The CAP towards 2020 Impact assessment

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The CAP towards 2020

Impact assessment

European Commission

DG Agriculture and Rural DevelopmentDirectorate for Economic Analysis, Perspectives and Evaluations

2

Outline

• Part I– Process

– Methodology

– Structure of the report

– Objectives

– Scenarios

– Impacts

– Monitoring and evaluation

• Part II– Direct payments:

• Redistribution of DP

• Greening

• Small farmers

• Young farmers

– Rural development• Allocation of RD envelopes

3

Part I

4

Process

1. Inter-service steering group– Between April 2010 and June 2011

– Composed of 20 DGs: SG, SJ, BEPA, BUDG, CLIMA, COMP, DEVCO, ECFIN, EMPL, ENER, ENTR, ENV, ESTAT, JRC, MARKT, OLAF, REGIO, RTD , SANCO, TRADE

2. Public Consultation– 517 contributions + Conference for stakeholders

– Strong CAP based on two pillars

– Focus on targeting, greening and better integration with other policies

3. Impact Assessment Board opinion – Recognises the amount of analysis conducted and an open process

– Main issues addressed in revised document: description of sub-options, simplification, monitoring and evaluation

5

Methodology

1. Internal analysis and studies– Combination of agricultural market outlook projections and simulation of impacts

at macro and micro level (FADN)

– International workshop on market outlook prospects and uncertainties

2. Contributions from the Steering Group members– Thematic working groups, led by different DGs

– Economic and prospective studies (JRC)

3. Evaluations and research projects – Both quantitative and qualitative information (e.g. RD mid-term evaluations)

– Listed in annex 11

6

Structure of the report

1. The CAP impact assessment process

2. Policy context, problem definition and EU value added

3. Objectives

4. Policy scenarios

5. Analysis of impacts

6. Comparing the scenarios with respect to objectives and impacts

7. Monitoring and evaluation

8. List of annexes

9. List of thematic groups

1. Situation and Prospects for EU Agriculture and Rural Areas

2. Greening the CAP

3. Direct payments

4. Rural Development

5. Market Measures

6. Risk Management

7. Research and Innovation

8. Simplification

9. Report on the Public Consultation

10. Impact of Scenarios on the Distribution of Direct Payments and Farm Income

11. Methodology; evaluations and research projects relating to CAP

12. Developing countries

7

Setting reform objectives

productivity and competitiveness

environmental and climate change performance

effectiveness and efficiency

Improving: the advisory system and networks (of farmers, advisors, researchers, food operators, consumers etc.) for knowledge creation and transfer

pro-competitive joint action among farmers and across the food supply chain in order to foster efficient use of resources, product development and marketing

incentives to use risk management instruments and active prevention strategies

increasing the number of agricultural areas which are under agricultural practices providing environmental and climate action benefits and encouraging the take-up of more advanced agri-environmental measures by Member States and farmers

rebalancing the direct payment to better reflect the objectives of income support and improved environmental performance

reducing the disparities in direct payment support levels between Member States and farmers

reducing administrative burden for farmers and managing authorities of existing tools without watering down their efficiency and effectiveness

8

Building policy scenarios

Adjustment

Continue the reform process by introducing further gradual changes while adjusting the most pressing shortcomings (e.g. more equity in the distribution of direct payments)

Integration

Capture the opportunity for reform ensuring that CAP becomes more sustainable and balanced (between policy objectives, MS and farmers) through more “green” targeted measures

Re-focus

More fundamental reform focusing entirely on environmental and climate change objectives through rural development, moving away from income support and most market measures

9

Key results - Comparison of scenarios by impact

Adjustment Integration Re-focus

Economic

Sector output +++ ++ +

Competitiveness (short/ long term)

++/+ +/++ +++

Response to crisis ++ +++ +

Social

Employment +++ ++ +

Income +++ ++ +

Territorial cohesion ++ +++ +

Environmental

Territorial coverage ++ +++ +

Targeted measures + ++ +++

Long term sustainability ++ +++ +

Simplification ++ + +++

10

Key results - Comparison of scenarios by objective

Adjustment Integration Re-focus

Viable food production ++ +++ +

Sustainable management of natural resources and climate action

+ +++ ++

Balanced territorial development ++ +++ +

EU value added ++ +++ +

Cost effectiveness + ++ +

11

Monitoring and evaluation (possible impact indicators)

