REGULATION (EU) 2021/2115 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 2 December 2021

establishing rules on support for strategic plans to be drawn up by Member States under the common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulations (EU) No 1305/2013 and (EU) No 1307/2013

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 42 and Article 43(2) thereof,

Having regard to the 1979 Act of Accession, and in particular paragraph 6 of Protocol No 4 on cotton attached thereto,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the Court of Auditors (1),

Having regard to the opinion of the European Economic and Social Committee (2),

Having regard to the opinion of the Committee of the Regions (3),

Acting in accordance with the ordinary legislative procedure (4),

Whereas:

(1) The Commission communication of 29 November 2017 entitled ‘The Future of Food and Farming’ sets out the challenges, objectives and orientations for the future common agricultural policy (CAP) after 2020. Those objectives include making the CAP more result-driven and market-oriented, boosting modernisation and sustainability, including the economic, social, environmental and climate sustainability of the agricultural, forestry and rural areas, and helping reduce the Union legislation-related administrative burden for beneficiaries.

(2) In order to address the global dimension and implications of the CAP, the Commission should ensure coherence with the Union external policies and instruments, in particular in development cooperation and trade. The Union’s commitment to policy coherence for development requires the taking into account of development objectives and principles when designing policies.

(3) Since the CAP needs to sharpen its responses to the challenges and opportunities as they manifest themselves at international, Union, national, regional, local and farm levels, it is necessary to streamline the governance of the CAP and improve its delivery on the Union objectives and to significantly decrease the administrative burden. The CAP should be based on delivery of performance (‘the delivery model’). Therefore, the Union should set the basic policy parameters, such as the objectives of the CAP and its basic requirements, while Member States should bear greater responsibility as to how they meet those objectives and achieve targets. Enhanced subsidiarity makes it possible to better take into account local conditions and needs and the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions, tailoring the support to maximise the contribution to the achievement of Union objectives.

(4) Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union (TFEU) apply to this Regulation. Those rules are laid down in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (5) (the ‘Financial Regulation’) and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes and indirect implementation, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also include a general regime of conditionality for the protection of the Union budget.

(5) Rules on measures linking the effectiveness of Union funds to sound economic governance, on territorial development and on the visibility of support from Union funds laid down in Regulation (EU) 2021/1060 of the European Parliament and of the Council (6) should also apply to support for rural development under this Regulation to ensure coherence with the Union funds concerned in relation to those aspects.

(6) Synergies between the EAFRD and Horizon Europe, established by Regulation (EU) 2021/695 of the European Parliament and of the Council (7), should encourage the EAFRD to make the best use of research and innovation results, in particular those stemming from projects funded by Horizon Europe and the European Innovation Partnership for agricultural productivity and sustainability (EIP), leading to innovations in the farming sector and rural areas.

(7) Given the importance of tackling the dramatic loss of biodiversity, support under this Regulation should contribute to mainstreaming biodiversity action in Union policies and to the achievement of the overall ambition of providing 7,5 % of annual spending under the multiannual financial framework (MFF) to biodiversity objectives in 2024 and 10 % of annual spending under the MFF to biodiversity objectives in 2026 and 2027.

(8) Member States should be given the flexibility to specify certain definitions and conditions in their CAP Strategic Plans. In order to ensure a common level playing field, a certain framework has, however, to be set at Union level constituting the necessary common elements to be included in those definitions and conditions (‘framework definitions’).

(9) In order to enhance the role of agriculture in providing public goods, it is necessary to establish an appropriate framework definition of ‘agricultural activity’. Moreover, in order to ensure that the Union can comply with its international obligations on domestic support as set out in the WTO Agreement on Agriculture, and in particular that the basic income support for sustainability and related types of intervention continue to be notified as ‘Green Box’ support which has no, or at most minimal, trade-distorting effects or effects on production, the framework definition of ‘agricultural activity’ should provide for both the production of agricultural products and the maintenance of the agricultural area, leaving the choice between those two types of activity to farmers. In order to adjust to local conditions, Member States should lay down the actual definition of ‘agricultural activity’ and the relevant conditions in their CAP Strategic Plans.

(10) In order to retain essential Union-wide elements to ensure comparability between Member State decisions, without however limiting Member States in reaching Union objectives, a framework definition of ‘agricultural area’ should be set out. The related framework definitions of ‘arable land’, ‘permanent crops’ and ‘permanent grassland’ should be set out in a broad way so as to allow Member States to further specify definitions according to their local conditions.

(11) The framework definition of ‘arable land’ should be laid down in such a way that it allows Member States to cover different production forms and that requires the inclusion of fallow land areas in order to ensure the decoupled nature of the interventions.

(12) The framework definition of ‘permanent crops’ should include both areas actually used for production and those that are not, as well as nurseries and short rotation coppice to be defined by Member States.

(13) The framework definition of ‘permanent grassland’ should be set in such a way that, in cases where grasses and other herbaceous forage remain predominant, it does not exclude other species that can be grazed. It should also enable Member States to specify further criteria and allow them to include species other than grasses or other herbaceous forage that may produce animal feed, whether used for actual production or not. This could encompass species of which parts of the plant, such as leaves, flowers, stems or fruits, can be grazed directly or when they fall to the ground. Member States should also be able to decide whether to limit the land where grasses and other herbaceous forage are not predominant or absent in grazing areas, including limiting it to land which forms part of established local practices.

(14) The framework definitions of ‘agricultural area’ should ensure that Member States cover agroforestry systems, where trees are grown in agricultural parcels on which agricultural activities are carried out to improve the sustainable use of the land.

(15) In order to ensure legal certainty that support is paid for an agricultural area which is at the farmer’s disposal and where an agricultural activity is exercised, a framework definition of ‘eligible hectare’ with the essential elements should be set out. In particular, Member States should set the conditions to determine whether the land is at the farmer’s disposal. Considering the likelihood of occasional and temporary use of agricultural land for an activity which is not strictly agricultural, and given the potential of certain non-agricultural activities to contribute to the income diversification of agricultural holdings, Member States should set appropriate conditions to include areas also used for non-agricultural activities as eligible hectares.

(16) In view of the high environmental ambition of the CAP, the eligible area should not be reduced as a result of the implementation of certain rules of conditionality and of the schemes for the climate, the environment and animal welfare (‘eco-schemes’) under direct payments. Agricultural areas should not become ineligible for direct payments when cultivated with non-agricultural products by way of paludiculture under either Union or national schemes which contribute to achieving one or more environmental or climate-related objectives of the Union. Furthermore, agricultural areas should remain eligible for direct payments when subject to certain Union requirements relating to the environmental protection, or afforested under rural development measures, including those afforested under the compliant national schemes, or areas under certain set-aside commitments.

(17) Taking into account the need for simplification, Member States should be allowed to decide that landscape features that do not significantly hamper the performance of the agricultural activity on a parcel remain part of the eligible area. When calculating the eligible area of permanent grassland while deducting the areas occupied by ineligible features, Member States should be allowed to apply simplified methodology.

(18) As regards the areas used for the production of hemp, in order to preserve public health and to ensure coherence with other bodies of legislation, the use of hemp seed varieties with tetrahydrocannabinol content below 0,3 % should be included within the definition of ‘eligible hectare’.

(19) With a view to further improving the performance of the CAP, income support should be targeted towards active farmers. To ensure a common approach at Union level, a framework definition of ‘active farmer’ displaying the essential elements should be set out. Member States should determine in their CAP Strategic Plans, on the basis of objective conditions, which farmers are considered to be active farmers. To reduce the administrative burden, Member States should be allowed to grant direct payments to smaller farmers who also contribute to the vitality of rural areas and to establish a negative list of non-agricultural activities compared to which the agricultural activities are typically marginal. The negative list should not be the only way in which the definition is determined but should be used as a complementary tool to help to identify such non-agricultural activities, without prejudice for the persons concerned to prove that they fulfil the criteria of the definition of ‘active farmer’. To ensure a better income, strengthen the socio-economic fabric of rural areas or pursue related objectives, the definition of ‘active farmer’ should not preclude the granting of support to pluri-active or part-time farmers who in addition to farming are also engaged in non-agricultural activities.

(20) In order to ensure consistency between the direct-payment types of intervention and the rural-development types of intervention when addressing the objective of generational renewal, a framework definition of ‘young farmer’ with the essential elements should be set out at Union level.

