energy efficiency total volume of investments17 (million EUR) 243
Improve efficiency of nitrogen fertiliser use total volume of investments (million EUR) 104
N of participants in trainings % of participants in CC related topics 40%
Soil management practices (measure 214) N of ha supported (million ha) 1.4
Afforestation and the establishment of agro- forestry system N of ha supported (ha) 10,000
Programmed expenditure (EAFRD million EUR)
Installations/infrastructure for renewable energy using biomass and other renewable energy sources (solar and wind power, geothermal)
total volume of investments (million EUR) 248
Processing of agricultural/forest biomass for renewable energy
total volume of investments (million EUR) 197
Biogas production using organic waste (on farm and local production)
Integrated and organic production (measure 214) N of ha supported (million ha) 1.58
Restructuring of diary sector
Investments related to dairy production (measure 121)
total volume of investments (million EUR) 1,116
Improvements in processing and marketing related to dairy sector (measure 123)
total volume of investments (million EUR) 270
Creation and enabling of access to broadband infrastructure
total volume of investments (million EUR) 383
Upgrade of existing broadband infrastructure total volume of investments (million EUR) 175
Laying down passive broadband infrastructure total volume of investments (million EUR) 129
As regards the two options examined:
Under option 1 where an increased focus is put on competitiveness and
innovation, positive effects would mainly come through increased resource efficiency and through modernisation implementing more environment friendly systems.
Under option 2 where an increased focus is be on the environment ('new
challenges'), it is likely that this would see more funds being used for agri- environment measures and climate change mitigation measures (including renewable energy and bio-based products) with positive effects for biodiversity and climate change.
4.2.2. Integration scenario
Even if the budget stays the same, the shift of some agri-environmental actions to the first pillar will free up some funds that might then be used for more targeted and more ambitious agri-environment measures, thus producing a further reinforcement of the environmental outcome of the policy.
Finally, the focus on innovation should have the effect of a better dissemination of efficient measures that improve resource efficiency.
4.2.3. Refocus scenario
The doubling of funds under this scenario and the clear focus on measures for the improvement of the environment and climate change actions (including renewable energy developments) should result in significant positive impacts on these areas of concern.
However, the fact that direct payments under Pillar I are phased out could severely compromise such an outcome. Without basic income support, the less competitive farmers who very often manage marginal land and land in remote areas in an extensive manner, thereby helping to maintain areas of high natural value, may cease their agriculture activity because they no longer earn an adequate income; moreover, GAEC that are part of the baseline for agri-environment measures no longer apply to land that does not receive direct payments (see below relevant extracts from Scenar 2020 Follow-
18 On the other hand, agriculture activity may be concentrated and intensified in
the most competitive areas.
It is thus questionable to what extent the increased budget that can be made available for NHA and AE support can make up for the loss of direct payments.
The fact that the Rural Development toolbox in this scenario will be emptied of most axis 1 and all of axis 3 measures will only further increase the risk of abandonment and have the effect of decreasing rural vitality in these regions.
Extracts from SCENAR 2020 - II
The role of farming to maintain landscape quality and biodiversity (associated with both atura 2000 and
H V areas) underlines the potential risk associated with land abandonment, which is apparent to different degrees in the three scenarios elaborated in the macroeconomic part of Scenar 2020-II. This possibility is put into perspective by the type of subsequent regional analysis performed, and within Scenar 2020-II an attempt has been made to identify the regions particularly characterised by those types of land use that might indicate an ongoing process of land abandonment. To do this, the future shares of different farming types projected on the horizon of 2020 have been clustered to give a broad overview of agricultural performance (but only for the Reference scenario). The conditions representing a risk of land abandonment are found in a third of the EU regions. Most of the regions in this cluster are located in France, Greece, Italy, Portugal and Spain in the western and southern EU; in Bulgaria, Hungary, Poland and Romania in the eastern EU; and in Finland and Sweden in the northern EU. The reduction in agricultural utilised land projected in the macro-economic analysis with regard to the Liberalisation scenario, however, indicates the heightened risk of more widespread land abandonment within the EU as the agricultural economy becomes more liberalised. In any case in the Liberalisation scenario the Good Agricultural and Environmental Conditions (GAEC) do not apply anymore due to the cessation of direct payments in the absence of Pillar 1. Farmers will still have to fulfil requirements of the environmental legislation, without further consideration of good agricultural practices that are present in the GAEC and not in the existing legislation. In the less competitive regions, in particular, structural land abandonment would be accompanied by environmental decline. As a secondary effect of such structural change, targeted Pillar 2 measures aiming to enhance the environment would not find addressees and, therefore, could no longer contribute to sustaining extensive farming practices and thus securing the ecological values and benefits which these provide.
ote that the average decrease in the nitrogen surplus in the Liberalisation scenario at UTS2 level hides
local concentration of the production. Particularly under the Liberalisation, the narrower concentration of production which is expected would mean also greater localised water pollution risks. Moreover, the predicted increase in farm specialisation and concentration under Liberalisation would increase the negative externalities of agriculture, both by leading to increased concentrations of pollutants in more intensive areas, by losing the features of mixed and less intensive farms which are key to protecting farmland biodiversity, and by leading to the abandonment of farmland in remoter areas, with concomitant loss to biodiversity and landscape, and an increase in climate change gas release through increased soil erosion. These effects are, however, not taken into account in CAPRI.
In addition to this assessment of environmental conditions via the indicators included in the CAPRI model (nitrogen and phosphate surplus, ammonia and greenhouse gas emissions), the consequences of the decline in agricultural land use for the environment should be mentioned. In particular under the Liberalisation scenario, the steep increase in land abandonment risks seriously undermining the ecosystem services and biodiversity values of the respective landscapes. This should be a serious concern for future policy design.
The environmental status of forests may benefit from the doubling of the funding for environment and climate change in the refocus scenario. However the phasing out of axis 1 measures would weaken the multifunctional services of forestry and would lead to negative side effects on the environment, such as creating abandonment of the less productive forests.
Finally, the new distribution key under both the integration and refocus scenarios with its focus on environmental indicators will, depending on how it is designed, have an effect on the level and distribution of environmental improvements.
4.3. Impact on the socio-economic development of rural areas
First, given that agriculture remains an important driver in many rural areas, the impact of the three scenarios on the agricultural sector will also affect rural areas in general. In addition, axis 3 measures are directly relevant for the broader socio-economic development of rural areas.
integrated approaches. Therefore, the rather "schematic" current structure of axis 3 would struggle to deliver maximum benefits for rural areas.
Finally, this scenario fails to address a number of shortcomings in the delivery of axis 3 measures identified in the current programming period, e.g. the fact that support for businesses outside agriculture and tourism is limited to micro-enterprises.
4.3.2. Integration scenario
This scenario facilitates the use of measures in combination and support for integrated projects provided that the Member State concerned can develop a good strategy to make the best use of the funds available in line with the EU priorities. LAGs also benefit from more freedom to deliver, and a better coordination with other funds should be ensured.
In the absence of minimum spending requirements, the Member States that are most advanced in reaching the socio-economic objectives of Europe 2020 in rural areas may choose to channel funds more towards objectives other than those currently covered by axis 3 measures (e.g. they might spend more on the environment), but this would have to be justified within the process of strategic programming. For the Member States that have yet to achieve significant progress towards Europe 2020 socio-economic targets, support for general socio-economic development would probably continue to be a priority.
4.3.3. Refocus scenario
In broad terms (i.e. taking into account all aspects of the scenario), the result would be a negative impact on the socio-economic development of rural areas, including the loss of valuable social capital formation and the undermining of micro- and family business development, which is currently an essential element of the rural economies. This would be especially felt in regions where agriculture is the main driver, as well as in regions most dependent on rural development funding.
