Summary

The Scenar 2040 study provides a comprehensive analysis of the potential impacts of broad Common Agricultural Policy (CAP)-related "what if" scenarios on the EU agricultural sector and its broader environment. The report presents two contrasted and theoretical CAP scenarios: "Productivity and Investment" (Prod&Inv) directs support towards enhancing productivity and competitiveness, whereas "Environment and Climate" (Env&Clim) redirects support towards more environmental and climate-focused interventions. Furthermore, the report presents results of a counterfactual NoCAP scenario, which simulates the removal of the entire CAP framework. This NoCAP scenario provides a useful reference point for assessing economic, social, and environmental impacts in the absence of the CAP framework.

Policy context

The study was commissioned by DG AGRI and was carried out in collaboration with the JRC. The Scenar 2040 analysis builds on the 2023 EU Agricultural Outlook and the current structure of national CAP Strategic Plans to explore support shifts across scenarios. The study aims to enrich policy discussions on the future of the CAP by providing quantitative insights into the general implications of alternative CAP trajectories.

Key conclusions

The Scenar 2040 results underscore the CAP’s essential role in the EU agricultural landscape and its broader socio-economic and environmental interlinkages. The results indicate that the removal of the CAP could have considerable economic, environmental, and social impacts, with significant heterogeneity across farms, regions, MSs, and sectors. The results of the two CAP scenarios reveal contrasted outcomes, with both scenarios showing impacts aligned with their respective narratives.

The analysis illustrates critical structural trade-offs. The Prod&Inv scenario shows production expansion lowering per-unit costs and domestic prices, strengthening EU competitiveness in global markets, but potentially intensifying some environmental pressures. Conversely, the Env&Clim scenario’s production contraction raises domestic prices, benefiting extensive producers but potentially increasing import reliance and reducing international competitiveness. The results underscore the fundamental structural trade-offs between intensification and extensification. Productivity-focused strategies enhance resource efficiency and limit herd and area expansion. Conversely, environmentally focused extensification, while reducing per-hectare or per-animal environmental pressures, often requires larger livestock and land bases to sustain output levels, which tends to raise pressures per unit of output. This structural trade-off likely persists, even with sustainable intensification approaches.

Overall, while policy measures can significantly affect production and price dynamics, particularly in certain sectors, the Scenar 2040 scenario results consistently indicate that core market fundamentals (e.g., demand elasticities, trade patterns, and production efficiency), remain the primary determinants of production outcomes. Policy choices, while impactful in shaping the distribution and intensity of effects, operate within these broader structural parameters.

The Scenar 2040 study broadly confirms the rationale underpinning existing policy objectives and reveals the diversity of the current CAP and its national CSPs. The results underscore the critical importance of nuanced policy design that effectively accommodates the heterogeneous needs and vulnerabilities within the EU’s agricultural sector, and the need for the CAP to address sectoral viability, environmental sustainability, and broader socio-economic outcomes. To be effective, policy instruments must not only achieve stated objectives within the constraints of market fundamentals but also be equitable in addressing the diverse national and regional contexts and conditions across the EU. Furthermore, the broader implications at the global level need to be considered, as demonstrated by the implications on emission leakage.

Main findings

The NoCAP scenario induces significant and heterogeneous economic, environmental, and social transformations across the EU's agricultural sector. Farm income would decline substantially, disproportionally affecting smaller farms, heightening vulnerability and increasing farm exit risks. Total EU agricultural production decreases considerably, and Utilised Agricultural Area (UAA) declines. Livestock production contracts significantly, especially in the meat sector, with substantial variation across categories. Trade dynamics shift, deteriorating the EU agri-food trade balance. Consumer prices rise, increasing household food expenditure shares, disproportionately affecting more vulnerable Member States (MSs). Collectively, these outcomes underscore the CAP’s redistributive role, revealing its impact on income distribution across farms, MSs and territories. Environmentally, EU agriculture non-CO2 GHG emissions decrease, but leakage leads to a net global emission increase. Total nitrogen surplus decreases but remains well above critical levels in hotspot regions. EU crop diversity declines, and the scenario indicates an intensification, with increased high-intensity farming.

The two alternative CAP scenarios present contrasting outcomes reflecting their respective narratives. The Prod&Inv scenario results in higher competitiveness and production, driven by higher investments and improved yields, enhancing EU self-sufficiency and trade, but slightly increasing nitrogen surpluses and agriculture GHG emissions. However, net global GHG emissions decrease as the more emission-efficient EU production replaces less efficient non-EU production (leakage benefit). Furthermore, the scenario indicates a decline in crop diversity in many farm types, and the stronger emphasis on enhanced productivity leads to increased high input intensity. Conversely, the Env&Clim scenario places greater emphasis on environmental sustainability, which results in lower productivity, decreased EU production levels, and higher prices. Overall UAA decreases, although increasing in several MSs as farmers try to partially compensate the assumed negative yield impacts. The EU trade balance worsens but without causing significant disruptions to self-sufficiency rates. While achieving EU environmental improvements (e.g. lower GHG emissions, reduced nitrogen surpluses), it may increase global challenges, such as higher non-EU agriculture GHG emissions due to production shifts (emission leakage). Crop diversity increases for the majority of farms across all farm types, and stronger support for more extensive farming practises decreases high-intensity farming.

Related and future Joint Research Centre work

The JRC has conducted other work relevant to this topic, including Scenar 2030 and the development of sustainable agricultural practices. The follow-up work to this report will include further analysis of the potential impacts of alternative CAP scenarios, the development of new policy measures, enhancements in integrated modelling frameworks, and improvements in key parameters, such as those related to sustainable productivity increases.

Quick guide

The Scenar 2040 study provides a comprehensive analysis of potential impacts of alternative CAP scenarios on the EU agricultural sector. The methodology uses a combination of three agro-economic simulation models. The scenarios simulate the impacts of different policy scenarios, including the Prod&Inv and Env&Clim scenarios, and a counterfactual NoCAP scenario, to assess their economic, social, and environmental impacts. The analysis builds on the 2023 EU Agricultural Outlook and the current structure of national CAP Strategic Plans to explore support shifts across scenarios. The main uncertainties and risks associated with the report's findings relate to several key assumptions, including yield impacts of CAP measures and national co-financing rates. Moreover, the report does not account for potential impacts of additional climate change, market volatility, and future policy uncertainty.