(21) In order to ensure consistency between the direct-payment types of intervention and the rural-development types of intervention when addressing the objective of facilitating business development in rural areas, a framework definition of ‘new farmer’ with common elements should be set out at Union level.

(22) In order to give substance to the objectives of the CAP as established by Article 39 TFEU, as well as to ensure that the Union adequately addresses its most recent challenges, it is appropriate to provide for a set of general objectives reflecting the orientations given in the communication on ‘The Future of Food and Farming’. A set of specific objectives should be further defined at Union level and applied by the Member States in their CAP Strategic Plans, taking into account the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole. While striking a balance across the dimensions of sustainable development, in line with the impact assessment, those specific objectives should translate the general objectives of the CAP into more concrete priorities and take into account relevant Union legislation, particularly with regard to climate, energy and environment.

(23) A smarter, modernised and more sustainable CAP needs to embrace research and innovation in order to serve the multi-functionality of Union agriculture, forestry and food systems, investing in technological development and digitalisation, as well as improving the uptake and effective deployment of technologies, digital technologies in particular, and the access to, and increased sharing of, impartial, sound, relevant and new knowledge.

(24) The Union needs to foster a modern, competitive, resilient and diversified agricultural sector which reaps the benefits of high-quality production and resource-efficiency and which ensures long-term food security as part of a competitive and productive agri-food sector while safeguarding the family farm model.

(25) In order to support viable farm income and resilience of the agricultural sector across the Union to enhance long-term food security, there is a need to improve the farmers’ position in the value chain, in particular by encouraging forms of cooperation that involve and benefit farmers, as well as by promoting short supply chains and improving market transparency.

(26) The Union needs to improve the response to societal demands on food and health, including high-quality, safe, and nutritious food produced in a sustainable way. In order to advance in that direction, specific sustainable farming practices, such as organic farming, integrated pest management, agro-ecology, agroforestry or precision farming, will need to be promoted. Similarly, actions to promote higher levels of animal welfare and initiatives to combat antimicrobial resistance should also be stimulated.

(27) The delivery model should not lead to a situation in which there are 27 different national agricultural policies, thus endangering the common nature of the CAP and the internal market. It should, however, leave to Member States a certain degree of flexibility within a strong common regulatory framework. This Regulation should therefore set the Union objectives and establish the types of intervention as well as the common Union requirements applicable to Member States, thus ensuring the common nature of the CAP. Member States should be in charge of translating that Union regulatory framework into support arrangements applicable to beneficiaries using an increased level of flexibility. In that context, Member States should act in line with the Charter of Fundamental Rights of the European Union and the general principles of Union law and ensure that the legal framework for the granting of Union support to beneficiaries is based on their CAP Strategic Plans and complies with the principles and requirements set out under this Regulation and Regulation (EU) 2021/2116 of the European Parliament and of the Council (8). They should also implement their CAP Strategic Plans as approved by the Commission.

(28) In order to foster a smart and resilient agricultural sector, direct payments keep on constituting an essential part to guarantee a fair income support to farmers. Likewise, investments into farm restructuring, modernisation, innovation, diversification and uptake of new practices and technologies are necessary to improve farmers’ market reward.

(29) In the context of greater market orientation of the CAP, as outlined by the communication on ‘The Future of Food and Farming’, market exposure, climate change and associated frequency and severity of extreme weather events, as well as sanitary and phytosanitary crises, may lead to risks of price volatility and increasing pressures on incomes, in particular of primary producers. Thus, although farmers are ultimately responsible for designing their on-farm strategies and for improving the resilience of their farms, a robust framework should be set up to ensure appropriate risk management.

(30) Supporting and improving environmental protection and climate action and contributing to the achievement of Union’s environmental and climate-related objectives is a very high priority in the future of Union agriculture and forestry. The CAP should play a role both in reducing negative impacts on the environment and climate, including biodiversity, and in increasing the provision of environmental public goods on all types of farmland and forest land (including high-nature-value areas) and in rural areas as a whole. The architecture of the CAP should therefore reflect greater ambition with respect to those objectives. It should include elements which support or otherwise induce a wide range of action in pursuit of the objectives within agriculture, food production, forestry and rural areas as a whole.

(31) The best combination of types of action for addressing those objectives will vary from one Member State to another. Concurrently with the need to increase efforts on adaptation to climate change, reductions in greenhouse gas emissions and enhanced carbon sequestration are both important in mitigating climate change. Energy production and use supported through the CAP should concern energy which clearly displays the characteristics of sustainability, including as regards greenhouse gases. With regard to the management of natural resources, a lower dependence on chemicals such as artificial fertilisers and pesticides may be particularly helpful including for the protection of biodiversity, where lower dependence on pesticides and action to halt and reverse the decline of pollinator populations is needed in a timely manner in many parts of the Union.

(32) As many rural areas in the Union suffer from structural problems such as a lack of attractive employment opportunities, skill shortages, underinvestment in broadband and connectivity, digital and other infrastructures and essential services, as well as youth drain, it is fundamental to strengthen the socio-economic fabric in those areas, in line with the Cork 2.0 Declaration ‘A Better Life in Rural Areas’, in particular through job creation and generational renewal, by bringing the Commission’s jobs and growth agenda to rural areas, by promoting social inclusion, support for young people, generational renewal and the development of ‘smart villages’ across the European countryside, and by contributing to mitigating depopulation.

(33) Equality between women and men is a core principle of the Union and gender mainstreaming is an important tool in the integration of that principle into to the CAP. There should therefore be a particular focus on promoting the participation of women in the socio-economic development of rural areas, with special attention to farming, supporting women’s key role. Member States should be required to assess the situation of women in farming and address challenges in their CAP Strategic Plans. Gender equality should be an integral part of the preparation, implementation and evaluation of CAP interventions. Member States should also strengthen their capacity in gender mainstreaming and in the collection of data disaggregated by gender.

(34) With a view to stabilising and diversifying the rural economy, the development, establishment and retention of non-agricultural enterprises should be supported. As indicated in the communication on ‘The Future of Food and Farming’, new rural value chains such as renewable energy, the emerging bio-economy, the circular economy, and ecotourism can offer good growth and job potential for rural areas while conserving natural resources. In this context, financial instruments and the use of the EU guarantee under InvestEU, established by Regulation (EU) 2021/523 of the European Parliament and of the Council (9), can play a crucial role for ensuring access to financing and for bolstering the growth capacity of farms and enterprises. There is a potential for employment opportunities in rural areas for legally staying third-country nationals, promoting their social and economic integration especially in the framework of community-led local development strategies.

(35) The CAP should keep ensuring food security, which should be understood as meaning access to sufficient, safe and nutritious food at all times. Moreover, it should help to improve the response of Union agriculture to new societal demands on food and health, including sustainable agricultural production, healthier nutrition, animal welfare and reduction of food waste. The CAP should continue to promote production with specific and valuable characteristics while helping farmers to proactively adjust their production according to market signals and consumers’ demands.

(36) In view of the scope of the reform that is necessary to achieve the objectives pursued and respond to concerns raised, it is appropriate to provide for a new legal framework in one single Regulation that covers the Union support financed by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD) and that replaces the arrangements currently laid down in Regulation (EU) No 1305/2013 of the European Parliament and of the Council (10) and Regulation (EU) No 1307/2013 of the European Parliament and of the Council (11).

(37) This Regulation should lay down the rules that apply to Union support financed by the EAGF and the EAFRD and granted in the form of types of intervention specified in CAP Strategic Plans drawn up by the Member States and approved by the Commission.

(38) In order to ensure that the Union can respect its international obligations on domestic support as set out in the WTO Agreement on Agriculture, certain types of intervention provided for in this Regulation should continue to be notified as ‘Green Box’ support which has no, or at most minimal, trade-distorting effects or effects on production, or to be notified as ‘Blue Box’ support under production-limiting programmes and therefore exempted from reduction commitments. While the provisions of this Regulation for such types of intervention are already in compliance with the ‘Green Box’ requirements set out in Annex 2 to the WTO Agreement on Agriculture or the ‘Blue Box’ requirements set out in its Article 6.5, it should be ensured that the interventions planned by Member States in their CAP Strategic Plans for those types of intervention continue to comply with those requirements. In particular, the crop-specific payment for cotton under this Regulation should continue to be designed to comply with the provisions of the ‘Blue Box’.

(39) It should be ensured that interventions, including coupled income support, comply with the Union’s international commitments. This includes the requirements of the Memorandum of Understanding between the European Economic Community and the United States of America on oil seeds under GATT (12), as applicable subsequent to changes to the Union separate base area for oilseeds following changes to the composition of the Union.