The absence of axis 3 measures in particular (leaving aside the absence of direct payments) would probably have a more mixed impact from one region to another. In regions which depend heavily on agriculture, extra axis 2 funding might offset the effects of the loss of axis 3 measures, at least in the short-to-medium term, and as far as agriculture is concerned. By contrast, regions with diversified economies would probably suffer negative effects from a shift to a more sharply environmental focus.
The scenarios examined compare the economic impacts of alternative "paths" of pillar 1 and 2 measures (over the period 2006-2020) with those of the current policy context.
Scenario 1 "Agricultural" rural development policy: All RD spending on axes 1 & 2.
Scenario 2 "Diversification" rural development policy:: All RD spending on axis 3.
Scenario 3 "Reduction of pillar 1 support": Pillar 1 support is reduced by 30%.
Scenario 4 "SCENAR scenario": EU-wide flat-rate direct payment is introduced in pillar 1; pillar 1 support is cut by 15% in nominal terms. Pillar 2 funds increase by 45% in nominal terms.
There are 3 other scenarios dealing with the distribution of funds within axis 3.
In this project 6 NUTS-3 regions representing different patterns (predominantly rural or urban regions; regions in the process of diversifying) are analysed. They were chosen with the help of the OECD-refined
and TERA-SIAP (Weingarten, et al ., 2009) territorial typologies.
The selected case studies are: Aberdeen City and Aberdeenshire (UK), Arkadia (GR), Jihomoravsky kraj (CZ), Guipuzcoa (ES), Potenza (IT) and Rheintal-Bodenseegebiet (AT).
Some initial findings are set out below:
If a decrease of pillar 1 funding is compensated by an increase of pillar 2 funding, in general the effects on GDP (both rural and urban) are very limited. Within the farm sector specifically, the impact on agricultural output and farm household income may be greater but is also moderated by the extra rural development funding.
A diversification-focused CAP (scenario 2) has varied effects according to the characteristics of the region in question. Over the period modelled (2006-2020), regional/local economies which are already diverse benefit (in particular from the perspective of the economic activity of their rural areas) from funding for diversification measures, whereas economies which still depend significantly on agriculture and food processing may suffer negative effects over that period, particularly in the short / medium term.
In general, keeping the total level of funding for axis 3 constant but reallocating it between measures has only a modest impact. However, in a given region the impact could be higher with the "right" choice of measures (in this case, investments made in rural public infrastructure and services with a view to improving the attractiveness of the rural areas of the region).
4.4. Impact from the change in the management system, including considerations of administrative burden
4.4.1. Adjustment scenario
The maintenance of the axis system under this scenario provides a crude guarantee of a minimum level of spending per objective, but may unduly constrain the development of a full-fledged strategic approach in combining measures in the best possible way to meet the policy objectives.
If, in addition, the same ring-fencing as in the Health Check is used to allocate the additional resources, the administrative burden will be considerable.
4.4.2. Integration scenario
If designed with the correct level of ambition (not too high, not too low), a Common Strategic Framework (CSF) will help to coordinate rural development policy with the other policies covered (i.e. the ERDF, the Cohesion Fund, the ESF and the EFF), especially in the case of Member States / regions that have struggled with coordination in the current period. The CSF will also help to link the policies covered to the objectives of the Europe 2020 strategy. With regard to this last point, a useful aspect of the CSF would be the inclusion of "thematic objectives" which between them would link the scope of Europe 2020 to the areas of action of the policies covered. All of the priorities of rural development policy would be included in these thematic objectives.
At national level, the CSF could translate into Partnership Contracts (PC) on the use of the EU funds concerned, including the relevant coordination mechanisms. Within the PCs, Member States would have to explain how they would use the policies covered to serve the thematic objectives of the CSF in ways which would be in line with their National Reform Programmes set in the framework of Europe 2020. Other key features of the PCs would include: the specification of indicators for assessing progress on the objectives chosen; and a description of national and regional mechanisms for co- ordinating the use of EU funds.
Framework with all structural funds as well as within Partnership Contracts with Member States. Moreover, the policy should be subject to ex-ante conditionalities and a performance reserve, like the other structural funds.
Conditionality is a not a new concept for rural development policy. The regulatory framework in the current period is already geared towards maximizing the efficiency and effectiveness of policy intervention with detailed conditions for the operation of programmes and individual measures (though in comparison to other policies, rural development policy operates more through conditions applying at the level of individual measures and beneficiaries). It is now proposed to bring these elements together in a more structured approach also in line with the approach for the other funds.
23 New /
refined ex-ante conditionalities for rural development policy should be essential for good programme performance and feasible in practice (a possible example would be the provision of sufficient resources and capacity-building activities to address needs related to requirements of monitoring and evaluation).
There is moderate evidence to suggest that the minimum spending requirements of the axis system have influenced the spending decisions of Member States. (For example, according to a simple analysis, planned spending levels have in some cases been close to the minimum permitted levels, especially with regard to axes 3 and 4 see Annex 4c). Therefore, the abolition of the axis system might lead some Member States / regions to change their spending patterns.
However, provided that strategic programming worked effectively, these changes should be appropriate to the individual situations of programming areas and clearly justified by a more realistic intervention logic (i.e. one which could depict a given measure's contribution to more than one priority / objective, instead of artificially limiting its contribution to one objective only).
To ensure that strategic programming did indeed function effectively, the Commission would have to be firm in not approving a given rural development programme before being satisfied that the programme was of adequate quality. Subsequent programme modifications would also have to be treated firmly.
4.4.3. Refocus scenario
The programming will be simplified, as there would no longer be any competition for funding between objectives. There would also be fewer issues of demarcation with cohesion policy.
Some Member States may lack the absorption capacity to make the full use of the environmental measures. In addition, some Member States may be even more tempted to use the now reduced set of measures for other purposes (e.g. income support) under the guise of environmental measures.
Finally, the absence of Leader would deprive rural areas of an important engine of innovative, tailor-made policy-making, which has a strong tradition in many Member States as a method for community-led local development in rural areas.
5.DISTRIBUTION OF RURAL DEVELOPMENT SUPPORT AMONG MEMBER STATES
In response to calls for more equity in the distribution of support in the next period, it is foreseen under the integration and the refocus scenarios to use objective criteria also taking the current distribution into account. This should maximize the added value of EU spending by ensuring a better fit between resources available and policy objectives.
One option is to use the so-called modulation formula that was used to distribute among Member States the additional resources made available through modulation.
Modulation: (0.65 Area + 0.35 Labour) x GDP inverse index
RD - Modulation scenario
5.1. Criteria for the distribution of support
For the integration scenario:
In relation to Objective 1 (competitiveness of the agricultural sector), agricultural area
and labour force are used as indicators of the economic size of the agricultural sector and labour productivity of the extent to which the sector is lagging behind;
In relation to Objective 2 (climate change and the environment), agricultural area,
Natura 2000, NHA, forest and permanent pasture areas are used as indicators of the public goods provided. Work on climate change vulnerability indicators is still ongoing and hence such indicators cannot be used.
In relation to Objective 3 (balanced territorial development), rural population is used
as an indicator of the target group benefiting from the support while the extent to which rural areas are lagging behind is covered by the use of a GDP coefficient for the whole formula.
For cohesion purposes, the whole formula is then calibrated by GDP/capita in PPS (the lower the GDP in the MS, the higher the MS envelope).
For the refocus scenario, only those indicators related to the environment and climate change remain relevant.
On this basis, the following options are considered: 24
Integration scenario: [1/3 [(½ Area + ½ Labour) x labour productivity inverse
EUR/elig. haRD - Integration (LFA)
i ai a7
al t aga
ar i a
st r i aki asl y
vaI t aanni a
t oEU- 1
ubl i c
ur g- 1i nme
i uar k
Por t u
Sl oCypr u
Li t hSwe
I r eEU
er l aFr a
Uni t e
Integration (LFA) - 2020 budget2013 budget
Refocus scenario: (1/3 Area + 1/3 Natura 2000 + 1/6 Forest + 1/6 Permanent
pasture) x GDP inverse index
EUR/elig. haRD - Refocus
by providing that no MS should end up with less than 90% and not more than
110% of its current envelope
by providing for a transitional period gradually moving towards the new
For the small Member States (LU, MT) an ad hoc solution would in any case be required.
