Common Agricultural Policy 2023-2027

By Jenny Brunton, Senior European Policy Advisor, British Agriculture Bureau.

After nearly 3 years of negotiations, the Portuguese Presidency of the Council reached a provisional agreement with the European Parliament on the Common Agricultural Policy (CAP) reform for 2023-2027. On 2 December, 2021, the agreement on reform of the common agricultural policy (CAP) was formally adopted.

Member States will implement the 2021-2027 CAP with ‘Strategic Plans’ at a national level. These plans will combine a wide range of targeted interventions addressing the Member States’ specific needs and delivering tangible results in relation to EU-level objectives. Member States only had until 31 December 2021 to submit their draft national strategic plans for approval by the Commission. The Strategic Plans are also the mechanism for alignment with the European Green Deal, including the EU’s flagship food policy, the Farm to Fork strategy, as well as the Biodiversity strategy, with the future CAP.

Eco-schemes: The previous round of negotiations in May failed after Council and Parliament did not find a common ground on the eco-schemes, namely the percentage of CAP’s direct payments earmarked for environmentally friendly agricultural practices. The compromise requires Member States to ring-fence 25% of Pillar 1 budget for eco-schemes, with a minimum floor of 20% in 2023 and 2024.

Each eco scheme would need to have two practices from the following areas:

  • climate change mitigation: including reduction of GHG emissions from agricultural practices, maintenance of existing carbon stores and enhancement of carbon sequestration;
  • climate change adaptation: including actions to improve resilience of food production systems, animal and plant diversity for stronger resistance to diseases and climate change;
  • protection or improvement of water quality and reduction of pressure on water resources;
  • prevention of soil degradation, soil restoration, improvement of soil fertility and of nutrient management;
  • protection of biodiversity, conservation or restoration of habitats or species, including maintenance and creation of landscape features or non-productive areas;
  • actions for a sustainable and reduced use of pesticides, particularly pesticides that present a risk for human health or environment;
  • actions to enhance animal welfare or address antimicrobial resistance.

Good Agricultural & Environmental Conditions (GAECs)

Under the deal, there are nine GAECs, two more than in the current CAP, which are mandatory for both Member States & farmers. New additions to the existing GAECS are:

  • GAEC 2 – Protection of wetland and peatland: applicable from 2024 (2025 if MS can justify the delay) MS shall ensure that an agricultural activity suitable for qualifying the land as agricultural area may be maintained.
  • GAEC 4 – Establishment of buffer strips along water courses with a minimum width of 3m: minimum width of 3m without using pesticides and fertilisers. In areas with significant dewatering and irrigation ditches MS may adjust, if duly justified for those areas, the minimum width in accordance with specific local circumstances.
  • GAEC 7 – Minimum soil cover to avoid bare soil in periods that are most sensitive: In duly justified cases, Member States may adapt the minimum standards to take into account the short vegetation period resulting from the length and severity of the winter period.
  • GAEC 8 – Crop rotation in arable land, except for crops growing under water: Rotation shall consist in a change of crop at least once a year at land parcel level (except in case of multiannual crops, grasses & other herbaceous forage, & land lying fallow), including the appropriately managed secondary crops. Recognising the diversity of farming methods & agro-climatic conditions, MS may authorise other practices of enhanced crop rotation with leguminous crops or crop diversification, which aim at improving and preserving the soil potential. Exemptions apply when:
  • more than 75% of the arable land is used for the production of grasses or other herbaceous forage, is land lying fallow, is used for cultivation of leguminous crops, or is subject to a combination of those uses;
  • where more than 75 % of the eligible agricultural area is permanent grassland, is used for the production of grasses or other herbaceous forage or for the cultivation of crops under water either for a significant part of the year or for a significant part of the crop cycle, or is subject to a combination of those uses;
  • with a size of arable land up to 10 hectares.

Member States may introduce a maximum limit of area covered with a single crop to prevent large monocultures, while certified organic farmers shall be deemed to comply with this GAEC standard.

  • GAEC 9 – Minimum share of agricultural area devoted to non-productive areas or features: 4% of arable land at farm level for non-productive areas and features. If 7% is under an eco-scheme, only 3% is necessary. 7% of arable land at farm level if includes catch crops or nitrogen fixing crops, cultivated without the use of plant protection products, of which 3% shall be land lying fallow or non-productive features.
  • 3 weighting factor for catch crops.
  • organic farmers shall be deemed to comply with this GAEC standard.