Europe 2020: SMART – SUSTAINABLE (resource Efficiency) – INCLUSIVE

CAP: Maintain sustainable agriculture throughout the EU

General objectives

Viable food production Sustainable management of natural resources and

climate action

Balanced territorial development

Impact indicators

Agricultural income1) development2) compared to rest of the economy

Agricultural productivity 1) development2) compared to rest of the world

Price stability (agri and food)1) terms of trade2) growth in food sector3) trade balance; share of high value added products in exports

Greenhouse gas emissions (including carbon sequestration)

Soil organic matter and erosion

Biodiversity1) farmland birds index2) HNV farmland areas3) water quantity and quality

Employment in rural areas1) poverty in rural areas 2) GDP per capita in rural areas (compared to rest of the economy)

12

Part II

13

Direct payments – redistribution scenarios

14

Redistribution of DP – economic criteria

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EUR/ha

DP status-quo (EUR/ha) EU-27 average (EUR/ha) DP MFF redistributed with economic criteria (EUR/ha)

Source: European Commission, DG Agriculture and Rural Development – Commission Staff Working Paper ‘Impact Assessment – CAP towards 2020’ (budget data from the MFF Communication - COM (2011) 500 (excluding cotton and POSEI); hectares of potentially eligible area in 2009)

15

Redistribution of DP – environmental criteria

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DP status-quo (EUR/ha) EU-27 average (EUR/ha) DP MFF redistributed with environmental criteria (EUR/ha)


16

Impact of the

different criteria

compared to the flat

rate

PPS GDP/cap GVA/ha AWU/ha LFA / UAA Natura 2000 / UAAPermanent grassland / UAA

BE

BG

CZ

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FR

IT

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++ ++ ++++ ++

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Redistribution of DP – minimum 80% of EU-27 average

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EUR/ha

DP status-quo (EUR/ha) EU-27 average (EUR/ha)

80% of EU-27 average (EUR/ha) DP - Min. 80% of EU-avg. (EUR/ha)


18

Redistribution of DP – minimum 90% of EU-27 average with objective criteria

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90% of EU-27 average (EUR/ha) DP - Min. 90% of avg. with objective criteria (EUR/ha)


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Redistribution of DP – closing 1/3 of the gap between current level and 90% of EU-27 average

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90% of EU-27 average (EUR/ha) DP - Closing 1/3 of the gap to 90% of the avg. (EUR/ha)


20

Direct payments – greening

21

Greening: Share of farms bearing the costs of greening measures

0%

10%

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70%

80%

90%

100%B

E

BG

CY

CZ

DK

DE EL

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HU IE IT LT LU LV MT

NL

AT

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PT

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I

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SK SI

UK

EU

-27

Source: European Commission, DG Agriculture and Rural Development – Commission Staff Working Paper ‘Impact Assessment – CAP towards 2020’

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Greening: Average total cost of greening per MS

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160B

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DE EL

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NL

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€/ha PEA

Maintaining permanent grassland Ecological set aside Green cover Crop diversification EU-27


23

Greening: Average total cost of greening per MS – only for farms which bear a cost


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160B

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€/ha PEA

Maintaining permanent grassland Ecological set aside Green cover Crop diversification EU-27

24

Greening: The distribution of farms according to greening costs

Share of farms by class of greening cost per ha of PEA - EU-27 (option 1)

21%19%

29%

12%8%

4%

1%2%

4%

0%

5%

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35%

0 0-15 15-30 30-50 50-80 80-120 120-160 160-200 > 200

Share of farms

Greening cost in €/ha of potentially eligible area


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Estimated cost for ecological set-aside


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Estimated cost for maintaining permanent grassland


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Total cost for greening


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Direct payments – small farmers

29

Average farm size and farms below 5 ha UAA

Source: Eurostat, Farm Structure Survey 2007

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% of holdings below 5 ha

Average farm size (UAA) Share of farms below 5 ha UAA

30

Budget and number of beneficiaries in the scheme for small farmers (5% budget)

0%

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50%C

Z 1

000

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100

0

LU 1

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FR

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0

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0

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000

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100

0

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0

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000

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1000

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000

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730

SI 5

05

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473

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72

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463

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362

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356

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355

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238

MT

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Share of beneficiaries below the treshold Share of budget needed

Source: European Commission, DG Agriculture and Rural Development – Commission Staff Working Paper ‘Impact Assessment – CAP towards 2020’ (own calculation using CATS data for financial year 2009)

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Direct payments – young farmers