EUR/elig. ha RD: 1/2 objective criteria 90/%/110% + 1/2 sq key for 2020 env.
i ai a75
al t agal
i asl y
t r i a- 2en
pr uI t aanni a
mt oEU- 1
ubl i c
ear i a
Por t u
er mI r e
er l aFnm
Li t hS
Uni t e
OC 90%/110% of current amounts - 2020 budget2013 budget
5.2. Assessment (for the integration and refocus scenarios)
As a general matter, a distribution on the basis of objective criteria would allow for a better fit between the policy objectives and the resources made available, thus a better use of the EU budget. However, this is less the case the closer we stay to the current distribution, and the more discretion the MS reserve to use the funds across the different objectives.
The partnership should contribute to the Europe 2020 strategy by increasing resource efficiency. Even if the setting up of the partnership does not depend on the policy choice to be made for the future CAP that is the subject of the current impact assessment exercise, the use of innovation as a guiding theme as well as enhanced possibilities to put measures together under the Integration scenario should facilitate actions under the partnership.
6.2. Future delimitation of intermediate NHA
Work is ongoing on the use of biophysical criteria for the future delimitation of the non- mountainous areas with natural handicaps on the basis of the Communication from the
Commission Towards a better targeting of the aid to farmers in areas with natural handicaps of 21 April 2009 accompanied by an impact assessment, and of the Council Conclusions of 22 June 2009.
For that purpose, the 8 biophysical criteria proposed by a scientific panel of independent experts have been tested by all Member States. The results of the simulations demonstrated the relevance and applicability of the biophysical criteria. Overall, they resulted in a modest increase in the total size of NHAs in the EU, with some changes within Member States. At national level, particular situations could arise, where the changes might affect large areas (mainly due to the removal of population and others socio-economic related criteria).
The analyses of the simulations also showed that a number of MS have to develop better datasets and that some refinements of the criteria, scientifically validated by experts, are necessary to adapt the method to better reflect data availability and others specific situations in Member States.
The end result of this exercise should be a credible and sound delimitation which is transparent and comparable across all EU Member States. Some areas will cease being eligible for payments to areas with natural handicaps, while some other areas will newly acquire this possibility.
This impact assessment will be used to justify the changes to be introduced on state aid rules.
6.4. WTO aspects
As a general matter, the measures currently in place comply with Green Box criteria as set out in Annex 2 of the Agreement on Agriculture. The changes proposed in the three policy scenarios under consideration do not affect the WTO compliance of the measures concerned.
Annex 4a Assessment of rural development policy in the current period (2007-2013)
Annex 4b Alignment with Europe 2020 on priorities and targets
Annex 4a Assessment of rural development policy in the current period (2007-2013)
This note presents a brief assessment of rural development policy in the current period (2007-2013) - always bearing in mind that, at the time of writing, the programmes will run for a further five-year period.
The note first analyses what might loosely be referred to as the "management system" of rural development policy.
It then assesses the strengths and weaknesses of three individual rural development measures which are considered especially significant (as well as the set of forestry measures).
1. THE MANAGEMENT SYSTEM OF RURAL DEVELOPMENT POLICY25
1.1. Description of key components
Rural development policy functions according to three broad objectives, which are:
(a) to improve the competitiveness of agriculture and forestry; (b) to improve the environment and the countryside; and (c) to improve the quality of life in rural areas and to encourage economic diversification.
The current management system of rural development policy essentially takes these broad objectives, links them to needs at national, regional and local level, and provides the tools with which Member States (MS) and regions target financial resources at these needs.
This management system is significantly more sophisticated than its predecessors and now carries the label "strategic targeting". A brief summary of the process of strategic targeting could be the following:
· EU strategic guidelines spell out the most important areas for action under each
of the three overarching objectives.
· On the basis of the strategic guidelines, MS draw up national strategy plans
(NSPs) which set out (still in relatively broad terms) their needs and their planned use of rural development policy.
· Next, rural development programmes (RDPs) are produced at either national or
regional level. RDPs contain an analysis of strengths, weaknesses, opportunities and threats (SWOT), a list of measures to be used to address that situation (based on a preset menu, but with tailoring of individual measures) and a set of targets.
· The ongoing implementation and impact of RDPs are assessed via a system of
First, the predefined measures of rural development policy are divided up according to "axes". There is one axis for each of the three objectives of the policy (and a cross-cutting axis related to the Leader approach see section 6). A given measure is assumed to contribute to the objective attached to the axis to which it "belongs"
and only to this objective. Within its RDP, a MS / region must spend a minimum proportion of its EU rural development funding on each axis, for the sake of balance between objectives.
Secondly, as part of the CAP Health Check agreed in 2008, an extra financial ring- fencing was introduced. At the end of the current period, MS / regions will have to show that they have spent certain amounts of money on operations
26 related to a
small list of specific "priorities" (e.g. climate change, water management). In order to steer MS / regions into spending the funding on operations which will be genuinely useful, the Commission provided detailed (indicative) lists of eligible operations.
1.2. Assessment: identifying needs, setting objectives, allocating funding
The current approach of strategic targeting marks a considerable advance from the previous period (2000-2006) in which MS / regions simply selected whichever measures they wished from the preset menu and allocated funding as they saw fit, with little formal justification.
Overall, the new approach has built an effective bridge though an imperfect one between the general goals of the EU, needs at national, regional and local level, and measures to be used to meet those needs.
Many of the SWOT analyses conducted by MS / regions contain some high-quality work, even if there have been divergent approaches in applying certain concepts and terms. The analyses have made it possible to compare national and regional circumstances across the EU.
· The RDP is only one tool available for addressing needs in rural areas it is part
of a "bigger picture".
· There seems to be a certain path dependence: if the authorities are familiar with a
given measure and have "successfully" spent money through it in the past, they look on it with greater favour.
· Ongoing spending commitments from the previous period have a certain
influence especially in the case of multi-annual measures with a long duration.
· Certain areas and groups whose needs are relevant to rural development policy
may not have made a convincing case that that they would be able to absorb funding.
· Last but not least: in some cases, discussions over resource allocation are seen as
significantly "political", and certain groups (especially farmers and land managers) may exert a particularly strong influence in some MS.
Another perceived weak point is that the axis system is misleading, because it supposes a 1:1 relationship between measures and objectives: i.e. that one measure serves one objective (i.e. competitiveness OR the environment OR quality of life / diversification), and one only. This supposition is clearly false (e.g. an investment can raise a farm's economic and environmental performance), and therefore its application inhibits the effectiveness of strategic targeting.
The ring-fencing introduced by the CAP Health Check has not been in operation for long, and therefore analysis of this subject is scarce. However, anecdotal evidence suggests that the administrative burden associated with ring-fencing has been very heavy even for the small number of priorities involved. Furthermore, the approach is not seen as effective at linking spending to results.
The comment has been made that at national, regional and local level the mechanisms in place ensuring such complementarity on the basis of consultation were sometimes not adequate.
There have also been a few problems of demarcation between rural development policy and instruments in the first pillar of the CAP.
1.4. Assessment: specific points on NSPs & RDPs, links & organisation
MS / regions seem to have had good intentions when drafting NSPs and RDPs. Attempts were made at reasonably broad consultation with stakeholders, and authorities made efforts to learn the new principles and procedures involved, drawing on technical support from the Commission.
In some cases, these efforts have led to positive results both in terms of RDPs which are better structured than they were in the previous period, and in terms of coherence between NSPs and RDPs.
