Farm business pathways under agri-environmental policies: Lessons for policy design

Abstract

European farmers have been adopting different practices in response to the Common Agricultural Policy (CAP). One of the new features of the CAP is the effort to encourage multifunctional farming systems which, besides food, also deliver environmental goods and services. The key policy instruments promoting environmentally-oriented farming are cross-compliance and greening, included as prerequisites for accessing the CAP direct payments, and agri-environment schemes (AES) provided as an optional additional program. In this study we examine how farmers have been coping with the CAP and its implications in terms of farm pathway dependence. The results reveal that intensive farmers adhere to cross-compliance and are exploring the possibilities for complying with greening in order to access the direct payments integrally, but either do not accesses or access the basic (entry) level of the AES in order to avoid taking land out of production. Extensive farmers easily comply with cross-compliance and greening and tend to enrol most of the farm into environment-related practices in order to access the high level of the AES. As all the farmers have an important part of their income from the CAP, these divergent coping strategies imply new challenges for policy makers in any future effort to reform the CAP.