Box 22C The EU Common Agricultural Policy

The EU Common Agricultural Policy (CAP) is the single most influential agricultural policy in Europe. Before its 1992 reform, the heart of the policy, in most cases, was the system of guaranteed high prices for unlimited production. These guarantees encouraged surpluses of produce such as cereals, beef, dairy products (milk) and wine. Quotas on some products were introduced during the 1980s, but the purpose of these was to maintain guaranteed high prices, not to deliver (even indirectly) environmental benefits.

The CAP has evolved considerably since its inception in the late 1960s, but it was not until 1985 that the EU acknowledged that agriculture had a direct and significant impact on the environment (CEC, 1985). In 1987 a detailed measure was adopted within the CAP which permitted EU Member States to make payments to farmers in environmentally sensitive areas affected by agriculture by setting aside land. This was later incorporated into the CAP, requiring Member States to make such payments (under the agri-environment EC Regulation 92/2078/EEC).

The main driver to reform of the CAP in 1992 was the high cost of surplus production subsidised by EU consumers/taxpayers, and the increasing amounts of EU money being spent on storing and selling off surpluses at subsidised prices on world markets (coupled with the desire to tackle the trade problems arising out of these subsidies, and the need to improve the competitiveness of EU agriculture on both internal and external markets).

The main aims of the 1992 changes were to reduce surpluses, cut prices for consumers and, to a certain extent, decouple support for farmers from production. Farmers' incomes have been restructured, and are now much less linked to price support. Consequently, the incentive to unlimited production, and therefore to increased application of chemicals, is substantially reduced. Objectives to bring production down to levels more in line with market demand and to encourage farmers to remain on the land also have relevance to the way agriculture affects the environment. Environmental matters were also given fuller specific consideration in development of the 1992 CAP reform, in which one of the five main objectives was stated to be to protect the environment and develop the natural potential of the countryside. The 1992 CAP changes included a declaration by the European Council affirming its commitment to pursuing environmental protection as an integral part of the CAP and calling on the European Commission to make further proposals on this.

Under the pre-1992 CAP arrangements, technology and genetic engineering were encouraged to develop higher milk yields or more productive cereals strains, but the reform of the CAP aims to encourage studies into varieties requiring lower inputs and producing lower yields.

The dual environmental objectives of the 1992 CAP do create strains: one objective is to remove a proportion of land from productive use, and another is to reduce applications of chemicals to agricultural land in some parts of the EU. Taking land out of productive use may lead farmers to try to maintain or increase yield by farming more intensively on the remaining areas of productive land. However, the intention is to reduce chemical inputs, as farmers' incomes are no longer so closely linked to production.