On the other hand, the process of producing both NSPs and RDPs has entailed difficulties in some cases.
Some MS which implement regional RDPs rather than a single national programme perceived a tension of principle between NSPs and RDPs: if regional RDPs are based to a large extent on a SWOT analysis carried out at regional level, to what extent should they be influenced by the national analysis behind the NSP?
Particularly (though not uniquely) for these MS, the process of producing NSPs and RDPs which were both consistent with each other and individually rigorous seemed highly time-consuming in a situation where time was arguably in short supply.
The CMEF is seen as having flaws in terms of the volume and value of data involved. The list of common indicators is seen to be long (leaving aside the additional indicators to be designed by MS); this fact, along with notably the obligation to break down indicators by age and sex of the beneficiaries where possible, is perceived as imposing a significant administrative burden.
Given the novelties of the system, MS / regions have used many of the indicators with varying levels of quality and completeness.
The CMEF has not fully overcome the difficulties involved in assessing the impact of policy action in cases where that impact is subject to multiple influences. However, it should be noted that such difficulties are certainly not unique to rural development policy they are common in policy-making in general - and that the now-established European Evaluation Network For Rural Development will contribute to easing these difficulties.
2. MEASURE 121 MODERNISATION OF AGRICULTURAL HOLDINGS27
The main purpose of investments under this measure is to improve the overall performance of farms by helping them to make better use of the factors of production. It can also provide assistance in complying with EU standards under certain conditions.
The maximum aid intensity permitted under the measure is 40 % in most cases. However, in Natural Handicap Areas (NHAs) the standard maximum rate is 50 %;
young farmers are eligible for an extra 10 percentage points, inside NHAs and outside them; aid intensity can reach 75 % in outermost regions and in smaller Aegean Islands.
· improvement of product quality.
Measure 121 is programmed in all Member States in the current period and in 86 RDPs (Wales and Valle d'Aosta have not programmed it). The EAFRD budget allocated by RDPs to this measure is 10 667 million for around 527 000 beneficiaries. The average contribution from the EAFRD is 18 300.
According to the financial plans in force at the end of 2010, this EAFRD contribution will be matched by 6 645 million of national public funding and 25 770 million of private funding.
Support is mostly paid as a grant, but in some cases as both a grant and an interest rate subsidy.
2.2. Assessment measure design and implementation
In general, this measure can be very effective in its essential mission of improving the overall performance of farms. There is clear evidence that the measure has made a strong contribution to:
· reducing production costs28 especially by encouraging a more efficient use of
· improving quality often indirectly, as only a small proportion of investments
appear to have been made with this in mind as a specific objective;
· increasing income;
· securing employment even though the measure also leads to a more efficient
use of labour;
· regions with small or medium-sized farms with low productivity where the
measure is used to foster general modernisation, advance the pace of structural change and add value to products though animal welfare and environmental concerns have also sometimes been addressed in such cases
· regions with highly productive farms where the measure is used to address
challenges related to the environment and animal welfare.
Several Member States report a very good uptake and financial execution, and the measure is considered to be a very important asset within the programmes
DG AGRI calculated that this measure has a high leverage effect. For every 1 of EU funds allocated, the total public support is 1.62 (i.e. with 0.62 from national / regional public funds). In addition to that, the average private expenditure is 2.47 giving total spending of 4.09 for every 1 of EU funding.
As stated above, the measure delivers clear benefits when targeted well; on the other hand, evaluation reports have suggested some instances of poor targeting, sometimes leading to deadweight effects in the case of support for large, highly productive farms undertaking 'traditional' investments - and for farms with a significant asset value which could have raised funding for investment from private- sector sources.
(However, it has been difficult to assess the extent of deadweight because of problems related to quantitative methodology and available monitoring data. Moreover, much of the relevant work carried out so far has focused on the EU-15 whereas the picture is somewhat different in many regions of the EU-12, where lending markets are less developed and the scope for raising private capital is more limited.)
Agri-environment payments encourage farmers to adopt agricultural practices or levels of production intensity which deliver positive environmental outcomes but imply lower profits. They are an essential tool for integrating environmental concerns into the CAP, and they play a crucial role in meeting society's demand for environmental public goods and ecosystem services provided by agriculture.
In order to be supported by agri-environment payments, a given practice must go beyond a farmer's or land manager's legal obligations. The agri-environment payment then provides compensation for additional costs and income foregone resulting from the commitment.
In general terms, the payments help to combat and adapt to climate change (e.g. by cutting greenhouse gas emissions and sequestering carbon), preserve valuable habitats and biodiversity, conserve diversity in genetic resources, care for landscapes and manage a range of natural resources sustainably (e.g. water and soil).
The range of the specific practices / types of farming which are covered is extremely wide. Just a few examples include:
· organic farming (N.B. for environmental benefit only not to influence product
· maintenance or introduction of extensive farming practices and extensive
· maintenance and management of landscape features;
· more sustainable use of chemical inputs (fertilisers and pesticides);
· conversion of arable land into grassland;
Essentially, although in the environmental sphere quantification is sometimes difficult, it is beyond question that measure 214 has delivered strong environmental benefits (see, for example, IEEP 2009).
The range of environmental benefits delivered is wide partly because the range of practices / operations covered is also wide. These benefits vary not only in nature but also in "depth": it is possible to support both "light-green" measures (with relatively light commitments but broad coverage) and "dark-green" measures (with more demanding commitments but usually narrower coverage).
Many agri-environment measures provide multiple environmental benefits. For example, a reduction in chemical inputs will have a positive impact not only on water quality but also (in many cases) on climate change mitigation and biodiversity preservation.
The voluntary agri-environment approach complements the contribution of the first pillar of the CAP. Direct payments help to keep farming in place around the EU and the link to cross-compliance helps to ensure that farmers observe a mandatory baseline of environmentally sustainable farming practice. Agri-environment measures then help to meet objectives beyond that baseline often, a long way beyond it in line with the expectations of society.
Agri-environment measures are very flexible and may be designed at the national, regional, or local level so that they can be adapted to particular farming systems and specific environmental conditions, be spatially differentiated and target specific environmental objectives.
In many cases, agri-environment measures also provide non-environmental benefits, especially in terms of local employment (e.g. by making the countryside more attractive and thereby stimulating tourism).
In practice, although all proposed agri-environment measures must be justified (the justification including a calculation of related costs incurred and income foregone), in practice some measures are proposed whose likely net benefits are limited e.g.
in cases where:
· measures are insufficiently tailored to regional / local needs;
· measures involve only commitments just above the baseline of legal obligations
(i.e. they are not combined with more demanding commitments);
· demanding commitments are (for budgetary reasons) not matched by an
appropriate payment rate (which discourages take-up).
Measure 214 works on the basis of obligations defined in a contract which must last at least 5 years. This is sometimes seen as too short, and sometimes as too long in the latter case, possibly discouraging some farmers and land managers from applying (e.g. if the land is rented).
The rules on using measure 214 to pay for "transaction costs" as well as (in some cases) costs arising directly from the environmental obligations are seen as unclear.
It is difficult (though not impossible) in the current rural development policy to link more complex agri-environment measures to support for relevant training for farmers and land managers who need help to make use of those measures.
Agri-environment measures sometimes entail the risk of a higher error rate than in some rural development measures. It should be emphasised, however, that this fact is inherent in some of the practices / operations supported and necessary to meet the measure's objectives (e.g. multiple obligations may be involved which can be checked only at certain times or over a relatively long period) and it should be weighed against the benefits delivered.
· First afforestation of non-agricultural land (measure 223, article 45);
· Natura 2000 payments in forests (measure 224, article 46);
· Forest environment payments (measure 225, article 47);
· Restoring forestry production potential and introducing prevention actions
(measure 226, article 48);
· Non-productive investments (measure 227, article 49).