(40) The information on, and assessment of, the performance of the CAP based on the implementation of the CAP Strategic Plans will be taken into account in the regular assessments by the Commission of the Policy Coherence for Sustainable Development, established on the basis of the 2030 Agenda for Sustainable Development.

(41) Building on the previous system of cross-compliance implemented until 2022, the system of new conditionality links full receipt of CAP support to the compliance of farmers and other beneficiaries with basic standards concerning the environment, climate change, public health, plant health and animal welfare. The basic standards encompass in a streamlined form a list of statutory management requirements (SMRs) and standards of good agricultural and environmental conditions of land (GAEC standards). Those basic standards should better take into account the environmental and climate challenges and the new environmental architecture of the CAP, thus delivering a higher level of environmental and climate ambition as set out in the Commission communication on the ‘Future of Food and Farming’ and the MFF for the years 2021 to 2027, established by Council Regulation (EU, Euratom) 2020/2093 (13).

(42) Conditionality aims to contribute to the development of sustainable agriculture through better awareness on the part of beneficiaries of the need to comply with those basic standards. It also aims to make the CAP more compatible with the expectations of society through improving consistency of the CAP with the environment, public health, plant health and animal welfare objectives. Conditionality should form an integral part of the environmental architecture of the CAP, as part of the baseline for more ambitious environmental and climate-related commitments, and should be comprehensively applied across the Union. Member States should ensure that proportionate, effective and dissuasive penalties are applied in accordance with Regulation (EU) 2021/2116 to farmers and other beneficiaries who do not comply with those requirements.

(43) The framework of GAEC standards aims to contribute to the mitigation of, and adaptation to, climate change, tackling water challenges, the protection and quality of soil and the protection and quality of biodiversity. The framework needs to be enhanced to take into account in particular the practices set until the year 2022 under the greening of direct payments, the mitigation of climate change and the need to improve farms’ sustainability and their contribution to biodiversity. It is acknowledged that each GAEC standard contributes to achieving multiple objectives. In order to implement the framework, Member States should set a national standard for each of the standards set at Union level, taking into account the specific characteristics of the area concerned, including soil and climatic conditions, existing farming conditions, farming practices, farm size and farm structures, land use, and the specificities of outermost regions. Member States should be able to set other national standards related to the main objectives of the GAEC standards in order to improve the environmental and climate delivery of the framework of the GAEC standards. Given the existing practices under organic farming system, no further requirement should be imposed on organic farmers as regards crop rotation. In addition, as regards the standards on crop rotation and on minimum share of arable land for biodiversity, Member States should be able to consider certain exceptions to avoid excessive burden on smaller farms or to exclude some farms that already fulfil the objective of the GAEC standards as they are covered to a significant extent by grassland, land lying fallow or leguminous crops. An exception should also be provided for the biodiversity requirement of minimum share of arable land in the case of predominantly forested Member States.

(44) SMRs need to be fully implemented by Member States in order to become operational at farm level and ensure equal treatment of farmers. To ensure the consistency of the rules on conditionality in enhancing the sustainability of the policy, SMRs should encompass the main Union legislation on the environment, public health, plant health and animal welfare, as implemented at national level, which imposes precise obligations on individual farmers and other beneficiaries, including obligations under Council Directive 92/43/EEC (14) and Directive 2009/147/EC of the European Parliament and of the Council (15) or Council Directive 91/676/EEC (16). In order to follow up on the joint statement made by the European Parliament and the Council annexed to Regulation (EU) No 1306/2013 of the European Parliament and of the Council (17), the relevant provisions of Directive 2000/60/EC of the European Parliament and of the Council (18) and Directive 2009/128/EC of the European Parliament and of the Council (19) should be included as SMRs into the scope of conditionality and the list of GAEC standards should be adapted accordingly.

(45) In order to contribute to the development of socially sustainable agriculture through better awareness, on the part of beneficiaries of CAP support, of the employment and social standards, a new mechanism integrating social concerns should be introduced.

(46) Such a mechanism should link full receipt of CAP direct payments as well as payments for environmental, climate-related and other management commitments, payments for natural or other area-specific constraints and payments for area-specific disadvantages resulting from certain mandatory requirements to the compliance of farmers and other beneficiaries with basic standards concerning working and employment conditions for farm workers and occupational safety and health, in particular certain standards under Council Directive 89/391/EEC (20) and Directives 2009/104/EC (21) and (EU) 2019/1152 (22) of the European Parliament and of the Council. By 2025, the Commission should assess the feasibility of including Article 7(1) of Regulation (EU) 492/2011 of the European Parliament and of the Council (23) and should, if appropriate, propose legislation to that effect.

(47) Member States should ensure that proportionate, effective and dissuasive penalties are applied in accordance with Regulation (EU) 2021/2116 to farmers and other beneficiaries who do not comply with those standards. Due to the principle of judicial independence, it is not possible to impose upon the judicial systems specific requirements on how decisions and convictions are made other than what is provided for in the legislation upon which those decisions and convictions are based.

(48) When establishing the social conditionality mechanism, in order to respect the right of Member States to define the fundamental principles of their social and labour systems, due account should be taken of the diverse national frameworks. Therefore, the Member State’s choice of enforcement methods, collective bargaining and the role of social partners, including, where applicable, in the implementation of directives in the social and employment domain, should be considered. National labour market models and the autonomy of the social partners should be respected. This Regulation should not impose any obligations on the social partners or on Member States regarding enforcement or controls in areas which according to the national labour market models are the responsibility of the social partners.

(49) Because of the complexity of setting up systems at national level which respect the autonomy and specificity of national systems, Member States should be allowed to implement social conditionality at a later date but in any event no later than as from 1 January 2025.

(50) Member States should ensure that there are farm advisory services tailored to the various types of production for the purpose of improving the sustainable management and overall performance of agricultural holdings and rural businesses, covering economic, environmental and social dimensions, and of identifying the necessary improvements as regards all measures at farm level provided for in the CAP Strategic Plans, including digitalisation. Farm advisory services should help farmers and other beneficiaries of CAP support to become more aware of the relationship between farm management and land management on the one hand, and certain standards, requirements and information, including environmental and climate ones, on the other hand. The list of the latter includes standards applying to, or necessary for, farmers and other CAP beneficiaries, including cooperatives, and set in the CAP Strategic Plan, as well as those stemming from the legislation on water, on the sustainable use of pesticides, on nutrient management as well as on the initiatives to combat antimicrobial resistance. Advice should also be available on the management of risks and innovation support for preparing and implementing emerging EIP operational group projects, whilst capturing and making use of grassroot innovative ideas. In order to enhance the quality and effectiveness of the advice, Member States should integrate all public and private advisors and advisory networks within the Agricultural Knowledge and Innovation Systems (AKIS), in order to be able to deliver up-to-date technological and scientific information developed by research and innovation.

(51) In order to support both the agronomic and the environmental performance of farms, information on nutrient management, with focus on nitrogen and phosphate which are the nutrients that from an environmental perspective can pose particular challenges and therefore deserve particular attention, should be provided with the help of a dedicated electronic Farm Sustainability Tool made available by the Member States to individual farmers. The Farm Sustainability Tool should provide on-farm decision support. In order to ensure a level playing field between farmers and across the Union, the Commission should be able to provide support to the Member States in the design of the Farm Sustainability Tool.

(52) In order to better inform and advise farmers on their obligations towards their workers with regard to the social dimension of the CAP, the farm advisory services should inform about the requirements regarding the provision, in writing, of the information referred to in Article 4 of Directive (EU) 2019/1152 and on the health and safety standards which are applicable on farms.

(53) In order to ensure a fairer distribution of income support, Member States should be allowed to cap or reduce the amounts of direct payments above a certain ceiling and the product should either be used for decoupled direct payments and in priority for the complementary redistributive income support for sustainability, or be transferred to the EAFRD. In order to avoid negative effects on employment, Member States should be allowed to take into account labour when applying the mechanism.

(54) To avoid the excessive administrative burden caused by managing numerous payments of small amounts and to ensure an effective contribution of the support to achieving the objectives of the CAP to which the direct payments contribute, Member States should set requirements in terms of minimum area or support-related minimum amount for receiving direct payments in their CAP Strategic Plans. When Member States decide to grant animal-related income support to be paid per animal, they should always set a threshold in terms of minimum amount to avoid penalising farmers who are eligible for this support, but whose area is below the threshold. Due to the very specific farming structure in the smaller Aegean islands, Greece should be able to decide whether any minimum threshold should apply in that area.

