Special Report No 14/2000

on "Greening the CAP" together with the Commission's replies

(pursuant to Article 248(4), second subparagraph of the EC Treaty)

(2000/C 353/01)

CONTENTS

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SUMMARY

The intensification of agricultural production, encouraged partly by high support under the common agricultural policy (CAP) and partly by agronomic trends, has created environmental problems which give cause for concern. The European Environment Agency's report "Environment in the European Union at the turn of the century" which was recently published, gives a detailed analysis of the environmental damage caused by certain agricultural practices. The Court's present report deals with environmental shortcomings of changes made to the common organisations of the markets (COMs) for arable crops and livestock by the 1992 reform of the CAP. Furthermore it considers problems encountered in achieving the environmental benefits which the new "accompanying measures" (agri-environmental (AE) Council Regulation (EEC) No 2078/92 and afforestation (AF) Council Regulation (EEC) No 2080/92) were designed to bring about.

Among other policy objectives, the environmental aim of reducing institutional prices for arable crops (see paragraphs 10 to 16) was to reduce the incentive for intensifying production. However, area aid payments which compensate farmers for income losses due to price reductions, the devaluation of some national currencies against the ecu, high prices on the world market in the years following the reform, all diminished the intended reduction of incentives for more intensive production methods.

In the livestock sector (see paragraphs 19 to 26), the reform introduced a premium per animal linked to stocking density limits, but the aim of extensifying production was not achieved. While limiting their aid claims to the eligible number, farmers continued to keep as many animals as they wished. In addition, lower feed prices due to lower cereal prices have encouraged intensive raising of livestock indoors. The reform also did not address the serious nitrate pollution problems in regions of intensive pig and poultry production due to inadequate waste disposals. The problems are aggravated by the unsatisfactory application of the Community's Nitrates Directive by Member States.

Furthermore Community aid continued to support certain forms of agricultural production which have environmentally negative side-effects: for example the production of tobacco, sugar beet, milk, wine, fruit and vegetables, fibre flax and artificially dried fodder (see paragraphs 27 to 30).

The "accompanying measures" to the changes made by the 1992 reform to the COMs, included: an agri-environment measure, which aimed at compensating farmers for using environmentally beneficial but costly farming techniques; and an afforestation measure, which aimed at compensating farmers for relevant expenses and loss of agricultural income resulting from planting trees on their farmland. These measures introduced explicit environmental objectives to the CAP: i.e. to reduce the polluting effects of agriculture, to favour an environmentally beneficial extensification of farming, to contribute to a countryside management compatible with environmental balance and to combat the greenhouse effect.

However, neither the Community nor the Member States targeted the use of Community funds according to pre-established environmental priorities (see paragraphs 37 to 69). In approving programmes the Commission has deployed insufficient resources causing shortcomings in some approvals and in programme management. In consequence funds were not allocated to the zones with the greatest agri-environmental problems and/or potential. Detailed implementing regulations were introduced only after four years in the case of AE, and not at all in the case of AF.

The effectiveness of some programmes is hampered by inadequacies in programme design. In some cases aid rates are too low to attract farmers to environmentally friendly farming techniques; in other cases, because aid rates are based on the average cost to farmers of compliance with programme requirements, farmers received rates of aid significantly in excess of their actual costs (see paragraphs 54 to 60). Aid should only be given if the farmer's commitments go beyond levels marked by the Nitrate Directive and good farming practice. The Member States' failure to fully implement the Nitrate Directive and the absence of adequate "Codes of Good Agricultural Practice" for much of Europe's farmland, create a risk of widespread local incompatibility of AE measures with the EC Treaty's "polluter pays principle": i.e., the European taxpayer is meeting some costs which should properly be borne by farmers. There is also poor coordination between the various Community schemes which have an impact on the environmental performance of agriculture (see paragraphs 61 to 70).

With respect to the implementation and control of programmes (see paragraphs 71 to 81), the AE measure in particular is very demanding of European and national administrative infrastructures. Control problems stem from weaknesses in the coordination of AE measures with the integrated administrative and control system (IACS) and from failures to address the specific control risks generated by the AE and AF measures. For example it is very difficult to verify that farmers are respecting limits on their use of fertiliser, in most programmes one of the necessary conditions to receive aid.

On evaluation (see paragraphs 82 to 89), the failure to set quantitative objectives and the widespread lack of baseline surveys of the pre-programme environmental state both at Community level and Member State level, makes it difficult to monitor progress in achieving environmental goals against harmonised, measurable criteria since the programmes started.

In terms of conclusions and recommendations (see paragraphs 90 to 102) the Community has not yet succeeded in significantly "greening" agriculture. In view of the most recent Agenda 2000 changes to the CAP, which continue the trend towards prioritising the environment within agriculture policy, the Court holds the view that the existing optional "eco-conditionality" rules should have been made mandatory throughout the European Union.

Improvements are needed from Member States in the design, implementation, control, monitoring and evaluation of programmes. The Commission must improve programme approval and follow-up on the spot by ensuring it has sufficient staff with the right skills, in order to properly discharge its responsibilities. A thorough review of all environmentally relevant measures which impact on agriculture should be conducted so as to secure better coordination between the various Community initiatives. The targeting of EU aid to priority zones and to combat damaging activities should be improved.

INTRODUCTION

1. The Treaty of Rome stipulates at Article 33 (ex Article 39(1)(a))(1) that the CAP should ensure "... the optimum utilisation of the factors of production, in particular labour". Due to the increasing cost of labour and rising land prices due to urbanisation, employment in agriculture decreased and production methods became more intensive. Up to the 1980s high price support and other production-related aids reinforced these trends and gave strong incentives for mechanisation and the abundant use of agro-chemicals (nitrate and phosphate fertilisers, herbicides, insecticides and fungicides). It is true that nowadays less than 5 % of the EU population feeds the rest. The price, however, is the concentration of intensive agriculture in zones of comparative advantages (e.g. good soil fertility, favourable climatic conditions, close proximity to sources of inputs and markets) and a tendency for abandoning agriculture on marginal land and/or in remote regions. Both tendencies give cause for environmental concern.

2. Concentration and intensification of agriculture have led to a situation where the average use of nitrogenous fertilisers reaches 34 tonnes per square mile in Germany and the United Kingdom compared to 7,6 tonnes in the United States of America(2), although the use of nitrogen fertilisers significantly declined between 1988 and 1992 (see Table 1). Large quantities of nitrates are absorbed into the soil in cases of high use of fertilisers and heavy application of animal manure. These nitrates, due to natural rainfall and increased irrigation, enter both the surface and underground water systems causing eutrophication which endangers aquatic life. The accumulation of nitrates above the 50 ml per litre limit set by the Community's Drinking Water Directive means that such water should not be used for human consumption, since higher levels can endanger human health. Water pollution is a serious environmental concern particularly in regions of water shortage.

Table 1

Artifical fertiliser consumption

(i.e. nitrogen, phosphate and potassium-based), 1988 to 1997.

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3. Due to overcultivation, use of heavy machinery, etc. in certain regions, land has suffered a loss of organic content and valuable trace elements, in some cases to such an extent that this process risks becoming irreversible. The Community's European Environment Agency (EEA) states that "there is widespread concern that levels will fall to below those needed to support a stable fertile and healthy soil although the evidence for such critical levels is equivocal"(3). The quality of the soil is further deteriorated by increased irrigation causing soil erosion. Furthermore, agricultural products themselves absorb toxic elements coming mainly from pesticides but also from fertilisers which could put at risk human health and wildlife. It is worthwhile noting that traces of DDT, use of which has been forbidden for 30 years now, are still found in the environment, in animal products and in humans.

4. The Treaty on European Union recognises both "agriculture" and "environment" as policy domains of Community competence and requires that environmental priorities be incorporated into the Community's other policies. In 1992, the Treaty's requirements were translated into specific policy objectives by the Community's fifth environmental action programme (5EAP), entitled "Towards sustainability". The 5EAP provided a detailed analysis of the environmental challenges facing the European Union, concentrating on five target sectors of Community policy, one of which was agriculture. The Treaty's requirement that environmental concerns be accommodated in all Community activities presented a major challenge to CAP policy-makers, who have traditionally focused on the economic objectives of the CAP. However, as the 5EAP makes clear, "Policies which are designed to promote economic development are doomed to eventual failure if they do not include the environmental dimension as an integral component.... Planet Earth requires certain types of 'investments' in order to maintain itself as a healthy ecosystem and to ensure long-term, sustainable, economic growth"(4).

5. The 5EAP set out a comprehensive indictment of contemporary agricultural practices, and concluded that "farming practices in many regions of the Community have led to over exploitation and degradation of the natural resources on which agriculture itself ultimately depends: soil, water and air.... Given all of these circumstances, it is not only environmentally desirable, but it also makes sound agricultural and economic sense to seek to strike a more sustainable balance between agricultural activity and the natural resources of the environment."(5) To achieve this, the 5EAP set out a range of medium-term and long-term goals for Community policy, and identified how and by whom these were to be achieved (see Annex I). The 5EAP therefore provides a benchmark against which to measure subsequent Community performance.

6. At the same time as the 5EAP was being agreed, a major reform of the CAP was being implemented under the chairmanship of the then EU Agriculture Commissioner, Ray Mac Sharry. The reform, although primarily prompted by overproduction and an increasing burden of expenditure, was expected, together with the Nitrates Directive of 1991, to remedy some of the environmental problems created by inappropriate intensification of agricultural production. It made two groups of changes to the CAP which were of environmental significance: firstly, price support was lowered in the common organisations of the market (COMs) for arable crops and livestock; and secondly, new environment-oriented "accompanying measures" were introduced.