4.2. Assessment measure design and implementation
Between them, the forestry-specific measures address a broad range of objectives, economic and social (this range is further extended by the measures which are relevant to the forestry sector but not specific to it).
The relatively popular afforestation measures have helped to increase the extent of EU forests, which are a vital resource for combating climate change, maintaining environmental stability in other respects and providing raw materials for the sustainable production of energy and goods.
The measures addressing suitable care of forests rather than their creation have helped to meet a range of genuine needs, including:
· carbon sequestration;
· improvement of water balance;
· soil protection;
5. MEASURE 312 SUPPORT FOR THE CREATION AND DEVELOPMENT OF MICRO-
The essential aim of the measure is to support the creation and development of micro-enterprises "with a view to promoting entrepreneurship and developing the economic fabric" in rural areas (quotation from Regulation 1698/2005).
The measure has a wide scope, covering non-agricultural and non-forestry activities as well as services linked to agriculture and forestry.
Typical supported investments include those in premises, equipment and (processing/industrial) facilities, IT software and patents.
Implementation of the measure is generally based on a business plan (especially in the case of starting a business), and on the demonstration of adequate professional abilities.
In the current period, the measure is programmed by 21 Member States, in 50 rural development programmes. The total planned EAFRD funding is 2 209 million.
According to the financial plans in force at the end of 2010, this EAFRD contribution will be matched by 885 million of national public contribution and 2 878 million of private funding. With national and private co-funding added, total investment should reach about 5.97 billion.
Actual spending started slowly as is common in the case of measures in axis 3 but has accelerated significantly.
The measure aims to support some 95 000 businesses and create 115 000 jobs.
Targeting of the measure has been relatively strong including through eligibility conditions (e.g. a minimum level of investment), selection criteria and aid intensities. Groups targeted include:
· female entrepreneurs;
· young people;
· particular business sectors;
· particular parts of rural areas where economic diversity needs to be stimulated
(mountains, areas with natural handicaps, remote areas, etc.)
· beneficiaries likely to score a good level of job creation.
The limitation of the measure to micro-enterprises has been criticised (e.g. in official requests to the Commission from certain managing authorities). It is judged that supporting small enterprises would lead to considerable benefits especially as this "gap" is in many cases not filled by other EU funds.
6. THE LEADER APPROACH
The "Leader approach" is a tool for stimulating rural development which is more flexible, territorial, innovative and especially "bottom-up" than the traditional delivery approaches of rural development policy as a whole. Its main elements are:
· area-based local development strategies intended for well-identified sub-regional
In the current period (2007-2013), the Leader approach has in a sense been brought into the "mainstream". This means that it can be used to implement projects which naturally relate to rural development measures in the main menu though it is not limited to doing so.
Planned spending on Leader from the EAFRD in the current period is 5 755 million 6 % of total EAFRD resources
36.According to the financial plans in force
at the end of 2010, this EAFRD contribution will be matched by 3 426 million of national public funding and 4 963 million of private funding, thus generating a total financial impact of 14 144 million in the areas selected. More than 2100 LAGs have been selected so far (not counting groups in Romania or Bulgaria) more than double the number under Leader +.
Actual spending on Leader started slowly but has been accelerating.
As the implementation of the Leader local development strategies in the current period is still at a relatively early stage in some Member States, the comments below relate both to Leader + (2000-2006) and to the current approach distinguishing where necessary.
6.2. Assessment conception and implementation
Generally, Leader has been successful in promoting the diversification of rural economies.
There has been a positive impact on employment creation and maintenance, on income (through creation of new enterprises and activities and through improved marketing and promotion of existing activities) and the creation of new facilities and services for local people.
Leader has brought local actors together at both strategic and operational levels who would not otherwise have met or co-operated. It has supported the development of local governance capacities. It has developed professionalism, local knowledge and contacts, increasing local actors' capacity for self-organisation. The areas covered by Leader have critical mass but are small enough not to threaten personal interaction between stakeholders of various types.
Greater fiscal autonomy appears to have led to greater scrutiny at LAG level of value for money, and thus contributed to greater added value.
In the current period, where MS have taken advantage of the mainstreaming of Leader as intended, this shift has provided them with a useful "new" delivery mechanism and governance tool for achieving the objectives of mainstream rural development measures.
In the current period, a significant number of Member States have subordinated Leader to the rules of the predefined measures in the measure catalogue. In these cases, the "innovative" quality of Leader has been compromised.
Following the inclusion of Leader in the administrative management of rural development policy as a whole, in some MS LAGs have no longer had adequate decision-making powers. This has hindered Leader's effectiveness.
In some cases, LAGs have lacked administrative capacity, and this and other factors have meant that the quality of local development strategies has been varied.
With regard to Leader + in particular (2000-2006), monitoring and evaluation were sometimes inadequate.
Delivery mechanisms of rural development policy
Delivery mechanism Description
EU strategic guidelines · adopted by the Council
set out the EU goals to be addressed through rural development policy
National strategy plans · submitted by Member States to the Commission (but
· identify national rural development needs and link them
to EU objectives
set out means for co-ordinating rural development policy with other EU policies
Rural development programmes (RDPs) · drawn up at either national or regional level
· analysis of strengths, weaknesses, opportunities,
threats (SWOT) in Member State / region concerned
· set quantitative targets
· select appropriate measures (see below), adapt these
to national/regional needs
· allocate funding to measures ensuring that a minimum
percentage of funding will be spent on each axis
Rural development measures · basic building blocks of policy (for example the measure
· describe types of operation (e.g. investment support for
drip irrigation) that can be supported with eligibility criteria, aid intensities, payment levels, other rules etc.
grouped into "axes" according to supposed effect (axis
Financial implementation State of play
Measure description EAFRD realised EAFRD programmed 2007-2013 EAFRD: % on target
111 Vocational training and
information actions 178.374.159 1.088.770.755 16%
112 Setting up of young farmers 960.913.203 2.887.459.093 33%
113 Early retirement 1.087.495.694 2.853.038.896 38%
114 Use of advisory services 24.905.326 440.116.503 6%
115 Setting up of management, relief and advisory services
4.765.168 93.521.358 5%
121 Modernisation of agricultural
holdings 4.006.385.790 10.667.014.207 38%
122 Improvement of the economic value of forests
91.251.870 653.687.055 14%
123 Adding value to agricultural and forestry products
1.184.998.893 5.647.323.016 21%
Cooperation for development of new products, processes and tech-nologies in the agriculture and food sector and in the forestry sector
124 22.091.416 349.276.602 6%
Infrastructure related to the
125 development and adaptation of agricul-ture and forestry 902.139.120 5.129.438.277 18%
126 Restoring agricultural production potential
128.594.404 477.542.677 27%
131 Meeting standards based on EU legislation
Natura 2000 payments and
213 payments linked to Directive 2000/60/EC 68.235.935 476.726.824 14%
214 Agri-environment payments 9.793.423.243 22.231.273.684 44%
215 Animal welfare payments 170.177.253 543.036.224 31%
216 Non-productive investments 72.592.201 591.086.049 12%
221 First afforestation of agricultural land
682.098.301 2.294.955.976 30%
222 First establishment of agroforestry systems on agricultural land
13.327 16.382.490 0%
223 First afforestation of non-
agricultural land 48.658.741 347.805.392 14%
224 Natura 2000 payments 7.211.959 101.956.083 7%
225 Forest-environment payments 17.514.378 271.411.253 6%
226 Restoring forestry potential and introducing prevention actions
389.600.509 1.609.673.680 24%
227 Non-productive investments 131.439.024 808.940.730 16%
Axis 2 18.751.250.678 42.775.485.565 44%
311 Diversification into non-agricultural activities
201.037.922 1.488.899.856 14%
312 Support for business creation and development
199.303.071 2.208.788.801 9%
313 Encouragement of tourism
activities 158.336.140 1.291.017.104 12%
431 Running the LAG, skills
acquisition, animation 166.786.045 959.729.194 17%
Axis 4 502.159.530 5.754.669.570 9%
511 Technical assistance 347.836.012 1.877.371.428 19%
611 Complimentary direct payments 438.676.604 645.581.697 68%
Total 31.146.283.591 184.108.40.2067 32%
Where uptake of individual rural development measures has been slow at the time of writing, reasons include the following:
· administrative requirements which are relatively time-consuming in the start-up
phase (e.g. Leader approach) ;
· limits on premia which are seen as low in relation to costs to be covered (e.g.