(55) Considering the importance of farmers’ participation in risk management tools, Member States should be allowed to assign a certain percentage of direct payments to support the farmers’ contributions to such tools.

(56) In order to guarantee a minimum level of agricultural income support for all active farmers, as well as to comply with the objective of ensuring a fair standard of living for the agricultural community laid down in Article 39(1), point (b), TFEU, an annual area-based decoupled payment should be established as the type of intervention ‘basic income support for sustainability’. In order to better target that support, it should be possible to differentiate the payment amounts by groups of territories, based on socio-economic or agronomic conditions, or to reduce them taking into account other interventions. With a view to avoiding disruptive effects for farmers’ income, Member States should be allowed to implement the basic income support for sustainability on the basis of payment entitlements. In that case, the value of payment entitlements before any further convergence should be proportional to their value as established under the basic payment schemes pursuant to Regulation (EU) No 1307/2013, taking into account the payments for agricultural practices beneficial for the climate and the environment. Member States should also achieve further convergence in order to continue to move progressively away from historical values.

(57) When providing decoupled direct payments based on the system of payment entitlements, Member States should continue to manage a national reserve or reserves per group of territories. Such reserves should be used, as a matter of priority, for young farmers and new farmers. Rules on the use and transfers of payment entitlements are also necessary in order to guarantee a smooth functioning of the system.

(58) Small farms remain a cornerstone of Union agriculture as they play a vital role in supporting rural employment and contribute to territorial development. In order to promote a more balanced distribution of support and to reduce administrative burden for beneficiaries of small amounts, Member States should have the option to design a specific intervention for small farmers replacing the other direct payments interventions. In order to ensure better targeting of that support, a differentiation of the payment should be possible. To enable small farmers to choose the system that best suits their needs, participation of farmers in the intervention should be optional.

(59) In view of the acknowledged need to promote a more balanced distribution of support to small and medium-sized holdings in a visible and measurable way, Member States should implement complementary redistributive income support for sustainability and dedicate at least 10 % of the direct payments envelope to such support. To allow for a better targeting of this complementary support and in view of the differences in farm structures across the Union, Member States should have the possibility to provide different amounts of complementary support for different ranges of hectares as well as to differentiate the support by regional level or by the same groups of territories as set in their CAP Strategic Plans for the basic income support for sustainability.

(60) It is within the responsibility of Member States to provide for a targeted distribution of direct payments and to reinforce income support for those who need it most. Various instruments available for Member States can effectively contribute to the achievement of that objective, including capping and degressivity, as well as interventions such as the complementary redistributive income support for sustainability and the payment for small farmers. An overview of Member States’ efforts in that respect should be laid down in their CAP Strategic Plans. Based on the needs in terms of fairer distribution of direct payments, including needs based on specific farm structure, Member States should have the possibility to opt either for the application of a mandatory redistributive payment and the corresponding minimum percentage, or for other appropriate measures, including the redistributive payment at a lower percentage.

(61) The creation and development of new economic activity in the agricultural sector by young farmers is financially challenging and constitutes an element that should be considered when designing the intervention strategy in the allocation and targeting of direct payments. That development is essential for the competitiveness of the agricultural sector in the Union and, for that reason, Member States should be allowed to establish complementary income support for young farmers. That type of intervention should provide young farmers with additional income support after the initial setting-up. Based on their assessment of needs, Member States should be able to decide on a calculation method for the payment, either per hectare or as a lump sum, and possibly limited to a maximum number of hectares. Since it should only cover the initial period of the life of the business, such payment should only be granted for a maximum duration after the submission of aid application and shortly after the initial setting-up. Where the duration of the payment goes beyond the year 2027, Member States should ensure that no legal expectations of beneficiaries are created for the period after that year.

(62) The CAP should ensure that Member States increase the environmental delivery by respecting local needs and farmers’ actual circumstances. Member States should, under direct payments in the CAP Strategic Plan, set up eco-schemes which are voluntary for farmers, and which should be fully coordinated with the other relevant interventions. They should be determined by the Member States as a payment granted either for incentivising and remunerating the provision of public goods by agricultural practices beneficial to the environment and climate, or as compensation for carrying out those practices. In both cases, they should aim to enhance the environmental and climate-related performance of the CAP and should consequently be conceived to go beyond the mandatory requirements already prescribed by the system of conditionality.

(63) To ensure efficiency, eco-schemes should as a general rule cover at least two areas of action for the climate, the environment, animal welfare and combatting antimicrobial resistance. For the same purpose, while compensation should be based on costs incurred, income loss and transaction costs stemming from the agricultural practices committed, taking into account the targets set under eco-schemes, the payments additional to basic income support need to reflect the level of ambition of the practices committed. Member States should have the possibility to set up eco-schemes for agricultural practices carried out by farmers on agricultural areas, in particular agricultural activities but also certain practices going beyond agricultural activities. Those practices may include the enhanced management of permanent pastures and landscape features, the rewetting of peatlands, paludiculture, and organic farming.

(64) Organic farming, regulated by Regulation (EU) 2018/848 of the European Parliament and of the Council (24), is a farming system that has the potential to substantially contribute to the achievement of multiple specific objectives of the CAP, and in particular to its specific environmental and climate-related objectives. In view of the positive effects of organic farming on the environment and the climate, Member States should in particular be able to consider organic farming when setting up eco-schemes for agricultural practices and assess in that context the level of support needed for agricultural land managed under the organic farming scheme.

(65) It should be possible for Member States to establish eco-schemes as ‘entry-level schemes’ as a condition for farmers for taking up more ambitious environmental, climate-related and animal welfare commitments under rural development. To ensure simplification, Member States should be able to establish enhanced eco-schemes. Member States should also be able to establish eco-schemes for supporting practices on animal welfare and combatting antimicrobial resistance.

(66) In order to ensure a level playing field between farmers, a maximum allocation should be set for the coupled income support under direct payments that Member States are allowed to grant in order to improve competitiveness, sustainability, or quality in certain sectors and productions that are particularly important for social, economic or environmental reasons and encounter certain difficulties. When designing those interventions, Member States should take into account their potential impact on the internal market.

(67) As it is widely recognised that the production of protein crops is encountering serious difficulties in the Union, there is no need to demonstrate such difficulties in the case of coupled income support interventions that target those crops. Member States should be allowed to use an additional part of their financial ceiling available for direct payments to grant coupled income support specifically for the support of protein crop production in order to reduce the Union’s deficit in this regard. Furthermore, Member States should be able to support mixtures of legumes and grasses under coupled income support as long as legumes remain predominant in the mixture.

(68) In accordance with the objectives set out in Protocol No 4 on cotton attached to the 1979 Act of Accession, it is necessary to continue a ‘crop-specific payment’ per eligible hectare linked with the cultivation of cotton, as well as the support for interbranch organisations in the cotton producing regions. However, since the budgetary allocation for cotton is fixed and cannot be used for other purposes and because the implementation of the crop-specific payment has a legal basis in the Treaties, the payment for cotton should not be part of the interventions approved in the CAP Strategic Plan and should not be subject to performance clearance and performance review. Specific rules as well as derogations from this Regulation and Regulation (EU) 2021/2116 should thus be laid down accordingly. For the sake of consistency, it is appropriate to do so in this Regulation.

(69) Types of intervention in certain sectors are needed to contribute to achieving the CAP objectives and reinforce synergies with other CAP instruments. In line with the delivery model, minimum requirements concerning the contents and objectives for such types of intervention in certain sectors should be established at Union level in order to ensure a level playing field in the internal market and avoid conditions of unequal and unfair competition. Member States should justify their inclusion in their CAP Strategic Plans and ensure consistency with other interventions at sector level. The broad types of intervention to be established at Union level should be laid down for the fruit and vegetables, wine, apiculture products, olive oil and table olives and hops sectors, as well as for other sectors among the sectors referred to in Article 1(2) of Regulation (EU) No 1308/2013 of the European Parliament and of the Council (25) and sectors covering products to be listed in an Annex to this Regulation, for which the establishment of specific interventions is deemed to have beneficial effects on the achievement of some or all of the general and specific objectives of the CAP pursued by this Regulation. In particular, given the Union’s deficit on plant protein and the environmental benefits their production brings, legumes should be included among the products listed in that Annex while respecting the EU WTO schedule on oilseeds, and those benefits should be promoted to farmers through, inter alia, the farm advisory services.