7. The more recent Agenda 2000 reform has introduced yet further changes to the CAP which have continued this trend towards prioritising the environment within agriculture policy. As the Berlin European Council of 24 and 25 March 1999 concluded, "the content of this reform will ensure that agriculture is multifunctional, sustainable, competitive and spread throughout Europe, including regions with specific problems, that it is capable for maintaining the countryside, conserving nature and making a key contribution to the vitality of rural life, and that it responds to consumer concerns and demands as regards food quality and safety, environmental protection and the safeguarding of animal welfare"(6). The EEA commented that "Agenda 2000 reforms promise to further the current progress in this area.... Overall, progress towards internalisation in agriculture is moving in the right direction by reducing environmentally damaging subsidies and introducing economic instruments, but at a slow pace"(7). However, the Agency also states: "the agricultural sector is still rich in market distortions which encourage harmful agricultural practices.... integration with a real and large scale effect on the environment has yet still to be realised"(8) (see Annex II for excerpts from the Agency's report on the state of the European environment).

8. This report analyses the environmental significance of the policy changes made to the COMs by the 1992 reform of the CAP (see paragraphs 10 to 31). It also analyses the significance of the problems encountered in achieving the environmental benefits which the accompanying measures were designed to bring about (paragraphs 32 to 89). For this audit, the Court, supported by external specialists, examined Member States' programmes and evaluations, specialist research literature, reports produced by the Community's European Environment Agency (EEA), works of the international Organisation for Economic Cooperation and Development (OECD), reports of the Commission, and studies by external environmental experts conducted on behalf of the Commission, as well as the results of the Court's own previous sound financial management and Statement of Assurance audits. In terms of fieldwork, a series of audit visits to the Commission, EEA, OECD, Germany, Spain, France, Italy, Portugal, Austria and Finland were undertaken in order to verify the implementation of the accompanying measures on the spot and to cross-check information gathered from other sources. In addition, the results of parallel audits by the National Audit Institutions of Denmark, Finland, Netherlands, Sweden and the United Kingdom were taken into account.

9. An analysis of EAGGF Guarantee expenditure is shown at Table 2. This analysis reveals a steady increase, in both absolute and relative terms, of the budget share for the environment-oriented accompanying measures. Five years after the reform and the 5EAP, they represent 4,5 % of total EAGGF-Guarantee expenditure, notwithstanding the co-financing burden on the Member States, which can be up to 50 % of total expenditure. Further EU resources within the main COMs, the Structural Funds and other Community initiatives also affect the environmental performance of agriculture but their cost cannot be quantified since the part devoted to agri-environment is not identified as such in the Commission's various management accounting systems.

Table 2

Analysis of EAGGF expenditure by sector, 1993 to 1997

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THE POST-1992 ENVIRONMENTAL IMPACT OF THE COMMON ORGANISATIONS OF MARKETS

Arable crops

10. Although Council Regulation (EEC) No 1765/92 Article 10(5) requires that, "Member States shall take the necessary measures to remind applicants of the need to respect existing environmental legislation", the Commission has not followed up this requirement in order to ensure its application by Member States. In practice Italy has taken no such measures, and Belgium and Portugal have not disclosed to the Court how this requirement of Community legislation is implemented.

11. For arable crops, the reform reduced institutional prices and introduced area-based direct payments, with the environmental aim of reducing the incentive given through CAP measures for intensive production using large amounts of agro-chemicals(9). However, these were counterbalanced by other factors. The anticipated effect of institutional price reductions on internal market prices was undermined by an unexpected rise in the world market prices of cereals. In some Member States, the green ecu-exchange rates fixed within the agrimonetary system reinforced the upholding of prices. Farmers in Greece, Spain, Italy and the United Kingdom consequently experienced notable real increases in prices between 1992 and 1995, leaving aside any increase in costs of imported inputs (see Table 3). The Community's failure to counteract this evolution meant the reform did not have a sustained, significant impact on farmers' use of artificial fertilisers, as the Commission has since noted: "a closer look at the data shows that although nitrogen fertiliser use decreased between 1985 and 1995 in the EU-15, both in terms of volume and in application rate (kilograms per hectare), the major decrease in application rate occurred between 1989 and 1992"(10). Since then, the quantity used has remained rather stable (see Table 1). In its report the EEA even identifies a gradual increase in nitrogenous fertiliser usage after 1992(11).

Table 3

Trends in market prices for arable crops in selected Member States, 1992 to 1995

The table below demonstrates that in some Member States, market prices for arable crops increased between 1992 and 1995.

The figures shown are market values per tonne, expressed in the national currencies of Greece (drachma), Spain (peseta), Ireland (pound), Italy (lira) and the United Kingdom (pound sterling).

In some cases, market prices continued to rise after 1995; for example in Greece the price of barley increased to GRD 52680 in 1996 and GRD 52970 in 1997.

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12. Similarly, the total weight of pesticides used in the European Union declined steadily until 1995, but it increased again in 1996. Indeed, where significant local reductions have been achieved, it often appears due to autonomous initiatives taken by Member States. Denmark's Pesticide Action Programme, introduced in 1987 and concentrating on training of farmers in the proper use of pesticides(12), is an example of such an initiative. Similar programmes operate in Finland, the Netherlands, and in Sweden. Furthermore, in these Member States the introduction of pesticide taxes has dramatically reduced consumption.

13. Because higher compensatory payments were paid for irrigated farmland than for non-irrigated farmland, farmers were given an incentive to use water. The irrigated area of the European Union rose by 123000 ha per annum in the 1990s(13). The EEA has noted that "Agriculture is the largest consumer of water in southern Europe, and this is increasing"(14). It also states that overall water abstraction in the European Union is, on average, 21 % of renewable water resources and declares this as a sustainable level. In many locations in southern Europe, water use by agriculture is unsustainably high: for example, in certain regions of Spain "irrigation and water management constitute one of the greatest threats to nature conservation"(15). Furthermore, irrigation is often accompanied by intensification i.e. higher use of fertilisers and pesticides(16). Maize production, encouraged by higher compensatory payments than is paid for other cereals, is also often environmentally negative, since it requires more water and agro-chemicals than the cereals it replaces. Maize production is concentrated in the south of Europe, where water resources are scarce and nitrate pollution problems are growing, albeit they are still below the EU average.

14. The reform also introduced high aid rates for sunflowers and durum wheat, which has encouraged production of these crops. However, sunflower cultivation causes nitrate leaching problems, because the soil is left bare for much of the season - 250 days per annum, compared with the average of 144 days per annum for other crops(17). With regard to durum wheat, the high rate of support paid for cultivation, and the continuous expansion of the zones designated for payment of this aid, have resulted in the loss of rare dry shrub steppes in Spain, to the detriment of wildlife(18).

15. Moreover, it was foreseen that aid would only be paid for land which had normally been used for arable crops before the reform. This was intended both to place a ceiling on Community expenditure and to protect environmentally valuable extensive pastures from conversion to arable crops. However, much grassland has been classified as eligible for arable aid, on the grounds that it has traditionally been used to grow arable crops within long rotations. In Sweden, an official evaluation observed that the introduction of arable aid has favoured production of cereals more than pasture, which has had a negative environmental impact(19). Similar results have been observed in Spain. The environmental consequences of land use conversion from pasture to arable is generally negative since growing cereals involves greater use of pesticides and generates more plant-nutrient leaching than pasture-growing.

16. An unfavourable environmental effect of the new regime stems from the fact that support allocation favours high yield regions and disfavours low yield regions. The pre-reform high yields were achieved by certain intensive practices now formally recognised by the 5EAP as unsustainable. By contrast the disfavoured low yield regions are often of high environmental value due to extensive farming, which provides greater biodiversity than would exist if the land were to be abandoned. In such regions, low rates of area aid perpetuate the poor long-term viability of farming. This puts the environmentally beneficial effects of certain farming systems at risk, where the marginalisation or abandonment of land is a concern. For example, within the region of Campania (Italy), rates of arable aid vary from ECU 446/ha in the fertile district of Napoli Pianura, to ECU 88/ha in the poor district of Salerno Montagna Interna (1995/1996).

Set-aside

17. The reform introduced a set-aside requirement obliging arable farmers to withdraw a proportion of their land from production. Set-aside has high environmental potential(20).

18. Council Regulation (EEC) No 2293/92 requires Member States to "apply appropriate measures which correspond to the specific situation of the land set aside from the outset so as to ensure the protection of the environment"(21). The Commission should have followed up this requirement in order to ensure its application by Member States. However, whereas some Member States have realised the environmental potential of set-aside, others have not (see Table 4). For example, whereas Denmark has introduced detailed and comprehensive prescriptions for the care of set-aside, in France environmental considerations "have not yet been of great concern"(22). For example, nitrate leaching is often a problem if soil is left bare, but the initial French prescription permitted set-aside to be maintained as bare soil, and even when revised, the prescription did not require a green cover to be in place before 1 May, although nitrate leaching is most significant during the winter months. In Spain, farmers are required to regularly either plough or spray their land, practices which can contribute to soil erosion and pesticide pollution.

Table 4

Specification and enforcement by Member States of prescriptions on care of set-aside land

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Livestock

19. Reform in the beef sector aimed at "the encouragement of extensive production through increased premia but with the introduction of strict stocking limits"(23). The Community aimed both to place a ceiling on expenditure, and to combat "the rising trend towards intensification"(24), by limiting the number of animals per hectare for which the basic animal premiums are paid(25). The farmer is paid on a per animal basis up to a maximum stocking density per hectare of 2 livestock units (LU); an additional "extensification premium" is paid when the stocking density is less than 1,4 LU/ha.