measure 114 use of advisory services) ;
· unclear level of need of measure in some areas (e.g. 115 setting-up of farm
management, relief & advisory services some services already in place in several Member States) ;
· new measure, therefore more difficult to use sometimes resulting in complex
conditions put in place by Member States / regions (e.g. 124 co-operation for development of new products, processes & technologies);
· in the case of measures "establishing" certain natural features, policy choice by
Member States / regions to focus on maintaining existing areas with those features rather than establishing new areas (e.g. 222 first establishment of agro- forestry systems on agricultural land) ;
Output and result indicators
Output indicators State of play
Number of RDP
the measures EAFRD 2007-2009 Total allocation uptake
111 Vocational training and information actions 78
112 Setting-up of young farmers 69
113 Early retirement 52
114 Use of advisory services 60
Setting up of farm management, relief and advisory services
1,958,763 137,271,564 1%
121 Modernisation of agricultural holdings 86 9,652,819,268
122 Improvement of the economic value of forests 50
123 Adding value to agricultural and forestry products 86
Cooperation for development of new products, processes and technologies
8,006,806 336,457,412 2%
Infrastructure related to the development and adaptation of agriculture and forestry 4,866,010,414
Restoring agricultural production potential damaged
by natural disasters and introducing appropriate prevention actions
131 Meeting standards based on Community legislation 17
214 Agri-environment commitments 88 20,317,820,878
215 Animal welfare payments 21
216 Non-productive investments 49
221 First afforestation of non- agricultural land 66
First establishment of agroforestry systems on agricultural land
223 First afforestation of non- agricultural land 39
224 Natura 2000 payments 15
225 Forest-environment payments 31
Restoring forestry potential and introducing prevention actions 1,552,976,933
227 Non-productive investments 71
Total Axis 2 39,751,267,021
311 Diversification into non- agricultural activities 67 1,442,111,649
312 Business creation and development 51 2,185,744,982
313 Encouragement of tourism activities 62
321 Basic services for the economy and rural population 64 2,685,865,662
322 Village renewal and development 54 3,046,071,082
511 Technical assistance 1,925,361,913
611 Direct Payments (RO and BG)
Monitoring output indicators 2007-2009, and targets 2007-2013
(before HC as at end 2009) 38
Code Measure Output Unit Value (2007-Targets 2007-
2009) 2013 % target
Vocational training and information actions
111 Number of participants
N, 1,136,877 5258036 22%
112 Setting up of young farmers Number of assisted young farmers
N, 36,660 188,427 19%
Number of beneficiaries N, 17,385 81,453 21%
113 Early retirement
Number of hectares released
Ha 230,000 998,627 23%
Number of farmers supported
N, 34,800 1,125,166 3%
114 Use of advisory services
Number of forest holders supported
N, 1,070 64,042 2%
Setting up of management, relief and advisory services Number of newly set up management, relief or advisory services
115 N, 185 1,191 16%
Number of farm holdings that received investment support
121 Modernisation of agricultural holdings
N, 105,800 592,700 18%
Improvement of the economic value of forests Number of forest holdings that received investment support
122 N, 6,020 68057 9%
Adding value to agricultural and forestry products
123 Number of enterprises supported
N, 7,060 69,000 10%
Cooperation for development of new products, processes and technologies
Participation of farmers in food quality schemes Number of supported farm holdings participating in a quality scheme
132 N, 134,000 393,381 34%
133 Information and promotion activities Number of supported actions
N, 2,041 51,635 4%
141 Semi-subsistence farming Number of semi- subsistence farm holdings supported
N, 8,885 110,889 8%
142 Producer groups Number of supported producer groups
N, 280 2,162 13%
Number of supported holdings in LFAs N, 2,568,319 3,734,832 69%
LFA Support to Less Favoured Areas
Supported agricultural land in LFAs
Ha 49,050,000 51,700,000 95%
Number of supported holdings in Natura 2000 areas/under WFD
N, 29,679 58,476 51%
Natura 2000 payments and payments linked
to Directive 2000/60/EC (WFD)
Supported agricultural land under Natura 2000/under WFD
Ha 536,492 1,506,695 36%
Number of farm holdings
N, 947,000 2,778,267 34%
Total area under agri- environmental support
Ha 33,150,000 60,000,000 55%
214 Agri-environment payments
Physical area under agri-environmental support
Ha 21,528,712 50,000,000 43%
Total Number of contracts
N, 1,675,447 2,931,033 57%
215 Animal welfare payments Number of animal welfare contracts
N, 126,700 184,287 69%
216 Non-productive investments Number of farm holdings
Number of forest holdings receiving support
N, 5,130 75,610 7%
Total forest area under forest environment support
Ha 211,886 2,135,933 10%
225 Forest-environment payments
Physical forest area under forest environment support
Ha 187,256 919,762 20%
Number of contracts N, 8,750 76,939 11%
Restoring forestry potential and introducing prevention actions
Number of prevention/restoration actions
226 N, 19,370 132,717 15%
227 Non-productive investments Number of supported forest holders
N, 39,411 136,876 29%
Diversification into non-agricultural activities
311 Number of beneficiaries N, 4,971 83,944 6%
Number of micro- enterprises supported/created
312 Business creation and development
N, 6,111 94,700 6%
313 Encouragement of tourism activities Number of new tourism actions supported
N, 3,691 44,146 8%
321 Basic services for the economy and rural Number of supported actions
N, 8,707 86,651 10%
Number of villages where actions took place
322 Village renewal and development
N, 12,790 32,400 39%
Conservation and upgrading of the rural heritage
323 Number of rural heritage actions supported
N, 23,462 70,671 33%
331 Training and information Number of economic actors participating
Result indicators state of play -
Result indicators Targets
Number of participants that successfully ended a training activity related to
agriculture and/or forestry 2 200 000
Increase in GVA in supported holdings/enterprises ('000 EUR) 25 900 000
Number of holdings / enterprises introducing new products and/or new
techniques 334 000
Number of farms entering the market 130 000
Value of agricultural production under recognized quality label/standards
(millions of euros) 16 700 000
Biodiversity 57 000 000
Water quality 38 000 000
Agricultural and forestry
Axis 2 areas under successful Climate change 26 000 000
contributing to (ha)
Soil quality 37 000 000
Avoidance marginalisation 53 000 000
Increase in Non-agricultural gross value added in supported business ('000
Annex 4b Alignment with Europe 2020 through priorities and associated targets
This section presents a preliminary analysis of possible EU "priorities" for the rural development policy post-2013 (the concept of "priorities" being an important aspect of improved strategic targeting in the integration scenario).
2. PROPOSED CONTENT, MODE OF OPERATION
The EU priorities for rural development would aim at translating the broad policy objectives outlined in overarching policy documents of the Commission (Europe- 2020 strategy, the Communication on the future CAP) into a set of concrete priority areas for action for the policy.
For the Member States the EU priorities will support the preparation of the rural development programmes (programming) by logically linking the objectives of the policy to possible operational outcomes and to the available instruments (including the set of rural development measures currently under development). For the Commission, the EU priorities will represent a reference tool for steering the programmes towards EU strategic priorities, thus ensuring the EU added value of the policy.