(70) National financial envelopes or other limitations in the form of caps are needed in order to maintain specificity of intervention and facilitate programming interventions for apiculture products, wine, olive oil and table olives, hops and other sectors to be defined in this Regulation. However, in order not to undermine the achievement of the objectives of the types of intervention in the fruit and vegetables sector, no financial limitations should apply in line with the current approach. Where Member States would introduce support for types of intervention in other sectors in their CAP Strategic Plans, the corresponding financial allocation should be deducted from the allocations for direct payments of the Member State concerned in order to remain financially neutral. Where a Member State would choose not to implement the specific interventions for the hops sector or the olive oil and table olives sector, the related allocations for that Member State should be made available as additional allocations for types of intervention in the form of direct payments.

(71) For interventions for rural development, principles are set out at Union level, in particular with regard to the basic requirements for the Member States to apply selection criteria. However, Member States should have ample discretion to lay down specific conditions according to their needs. Types of intervention for rural development include payments for environmental, climate-related and other management commitments that Member States should support throughout their territories, in accordance with their specific national, regional or local needs. Member States should grant payments to farmers and other land managers who undertake, on a voluntary basis, management commitments that contribute to climate change mitigation and adaptation and to the protection and improvement of the environment including water quality and quantity, air quality, soil, biodiversity and ecosystem services including voluntary commitments in Natura 2000 and support for genetic diversity. Support under payments for management commitments may also be granted in the form of locally-led, integrated or cooperative approaches and result-based interventions.

(72) Support for management commitments may in particular include organic farming premiums for the maintenance of, and the conversion to, organic land. Member States should, on the basis of their in-depth analysis of the organic sector and taking into account the objectives they intend to achieve in relation to organic production, consider organic farming for management commitments in accordance with their specific territorial needs, allocate support to increase the share of agricultural land managed under the organic farming scheme and ensure that allocated budgets match the expected growth in organic production. Support for management commitments could also include payments for other types of intervention supporting environmentally friendly production systems such as agro-ecology, conservation agriculture and integrated production; forest environmental and climate services and forest conservation; premiums for forests and establishment of agroforestry systems; animal welfare; conservation, sustainable use and development of genetic resources, in particular through traditional breeding methods. Member States should be allowed to develop other schemes under that type of intervention on the basis of their needs. That type of payment should cover additional costs and income foregone only resulting from commitments going beyond the baseline of mandatory standards and requirements established in Union and national law, as well as conditionality, as laid down in the CAP Strategic Plan. It should be possible for commitments related to that type of intervention to be undertaken for a pre-established annual or pluri-annual period and go beyond seven years where duly justified.

(73) Forestry interventions should contribute to the implementation of Commission communication of 16 July 2021 entitled ‘New EU Forest Strategy for 2030’ and, where appropriate, to widening the use of agroforestry systems. They should be based on Member States’ national or subnational forest programmes or equivalent instruments, which should build on the commitments stemming from Regulation (EU) 2018/841 of the European Parliament and of the Council (26) and those made by the Ministerial Conferences on the Protection of Forests in Europe. Interventions should be based on sustainable forest management plans or equivalent instruments that duly consider effective carbon storage and sequestration from the atmosphere while enhancing biodiversity protection and may comprise forest area development and sustainable management of forests, including the afforestation of land, fire prevention and the creation and regeneration of agroforestry systems; the protection, restoration and improvement of forest resources, taking into account adaptation needs; investments to guarantee and enhance forest conservation and resilience, and the provision of forest ecosystem and climate services; and measures and investments in support of the renewable energy and bio-economy.

(74) In order to ensure a fair income and a resilient agricultural sector across the Union territory, Member States should be allowed to grant support to farmers in areas facing natural and other area-specific constraints, including mountain and island areas. As regards payments for areas facing natural and other specific constraints, the designation made pursuant to Article 32 of Regulation (EU) No 1305/2013 should continue to apply.

(75) For the CAP to deliver enhanced Union added value on the environment and to reinforce its synergies with the financing of investments in nature and biodiversity, it is necessary to keep a separate measure aiming at compensating beneficiaries for disadvantages related to the implementation of Natura 2000, established by Directive 92/43/EEC, and of Directive 2000/60/EC. Support should therefore continue to be granted to farmers and forest holders to help address specific disadvantages resulting from the implementation of Directives 92/43/EEC and 2009/147/EC and in order to contribute to the effective management of Natura 2000 sites. Support should also be made available to farmers to help address disadvantages in river basin areas resulting from the implementation of Directive 2000/60/EC. Support should be linked to specific requirements described in the CAP Strategic Plans that go beyond relevant mandatory standards and requirements. Member States should also ensure that payments to farmers do not lead to double funding with eco-schemes while allowing enough flexibility in CAP Strategic Plans to facilitate complementarity between different interventions. Furthermore, the specific needs of Natura 2000 areas should be taken into account by Member States in the overall design of their CAP Strategic Plans.

(76) The objectives of the CAP should also be pursued through support for investments, productive as well as non-productive, on-farm as well as off-farm. Such investments may concern, inter alia, infrastructures related to the development, modernisation or adaptation to climate change of agriculture and forestry, including access to farm and forest land, land consolidation and improvement, agro-forestry practices and the supply and saving of energy and water. It may also cover investments in the restoration of agricultural or forestry potential following natural disasters, adverse climatic events or catastrophic events, including fires, storms, floods, pests and diseases. In order to better ensure the consistency of the CAP Strategic Plans with Union objectives, as well as a level playing field between Member States, a negative list of investment topics should be included in this Regulation. Member States should make the best use of the available funds for investments by aligning support for investments with the relevant Union rules in the areas of environment and animal welfare.

(77) Young farmers in particular need to modernise their farms in order to make them viable in the long term. However, they often experience low turnover during the first years of business. It is therefore important that Member States facilitate and give priority to investment interventions carried out by young farmers. To that end, Member States should be allowed to set in their CAP Strategic Plans higher support rates and other preferential conditions for investments on young farmers’ holdings. Member States should also be allowed to give increased investment support to small farms.

(78) When providing support for investments, Member States should take particularly into account the cross-cutting objective of modernising agriculture and rural areas by fostering and sharing of knowledge, innovation and digitalisation in agriculture and rural areas, and encouraging their uptake. Support for investments in installation of digital technologies in agriculture, forestry and rural areas, such as investments in precision farming, smart villages, rural businesses and information and communications technology infrastructures should be included in the description in the CAP Strategic Plans of the contribution of those plans to the cross-cutting objective.

(79) Taking into consideration the Union’s objective of good status for water bodies and the need for investments to be in line with that objective, it is important to set rules as regards the support for the modernisation and the development of irrigation infrastructures so that agricultural water use does not put that objective at risk.

(80) In the light of the need to fill the investment gap in the Union agricultural sector and improve access to finance for priority groups, particularly young farmers and new farmers with higher risk profiles, use of the EU guarantee under InvestEU and combination of grants and financial instruments should be encouraged. Since the use of financial instruments across Member States varies considerably as a result of differences in terms of access to finance, banking sector development, presence of risk capital, familiarity of public administrations and potential range of beneficiaries, Member States should establish in their CAP Strategic Plans appropriate targets, beneficiaries and preferential conditions, and other possible eligibility rules.

(81) Young farmers, new farmers and other new entrants still face significant barriers regarding access to land, high prices or access to credit. Their businesses are more threatened by price volatility for both inputs and produce and their needs in terms of training in entrepreneurial, risk prevention and risk management skills are high. It is therefore essential to continue the support for the setting-up of new businesses and new farms. Member States should also be allowed to set in their CAP Strategic Plans preferential conditions for financial instruments for young farmers, new farmers and other new entrants. The maximum amount of aid for the setting-up of young farmers and rural business start-up should be increased up to EUR 100 000, which can be accessed also through or in combination with financial instrument form of support.

(82) In the light of the need to ensure appropriate risk management tools, support to help farmers manage their production and income risks should be maintained and widened under the EAFRD. Specifically, insurance premiums and mutual funds, including an income stabilisation tool, should remain possible, but support should also be made available for other risk management tools. Furthermore, all types of risk management tool should have the scope to cover production or income risks, as well as to be targetable to agricultural sectors or territorial areas where needed. Member States should be allowed to make use of procedural simplifications, such as relying on indexes to calculate the production and income of the farmer, while ensuring appropriate responsiveness of the tools to the farmers’ individual performance and avoiding overcompensation of losses.