20. However, in practice Community rules allow a farmer to keep as many animals as he wishes, provided he limits his claim to the eligible number. Producers' organisations were quick to identify this weakness: one advised its members, "Having done your sums, if you discover that your CAP stocking rate is just over 1,4 LU/hectare, it may pay you not to claim on a few animals, in order to qualify for the bonus on all the rest"(26).

21. With regard to small producers, Council Regulation (EEC) No 2066/92 specifies that "a producer shall be exempt from the application of the stocking density if the number of animals held on his holding and to be taken into account for determining the stocking density is not more than 15 LUs"(27). This concession undermines the impact of the measure: for example, in Portugal, 90 % of cattle holdings are exempt(28). Furthermore, although this concession was intended by the Council to benefit small producers, Commission rules permit large and intensive producers to benefit from it(29): every producer, regardless of size, can receive premiums on his first 15 LUs, even if he has no pasture or forage area.

22. Thus, the practical impact of the stocking density restrictions has been generally limited; for example, a study in the United Kingdom found that only 20 % of beef farmers, when surveyed, anticipated a change in management practices in response to these rules(30). Furthermore, the stocking density rules have had some negative environmental consequences. In the Ebro Valley in Aragon (Spain) where cattle fattening units are concentrated and stocking rates clearly exceed 2 LUs/ha, producers have nevertheless benefited from beef premiums by renting pasture in the nearby Pyrenees. The environment has suffered thereby not only from the continued intensification of production in the Ebro Valley, but also through the effective abandonment of mountain pasture zones(31).

23. In the sheep and goat sector the establishment of the COM in 1980 led to a substantial increase in livestock numbers: from 81 million in 1970 to 113 million in the EU-12 of 1990. The introduction of individual farmer quota restrictions in 1991 stabilised the size of flocks, but at levels which are unsustainable in some localities(32). The consequence is overgrazing - i.e. uprooting and destruction of vegetation - which results in loss of biodiversity and soil erosion. Overgrazing is still problematic in parts of Greece, Ireland and the United Kingdom(33).

24. Regulations in both the beef and veal and sheep and goats COMs permit Member States to apply "eco-conditionality' rules, i.e. to impose appropriate COM-relevant environmental protection restrictions on farmers, and to withhold Community aid from farmers who do not conform to such measures. However, these measures have not had a great impact(34). To date only Greece and the United Kingdom have introduced such measures (see Tables 5and 6)."

Table 5

Eco-conditionality rules in the beef and veal CMO

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Table 6

Eco-conditionality rules in the sheep and goats CMO

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25. The encouragement of forage maize production by high levels of Community support, and the lowering of feed prices due to lower cereal prices since 1992, has provided an advantage for intensive raising of livestock indoors, compared to feeding livestock on pasture. The Commission and Eurostat, the European Communities' statistical office, have acknowledged that some "elements of the 1992 reform had a negative effect on the environment.... A good example... was the extension of cereal aid to silage maize.... This gave an added comparative advantage to intensive cattle rearing, particularly dairy cows, to the detriment of extensive livestock rearing"(35).

26. Furthermore, it is a major weakness of post-reform Community policy that it has not addressed the serious environmental problems arising from intensive livestock production in Europe. It has been estimated that "a modern (relatively small) farm of 40 hectares with a dairy herd of 50 cows and a 50-sow-pig herd has a potential pollution load equivalent to that of a village of 1000 inhabitants"(36). The Community taxpayer meets the cost of the "export refund" (export subsidy) regime, which in its present form indirectly encourages intensive pig production in large-scale indoor confinement operations containing thousands of animals(37). These production methods can generate serious problems of nitrate pollution from animal waste(38) and can have serious animal health implications - the "potential for effective disease control is likely to get worse unless the whole question is addressed"(39). Such pollution is particularly problematic throughout the Netherlands and Belgium, and in France (Brittany), Germany (North Rhine-Westphalia), and Italy (Lombardy)(40).

COMs unreformed by "Mac Sharry"

27. With regard to those COMs not included in "Mac Sharry", several have since recently been reformed, but the future environmental impact of regime changes will depend on their prompt, comprehensive and rigorous implementation by the Member States. Tobacco production, concentrated in southern Europe, is damaging due to its high demand for pesticides and fertilisers. Environmental considerations are integrated in neither the milk regime where intensive production contributes substantially to nitrate and other farm waste pollution problems, nor in the sugar regime, where production of sugar beet requires high amounts of water and herbicides. Pesticide use is high in areas of intensive horticulture, and also in some wine growing regions(41). The Court previously noted cases of groundwater pollution resulting from the destruction by burial of large volumes of fruit, withdrawn from the market and paid for by Community support(42).

28. Even recent developments in some COMs have failed to take adequate account of environmental concerns. For example, Community support paid for the uprooting of vines, a measure designed to eliminate overproduction of wine, is conditional on environmental considerations only if the Member State so chooses. Any failure to establish such rules would be an important weakness, because uprooting generates "increasing vulnerability to soil erosion... In Greece, 80 % of uprooted vineyards concern traditional vine regions on Crete, and the Peloponnese, which as a result, are affected by erosion, land abandonment and fires"(43). Grubbing-up has had negative impact in Spain, and in Sicily (Italy), where since 1992 over 15000 hectares of vines have been uprooted at a cost to the Community of ECU 111 million.

29. The COM for fibre flax is clearly responsible for localised environmental damage. The COM pays aid on an area basis; but unlike arable aid, Community support is paid even if the land was not previously used to grow fibre flax. Farmers can therefore qualify for aid by planting flax even on agronomically-poor but environmentally-rich land, such as meadows and extensive pasture land. Indeed, the exclusion of fibre flax from the arable aid scheme is a positive inducement to grow it on previously uncultivated land. In the United Kingdom, several officially-designated sites of special scientific interest have been damaged or destroyed by farmers growing fibre flax.

30. The limited extent to which environmental considerations have been integrated into parts of the CAP can perhaps best be illustrated by reference to the unreformed regime which supports the production of dried fodder. The scheme provides for two rates of aid: a low rate for fodder dried naturally by the sun and a high rate for machine-dried fodder, to compensate for the extra fuel costs. Such energy subsidies are inconsistent with Community energy policy(44). The differentiation in aid rates has had a big impact on how fodder is dried. At the time of Spain's accession to the Community in 1986, only 61000 tonnes of fodder was dried artificially each year: in 1996/1997, 1414000 tonnes was dried in this way as producers found the higher rate of aid more profitable. The annual energy consumption of this regime in Spain alone is sufficient to meet the annual electricity needs of a town the size of Alicante (285000 citizens). More than 200000 hectares of forest are needed to absorb the additional carbon dioxide produced by the drying process.

31. As a report has summed up, "despite the frequent claims that the CAP has been 'reformed', the whole edifice of European agriculture is still based on a high-price/high-subsidy foundation which positively encourages maximum output.... The 1992 reform of the CAP, to only a modest extent, took into account environmental concerns. The reduction of prices for some major products is claimed by the European Commission to have diminished the pressure of agricultural activities on the environment. In particular, it was expected to have led to a less intensive use of pesticides and nutrients in the crop sector, and a reduction of emissions (methane, ammonia, nitrates) especially from animal farming. In the event, it made little difference"(45).

THE ENVIRONMENTAL IMPACT OF THE ACCOMPANYING MEASURES

32. The accompanying measures, i.e. Council Regulations (EEC) No 2078/92, (EEC) No 2079/92 and (EEC) No 2080/92 of 30 June 1992, introduced aid for "adoption of environment-friendly farming practices", "early retirement of farmers" and "afforestation of agricultural land" respectively(46). In practice, the "early retirement" measure has had insignificant environmental impact - although Article 2 of Regulation (EEC) No 2079/92 permits Member States to establish "ecological reserves" with land withdrawn from production, to date only Ireland has made use of this possibility, reserving a total of 54 hectares for ecological purposes at an annual cost to the EU budget of ECU 54000. Given its very limited environmental impact the "early retirement" measure will not be analysed further in this Report.

33. The comprehensive aims of Regulation (EEC) No 2078/92, commonly referred to as the "agri-environmental" Regulation, are: to accompany the changes to be introduced under the market organisation rules; to contribute to the achievement of the Community's policy objectives regarding agriculture and the environment; to contribute to providing an appropriate income for farmers. The aims of the "afforestation" Regulation (EEC) No 2080/92 are: to accompany the changes to be introduced under the market organisation rules; to contribute towards an eventual improvement in forest resources; to contribute towards forms of countryside management more compatible with environmental balance; to combat the greenhouse effect and absorb carbon dioxide(47).

34. These measures were innovative within the EAGGF-Guarantee Fund, in giving a significant role for Member States in Community policy development as well as implementation, in accordance with the principle of subsidiarity, as established in the Treaty of Maastricht. The "agri-environmental" Regulation requires Member States to draft concrete programmes which are tailored to suit their specific agricultural and environmental situations. These drafts are then submitted to the Commission, for examination and eventual approval in the form of a Decision. A unit within the Commission's Directorate-General for Agriculture is responsible for detailed examination; other DGs, including DG-Environment and DG-Financial Control are also consulted during the approval process. Programmes are then submitted to a vote in the "STAR-Committee"(48), prior to formal approval by the Commissioner for Agriculture. Farmers adhere to the programmes by concluding five-year contracts with national administrations for all or part of their holdings. Farmers commit themselves to adopting the farm practices defined in the contracts. However, while Member States have a large role in developing and implementing programmes, nevertheless, in accordance with the Community's Financial Regulation, ultimate responsibility for the sound financial management of Community funds remains with the Commission.