The following five EU priorities for the rural development policy may be proposed, based on the analytical work carried out within the Impact Assessment process:
· Transfer of knowledge;
The content of this proposed list of priorities shows clear links with the Europe 2020 strategy, especially as regards the issue of sustainable growth and corresponding headline targets.
A number of possible synergies and complementarities exist between the different priorities (e.g. increasing resource efficiency can equally support the competitiveness of agriculture etc.).
Each of the priorities is intended to be matched by a limited number of "target indicators" (currently under development), which will have to be quantified ex ante, within programming, and regularly monitored during the implementation of the programmes. The target indicators intend to capture the expected (during the programming phase) and actual (during the implementation phase) outcomes of the programmes in relation to relevant intervention areas within each priority.
As for the measures which could possibly serve each of the priorities, full flexibility would be left to the Member States concerning the choice of measures and instruments for achieving the different priorities, in the context of strategic programming. As a result of the programming phase, the Member States will have to demonstrate that relevant combinations of measures are included into the programmes in relation to each priority, in view of achieving the corresponding targets.
Specific provisions would be defined in the design of the measures to ensure strong links with the priorities and with the horizontal guiding themes concerning climate change, environment and innovation.
When looking at the priorities, it is important to consider that a single measure (and projects under a given measure) can contribute to different priorities (and therefore to different target indicators). As an example, a given investment increasing energy efficiency of an agricultural holding will certainly contribute to priority 5, but it may also support the competitiveness of the agricultural sector (priority 2). Similarly, a more rationale use of chemical inputs as a result of, for example, agri-environmental measures, will at the same time increase resource efficiency at the level of the agricultural holding, helping reducing GHG emissions from agriculture (priority 5) and contribute to the protection of ecosystems (priority 4). Many other similar examples can be drawn.
By contrast, impact indicators refer to the benefits of the policy beyond its immediate effects on direct beneficiaries e.g. in the agricultural sector as a whole, or even in rural areas as a whole. It is more difficult to set targets for such indicators because they are affected by a wider range of factors.
The difficulties related to impact indicators have been apparent in the current period. Rural development programmes are supposed to set targets at the level of impact indicators, aggregated from targets at measure level and axis level. However, this has proved challenging in some programmes; and in these cases, much of the reliable targeting carried out has been at measure level. Such targeting is not without value;
however, the picture which it gives of the effect of rural development policy may prove not to be completely satisfactory.
Therefore, in the period after 2013, choosing appropriate target indicators closer to the result level than the impact level should make the targeting system more manageable. (It should be noted that impact indicators would still be used within the overall evaluation process, but would not be used for ex-ante targeting.) Of course, there would still be a certain administrative burden involved: the effort involved in agreeing the targets for a given programme - and then agreeing the combination of measures to be used to meet those targets should not be underestimated. On the other hand, administrative effort is already involved in the current approach to setting the main targets. Overall, there should be a simplification effect (even if the provisions of "greening" in the first pillar of the CAP had to be taken into account in some cases for target-setting in rural development policy).
At the same time as being more manageable, a targeting system with the right priorities and indicators would provide an improved picture of what was being achieved by rural development policy, in line with Europe 2020 and other sources of strategic orientation. Result indicators are capable of providing "useful" information; moreover, priorities and target indicators chosen specifically with Europe 2020 in mind would of course give a clearer image of how rural development policy was serving the Europe 2020 strategy.
Furthermore, it should be repeated here that the explicit flexibility which MS / regions would enjoy in using measures in combination to achieve any given target set against priorities would allow them to construct programmes with stronger intervention logics.
Annex 4c Implications of a change in the management system
This annex attempts to assess the possible impact of various approaches to managing rural development policy, in line with the three scenarios set out in the impact assessment exercise as a whole.
It should be read in conjunction with annex [ ], which presents a picture of how (and how well) rural development policy has been functioning in the current period of 2007-2013.
1. SCENARIO 1: "ADJUSTMENT"
1.1. Summary of the management approach to be applied (see also table 1)
Under this scenario, the management approach for rural development (RD) policy would be essentially the same as in the current period (2007-13).
· Strategic targeting (result-based management) would be applied, in more or less
the same manner as at present.
· The overall strategic objectives of the competitiveness of agriculture, the
sustainable management of natural resources and balanced territorial development would apply.
· Rural development programmes (RDPs) would still operate at either national or
regional level. As at present, they would be subject to an approval process.
· RD measures would still be divided into axes. Each axis would still have one
(and only one) strategic objective attached to it; minimum spending requirements would apply to each axis for each RDP. (This is a form of input-based management.)
· Under the "Health Check method" of ring-fencing, minimum spending
requirements would also apply to operations related to a small number of objectives which would be more specific than the "strategic" objectives. These would be related either to competitiveness and innovation, or to the environment. (This is another form of input-based management.)
· Complementarity / demarcation between RD policy and other policy tools would
still be ensured primarily at national / regional level.
· With the axis system still in place, the process of using measures in combination
to meet objectives would continue to be problematic40 - especially because there
are administrative difficulties involved in combining measures from different axes. The axis system would also continue to make it impossible to give a full picture of the effects achieved by measures, as it would still be assumed that a given measure contributed to one objective and one only (so that an investment in a farm raised either economic or environmental performance not both).
The axis system would nevertheless continue to provide a crude guarantee that the spending of a given MS / region on a given strategic objective would not drop below a certain minimum level. The guarantee would be "crude" in the sense that it would not reflect the fact that most measures contribute to more than one objective, and that it would in itself give no information about the quality or impact of measures.
Ongoing ring-fencing in the style of the Health Check would continue to ensure that certain amounts of funding were still being spent on certain relatively specific objectives (more specific than the strategic objectives). However, this would in no way guarantee outcomes it would essentially be an exercise in "labelling" money and would therefore contradict the approach of strategic targeting. By its very nature (as experienced in the current period), it would continue to add considerably to the administrative burden borne at EU, national and regional level.
2.SCENARIO 2: "INTEGRATION"
2.1. Summary of the management approach to be applied (see also table 1)
· Strategic targeting would be applied, with certain adaptations (see below).
· The overall strategic objectives of the competitiveness of agriculture, the
· The current EU strategic guidelines for rural development would be replaced by a
common strategic framework (CSF) which would cover the European Agricultural Fund for Rural Development, the European Regional Development Fund, the Cohesion Fund, the European Social Fund and the European Fisheries Fund.
o The CSF would set out how each fund could contribute to the goals of the
Europe 2020 strategy (smart, sustainable and inclusive growth). In the case of rural development policy, this implies that the CSF would indicate by which means the rural development "priorities" would contribute to achieving the overarching goals of the Europe 2020 strategy.
o In one version of the scenario, strict "burden-sharing" would be attempted
between the funds within the CSF. In other words, there would be an attempt to quantify at EU level the contribution which each fund could make to the objectives of Europe 2020.
o In another version of the scenario, the description of how each fund could
contribute would be mainly qualitative. Any quantitative targets which were set for rural development policy within the CSF would be indicative, and they would not be set with mathematical reference to the other funds.
· The CSF would be matched by equivalent national framework documents,
reflecting the scope and objectives of the CSF at the level of each Member State. This could take the form of "Partnership Contracts", the precise structure and content of which will be defined by the Commission Services concerned by the CSF.
· RDPs would still operate at either national or regional level. As at present, they
would be subject to an approval process.
If it provided guidelines at EU level on how the five funds concerned would work
together in the service of Europe 2020 , the CSF and "Partnership Contracts" would provide greater consistency from one MS / region to another in terms of how the funds are co-ordinated. On the other hand, this could mean less flexibility for MS / regions in deciding how to co-ordinate the funds on their territory. Therefore, there might be a particular gain for MS / regions which have struggled to ensure this co- ordination in the current period, but less of a gain for others.
This point might be especially relevant to co-ordination at the regional (in the Member States implementing regional programmes) and sub-regional level, where the sophistication of strategies to co-ordinate funds varies significantly.