(83) Support should enable the establishment and implementation of cooperation between at least two entities with a view to achieving the objectives of the CAP. It should be possible for such support to entail all aspects of such cooperation, such as the setting-up of quality schemes and information and promotion activities for quality schemes; collective environmental and climate action; the promotion of short supply chain and local markets; pilot projects; operational group projects within the EIP local development projects, smart villages, buyers’ clubs and machinery rings; farm partnerships; forest management plans; networks and clusters; social farming; community supported agriculture; actions within the scope of LEADER; and the setting-up of producer groups and producer organisations, as well as other forms of cooperation deemed necessary to achieve the specific objectives of the CAP.

(84) It is important to support preparation of certain kind of cooperation, in particular for EIP operational groups, LEADER groups and smart-village strategies.

(85) The communication on ‘The Future of Food and Farming’ refers to the exchange of knowledge and focus on innovation as a cross-cutting objective for the new CAP. The CAP should continue to support the interactive innovation model, which enhances the collaboration between actors to make best use of complementary knowledge with a view to spreading solutions ready for practice. Farm advisory services should be strengthened within the AKIS. The CAP Strategic Plan should provide information on how advisors, researchers and the national CAP network will work together. Each Member State or region, as appropriate, in order to strengthen its AKIS and in line with its AKIS strategic approach should be able to fund a number of actions aimed at knowledge exchange and innovation, as well as facilitate the development by farmers of farm-level strategies to increase the resilience of their holdings, using the types of intervention developed in this Regulation. In addition, each Member State should establish a strategy for the development of digital technologies and for the use of those technologies to demonstrate how digitalisation in agriculture and rural areas will be boosted.

(86) The EAGF should continue financing types of intervention in the form of direct payments and types of intervention in certain sectors, whereas the EAFRD should continue financing types of intervention for rural development. The rules for the financial management of the CAP should be laid down separately for the two funds and for the activities supported by each of them, taking into account that the new delivery model gives more flexibility and subsidiarity for Member States to reach their objectives. Types of intervention under this Regulation should cover the period from 1 January 2023 to 31 December 2027.

(87) Support for direct payments under the CAP Strategic Plans should be granted within national allocations to be fixed by this Regulation. Those national allocations should reflect a continuation of the changes whereby the allocations to Member States with the lowest support level per hectare are gradually increased to close 50 % of the gap towards 90 % of the Union average. In order to take into account the reduction of payments’ mechanism and the use of its product in the Member State, the total indicative financial allocations per year in the CAP Strategic Plan of a Member State should be allowed to exceed the national allocation.

(88) In order to facilitate the management of EAFRD funds, a single contribution rate for support from the EAFRD should be set in relation to public expenditure in the Member States. In order to take account of their particular importance or nature, specific contribution rates should be set in relation to certain types of operation. In order to mitigate the specific constraints resulting from their level of development, their remoteness or their insularity, an appropriate EAFRD contribution rate should be set for less developed regions, for the outermost regions, and the smaller Aegean islands, and for transition regions.

(89) Objective criteria should be established for categorising regions and areas at Union level for support from the EAFRD. To that end, the identification of the regions and areas at Union level should be based on the common system of classification of the regions established by Regulation (EC) No 1059/2003 of the European Parliament and the Council (27). The latest classifications and data should be used to ensure adequate support, in particular for addressing regions that are lagging behind and interregional disparities within a Member State.

(90) The EAFRD should not provide support for investments that would harm the environment. Hence, it is necessary to provide in this Regulation a number of exclusion rules. In particular, the EAFRD should not finance investments in irrigation which do not contribute to the achievement, or the preservation, of good status of the associated water body or bodies, and should not finance investments in afforestation which are not consistent with environmental and climate-related objectives in line with sustainable forest management principles.

(91) For the purpose of ensuring adequate financing for certain priorities, rules on minimum and maximum financial allocations for these priorities should be set. Member States should reserve at least an amount corresponding to 3 % of their annual direct payments envelope before any transfer for interventions targeting generational renewal. Such interventions may include enhanced income support and setting-up support. Considering the importance of investment support for young farmers to make their farms viable in the long term and reinforce the attractiveness of the sector, a share of the expenditure for the investment interventions with higher support rate for young farmers should also count towards the minimum amount to be reserved for contributing to achieving the specific objective to attract and sustain young farmers and new farmers and facilitate sustainable business development in rural areas.

(92) With a view to ensuring that sufficient financing is made available under the CAP to deliver on the environmental, climate-related and animal welfare objectives in line with the Union’s priorities, a certain share of both EAFRD support, including investments, and direct payments should be reserved for those purposes. Given that the schemes for the climate, the environment and animal welfare are introduced for the first time under direct payments, certain flexibilities in terms of planning and implementation should be granted, in particular in the first two years, to allow Member States and farmers to gain experience and ensure a smooth and successful implementation, taking also the level of the environmental and climate-related ambitions under EAFRD into account. With a view to respecting the overall environmental and climate-related ambition, such flexibility should be framed and subject to compensation within certain limits.

(93) The LEADER approach for local development has proven its effectiveness in promoting the development of rural areas by fully taking into account the multi-sectoral needs for endogenous rural development through its bottom-up approach. LEADER should therefore be continued in the future and its application should remain compulsory with a minimum allocation under the EAFRD.

(94) Reflecting the importance of tackling climate change in line with the Union’s commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, the CAP should contribute to mainstreaming climate action in the Union’s policies and to the achievement of an overall target of 30 % of the Union’s budget expenditures supporting climate objectives. Actions under the CAP are expected to contribute 40 % of the overall financial envelope of the CAP to the achievement of climate-related objectives. Relevant actions should be identified during the CAP Strategic Plans’ preparation and implementation, and reassessed in the context of the relevant evaluations and review processes.

(95) Where unit amounts are not based on actual costs or income foregone, Member States should set the appropriate level of support based on their assessment of needs. The appropriate unit amount might be a range of appropriate unit amounts rather than one single uniform or average unit amount. Therefore, Member States should also be allowed to lay down, in their CAP Strategic Plans, a justified maximum or minimum unit amount for certain interventions without prejudice to the provisions relating to the level of payments for the relevant interventions.

(96) The transfer of responsibility to Member States for assessing needs and achieving targets goes hand in hand with an increased flexibility to set up the combination of types of intervention in the form of direct payments, types of intervention in certain sectors and types of intervention for rural development. This should be supported by some flexibility to adjust the relevant national allocations of funds. When Member States estimate that the pre-allocated envelope is too low to have room for all intended measures, a certain degree of flexibility is therefore justified, while avoiding considerable fluctuations in the level of annual direct income support versus the amounts available for multi-annual interventions under the EAFRD.

(97) To enhance the Union added value and to preserve a functioning agricultural internal market, as well as to pursue the general and specific objectives of the CAP, Member States should not take decisions pursuant to this Regulation in isolation but in the framework of a structured process that should materialise in a CAP Strategic Plan. Union top-down rules should lay down the specific Union-wide objectives of the CAP, the main types of intervention, the performance framework and the governance structure. Such a distribution of tasks is aimed at ensuring full correspondence between financial resources invested and results achieved.

(98) In order to ensure a clear strategic nature of these CAP Strategic Plans and to facilitate the links with other Union policies, and particularly with established long-term national targets deriving from Union legislation or international agreements such as those related to climate change, forests, biodiversity, and water, it is appropriate that there should be one single CAP Strategic Plan per Member State, taking into account its constitutional and institutional provisions. The CAP Strategic Plan may, where appropriate, include regionalised interventions.

(99) In the process of development of their CAP Strategic Plans, Member States should analyse their specific situation and needs, set targets linked to the achievement of the objectives of the CAP and design the interventions which will allow those targets to be reached, while being adapted to the national and specific regional contexts, including those of the outermost regions. Such process should promote more subsidiarity within a common Union framework, while compliance with the general principles of Union law and the objectives of the CAP should be ensured. It is therefore appropriate to set rules on the structure and content of the CAP Strategic Plans.