35. Aid is provided in the form of premiums calculated either per hectare (ha) or per livestock unit (LU). The aid is designed to compensate farmers for extra costs incurred in consequence of programme participation, and/or for yield lost. Programme administration and control is performed by national administrations. Aid expenditure is co-financed by the Community and Member States, in proportions of 75 %/25 % respectively in poor regions of the European Union (Objective 1 regions), and 50 %/50 % in more prosperous regions. By October 1998, 158 AE programmes had been approved, on the basis of which, contracts were signed covering around 23 million ha, representing 17 % of total EU farmland. The participation target set by 5EAP, i.e. that 15 % of European farmland should be covered by AE measures by 2000, has therefore been achieved ahead of schedule. However, high participation rates may be considered as a first step towards programme success; they are not a guarantee, in themselves, of significant environmental impact. Even if one hectare in seven is being farmed "sustainably", if the remaining six hectares are farmed using unsustainable practices, then it will not be possible to achieve the other targets set by 5EAP.

36. Forestry policy as such falls within the Member State policy domain. However, the afforestation of agricultural land falls within the Community policy domain and the AF Regulation works on a similar basis as the AE Regulation. The Community co-finances tree plantation costs, plantation maintenance costs for five years, and compensation to farmers for a period of 20 years for their loss of agricultural income due to the conversion of agricultural land to afforested land. Currently there are 43 programmes in operation across the European Union. On the basis of these programmes 700000 hectares have been afforested.

Planning

Commission planning

37. Targeting of scarce resources is essential to apply them with greatest impact. However, the Commission did not carry out a comprehensive analysis on EU level of where and how EU funds could best be spent to maximise environmental impact. The same remark is valid for AF. In consequence, the main factor determining the absorption of EU funds has been the willingness of Member States to provide co-financing. In regions where environmental concerns are prioritised and local funding is available, EU expenditure has been relatively high; in poorer regions, and/or where AE and AF concerns are perceived as less important, EU expenditure has been low.

38. The result was a heavily askew distribution of EU funds, as shown in Tables 7and 8. When analysing the differences between Austria and Greece or Germany and Spain, for example, it becomes evident that both sets of countries have approximately the same agricultural surface but receive significantly different amounts for environmental programmes. While Spain and Greece have well evidenced and pressing problems such as water pollution, over-grazing and soil erosion, a lot more money is spent in Germany and Austria mainly on measures applied on a large scale which do not require big changes in established agricultural practices. Prior to its accession in 1995, Austria's environmental protection legislation was already long-established; consumption of fertiliser was below the EU-12 average, and the intensity of livestock production at 0,7 LU/ha was barely half that of the EU-12 average of 1,3 LU/ha. Despite representing only 2 % of European farmland, Austria has absorbed 21 % of total AE spending in the European Union.

Table 7

Expenditure on agri-environmental measures, 1993 to 1997

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Table 8

EAGGF expenditure on afforestation measures, 1993 to 1997

>TABLE>

39. It follows that maintaining existing practices has become the main target of Community AE expenditure, rather than ameliorating environmentally damaging intensive practices. Although this constitutes a legal and regular use of funds under the AE Regulation, support for existing practices only delivers value for money if it can be demonstrated that the alternative to support would be discontinuation of such practices, i.e., abandonment of agricultural land or intensification. The Commission, however, approved programmes without demanding from Member States appropriate evidence of the existence of such risks.

40. Given the importance which the 5EAP gave to combating the damages inflicted by intensive farming practices, the allocation of Community resources upon the basis of the ability and/or willingness of Member States to provide co-financing, rather than on the basis of an objective assessment of need, represents a fundamentally inefficient approach to aid distribution. The Commission has since acknowledged (within the context of demanding improved evaluation of AE programmes) that what is required is "a more effective realisation of the goal of applying agri-environmental programmes throughout the territory of the European Union according to needs"(49). The principle of subsidiarity which is integral to Council Regulations (EEC) No 2078/92 and (EEC) No 2080/92 should not hinder the Commission to better coordinate Member State and Community efforts on the basis of agri-environmental and afforestation priorities identified at European level.

41. Meanwhile, the Commission has noted that, "only five Member States account for 86 % of the expenditure. Uptake of programmes is generally low in highly productive and intensive agricultural areas. Biodiversity in these areas may come under increasing pressure"(50). The new Regulation on rural development (Council Regulation (EC) No 1257/1999) is more precise on programme justification and on building strategies to cope with environmental problems caused by agriculture(51).

42. Weaknesses in targeting have not only been geographical; the important environmental problem of agriculture-generated atmospheric pollution has not been tackled effectively. Agriculture accounts for 9 % of total greenhouse gas emissions in Europe; it is the main source of methane (48 %) and nitrous oxide (52 %) emissions in the European Union(52). Agriculture also accounts for 95 % of ammonia emissions in Europe, which contributes towards acidification(53). The 5EAP set aims for reducing this pollution, but Community action to achieve these is still pending. The Commission has noted, "while the agricultural contribution to air pollution is understood, no particular agri-environmental strategy has been established to counter the effect"(54).

43. The effects of the Commission's failure to conduct an analysis of the European Union's most important environmental needs before launching implementation of the accompanying measures could have been partially corrected had the Commission given detailed guidance to Member States for designing their programmes. The Commission's failure to emphasise the environmental aspect of AF policy has permitted some Member States to submit programmes which overemphasise commercial considerations.

44. The lack of priority given to environmental needs could also have been partially corrected had the Commission linked the approval of the programmes to the achievement of specific and substantial environmental benefits. The Commission evaluation report for AE acknowledges weakness: "In many programmes, the identification of objectives needs to be more specific"(55). The Commission, instead, initially approved AE programmes which did not adequately prioritise the environment. This is evident from the Commission's approval of the French "prime à l'herbe" measure in 1993(56), which was given despite reservations expressed by Commission services because of the weak evidence justifying the measure(57). However, certain weaknesses in this measure were addressed by a programme amendment in 1998. Another example is the Finnish AF programme. Although it was not demonstrated how it could contribute to the achievement of environmental benefit, it was nevertheless approved conditional on relevant explanation by the national authorities. Although the latter failed to respect this requirement, the Commission has taken no remedial action to secure compliance.

45. A reason for the above weaknesses, which also negatively affected the performance of monitoring and controlling of the measures, is the AE unit's inadequacy in human resources, both in quantitative and qualitative terms. The Commission failed to deploy enough of its staff to this area. These problems were aggravated by the fact that the number of programmes to be dealt with turned out to be much higher than expected and that the programmes are very heterogeneous in terms of aims, administrative mechanisms, farming practices funded and costs. For example, some Member States' programmes cover the entire national territory (e.g. Sweden), others cover administrative regions (e.g. Italy) or topographical zones such as individual river valleys (e.g. the United Kingdom). The high number and diversity of programmes should have been anticipated by the Commission: the Council, in approving Regulation (EEC) No 2078/92, enacted a very flexible policy instrument, permitting Member States a high degree of autonomy to design programmes which are adaptable to the unique structure, systems and environmental conditions found at national, regional and local levels within each Member State.

46. Regulations (EEC) No 2078/92 and (EEC) No 2080/92 both anticipate that the Commission establish detailed implementing rules for agri-environment and afforestation. Rules to assist Commission budgetary forecasting were established, but detailed rules for Member States, covering programme design, implementation, control and evaluation, were not introduced promptly by the Commission. The implementing regulation concerning agri-environment was not adopted until four years after the entry into force of the basic Council Regulation, by which time most Member State programmes had already been adopted and started to be implemented(58).

47. In respect of afforestation, no implementing rules have so far been adopted by the Commission. It should be mentioned that detailed requirements have been developed by the Commission, but these lack legislative force. This difference in Commission approach between AE and AF has created inconsistencies in Community policy implementation. For example, in respect of AE, Member States must provide detailed evidence to support proposed programme aid rates; these specific rates are then approved by the Commission. By contrast, in respect of AF, such information is not demanded of national authorities; the Commission approves aid rate maxima, within which Member States are free to set aid rates, without need for Commission approval.

48. With respect to staff requirements, the Commission underestimated the workload which the accompanying measures would generate for its own staff. In particular, the staffing of the unit responsible for AE was based on the assumption that most Member States would submit only one draft programme for approval. In fact most Member States proposed several zonal programmes, as well as "horizontal" measures covering the entire national territory. Many of these draft programmes were amended in response to Commission input and some were rejected as unsuitable for Community co-financing. For example, a proposal from Belgium to compensate farmers for using less fertiliser in order to reduce nitrates pollution was rejected, because of that Member State's failure to implement the Nitrates Directive. By late 1998 the Commission had approved a total of 158 programmes and more than 270 programme amendments, representing a total of over 2500 distinct and in many cases complex measures.

49. Furthermore, the Commission did not revise unit staffing even when its underestimate of the workload became apparent. In 1998, only 4,75 full-time-equivalent A-grade staff were deployed to manage expenditure of over ECU 1500 million per annum. The problem of insufficient staffing has been exacerbated by the failure to fill vacancies promptly and to ensure adequate continuity of staff. Of the 12 staff in the unit in October 1994 (working on a range of measures, as well as AE), only one remained by June 1996, and most of the replacement personnel have in their turn since been replaced. Even the post of Head of Unit remained vacant between September 1997 and May 1998. Furthermore, a lack of C and B grade staff means that A grade staff spend time undertaking clerical duties.