If the CSF attempted strict "burden-sharing" i.e. if it selected targets related to
Europe 2020 and then quantified (in a binding fashion and at EU level) the contribution which each fund could make, a heavy technical and administrative burden would result:
· It would be difficult to make a reliable assessment of the potential contribution of
each fund towards some targets especially in cases where that potential contribution was small.
· There could be an organisational mismatch between the funds concerned and
other tools for implementing the Europe 2020 strategy. On the one hand, the CSF would define how instruments would work together at EU level. On the other hand, within the main framework of Europe 2020 , MS would be defining how instruments should work together at national level through their National Reform Programmes.
If the CSF limited itself to a primarily qualitative description of how each fund could contribute to the objectives of Europe 2020 , the problems described above would be avoided. Nevertheless, the CSF would probably still help to steer RDPs
Relying on strategic targeting, abolishing the axis system and ring-fencing
Perhaps the central question related to scenario 2 is: Would it result in RDPs that reflected the genuine needs of regions, MS and the EU in a balanced way?
A fear has been expressed that the abolition of the axis system and its minimum spending requirements would allow MS / regions to spend disproportionate sums of money on certain objectives (for example, competitiveness) for "political" reasons while inappropriately neglecting others (for example, environmental care).
It is very difficult to test this hypothesis about a possible future. However, a related question which can be addressed instead is whether the axis system has exerted any influence on spending choices in the current period. And indeed, an examination of the spending decisions which MS made prior to the CAP Health Check suggests that the minimum spending requirements of the axis system probably did exert a certain influence in some cases.
The table on page  presents planned allocations of EAFRD funding as of August 2008 (before the CAP Health Check came into effect), ordered by MS. It is intended to give an approximate view of how MS were dividing up their EAFRD resources once most initial difficulties with the programming process had been resolved.
It emerges from the table that planned spending levels were close to the minimum permitted minimum levels
41 in some cases, especially with regard to axes 3 and 4.
The table must be treated with considerable caution for at least two reasons.
· First, for the sake of simplicity, the table does not take account of the fact that
some MS operate regional rather than national RDPs.
· Secondly, the situation is complicated by the fact that, in the current period, all
Therefore, abolishing Health-Check-style ring-fencing for a new programming period should not make it difficult to produce balanced RDPs - provided that the management mechanisms still in place performed adequately.
Having considered the respective roles of the axis system and ring-fencing, we now come to the heart of the matter: Would the strategic targeting approach alone be sufficient to steer MS / regions into producing balanced RDPs?
An essential point is that the Commission would retain a very important lever: RDPs would remain subject to a full approval process, and the Commission would simply not propose approval for an RDP before being satisfied that the RDP was of sufficient quality in other words, that it reflected the relevant ex-ante evaluation, that it was in line with the CSF, and that it addressed each priority adequately, also taking account of the cross-cutting guiding considerations of innovation, the environment and climate change.
A "firm" approach of this sort would be all the more effective if negotiations over RDPs focused clearly on important points and were not sidetracked by less significant details. Provided that the CSF did not create excessive additional complexities (see related section), we could reasonably expect that the process of strategic targeting would operate more effectively and efficiently after 2013 than in the current period because MS / regions would have acquired additional experience
of the process
If we assume that the strategic targeting process would function reasonably well, there would be benefits from abolishing the axis system and the ring-fencing of the Health Check:
· It would be easier to combine measures to reach particular objectives / priorities.
· It would also be possible to explicitly design measures which contributed to more
However, it must be re-emphasised here that the apparent ease with which this can be done within the axis system is misleading, because the system makes false assumptions about the range of impacts of measures and says nothing about what is actually achieved.
In any case, it might be possible to estimate approximately how much was being spent on a given objective / priority . Moreover, precise financial reporting would still be provided with regard to spending on individual measures.
3. SCENARIO 3: REFOCUS
3.1. Summary of the management approach to be applied (see also table 1)
· Strategic targeting would be applied, but with a much narrower range of intended
outcomes (see below).
· Rural development programmes (RDPs) would still operate at either national or
regional level. As at present, they would be subject to an approval process.
· The policy would make use of a number of relatively specific "priorities" (see
section 2). In this scenario they would be very sharply focused on the environment, though an additional objective would be to facilitate the phasing- out of direct payments.
· As the priorities would be more focused, the axis system would be abolished.
· Ring-fencing in the style of the CAP Health Check would be abolished.
· Within each RDP, a limit would be placed on spending on temporary measures to
ease the process of phasing out direct payments.
The abolition of the axis system and of ring-fencing in the style of the Health Check would lighten the administrative burden.
It would probably be easier to achieve demarcation between rural development policy and other policies because the field of activity of rural development policy would be much narrower.
However, full complementarity including the avoidance of "funding gaps"
between policies would be a much sterner challenge. Whereas at present, support for the general socio-economic development of rural areas is programmed within rural development policy, under the refocus scenario any such support would be administered through other EU policies (if it were maintained at all): the "automatic" synergies between funding for the environmental care and for socio- economic development would be lost. The inclusion of rural development policy in a CSF could be helpful in this respect (see section 2.2 for a discussion of the likely advantages and disadvantages of a CSF).
Strictly in terms of management: Difficulties of demarcation between the current first and second pillars of the CAP would be over, since the first pillar would no longer exist.
Overall, the programming process might be simpler with regard to rural development policy itself. However, this would depend partly on whether very precise targeting of funds at very precise environmental outcomes was sought. If the level of ambition were high in this respect, that would imply considerable effort in the development and use of sophisticated measures, priorities and indicators.
Summary of key elements of each scenario for the purposes of this annex
Management element Scenario 1 Scenario 2 Scenario 3 -
Adjustment Integration Refocus
Strategic targeting? Yes Yes Yes
Broad objectives related to Broad objectives related to Overall objectives more focused on environment
natural resources and development of rural areas retained natural resources and development of rural areas retained
environment and climate change would be cross- cutting guiding themes
Small number of
indicators would fix
areas of emphasis
RDPs national or regional? Both, as at present Both, as at present Both, as at present
Axis system? Yes No - abolished No - abolished
Ring-fencing in style of CAP Health Check? Yes No abolished No - abolished
Operates in favour either
% levels of planned EAFRD spending per axis by Member State
(situation in August 2008 before CAP Health Check)
MS Axis 1 ( 10%) Axis 2 (25%) Axis 3 (10%) Axis 4 MS Axis 1 (10%) Axis 2 (25%) Axis 3 (10%) Axis 4
BE 49 % 36 % 12 % 5.0 % LU 29 % 59 % 9 % 5.9 %
BG 38 % 25 % 28 % 2.4 % HU 46 % 33 % 16 % 5.5 %
CZ 23 % 55 % 20 % 5.0 % MT 34 % 27 % 34 % 4.0 %
DK 21 % 63 % 12 % 9.6 % NL 32 % 31 % 34 % 9.9 %
DE 28 % 41 % 29 % 6.0 % AT 15 % 72 % 10 % 5.5 %
EE 38 % 37 % 19 % 10.0 % PL 41 % 34 % 23 % 4.8 %
IE 10 % 80 % 10 % 10.0 % PT 46 % 41 % 8 % 10.1 %
EL 44 % 35 % 18 % 6.1 % RO 40 % 24 % 26 % 2.3 %
ES 45 % 39 % 12 % 11.3 % SI 34 % 52 % 12% 3.0 %
FR 38 % 50% 10 % 5.1 % SK 34 % 50 % 14 % 3.0 %
IT 38 % 44 % 14 % 8.1 % FI 11 % 74 % 13 % 5.3 %
CY 44 % 44 % 10 % 2.7 % SE 15 % 70 % 11 % 5.8 %
LV 47 % 28 % 20 % 2.5 % UK 13 % 73 % 13 % 6.2 %