(100) In order to ensure that the setting of targets by Member States and that the design of interventions is appropriate and maximises the contribution to achieving the objectives of the CAP, it is necessary to base the strategy of the CAP Strategic Plans on a prior analysis of the local contexts and an assessment of needs in relation to the objectives of the CAP. It is also important to ensure that the CAP Strategic Plans can reflect changes in Member States’ conditions, structures (both internal and external) and market situations adequately and that they can, therefore, be adjusted over time to reflect those changes.

(101) The CAP Strategic Plans should aim to ensure enhanced coherence across the multiple tools of the CAP, since they should cover types of intervention in the form of direct payments, types of intervention in certain sectors and types of intervention for rural development. They should also ensure and demonstrate the alignment and appropriateness of the choices made by Member States to the Union priorities and objectives. In that perspective, CAP Strategic Plans should include an overview and explanation of the tools ensuring a fairer distribution and more effective and efficient targeting of income support. It is therefore appropriate that they contain a result-oriented intervention strategy structured around the specific objectives of the CAP, including quantified targets in relation to those objectives. In order to allow their monitoring on an annual basis, it is appropriate that those targets are based on result indicators.

(102) The intervention strategy should also highlight complementarity both between CAP tools and with the other Union policies. In particular, each CAP Strategic Plan should take account of the relevant environmental and climate legislation, and national plans emanating from that legislation should be described as part of the analysis of the current situation (‘SWOT analysis’). It is appropriate to list the legislative acts which should specifically be referred to in the CAP Strategic Plan.

(103) Given that flexibility should be accorded to Member States as regards the choice of delegating part of the design and implementation of their CAP Strategic Plans at regional level on the basis of a national framework, in order to facilitate co-ordination among the regions in addressing nation-wide challenges, it is appropriate that the CAP Strategic Plans provide a description of the interplay between national and regional interventions.

(104) Since the CAP Strategic Plans should allow the Commission to assume its responsibility for the management of the Union budget and provide Member States with legal certainty on certain elements of the CAP Strategic Plan, it is appropriate that the CAP Strategic Plans contain a specific description of the individual interventions, including the eligibility conditions, the budgetary allocations, the planned outputs and the unit costs. A financial plan is necessary to provide an overview on all budgetary aspects and for each intervention, together with a target plan.

(105) In order to ensure the immediate start and efficient implementation of the CAP Strategic Plans, support from the EAGF and the EAFRD should be based on the existence of sound administrative framework conditions. Each CAP Strategic Plan should therefore include the identification of all governance and coordination structures of the CAP Strategic Plan, including the control systems and penalties, and the monitoring and reporting structure.

(106) Considering the importance of the specific objective of modernising agriculture and rural areas, and in view of its cross-cutting nature, it is appropriate that Member States include in their CAP Strategic Plans a dedicated description of the contribution that those CAP Strategic Plans will make to achieving that objective, including their contribution to the digital transition.

(107) In view of the concerns related to administrative burden under shared management, simplification should also be subject to specific attention in the CAP Strategic Plan.

(108) Given that it is not appropriate for the Commission to approve information which can be considered to be background or historical information, or which is under the responsibility of the Member States, certain information should be provided as Annexes to the CAP Strategic Plan.

(109) Pursuant to paragraphs 22 and 23 of the Inter institutional Agreement of 13 April 2016 on Better Law-Making (28), Union funds need to be evaluated on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burdens, in particular on Member States. Those requirements, where appropriate, can include measurable indicators, as a basis for evaluating the effects of the funds on the ground.

(110) The approval of the CAP Strategic Plan by the Commission is a crucial step in order to ensure that the policy is implemented in accordance with the common objectives. In accordance with the principle of subsidiarity, the Commission should provide the Member States with appropriate guidance in presenting coherent and ambitious intervention logics.

(111) It is necessary to provide for the possibility for programming and revising CAP Strategic Plans, in accordance with the conditions laid down in this Regulation.

(112) A national managing authority should be responsible for the management and implementation of each CAP Strategic Plan and should be the primary contact point for the Commission. However, where elements relating to rural development policy are dealt with on a regional basis, Member States should be able to establish regional managing authorities. The managing authorities should be able to delegate part of their duties while retaining responsibility for the efficiency and correctness of management and ensuring coherence and consistency of the CAP Strategic Plan and coordination between the national managing authority and the regional managing authorities. Member States should ensure that, in the management and implementation of their CAP Strategic Plans, the financial interests of the Union are protected in accordance with the Financial Regulation and Regulation (EU) 2021/2116.

(113) The responsibility for monitoring the CAP Strategic Plan should be shared between the national managing authority and a national monitoring committee set up for that purpose. The national monitoring committee should be responsible for the monitoring of the effectiveness of the implementation of the CAP Strategic Plan. To that end, its responsibilities should be specified. Where the CAP Strategic Plan contains elements that are established by regions, Member States and the regions concerned should be able to establish and compose regional monitoring committees. In that event, the rules on coordination with the national monitoring committee should be clarified.

(114) The EAFRD should support through technical assistance, at the initiative of the Commission, actions relating to the fulfilment of the tasks referred to in Article 7 of Regulation (EU) 2021/2116. Technical assistance may also be provided, at the initiative of Member States, for the purpose of the fulfilment of the tasks necessary for the effective administration and implementation of support in relation to the CAP Strategic Plan. An increase in the technical assistance at the initiative of Member States is only available for Member States whose EAFRD allocation is not higher than EUR 1,1 billion. The EAFRD support for technical assistance should take into account the increase in administrative capacity building as regards the new governance and control systems in the Member States.

(115) In a context where Member States will have much more flexibility and subsidiarity in the design of interventions to reach common objectives, networks are a key tool to drive and steer policy and to promote stakeholder engagement, knowledge sharing and capacity building for Member States and other actors. The scope of networking activities will be extended from rural development to encompass both pillars of the CAP. A single Union-level CAP network should ensure better coordination between networking activities at the Union and at the national and regional levels. The European and national CAP networks should replace the current European Network for Rural Development and the EIP-AGRI Network at Union level and the national rural networks, respectively. The European CAP network should contribute to the activities of the national CAP networks to the extent possible. The networks should provide a platform for promoting increased exchange of knowledge in order to improve the implementation of the CAP Strategic Plans and capture the results and added value of the policy at Union level, including the Horizon Europe policy and its multi-actor projects. In the same perspective of improvement of the exchange of knowledge and innovation, the EIP assisted by the European and national CAP networks should support the implementation of the interactive innovation model in accordance with the methodology outlined in this Regulation.

(116) Each CAP Strategic Plan should be subject to regular monitoring of the implementation and of progress towards the established targets. Such a performance, monitoring and evaluation framework of the CAP should be set up with the purpose of demonstrating the progress and assessing the impact and efficiency of policy implementation.

(117) The result orientation triggered by the delivery model requires a strong performance framework, particularly since CAP Strategic Plans would contribute to the achievement of broad general objectives for other policies under shared management. A performance-based policy implies annual and multi-annual assessment on the basis of selected outputs, result and impact indicators, as defined in the performance, monitoring and evaluation framework. To that end, a limited and targeted set of indicators should be selected in a way which reflects as closely as possible whether the supported intervention contributes to achieving the envisaged objectives. It should be possible for the indicators relating to the specific environmental and climate-related objectives to cover interventions which contribute to fulfilling the commitments emanating from the relevant Union legislative acts.

(118) As part of the performance, monitoring and evaluation framework, Member States should monitor and report annually to the Commission on the progress made. The information provided by the Member States is the basis on which the Commission should report on the progress towards the achievement of specific objectives over the whole CAP Strategic Plan period, using for that purpose a core set of indicators.

(119) Mechanisms should be put in place to take action to protect the Union’s financial interests in case the CAP Strategic Plan implementation deviates significantly from the targets set. It should therefore be possible for the Commission to ask Member States to submit action plans in the case of significant and non-justified underperformance. This could lead to suspensions and, ultimately, reductions of the Union funds if the planned results are not achieved.

(120) In accordance with the principle of shared management, Member States, where relevant ensuring the involvement of the regions in the design of the evaluation plan and in the monitoring and evaluation of the regional interventions of the CAP Strategic Plan, should be responsible for the evaluation of their CAP Strategic Plans, whereas the Commission should be responsible for the syntheses at Union level of the Member States’ ex-ante evaluations, and for carrying out the Union-level interim and ex-post evaluations.

(121) In order to ensure a comprehensive and meaningful evaluation of the CAP at Union level, the Commission should rely on context and impact indicators. Those indicators should be primarily based on established data sources. The Commission and the Member States should cooperate to ensure and further improve the robustness of the data needed for the context and impact indicators.