50. There are also "qualitative" weaknesses. Only one of the unit's officials has any professional training in agronomy, and none is trained in environmental matters. It is over 12 years since a specialist recruitment exercise for agronomists was undertaken by the Commission, and the unit has no access to specialist environmental expert recruitment. It was not until 1997 that any consultancy resources were formally allocated to the unit; and the only relevant specialist training given to unit staff over the past five years has been two half-day courses in analytical techniques. The implementation of the new Rural Development Regulation constitutes a yet further substantial increase in the Commission's responsibilities; the resources needed to address this new workload have to be adequately quantified by the Commission.

Member State planning

51. The failure at Community level to allocate funds on the basis of environmental priorities has been widely replicated at national and regional levels within Member States. As the Commission has realised, the AE programmes have had "a notable lack of impact on intensive areas"(59). Generally, funding is targeted neither to the zones of greatest environmental priority, nor to the agricultural activities which are most damaging to the environment. This is problematic in Germany, France, Italy, Finland, Portugal, Austria, Sweden and the United Kingdom (see Text box 1).

Text box 1

In Germany, the national environment ministry recognises that the Land of North Rhine Westphalia, which accounts for 9 % of Germany's farmland, has urgent AE needs because of intensive farm practices: but only 0,7 % of EU-AE funding paid in Germany is allocated to this region. In Saxony, intensive farming is responsible for nitrate pollution and soil erosion, but few measures address the most polluting sector of Saxon agriculture, that is the large intensive livestock farms established by the former German Democratic Republic. In Bavaria, the Court's auditors found that only a few farmers participating in the KULAP programme changed their practices in order to satisfy programme eligibility criteria. The others were supported for their normal, existing extensive and environmentally beneficial farming practices. The aid could be justified only if these practices were threatened by discontinuation (i.e. either intensification or abandonment). However most farmers audited declared they would continue with these same practices, even if aid were discontinued. Furthermore, the official Bavarian evaluation found that most participants in some measures were farmers already practising these methods, and that there was minimal difference in the environmental performance of participating and non-participating farmers. In Baden-Württemberg (Germany), the MEKA programme does not adequately address some severe local environmental problems caused by intensive practices, for example pesticide and fertiliser pollution in Kaiserstuhl, Kraichgau and south of Stuttgart.

In France, the allocation of funds between regions was based on purely agronomic criteria, i.e. the number of farmers and hectarage of each region, with no reference to environmental problems or risks. In consequence, areas with pressing environmental needs, such as Brittany, which suffers from high nitrate pollution due to intensive pig farming, were not given due priority.

In Italy, although environmental priorities were initially important in the regional allocation of funds, this approach was subsequently abandoned in favour of a demand-led approach, i.e. the regions which spent most received the greatest budget in the following year.

In Sicily, although the regional programme identifies the localities of highest environmental priority, aid distribution is indiscriminate across the region. Furthermore, the main AE problems relate to water management and soil erosion; but instead of addressing these problems directly, the programme encourages organic production, for which there is no outlet, and reduction of chemical inputs.

In Finland, although the main agricultural pollution problems identified by the programme are concentrated in the south-west of Finland, only 20 % of total expenditure is devoted to this region. Furthermore, the Finnish programme even allowed farmers in certain circumstances to apply more fertiliser than the economic optimum.

In Portugal, a key national problem is salinisation of fresh groundwater reserves. Ingress of seawater occurs because too much groundwater is being extracted for use by agriculture. This problem is not addressed by the programme. Furthermore, only farmers with less than 50 ha and/or 50 LUs are eligible for AE aid. This reduces by half the hectarage which could be covered by the scheme, and undermines the environmental potential of the programme.

In Spain, the national measure combating soil erosion, one of Spain's two biggest AE problem, was not implemented during the first two years of programme operation, due to a lack of national funds available for co-financing.

In Austria, there was a provincial allocation of funds but the national authorities could not provide the Court with evidence to support it. In addition, the Court's auditors found that livestock density supported by AE aid remained too high to deliver significant ecological benefit to pasture land, in terms of greater bio-diversity i.e., variety and quantity of wild plant and animal life. Indeed, the high density allowed by the programme motivated existing extensive producers to intensify their production in order to exhaust the possibility for aid. AE measures have thus only slightly reduced the Austrian stock numbers (0,1 %). Moreover, in this Member State only a limited number of farmers had to change their normal practices to satisfy the programme.

In Sweden, the National Audit Office concluded in its report that "the environmental effects of the grants are much smaller than they would have been if there had been a greater focus on, for example, the counties of Skåne or Halland where there is extensive nitrogen leakage".

In the United Kingdom, the National Audit Office pointed out that there is better scope for targeting of aids within programme zones and for giving a higher priority to the support of environmentally friendly arable techniques.

52. The failure to prioritise environmental needs also characterises the management of AF measures. The EEA has noted in respect of AF, that "in many cases, fast-growing species, including exotic species, have been used, often at the expense of habitats of high biodiversity value"(60). An Irish study found that "It is generally thought that planting trees is good for the environment.... However, in Ireland, where planting consists of predominantly commercial forests, 80 % of which are non-indigenous conifers, there is considerable concern regarding the external costs of afforestation (costs which are borne by people other than the forest owner). Of particular concern are the potential negative effects of forestry on landscape, water and wildlife"(61). Poor prioritisation of environmental needs is also evident in Spain, Austria, Germany, Portugal and Italy (see Text box 2).

Text box 2

In Spain, the national AF programme identifies among its primary objectives the combating of soil erosion and desertification, but the criteria for regional and local distribution of funds give priority to agricultural and commercial factors rather than environmental requirements.

The Court's auditors found evidence at one beneficiary of inadequate concern by the agricultural authorities for environmental needs. While environment agency officials recommended a mixed plantation of different varieties of oak trees (95 % quercus rotundifolia, with only 5 % quercus suber), the agricultural authorities approved a single-variety plantation with 100 % quercus suber.

In Austria, the Commission-approved programme foresees that 70 % of the total aid paid for "afforestation", is actually paid to support the construction of forest tracks; ECU 37 million from a budget of ECU 53 million for 1995 to 1997(62). Although forest track building has been defended by the Member State authorities on grounds that it allows better care of woodland and environment-friendly felling and removal of trees, the proportion of the AF budget spent on this activity is high. Furthermore the EEA notes that even narrow non-asphalted service tracks may lead to fragmentation of habitats and easier access to previously remote areas, with long-term implications for the integrity of the ecosystems(63).

In Germany (Bavaria), the Court's auditors found that track construction had increased the accessibility of hitherto-remote high alpine forest.

In Portugal, some beneficiaries visited by the Court's auditors were found to have uprooted mature trees, in order to qualify for new plantation aid. This caused soil erosion, a problem exacerbated by excessive soil disturbance during the planting of the new trees.

In Italy, at regional level only 0,001 % of Emilia-Romagna's farmland has been afforested, and this with tree species chosen for their commercial rather than environmental value.

53. Moreover, the means specified in the programmes to achieve environmental objectives sometimes raise doubts about their efficiency. In Castile-La Mancha (Spain), where the programme aims to reduce water use, the use of water was already restricted by national law before the introduction of AE measures, whereby large farms got less access rights to water per hectare than small farms. The AE programme introduced the regional average pre-programme water consumption per hectare as a baseline for measuring the individual reduction in water consumption. Farmers are compensated if they commit themselves to using 50 %, 70 % or 100 % less water than the regional average consumption of water per hectare in the pre-programme period. In addition, they are exempted from the water-use restrictions under national law.

54. Such a programme is attractive to farmers whose water consumption and/or access rights are already lower than the regional averages. These farmers can qualify for the 50 %, 70 % or 100 % reduction schemes even though they reduce their actual water consumption by less than 50 %, 70 % or 100 % respectively. Indeed, farmers whose previous water consumption/rights were below the 50 % or 70 % of the regional average are even able to increase their actual water consumption, and get aid as well. The scheme is also attractive to farmers who have no water or access rights at all. A local study in Castile-La Mancha found the perverse situation that most of the 570 holdings in receipt of AE aid for agreeing to use no irrigation had no access to irrigation in any event. In the opposite case, small farmers with substantial access rights and correspondingly high water consumption already, would find the AE scheme unattractive, because the aid is insufficient to compensate them for lost yield.

55. A further problem was noted by the Court in Castile-La Mancha. Aid is being paid in respect of set-aside land, even though programme conditions regarding set-aside land are no more onerous than those already required by the arable crops scheme. It follows from Commission Regulation (EC) No 746/96, Article 10(1) that payment of AE aid in such circumstances is irregular. Given that set-aside constitutes around 30 % of programme hectarage, this represents a grave waste of Community funds. A more thorough examination of programme documentation prior to approval could have prevented this problem from arising.

56. The effectiveness of programmes depends also on the correct calculation of aid rates. Regulation (EEC) No 2078/92 specifies that AE aid is paid to compensate farmers for obeying specific restrictions on their farm practice, restrictions which result in a loss of net income. If aid rates are set too low, then few farmers will participate and programmes will have little environmental impact. If aid rates are set too high, then programme costs will be higher than necessary.

