The present report was carried out by the Joint Research Centre (JRC) and external experts in the context of the JRC's analytical support to the Directorate-General for Agriculture and Rural Development. The report analyses the impact on the agricultural sector of stylised scenarios, reflecting the main drivers of policy debate and thus providing a framework for further exploration of the process of designing the future CAP. While the scenarios presented do not represent real policy options, they underline the potential for changes to current agri-food policies to address societal challenges and demands.
The study considers three scenarios that take polar paths, against a reference scenario, to characterise different visions for the CAP. The first scenario, Income & Environment (Inc&Env), maintains the EU’s CAP budget at its current nominal level, but is more restrictive with regard to the level of farmer compliance with agri-environmental objectives needed for direct payment eligibility. The second scenario, Liberalisation & Productivity (Lib&Prod), assumes a strong reduction in subsidies (the removal of Pillar 1 direct payments, which are returned to tax payers), with a shift of Pillar 2 payments to productivity-increasing measures and further trade liberalisation. As a variant of the Lib&Prod scenario, the No Policy (NoCAP) scenario also eliminates Pillar 2 payments, thus removing all budgetary support to agriculture.
The results show the vulnerability of small farms, in particular in marginal areas of the EU, where agriculture (and its subsidies) is far more important economically than market income, has to be emphasised. The trade liberalisation scenarios reveal opportunities for some but risks for even more agri-food sectors. Special attention must be paid to the complex relations, incentives and trade-offs of the different instruments, in particular regarding the environmental dimension. The objective of direct payments has to be clearly defined, as they still represent the largest share of the budget dedicated to agriculture and steer most of the sector’s responses. If distributional aspects are key, then the target population needs to be better defined; if environmental performance is key, then conditionality has to be better designed.
The analysis of the social, economic and environmental impacts of various options for the next CAP employs the iMAP platform models MAGNET, CAPRI and IFM-CAP in an integrated manner covering different spatial scales (global, European Union (EU), Member State, NUTS 2 region and individual farm levels). The use of three different models and their (soft) linkages adds complexity, particularly when trying to compare results across models (e.g. different commodity categories).
The policy scenarios are assessed with regard to their impact on markets (production, demand, trade and prices), land use, the environment and farmer income from the global level to the farm level. The figure below summarises the impact of the three scenarios on agricultural production, farm income, greenhouse gas (GHG) emissions from the agri-food sector, nitrogen surplus, utilised agricultural area and farm jobs. Negative values show a reduction in these indicators under a given scenario and positive values an increase. For the analysis, it was considered that increases in agricultural production and farm income are improvements, while for GHG emissions and nitrogen surplus, the contrary holds.
Designing an agricultural policy that tackles all of its societal objectives is a daunting task. At best, the policy will have to focus on key priorities and accept that trade-offs will have to be made with regard to others. An internationally competitive agriculture sector in Europe might come at the expense of increased environmental pressures or reduced job creation in the sector.
Despite the extreme nature of the scenarios chosen, some objectives would be only partly achieved. Further increasing the performance of agricultural policy in some areas would require even more extreme policies to be implemented, which might not be possible under the current institutional architecture.
The general caveats that apply to all modelling exercises (i.e. a simplified representation of reality, no forecasting models, high uncertainty, etc.) apply to this study.
Moreover, many of the concerns that surround the agricultural policy debate, such as generational renewal, value distribution along the food chain and structural change, cannot be captured in the model results and warrant additional investigation before any conclusions are made with regard to which policy option best meets them. In this context, expanding the analysis to a food systems approach could provide further insights into other impacts of the policy options.
During the course of this study, experiences have revealed repeatedly that the linkage of models is a challenge and, in some cases, the resulting improvement in the quality of the analysis is minor. Further research must be dedicated to identifying the areas in which investing in model linkage does in fact improve analytical capacity. Furthermore, the assumptions on key parameters (e.g. the impact on productivity of Pillar 2 payments) are crucial to identifying the magnitude of some of the shocks (while the direction of the shocks will not be affected). The JRC should also invest some additional resources in improving these parameters.
At the time of finalising this report, the main uncertainties about the future of the agricultural sector and its related policies stemmed from the early stages of discussions on the Multiannual Financial Framework 2021-2027 and Brexit negotiations. The JRC will continue to support the analysis of these topics using the tools described in this report.
Detailed results of the three models employed in this study (CAPRI, IFM-CAP, MAGNET) can be accessed in the interactive dasboards. Users can freely dig into the results, download the data and perform self-analysis.Access the dashboards
This interactive factsheet was created by the Joint Research Centre (JRC), the European Commission's science and knowledge service.
It aims to provide evidence-based scientific support to the European policy-making process. The scientific output expressed does not imply a policy position of the European Commission.
Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this factsheet and underlying data.