32

Impact of Young Farmer Scheme

(YFS) with a lump-sum support

N° ha ha € %BE 369 37,8 28,6 2.887 0,20%BG 1.890 17,8 6,2 1.039 0,24%CZ 337 77,7 89,3 4.950 0,19%DK 365 74,1 59,7 5.135 0,21%DE 4.001 43,9 45,7 3.375 0,26%EE 142 70,6 38,9 1.521 0,16%IE 1.011 44,8 32,3 2.161 0,18%GR 6.233 10,1 4,7 918 0,28%ES 5.513 35,0 23,8 1.485 0,16%FR 3.977 90,3 52,1 3.763 0,20%IT 6.721 12,3 7,6 1.158 0,20%CY 173 5,4 3,6 472 0,16%LV 873 20,1 16,5 711 0,28%LT 1.438 17,7 11,5 772 0,24%LU 18 82,4 56,9 3.922 0,21%HU 4.592 8,9 6,8 575 0,20%MT 50 0,9 0,9 156 0,16%NL 564 27,9 24,9 2.638 0,19%AT 1.939 19,0 19,3 1.234 0,34%PL 27.489 7,5 6,5 414 0,36%PT 768 27,0 12,6 1.298 0,16%RO 19.720 2,9 3,5 147 0,15%SI 394 9,2 6,5 716 0,20%SK 315 45,3 28,1 1.512 0,12%FI 688 42,2 33,6 1.983 0,25%SE 474 56,4 42,9 2.522 0,17%UK 1.241 91,5 53,8 3.106 0,10%EU-27 91.292 17,8 12,6 986 0,21%EU-15 33.880 35,3 22,0 1.967 0,20%EU-12 57.412 7,5 6,0 407 0,25%

* based on figures of young farmers assisted in RD programmes and Eurostat

** 25% of average DP/ha x average farm size of young farmers (with limit of 25 ha in MS whose average size of holding is below 25 ha and limit of average size of holdings in the MS where average holding size is more than 25 ha)

average farm size in MS

YFS in share of total DP

budget

number of farmers

concerned by YFS*

average farm size of

young farmers

YFS payment per

farmer**

33

Rural development

34

Rural development

• Methodology– Largely qualitative analysis on the basis of evaluations, studies, RTD projects

– See also IA for the reform of the structural funds

• Structure– Assessment of current policy in the light of future challenges and opportunities

– Identification of main issues for the reform and formulation of policy options• Alignment with Europe 2020

• Policy delivery, incl. coherence with other policies

• Budget and distribution

– Analysis of impacts for each option on:• Agriculture

• Environment and climate change

• Socio-economic development of rural areas

– Distribution of support: alternative options

35

Assessment of current policy

State of play on selected output indicators

Measure Indicator Total realised 2007-2009

Target 2007-2013

% of target

achieved 111 Vocational training and

information actions Number of participants in training

1 136 877 5 258 036 21,6%

121 Modernisation of agricultural holdings

Number of farm holdings supported

105 802 592 700 17,9%

Number of holdings supported

2 568 319 3 734 832 71,5% 211 212

Payments to farmers in areas with handicaps (Article 36 (a) (i) and (ii) of Reg. (EC) N. 1698/2005)

UAA supported (Ha) 49 005 000 51 700 000 94,8%

Physical area supported (Ha)

21 528 713 50 000 000 43,1% 214 Agri-environment payments

Number of contracts 1 675 447 2 931 033 57,2%

Physical area supported (Ha)

187 257 919 762 20,4% 225 Forest-environment payments

Number of contracts 8 747 75 884 11,5%

312 Business creation and development

Number of micro-enterprises supported

6 111 94 700 6,5%

321 Basic services for the economy and rural population

Number of actions supported

8 707 86 651 10,0%

36

Assessment of current policy

Selected result indicators (targets 2007-2013)

AXIS 1 Increase in GVA in supported holdings/enterprises (EUR million) 25 900

121 Modernisation of farms 5 362 123 Adding value to agricultural and forestry products 7 839

Number of holdings / enterprises introducing new products and/or new techniques

334

121 Modernisation of farms 172 122 Improving the economic value of forests 50

AXIS 3 Increase in Non-agricultural gross value added in supported business (EUR million)

3 100

312 Business creation and development 1 491 Gross number of jobs created 307

313 Encouragement of tourism activities 108 Population in rural areas benefiting from improved services (unique number of persons)

71 000

321 Basic services 21 048 322 Village renewal 25 939

Increase in internet penetration in rural areas (unique nbr of persons) 47 060

37

The role of agriculture in rural areas

38

Distribution

• Background: Modulation formula– (0.65 Area + 0.35 Labor) x GDP inverse index

• Analysis of different options using a two-fold approach:– Using criteria linked to the policy objectives, such as:

• Objective 1: Area, Labor, Labor productivity inverse index

• Objective 2: Area, N2000, NHA, Forest, Permanent pasture areas

• Objective 3: Rural population, GDP inverse index

and

– Factoring in the current distribution

• Impact: – Use of objective criteria allows for a better use of budgetary resources

– Smooth redistribution allows for continuity

39

Example: use of objective criteria

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Note: This distribution key doesn't take into account the transfers made through the market reforms in the tobacco, cotton and wine sectors

Formula: [1/3 [(½ Area + ½ Labor) inv index labor prod] + 1/3 (1/3 NHA area + 1/3 N2000 + 1/6 Forest + 1/6 PP) + 1/3 Rural pop] x GDP inv index

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Example: Use of objective criteria within 90-110% range and current distribution

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Thank you

42

Annexes

43

Agriculture under growing pressure (1)

Agricultural and food prices have recently reversed their long-term trends

(World Bank real price indices, 2000 = 100)

0

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Agriculture Energy Fertilizers Metals/minerals

Source: World Bank

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-200

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EU

pri

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aver

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-200

2=10

0)

soft wheat maize beef poultry butter SMP cheese


with positive medium-term price projections for the EU …

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70

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90

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105

110

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Output prices - EU-27 Input prices - EU-27

Source: Eurostat


… but deterioration of the sector’s terms of trade

46

95

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115

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7

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Agriculturalcommodity prices

Overall inflation(HICP)

Food producer prices Food consumer prices

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7

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Agriculturalcommodity prices

Overall inflation(HICP)

Food producer prices Food consumer prices

Source: Eurostat


… and difficulties linked to the functioning of the food supply chain

47

(agricultural income/AWU in real terms, 2010, EU 27=100)

0

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EU 15 EU 27 EU 12

(agricultural income as % of average income in the total economy, average 2008-2010)

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100%

EU15 EU 27 EU12

Source: DG Agriculture and Rural Development, based on Eurostat data


… with direct translation on the income situation

48

Level of direct payments and total operating subsidies as a percentage of agricultural factor income

(avg. 2007-2009)

0%

20%

40%

60%

80%

100%

120%

AT

BE

BG CY

CZ

DK

EE FI

FR

DE EL

HU IE IT LV LT LU MT

NL

PL

PT

RO

SK SI

ES

SE

UK

EU

-15

EU

-12

Direct payments Total operating subsidies

Source: DG Agriculture and Rural Development

Note: Total operating subsidies include state aids granted by Member States

49

… while having to meet EU ambitions on environment and biodiversity protection, climate action and energy

efficiency ...

Declining trend of GHG emissions in EU agriculture since 1990

Source: EEA

Tg CO2 equivalents

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

EU-27 = -20%

EU-15 = -12%

50

Climate change – Possible impacts on EU agriculture

▲ Floods risk▲ Hotter and drier summers▲ Sea levels▲ Risk crop pests, diseases▲ Crop, forage yields▼ Animal health, welfare

▼ Water availability ▲ Risk drought, heat spells▲ Risk soil erosion▼ Growing season, crop yields ▼ Optimal crop areas

▼ Summer rainfall▲ Winter storms, floods▲ Length growing season, yields▲ Suitable farmland▲ Pests, diseases risks

▲ Winter rainfall, floods ▼ Summer rainfall ▲ Risk drought, water stress ▲ Soil erosion risk ▲ Yields, range of crops

Source: DG Agriculture and Rural Development, based on EEA reports, JRC and MS academic studies

51

Importance of rural areas (2008)

23.616.9 21.6

35.5

32.034.5

9.2

40.951.1

43.9

56.6

34.3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% Territory % Population % GVA % Employment

Predominantly Rural Intermediate Regions Predominantly Urban

52

Importance of primary sector in employment

53

Performance of managers < 45 years and > 55 years in the EU-27 (2007)

121

< 45 years old157

146

121130

79> 55 years old

6267

74

85

Average EU farm = 100

0

20

40

60

80

100

120

140

160

180

Economic size(ESU)

Utilisedagricultural area

(ha)

Labour force(AWU)

ESU / AWU ha / AWU

54

Capping - distribution of beneficiaries (in % of the respective total number of beneficiaries)

Distribution of beneficiaries (CATS 2008)

0%

10%

20%

30%

40%

50%

60%

70%

80%0

≥ 0

< 5

00

≥ 5

00 <

1 2

50

≥ 1

250 <

2 0

00

≥ 2

000 <

5 0

00

≥ 5

000 <

10 0

00

≥ 1

0 0

00 <

20 0

00

≥ 2

0 0

00 <

50 0

00

≥ 5

0 0

00 <

100 0

00

≥ 1

00 0

00 <

200 0

00

≥ 2

00 0

00 <

300 0

00

≥ 3

00 0

00 <

500 0

00

≥ 5

00 0

00

CATS payment class (in €)DE EU-15 EU-12 FR

55

Capping - distribution of beneficiaries (in % of the respective total number of beneficiaries)