57. The Court's auditors found widespread discrepancies between aid rates derived from zonal averages of participation costs and the real costs of participation. An official evaluation in Finland found that in 1997 the gross cost to Finnish farmers of programme participation totalled FIM 773 million (ECU 110 million); but the aid paid totalled FIM 1372 million (ECU 195 million), an excess over the total participation costs to Finnish farmers of almost FIM 600 million (ECU 85 million)(64). For the period 1995 to 1997, the Court estimates that the gap between calculated total costs incurred by farmers and total aid paid to farmers in Finland amounted to ECU 422 million. In Sweden, the National Audit Office concluded that the rate of AE support paid for the measure concerning perennial ley farming was significantly in excess of Swedish farmers' actual costs of participation(65). The UK National Audit Office found that aid rates for some measures were higher than the average participation costs to farmers, but in respect of most measures, aid rates are set lower than farmers average participation costs. Similar problems were identified in Germany, Austria, Portugal and Spain (see Text box 3).

Text box 3

In Germany, an official evaluation of the federal programme found that aid rates were insufficient to compensate the farmers for their conversion costs. In Baden-Württemberg (Germany), the official MEKA evaluation concluded that aid rates were excessive for some measures, for example grassland protection aid.

In Austria, in contrast with all other measures set out in the national programme, the aid rate for the Elementarförderung lacks quantified justification. This aid rate was subsequently acknowledged as excessive by the national authorities and reduced. The rates for several further measures, for example those in support of crop rotations and for cessation of maize production, are excessive on the basis of available evidence. By contrast, farmers participating in counter-erosion measures are undercompensated.

In Portugal, aid rates undercompensate farmers by more than a quarter of their real costs.

In Spain, the Court's auditors identified an increase in aid rates by the Spanish authorities which lacked any supporting evidence.

58. AE aid rates might also be inaccurate if the programme zone is not agronomically and environmentally homogenous, as required by Article 3(2) of Regulation (EEC) No 2078/92. If zones are not homogenous, then aid rates based on average yield foregone will significantly overcompensate farmers in low-yield localities, and undercompensate farmers in high-yield localities. The Court has found that many programme zones are neither agronomically nor environmentally homogenous. For example, in Baden-Württemberg (Germany), the Marktentlastungs- und Kulturlandschaftsausgleichsprogramm (MEKA) programme zone covers the entire region. But the region varies from the fertile, intensively managed arable fields of the Rhine valley, to the extensive, sub-alpine pasture land of the Black Forest. On poor land the programme is adopted by farmers in order to generate income, while on good land only environmentally committed farmers participate. In consequence, participation in MEKA is more substantial in extensively-farmed areas, and less substantial in the polluted, intensively-farmed areas of the region. The Court identified similar weaknesses in France (concerning the general measure "prime à l'herbe") and Bavaria (see Text box 4).

Text box 4

In France with regard to the national "prime à l'herbe" measure, as DG-Environment warned during the programme approval procedure, the premium is too low to preserve poor pasture from abandonment, and in respect of rich pasture it is simply an income aid for farmers.

In Bavaria (Germany), land quality varies greatly (rental prices range from DEM 206 to DEM 874 per hectare). Participation is high in poor areas, but low in rich areas, which are often the most intensively farmed and environmentally problematic.

59. The problem is known to the Commission: "Evaluation and research have shown that basing zoning on the administrative region might result in inconsistencies between programmes within one Member State. One example is the implementation of the measures of reduction in chemical use in Italian regional programmes.... Some studies show that the blanket application has reduced the efficiency of measures, with some overpayment in areas where the measures represent less effort on the part of the farmer and underpayment in more profitable areas, with a correspondingly lower take up"(66).

60. Similar observations arise concerning AF. In Spain, the official calculation to establish aid rates for reimbursement of plantation costs, maintenance costs and agricultural income foregone were performed by an advisory scientific committee. However, no documentary record of the committee's deliberations or of the evidence on which it based aid rates was available for examination by the Court. This makes it practically impossible to verify the accuracy of aid rates. In Portugal, no justification could be found for plantation costs per hectare increasing with farm size. The Commission has identified similar problems in Italy and France but has taken no remedial action. At regional level, the Court found discrepancies in Extremadura (Spain) between the authorised aid rates and the real costs incurred by farmers, for example one farmer was reimbursed ESP 185 per sapling, although the plants had cost him less than ESP 60 each.

61. At the planning stage, programmes should be coordinated with other relevant Community initiatives and vice versa, in order to ensure a comprehensive response to environmental needs and to avoid duplication of effort and waste. The Structural Funds provide aid for agri-environmental capital investment on farms, and the LIFE and LEADER programmes support local environmental projects in the countryside. The Commission has itself observed that "case studies demonstrate a lack of coordination between accompanying measures and between those and rural development policies"(67). The Court has identified numerous cases of poor practical coordination.

62. For example, in Spain AF support is paid for the conversion of agricultural land into forest while reforestation aid is payable from the Structural Funds for planting trees on land which is non-agricultural. However, the national authorities have not adequately defined "agricultural land". The adopted definition, "land having a production function resulting in an income for a farmer", is not practicable, because even the poorest land (which qualifies for Structural Funds' reforestation aid) may be used for a few days' rough grazing each year. There is consequently a significant potential overlap between the two Community programmes, creating a risk of double payments. The same problem exists in Portugal.

63. There is also a lack of coordination between separate AE programmes within or among Member States. In Bavaria, the Ministry of Agriculture and the Ministry of Environment each independently operates its own programme: respectively, Kulturlandschaftsprogramm (KULAP) and Vertragsnaturschutz-programm (VNP). These address the same problems in the same localities, and are in some instances in competition (e.g. measures to support environmentally friendly vineyard cultivation). Following the Court's audit, the Bavarian authorities, on request of the Commission, have since harmonised procedures to assure coherence between AE measures.

64. In Italy the catchment area of the River Po has common environmental problems, but each of the administrative regions through which the river flows has developed its own programme. Similarly, Luxembourg and Germany both support environment-friendly farming in vineyards on opposing banks of the Moselle; but even though the agri-environmental conditions are similar, the programmes are different.

65. A similar problem was identified with regard to organic production. Some Member States only support conversion from conventional to organic methods while others also support post-conversion maintenance of organic methods (see Text box 5).

Text box 5

There is inconsistency between Member States in the criteria governing payment of AE aid to encourage organic plant production. In France, Greece, Portugal and the United Kingdom, agri-environmental support is paid only for conversion from conventional to organic production. Existing organic producers are not supported in these Member States. By contrast, the following Member States support the continuation of organic production, as well as conversion Austria, Finland, Italy and Germany. This means that existing organic producers in Greece, France, Portugal and the United Kingdom are disadvantaged compared with farmers in other Member States. The above situation may distort internal competition within the Community.

66. Lack of coordination is also found between AE and AF measures. For example, in Bavaria, in the mixed pasture/woodland sub-alpine region, ecologically valuable extensive pasture qualifying for AE aid has been afforested with AF support. Planting trees in such landscapes, to "fill in" gaps in the forest, is detrimental to biodiversity. Similar practices occur in France, Portugal, Finland and Austria (see Text box 6).

Text box 6

In France, the Court's examination of the local measure for Millevaches in the Limousin found that pastures on the high plateau eligible for AE aid had also been scheduled for afforestation with AF support.

In Portugal, AE measures in the uplands have low rates of participation, because AF support is financially much more attractive.

In Finland, there are serious doubts over the environmental desirability of afforesting agricultural land. The Ministry of Environment considers that no agricultural parcel should be afforested; in order to maximise biodiversity, the priority should be to maintain open farmed spaces.

In Austria, the situation is similar: since Austria has a large forest cover, there is no environmental need to afforest farmland.

67. In addition, there is a lack of coordination between AE/AF support and arable scheme aid. The EEA has referred to competition of AE measures "with mainstream production support payments (such as the maize premium)"(68). In Sweden, the National Audit Office (SNAO) found that "the environmental grants for perennial ley farming are in danger of taking second place to the higher arable area payments"(69). Similar problems were identified in Portugal and Spain (see Text box 7).

Text box 7

In Portugal, some of the AE measures have to remedy the damaging effects of the CAP: AE aid is given in respect of local fruit trees that would otherwise tend to be replaced by new varieties with higher yields, better rewarded within the fruit and vegetable COM, but with higher use of agrochemicals. AE aid is also given to support extensive livestock production which is endangered by the high livestock premiums provided by the 1992 CAP reform. Other AE measures designed to preserve temporary grasslands and pastures, must compete with the higher arable aid for which the land is eligible.

In Spain, AE aid is paid to reduce water consumption; but the arable aid regime pays a higher rate of support for irrigated land than for non-irrigated land, and this encourages farmers to irrigate. In consequence, AE aid rates have been raised in order to increase programme attractiveness to arable farmers.

The Commission in its Agenda 2000 proposals has underlined that "the scale of support still provided through prices and crop specific payments (e.g. silage, maize and flax) may discourage farmers from committing themselves to more extensive practices or dedicating land to environmental purposes" (in COM(2000) 97 final, p. 24).

68. There are also unjustified differences in the prescriptions for set-aside. In the United Kingdom, farmers sow and maintain a green cover on set-aside land in order to qualify for set-aside payments, under the arable crops scheme, whereas in Saxony the authorities allow set-aside land to be eligible for AE support in addition to the arable set-aside payments, if a green cover is sown and maintained.

