The targeting of direct payments to farmers should be improved to reflect the “ambitious policy goals” of the EU, according to a new Organisation for Economic Co-operation and Development (OECD) report.
The Policies for the Future of Farming and Food in the European Union review examines how EU policies and interventions up to 2022 have enhanced the productivity, sustainability and resilience of the EU’s food and agriculture sector.
It also explores the potential of the Common Agricultural Policy (CAP) 2023-2027 to meet the objectives of the European Green Deal.
The report notes that the EU’s agri-food sector is at “a critical juncture” as it confronts climate change, crises such as the Covid-19 pandemic and the war in Ukraine, along with ensuring food security, environmental sustainability and providing livelihoods.
OECD
The review says that in recent years EU agricultural productivity has increased at a slower pace than in other OECD countries.
It notes that the environmental sustainability performance of the agri-food sector “has not improved in line with expectations”.
“This stalled progress is not due to insufficient ambition or lack of resources, but rather to policy design and implementation,” the report states.
According to the OECD, the main challenge for the CAP is “to overcome its path dependency and move towards a bolder and more forward-looking food systems policy”.
“Recent CAP reforms have changed the way support is delivered, but have only resulted in incremental progress,” it said.
The report said that an EU-wide high-level discussion is needed on the purpose of the CAP, the rights and responsibilities of farmers, and the financial weight given to income compared to environmental or other objectives is needed.
Direct payments
In order to meet the objectives of the European Green Deal, the OECD said that the EU will need to redesign farmer payments, regulations, innovation and data strategies, as well as adopt new approaches to deliver environmental services.
The report notes that efforts have been made to improve fairness and better distribute direct payments to farmers.
However, it adds that payments may keep some farmers in uncompetitive activities, stifle innovation, slow structural and generational change and weaken long-term resilience of the sector.
The OECD recommends that the role of direct payments should be reoriented by separating and targeting measures aimed at income support and measures aimed at environmental sustainability.
These payments should be linked to results and ensure that they do not undermine incentives for innovation and generational renewal.
The report says the EU needs to accelerate the transition to targeting income support to low-income farmers and “phase out market price support and payments with potential to harm the environment and to distort markets and trade”.
Report
The OECD also calls on the EU to reconsider the role and scope of cross-compliance mechanisms to increase their cost-effectiveness.
It adds that the EU needs to design “outcome-based regulations that do not hamper innovation, specifying their objectives and monitoring outcomes to increase effectiveness in promoting sustainability”.
Among the other recommendations are enhanced support for innovation in the agri-food sector and improved data-driven policy design.
The OECD said that the EU should adopt result-based payments for environmental services and collective action.
“Transform voluntary schemes into result-based multi-annual payments for environmental services to increase policy performance and offer farmers additional sources of revenue,” it said.
The report also notes the lack of data available on the disposable income of farm households across the EU – only Ireland and the Netherlands are currently gathering such information.
However, the OECD said that the approaches vary widely and do not allow comparisons across countries.
There is also no reliable system across the EU to compare agricultural incomes with those in other sectors of the economy which “could justify EU income support for farmers”.