Distribution of beneficiaries (CATS 2008)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%0

≥ 0

< 5

00

≥ 5

00 <

1 2

50

≥ 1

250 <

2 0

00

≥ 2

000 <

5 0

00

≥ 5

000 <

10 0

00

≥ 1

0 0

00 <

20 0

00

≥ 2

0 0

00 <

50 0

00

≥ 5

0 0

00 <

100 0

00

≥ 1

00 0

00 <

200 0

00

≥ 2

00 0

00 <

300 0

00

≥ 3

00 0

00 <

500 0

00

≥ 5

00 0

00

CATS payment class (in €)RO EU-15 EU-12 PL

56

Estimates of the product of capping

Source: DG Agriculture and Rural Development – EU-FADN

Amounts capped and transferred from PI to PII in million €

2014 2015 2016 2017 2018 2019Belgium 0 0 0 0 0 0Bulgaria 2 6 13 14 14 14Czech Republic 0 0 0 0 0 0Denmark 0 0 0 0 0 0Germany 1 1 1 0 0 0Estonia 0 0 0 0 0 0Ireland 0 0 0 0 0 0Greece 38 37 35 33 33 33Spain 18 18 19 19 19 19France 0 0 0 0 0 0Italy 0 0 0 0 0 0Cyprus 0 0 0 0 0 0Latvia 0 0 0 0 0 0Lithuania 0 0 0 0 0 0Luxembourg 0 0 0 0 0 0Hungary 9 9 9 9 9 9Malta 0 0 0 0 0 0Netherlands 0 0 0 0 0 0Austria 0 0 0 0 0 0Poland 0 0 0 0 0 0Portugal 0 0 0 0 0 0Romania 4 8 14 15 15 15Slovenia 0 0 0 0 0 0Slovakia 2 2 3 3 3 3Finland 0 0 0 0 0 0Sweden 0 0 0 0 0 0United Kingdom 89 90 91 91 91 91EU-27 164 172 185 186 186 186

Calendar year

57

EUROPE 2020 Strategy

• Headline targets– Raise employment rate to 75%

– Invest 3% of GDP in R&D

– 20% reduction in GHG emissions; 20% share of renewable energy; 20% increase in energy efficiency

– Reduce share of early school leavers to 10%

– Lift 20 million Europeans out of poverty

• Flagship initiatives

Smart growth

– ‘Innovation Union’

– ‘Youth on the move’

– ‘A digital agenda for Europe’

Sustainable growth

– ‘Resource efficient Europe’

– ‘An industrial policy for the globalisation era’

Inclusive growth

– ‘An agenda for new skills and jobs’

– ‘European platform against poverty’

58

Output, margins and Coupled Direct Payments, specialist beef breeders

AT AT ES ES FR FR PT PT

Farms moving to

(-) Total farms

Farms moving to

(-) Total farms

Farms moving to

(-) Total farms

Farms moving to

(-) Total farms

Farms represented 720 1 840 1 690 43 870 16 020 70 870 2 210 8 410

Farms represented % ot total 39% 100% 4% 100% 23% 100% 26% 100%

Beef specialisation - % output 67% 65% 80% 85% 82% 84% 79% 75%

Heard affected - total LU 26 371 67 393 120 495 1 178 545 5 213 700 86 049 327 452

Share of herd affected 44% 6% 18% 31%

in €/COW

TOTAL BEEF OUTPUT 729 763 538 797 790 965 388 441

TOTAL BEEF COUPLED DP 265 267 220 160 251 233 226 210

Share of CP in output value 36% 35% 41% 20% 32% 24% 58% 48%

Gross margin -118 -33 -94 279 -101 142 -95 68Gross margin with CP 147 234 126 438 150 375 131 278

in €/AWU

Total output 18 553 18 908 33 110 28 135 35 813 48 220 9 840 12 297

Balance subsidies and taxes 22 132 21 725 18 180 9 772 24 755 26 463 10 894 9 658

of which LFA/AWU 4 598 4 660 693 655 3 070 2 783 1 103 1 023

of which environmental/AWU 8 387 7 934 814 166 2 504 2 621 865 854

Share of all subsidies in total receipts 54% 53% 35% 26% 41% 35% 53% 44%

Source: DG Agriculture and Rural Development – EU-FADN

The CAP towards 2020 Impact assessment

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