69. Lack of coordination is also apparent between AE support and the Community's environmental protection regime. For example, a significant proportion of AE aid is spent on compensating farmers for using less fertiliser, to combat nitrate pollution. Meanwhile, 12 Member States currently face proceedings in the European Court of Justice, because of non-transposition and/or the incorrect application of the Community's Nitrates Directive: This Directive anticipates that farmers should limit their use of fertiliser, without compensation (B, D, EL, E, F, IRL, I, L, NL, A, P, and UK). A recent study has concluded that largely because of agricultural effluent, "it is estimated that 5 % to 6 % of the European population is now being supplied with drinking water which contains more nitrate than the permitted EU maximum of 50 mg/litre and 25 % of the population is using water with a level greater than the optimum of 25mg/litre"(70). With regard to the Nitrates Directive, the poor implementation of which was the subject of a previous report by the Court(71), not one Member State has a fully satisfactory transposition record (see Table 9). Implementation by Member States of the countryside-related nature-protection Wild Birds and Habitats Directives has also been problematic. As the EEA has concluded, "until now, at EU level, the link between 'Nature' legislation and the CAP has remained inadequate "(72).

Table 9

Implementation by Member States of the Nitrates Directive

>TABLE>

70. Furthermore, there is inconsistency between European and national policies concerning agriculture and the environment. The EEA has noted that some Member States, particularly in the south, subsidise water use by farmers; at the same time, EU funds are being used to pay farmers to use less water. "At the national level, perhaps the most obvious subsidies with an environmental effect are to irrigated agriculture in southern Europe. Municipalities supplying water to agricultural units in the Po Basin in Italy are required to charge prices based on cost recovery but in practice numerous exemptions are granted. In Spain, agricultural abstraction is subject to a levy which is not related to volume of water used, but to area of land, and there is a shortfall between recovered costs and the costs of supply. In other countries, subsidies may take the form of exemption from taxes: this is so in Portugal where irrigation water is exempted from a new tax introduced in 1995 and in the Netherlands where farmers are exempt from the groundwater extraction tax"(73).

Implementation and control

Commission implementation and control

71. The implementation of some AE measures may be incompatible with the EU Treaty's "polluter pays principle"(74). While this principle requires that the polluter has to pay for avoiding or repairing the environmental costs of any economic activity, the AE policy apparently transfers the environmental costs of agriculture from farmers to taxpayers. The agri-environmental approach is only compatible with the polluter pays principle provided that farmers are paid to deliver a standard of environmental performance which exceeds "good agricultural practice". However, across much of Europe, standards of normal performance, such as "codes of good agricultural practice", are either non-existent or underdeveloped. It is therefore often not feasible in practice for the Commission to ensure that EU aid is securing real improvements in farmers' environmental performance, rather than simply benefiting farmers' incomes.

72. With respect to control, the Commission does not routinely visit Member States to verify the data or analyses submitted by Member States in support of draft programmes; nor do AE-unit or AF-unit personnel routinely conduct missions to verify that programmes are in practice providing good environmental value for money. Commission inspectors do visit on the spot to verify the legality and regularity of payments; but the role of these personnel does not include evaluating the environmental effectiveness of AE or AF measures. The current "Brussels-based" approach to programme management is not consistent with effective, practical control. The Commission's inactivity in this respect is disconcerting, since it is well aware of the validity of the Court's criticisms: as the Commission's own evaluation report notes, "with diverse measures, control difficulties are evident"(75).

Member State implementation and control

73. The AE policy in particular is very demanding of Member States' administrative infrastructures. Specifically, Member States need to deploy agronomists and environmental experts to identify AE problems and to propose practical solutions to these. Administrators are needed to convert the scientists' theoretical considerations into detailed programme requirements. Inspectors are needed to verify beneficiary compliance. Skilled personnel is required to monitor and evaluate programme impacts.

74. The work of the National Audit Office (NAO) in the United Kingdom has determined that the ratio of administrative costs to farmers' grants is very high(76). The NAO found that for the biggest AE programme in the United Kingdom, total administrative costs during the early phase of implementation in 1995 to 1996 were ECU 13 million, equivalent in value to 46 % of the grants paid to farmers (see Figure 1). The scheme is complex, and its administration involves many different processes. Annual scheme management costs total ECU 8 million, and environmental monitoring and research cost ECU 5 million (see Figure 2). If such high costs are necessary for the proper management and control of programmes, then the annual collective cost to Member States of AE policy implementation would be ECU 700 million. Another detailed examination of Member State administrations' activities even reached the conclusion, that the total EU-wide direct implementation cost of Regulation (EEC) No 2078/92 (not including costs of environmental monitoring), must have amounted to between ECU 1000 and 2000 million in the period 1992 to 1996(77). In spite of such high cost the EEA has noted, there is "insufficient administrative capacity and experience in many regions to handle this new policy"(78).

Figure 1

Environmentally sensitive areas scheme - grant payments and administrative costs, 1991/92 to 1996/97

>PIC FILE= "C_2000353EN.002701.EPS">

Notes:

1. Costs prior to 1993/94 do not include research programme costs as these are not separately identifiable.

2. 1996/97 figures are estimated and include some research and development relating to the countryside stewardship sheme.

3. Administrative costs in 1991/92 were not available and were assumed to be similar to 1992/93.

Source:

UK National Audit Office report, "Protecting environmentally sensitive areas", p. 33.

Figure 2

Administrative costs of the environmentally sensitive areas scheme, 1995/96

>PIC FILE= "C_2000353EN.002702.EPS">

(79)Source:

UK National Audit Office report, "Protecting environmentally sensitive areas", p. 34.

75. Significant implementational difficulties resulting in low rates of farmer participation and consequently low environmental impact, were identified by the Court in Germany, Portugal, the United Kingdom, Austria, Spain, France, Finland and Sweden (see Text box 8).

Text box 8

In Bavaria (Germany), uptake of certain measures in the KULAP programme - such as 20-year set-aside, which covers just over 100 ha is so low that environmental impact is minimal. Baden-Wurttemberg's MEKA programme shares similar problems for some measures. In Saxony, 85 % of farmland is at risk of erosion but only 30 % of farmland is covered by anti-erosion measures. Indeed, in the most vulnerable localities, participation in the key anti-erosion measure (mulch saat) is as low as 3 %.

In Portugal, the measures to combat intensive practices and to reconvert arable land to pasture, have had no environmental impact since they were not applied.

In the UK, the NAO found participation was much lower than planned in some regions, for example in the Cotswold Hills, only 1600 ha of arable land had been converted to grassland compared with a target of 6000 ha. The UK Parliamentary Committee scrutinising national expenditure noted that the impact of the scheme could have been much bigger if the Ministry had been more proactive in marketing the scheme.

In Austria, the Court's auditors found confusion among farmers and a high rate of error in aid applications due to the considerable number of measures available, of which some could be cumulated with others whereas others could not.

In Spain, the Court's auditors found that the national contribution in respect of both AE and AF measures, was being paid late to beneficiaries. This practice is irregular and undermined programme credibility and participation.

Administrative complexity is also a problem in France, where administration and control functions were separated between a large number of organisations.

In Finland, farmers found the application procedure so complex that they had to employ specialists in order to fill in their claims.

The Swedish National Audit Office found that farmers sometimes refrained from joining the Swedish AE scheme due to the administrative burden this entailed.

76. With regard to control at Member State level of EU expenditure, an important tool for verifying beneficiary compliance with EAGGF-Guarantee fund requirements is the Community-supported integrated administration and control system (IACS), which operates in each Member State for most of the EAGGF-Guarantee expenditure. Weaknesses in the control of AE and AF measures as a result of AE/AF controls failing to achieve the standards equivalent to IACS were identified in the course of this audit in Portugal, Germany, Austria, Italy and France (see Text box 9). For example, in Saxony, many of the official maps used to verify aid claims are over 75 years old and are in consequence inaccurate, a problem common to all the territories of the former German Democratic Republic. The Commission has itself noted that "in one Member State, no on-site farm inspections were made until 1995 and in several Member States there was little or no cross-checking data contained in IACS"(80).

Text box 9

In Portugal, the IACS was still not completed at the date of the Court's auditors visit in January 1998. In the North, the problem was exacerbated by the absence of a cadaster. During farm visits the auditors identified discrepancies concerning most of the aid claims of the 16 farms visited. Comparison between arable aid, olive aid and wine declarations showed excessive payments for AE measures, or in respect of other schemes.

In Austria, the official record of slope gradients has not yet been completed, so that information on gradients supplied by the farmers in their aid declaration, which is one of the conditions for receiving some of the AE aid, cannot be checked by administrators.

In Italy, the follow-up of discrepancies detected by the IACS was inadequate and does not always result in the application of sanctions required by European legislation. The lack of a detailed record of inspection results does not allow the use of risk analysis in inspection sample selection, as required by EU regulations.

In France, fields receiving AE aid were not recorded on the same computer as fields receiving arable aid and therefore could not be cross-checked by computer with the parcels receiving arable aid.

77. Further control problems exist. Most programmes include a measure to compensate farmers for using less fertiliser (see Text box 10). However, it is not feasible to verify compliance with such measures. As the State Audit Office found in Finland, "monitoring certain conditions in the programme is problematic with current control methods. Monitoring fertiliser levels was considered especially difficult. In related studies reliably verifying fertiliser levels has been considered practically impossible"(81). Visual inspection, soil sampling and examination of farm records, if undertaken with care, can all contribute to verification; but none of these methods is definitive. This problem is known to the Commission's own auditors, but the Commission continues to approve such measures.

Text box 10

In France, no routine soil or water testing was conducted with regard to the "prime à l'herbe" scheme, even though farmers are required not to apply more than 70 kg/ha of fertiliser on their grassland. The national authorities consider it impossible in practice to verify beneficiary compliance with fertiliser restrictions. Control therefore often consists primarily in asking the farmer how much fertiliser he has applied: if the response is consistent with a rate of fertilisation respecting the scheme limit, then the aid is paid.