Exemptions apply when:

  • more than 75% of the arable land is used for the production of grasses or other herbaceous forage, is land lying fallow, is used for cultivation of leguminous crops;
  • where more than 75 % of the eligible agricultural area is permanent grassland, is used for the production of grasses or other herbaceous forage or for the cultivation of crops under water either for a significant part of the year;
  • with a size of arable land up to 10 hectares.

Transferring funds between Pillars: up to 25% of Pillar 1 funds can be transferred to Pillar 2. Transfers from Pillar 2 to Pillar 1 are limited to 25% but can be increased by an additional 15% if used for measures to mitigate & adapt to climate change, foster sustainable management of natural resources (such as water, soil, & air), & protect biodiversity, & by up to 2% if ring-fenced for young farmer support.

Internal convergence: all per hectare direct payments within MS must reach a minimum level of 85% of the average value by 2026 at the latest.

Redistributive payments: Minimum 10% of direct payments allocated as complementary income support for small & medium sized farms or MS can instead implement a mechanism to progressively reduce direct payments to farmers above €60,000 (by up to 85%) & cap direct payments at €100,000 (voluntary). If the capping mechanism is introduced then businesses can deduct 50% of agriculture-related salaries, taxes & social contribution from the total amount before reduction.  

Coupled support: Member States can address difficulties in certain sectors, improve their competitiveness, sustainability or quality, through retained voluntary coupled aid at 13% (P1) +2%(P2). The list of eligible sectors is extended to include starch potatoes (but not ware), the derogation for protein crops is maintained (mix of legumes & grasses are acceptable provided that legumes are “predominant”). MS must provide an explanation on how the interventions on coupled support are consistent with the Water Framework Directive.

Enhanced conditionality: baseline requirements for receiving direct payments with increased penalties for recurring non-compliance. Beneficiaries who repeatedly fail to comply with conditionality provisions, would lose 10% of their entitlements (increase from current 5% penalty) with intentional breach penalties set at 15%.

Social dimension: Introduction of a “social conditionality” mechanism which will link direct payments for farmers with complying with workers’ rights. The proposal is voluntary for Member States from 2023, but mandatory from 2025. CAP beneficiaries will have to respect elements of European social & labour law through the mechanism connecting national labour inspectors with CAP paying agencies to inform them when EU labour rules are infringed on farms, while a simple system should be set up to penalise all breaches.

EAFRD ringfencing: Minimum 35% of Pillar 2 budget ring-fenced for environment & climate-related commitments which promote environmental, climate & animal welfare practices, with a 50% weighting for Areas of Natural Constraint (ANC) & 100% for all other interventions including animal welfare & green investment.

Small farmers: MS can set different lump sums or amounts per hectare linked to different area thresholds e.g., frontloading of payments.

Young farmers: Mandatory minimum level of 3% of Pillar 1 ring-fenced for young farmers. This could cover income support, investment or start-up aid for young farmers, with flexibility for national capitals to define the age limit (up to 40 years of age). The per hectare top-up should be granted for the first five years following its application. Support for new farmers could also be granted from Pillar 2.

Investments: Large scale infrastructure such as broadband, flood or coastal protection

preventive actions aimed at reducing the consequences of probable natural disasters, adverse climatic events or catastrophic events are eligible for support.

  • Investment for irrigation is eligible provided there is no negative environmental impact.

CMO Regulation

International Trade Policy

  • A joint statement signed by the three institutions on health and environmental standards for imported products in order to send a strong signal for environment and biodiversity concerns
  • A bilateral statement by the European Parliament and the Council asking the Commission to prepare a report at the latest by June 2022 on these issues.
  • A unilateral statement by the Commission indicating what could be done in terms of the imports of agricultural and agri-food products from 3rd countries.

Products eligible for public intervention: Pigmeat, sheepmeat, poultry and sugar will not be included. The three institutions to work together in the High Level Group and to assess the conclusion of a study to be published by the end of 2021, and then finalise eligible products. Public intervention shall be available for:

  • common wheat, durum wheat, barley and maize, from 1 November to 31 May;
  • paddy rice, from 1 April to 31 July;
  • beef and veal, throughout the year;
  • butter and skimmed milk powder, from 1 March to 30 September.

Agricultural reserve: An agricultural reserve will be introduced to fund market measures in times of crises, with an annual budget of at least €450 million (in current prices). The total unused amount of the reserve available at the end of 2022 will be rolled over to 2023 and if appropriations remain available after financing the agricultural reserve, these shall be reimbursed to the beneficiaries. Financial discipline will only be used as a last resort, there will be a threshold of €2000.