In Rhineland-Pfalz's Steillagenprogramm (steep slope vineyard programme) (Germany), it was left to beneficiaries to identify soil sample sites, take samples, and submit samples to the official laboratories which would examine the soil in order to verify compliance with fertiliser restrictions.

In Saxony (Germany), although in principle soil tests should be made during each "in-depth inspection", in practice in the locality visited by the auditors only one such inspection had been performed since the introduction of the scheme - and no soil test had been performed.

In Bavaria's VNP programme (Germany), although in principle soil testing was recommended, in practice it was not performed.

In Bavaria's KULAP programme, official evaluators noted inspectors' difficulty in verifying beneficiary compliance with some measures.

In Baden-Wurttemberg (Germany), no examination of farm records was performed to compensate for the absence of routine soil testing and to corroborate visual inspection results with documentary evidence.

In the United Kingdom, Commission inspectors found that, "The control of fertilisers is very doubtful. Only the features of the grassland are taken into consideration (e.g. the colour and types of grass found). No soil analysis or grass analysis is executed" (European Commission, DG VI. A. I.3 mission report, on "accompanying measures' in the United Kingdom, 19.11.1998, paragraph 7.2). The visual inspections are complemented by verification of fertiliser records which the participants in the scheme are obliged to hold."

78. In practice, some Member States (e.g., Denmark) have found that the most effective method of combating nitrate pollution, is via farm-fertilisation planning and inspection. This involves national authorities and the individual farmer agreeing a farm plan which identifies how much nitrogen can be applied to each field, and when, in order to ensure both pollution prevention for the environment and profitability for the farmer. A field-level approach is appropriate, because the ability of farmland to retain nitrogen is dependent on the characteristics of each individual field: for example soil composition, the current crop's capacity to absorb nitrogen, the cropping history, field gradient, and proximity to water courses. Such fertilisation planning is administratively demanding, both of Member State authorities and farmers, but it has been found to constitute a practical and effective method of combating nitrates pollution.

79. Some control problems appear unique to individual programmes, but are symptomatic of the difficulty which national administrations experience in developing control systems adequate to the demands of the AE policy approach. In Castile-La Mancha, in order to control water use the authorities rely on theoretical agronomic tables of water consumption which set out how much each type of crop should normally consume (see paragraphs 54 and 55). The authorities even allow farmers to declare a lower rate of water consumption than specified in the theoretical agronomic tables, in return for extra AE aid: although the programme requires that in such circumstances the farmer must install a flow-meter in order to prove his compliance, in practice this requirement was not universally applied in the first years of programme operation. There is a risk that a farmer could use more water than is specified in these tables if he wished to maximise yields. Due to such inadequacies in control, the Commission has requested a financial correction from the Spanish authorities in respect of this programme.

80. Similar "unique" control problems were identified in Finland, where 80 % of "inspections" are performed via examination of satellite photographs, a procedure which is unable to detect many forms of AE non-compliance, for example application of pesticides. The Finnish State Audit Office identified "significant deficiencies in administrative control procedures.... For example, in 1998 environmental management programmes were missing for around 3000 farms and farming plans for nearly 5000 farms out of a total of approximately 77000 farms. The necessary administrative controls have not been used to ensure that farmers have met the conditions for support before support has been paid". The State Audit Office also identified wide regional variance in inspection rates, and regional variance in the severity of sanctions applied to farmers in the event of non-compliance with programme requirements(82).

81. Control problems were also identified by the Court for afforestation measures. For example in Finland, although the programme requires an inspection visit prior to plantation approval, the Court found no evidence of such visits being made for some of the beneficiaries. Furthermore, in one forestry centre none of the beneficiaries had implemented their projects as approved by the authorities. In one case the Court found that a plantation approved for broad-leaved trees consisted entirely of conifers. In Extremadura (Spain), one beneficiary was paid to build 25 km of forest tracks; however, he built only 17 km, and improved a further 3 km. In the same case, the authorities failed to deduct ineligible surfaces, including a river, from the claimed area. And for "agricultural income foregone" aid purposes pastureland without trees was inappropriately classified as high-value "wooded pasture/arable crops". The auditors found no supporting documents were kept showing that claims had been checked prior to payment or how inspectors had in practice verified compliance. Commission inspectors identified similar problems in Castile-Leon and Castile-La Mancha in 1997/1998. Control problems were also identified in Italy (Emilia-Romagna) and Austria.

Follow-up

82. The Community's Financial Regulation Article 2 requires the Commission, acting in collaboration with the Member States, to ensure that Community expenditure takes place within the context of programmes with specific objectives; and that performance against objectives is measured. But as already indicated, evaluation work has been undermined from the outset by the failure at both Community and Member State level to support the design of the programmes and the setting of the objectives with a baseline survey of the state of the environment. As the EEA has recently reported, "Links between agriculture as an important driving force and environmental pressures are diverse and complex. There is relatively little data available at a European level to provide an objective view of changing pressures on the rural environment. Although work is progressing on agri-environment indicators within the European Union and the OECD as well as at national level, they have yet to be applied in a systematic way"(83).

83. The failure to develop environmental indicators on the basis of which the impact of the programmes could be quantified was an additional factor undermining the work of evaluation. This problem has been recognised clearly by the Commission and the Member States. In its summary report of Member State evaluations the Commission states, "There has been comparatively little progress in developing indicators which are applicable to the evaluation of agri-environment policies.... In conclusion, indicator selection to monitor environmental impacts is essential to the success of any evaluation programme. Indicators must be relevant to the programme and its area of application. A pre-condition of selecting useful indicators is that programme objectives must be specific and clear; having vague objectives is likely to present great difficulties in terms of monitoring impacts"(84).

84. The development of appropriate indicators is essential, if future environment-oriented expenditure within the agriculture policy domain is to achieve value for money. As the report produced for the European Parliament's Committee on Budgetary Control by Professor Stefan Tangermann, concludes, "To deal with all these matters will require indicators of: resource protection for soil, water and atmosphere; of the extent and health of natural and semi-natural habitats; of bio-diversity presumably on both farmed land and in field boundaries and land surrounding agriculture; landscape features and landscape change; historical and heritage features"(85). There are currently significant gaps in agri-environmental knowledge, for example, "For want of adequate analyses it is impossible at present to assess the presence and scope of the residues of numerous pesticides likely to have adverse effects on health"(86).

85. At Member State level, in the United Kingdom, the national parliament's Public Accounts Committee concluded on the basis of NAO evidence, "We are dismayed that, 10 years after the start of the scheme, the Ministry have still not developed an adequate set of measurable targets for judging the success of the scheme"(87). In Sweden, the SNAO found "our audit shows that only a very limited evaluation can be made of the effects of environmental grants where the conservation of biological diversity is concerned.... This means that the Government lacks, to a great extent, the basic data it needs to make choices between different environmental measures"(88). The EEA has noted as a weakness of AE policy implementation, that "there was no comprehensive evaluation or monitoring of results"(89). There were, however, some exceptions to this general failure; such as the Bavarian Ministry of Environment's VNP programme, which was supported by a good baseline survey.

Commission follow-up

86. The basic regulations for both AE and AF required the Commission to report to the Council and the European Parliament on the application of these measures within three years of their adoption and implementation(90). This reporting was duly carried out in late 1997(91). However, neither of the "application reports" presented constitutes an evaluation.

87. With regard to AE, the Commission has both carried out its own study of policy impact and produced a report summarising the results of Member States' evaluations. The Commission's own study examined AE measures at programme level in a wide range of Member States. This evaluation, performed by external expert consultants on behalf of the Commission, identifies many of the same shortcomings as highlighted by the Court in this report. The Court welcomes the development of an "evaluation culture" in the Commission and Member States with regard to AE programmes.

88. By contrast, the environmental impact of the AF policy initiative has not been adequately analysed at Community level. Although trees planted in the 1990s will not be mature until decades in the future, nevertheless evaluation is necessary now in order to verify that AF is proceeding as foreseen, for example to verify that trees are being planted in the places of greatest environmental need. Failure to evaluate means that inefficient practices, such as the use of sapling species which, after plantation, were found to be unsuited to local conditions, may not be identified and rectified and EU funds may not achieve their full potential in terms of environmental value for money.

Member State follow-up

89. At Member State level, the analysis of AE policy impact has been mixed. For example, in Germany three regions have produced impressive evaluation studies; but 22 programmes have not yet been evaluated. In Italy, environmental evaluations have yet to be performed by three regions. In some Member States the quality of evaluation is inadequate, for example in Castile-La Mancha (Spain), the evaluation does not isolate the impact of the programme from other factors affecting water levels, such as annual variation in rainfall. The Member State and Commission's assertion that this programme is responsible for increasing groundwater levels, is unsupported by empirical evidence. Although empirical data on precipitation is available, it is not used. In fact, a five-year drought in Spain ended in 1996, and this is the likely cause of increased groundwater levels. Furthermore, in Luxembourg and in several regions in other Member States the Commission has noted that "there appears to have been a considerable lack of commitment to evaluation"(92). There has been no evaluation produced at Member State level of the environmental aspects of afforestation.

CONCLUSIONS AND RECOMMENDATIONS

90. The importance of environmental considerations within agricultural policy is set to increase further over time. The Commission's major policy direction document, "Agenda 2000: For a stronger and wider Union", notes "The integration of environmental goals into the CAP and the development of the roles farmers can and should play in terms of management of natural resources and landscape conservation are another increasingly important objective for the CAP.