(122) When assessing the proposed CAP Strategic Plans, the Commission should assess the consistency and contribution of the proposed CAP Strategic Plans to the Union’s environmental and climate legislation and commitments and, in particular, to the Union targets for 2030 set out in the Commission communication of 20 May 2020 entitled ‘A Farm to Fork Strategy for a fair, healthy and environmentally-friendly food system’ (‘Farm to Fork Strategy’) and the Commission communication of 20 May 2020 entitled ‘EU Biodiversity Strategy for 2030: Bringing nature back into our lives’ (‘EU Biodiversity Strategy’).

(123) Member States should be required to show, through their CAP Strategic Plans, a greater overall ambition in comparison with the past in respect of the specific environmental and climate-related objectives of the CAP. Such ambition should be considered to consist of a range of elements related to, inter alia, impact indicators, targets set against result indicators, design of interventions, intended implementation of the system of conditionality, and financial planning. Member States should be required to explain in their CAP Strategic Plans how they are displaying the greater overall ambition required, with reference to the various relevant elements. That explanation should include national contributions to achieving the Union’s targets for 2030 set out in the Farm to Fork Strategy and the EU Biodiversity Strategy.

(124) The Commission should draw up a summary report on Member States’ CAP Strategic Plans to assess the joint effort and collective ambition of Member States to address the specific objectives of the CAP at the beginning of the implementation period, taking into account the Union’s targets for 2030 set out in the Farm to Fork Strategy and the EU Biodiversity Strategy.

(125) The Commission should submit a report to the European Parliament and the Council in order to assess the operation of the new delivery model by the Member States and combined contribution of the interventions set out in Member States’ CAP Strategic Plans’ to achieving the environmental and climate-related commitments of the Union, in particular those emerging from the European Green Deal.

(126) Articles 107, 108 and 109 TFEU should apply to the support for the types of intervention under this Regulation. Nevertheless, given the specific characteristics of the agricultural sector, those TFEU provisions should not apply to types of intervention in the form of direct payments and types of intervention for rural development concerning operations falling within the scope of Article 42 TFEU that are carried out under and in conformity with this Regulation, or to payments made by Member States intended to provide additional national financing for types of intervention for rural development for which Union support is granted and which fall within the scope of Article 42 TFEU.

(127) In order to avoid a sudden and substantial decrease in support in certain sectors in Member States having granted transitional national aid in the period 2015-2022, those Member States should be allowed to continue to grant such aid under certain conditions and limitations. Taking into account the transitional nature of that aid, it is appropriate to continue its phasing out by gradually reducing, on an annual basis, the sector-specific financial envelopes for that aid.

(128) Personal data collected for the purposes of the application of any provision enshrined in this Regulation should be processed in a way that is compatible with those purposes. They should also be made anonymous when processed for monitoring or evaluation purposes, and be protected in accordance with Union law concerning the protection of individuals with regard to the processing of personal data and on the free movement of such data, in particular Regulation (EU) 2016/679 of the European Parliament and of the Council (29) and Regulation (EU) 2018/1725 of the European Parliament and of the Council (30). Data subjects should be informed of such processing and of their data protection rights.

(129) Notifications are needed from Member States for the purpose of applying this Regulation, and for the purpose of monitoring, analysing and managing financial entitlements.

(130) In order to supplement or amend certain non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Inter institutional Agreement on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(131) In order to ensure legal certainty, protect the rights of farmers and guarantee a level playing field between Member States as regards common requirements and indicators, the power to adopt certain acts should be delegated to the Commission in respect of the adaptation of common indicators related to output, result, impact and context to address technical problems with their implementation; and rules as regards the ratio for GAEC standard 1.

(132) In order to ensure legal certainty, protect the rights of farmers and guarantee a smooth, coherent and efficient functioning of types of intervention in the form of direct payments, the power to adopt certain acts should be delegated to the Commission in respect of rules making the granting of payments conditional upon the use of certified seeds of certain hemp varieties and the procedure for the determination of hemp varieties and the verification of their tetrahydrocannabinol content; rules establishing a harmonised basis for the calculation of the reduction of payments in the framework of capping and degressivity; measures to avoid beneficiaries of coupled income support suffering from structural market imbalances in a sector, including the decision that such support may continue to be paid until 2027 on the basis of the production units for which it was granted in a past reference period; rules and conditions for the authorisation of land and varieties for the purposes of the crop-specific payment for cotton and rules on the conditions for the granting of that payment and on the eligibility requirements and agronomic practices relating thereto; rules in respect of criteria for the approval of interbranch organisations and rules governing the consequences where the approved interbranch organisation does not satisfy such criteria and obligations for producers.

(133) In order to ensure that types of intervention in certain sectors contribute to achieving the CAP objectives and reinforce synergies with other CAP instruments and in order to ensure a level playing field in the internal market and avoid unequal or unfair competition, the power to adopt certain acts should be delegated to the Commission in respect of rules for the proper functioning of types of intervention in certain sectors, the type of expenditure to be covered and in particular administrative and personnel costs, the basis for the calculation of Union financial assistance, including the reference periods and the calculation of the value of marketed production and of the degree of organisation of producers in certain regions, and the maximum level of Union financial assistance for certain interventions aiming to prevent market crisis and to manage risks in certain sectors; rules for the fixing of a ceiling for expenditure on the replanting of orchards, olive groves or vineyards; rules under which producers are to withdraw the by-products of winemaking, and on exceptions to that obligation in order to avoid additional administrative burden and rules for the voluntary certification of distillers, and rules for the different form of support and the minimum durability of supported investments in certain sectors as well as on the combination of funding for some interventions in the wine sector. In particular, in order to ensure the effective and efficient use of Union funds for interventions in the apiculture sector, the power to adopt certain acts should be delegated to the Commission in respect of additional requirements concerning the notification obligation and the establishment of a minimum Union contribution to the expenditure to implement those types of intervention.

(134) In order to ensure legal certainty and to guarantee that interventions for rural development achieve their objectives, the power to adopt certain acts should be delegated to the Commission in respect of support for management commitments concerning genetic resources and animal welfare and for quality schemes.

(135) In order to take into account future changes in Member States’ financial allocations or to address problems experienced by Member States in the implementation of their CAP Strategic Plans, the power to adopt certain acts should be delegated to the Commission in respect of the Member States’ allocations for types of intervention in the form of direct payments, modifying weightings applied to support on the basis of its contribution to the achievement of climate change objectives, and rules on the content of the CAP Strategic Plan.

(136) In order to facilitate the transition from the arrangements provided for in Regulations (EU) No 1305/2013 and (EU) No 1307/2013 to those laid down in this Regulation, the power to adopt certain acts should be delegated to the Commission in respect of measures to protect any acquired rights and legitimate expectations of beneficiaries.

(137) In order to ensure uniform conditions for the implementation of this Regulation and to avoid unfair competition or discrimination between farmers, implementing powers should be conferred on the Commission as regards the fixing of reference areas for the support for oilseeds, rules for the authorisation of land and varieties for the purposes of the crop-specific payment for cotton and related notifications, the calculation of the reduction where the eligible area of cotton exceeds the base area, the Union financial assistance for distillation of by-products of winemaking, rules on the presentation of the elements to be included in the CAP Strategic Plan, uniform conditions for the application of the information and publicity requirements relating to the possibilities offered by the CAP Strategic Plans, setting out the organisational structure and operation of the European CAP network, rules relating to the performance, monitoring and evaluation framework, rules for the presentation of the content of the annual performance report, rules on the information to be sent by the Member States for the performance assessment by the Commission and rules on the data needs and synergies between potential data sources, and rules for the operation of a system for a secure exchange of data of common interest between the Commission and Member States. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (31).

(138) In the light of the fact that indicators are already laid down in Annex I for the purpose of monitoring, evaluation and the annual performance reporting, the adoption of other indicators for the monitoring and evaluation of the CAP should be submitted to additional scrutiny by Member States. Equally, the additional information that Members States are required to provide to the Commission for the monitoring and evaluation of the CAP should be subject to a positive opinion of the Common Agricultural Policy Committee. The Commission should therefore not be allowed to lay down an obligation for Member States to provide additional indicators and information on CAP implementation for the monitoring and evaluation of the CAP if the Common Agricultural Policy Committee does not find a qualified majority for or against the Commission proposal and therefore cannot express any opinion.

(139) In order to ensure uniform conditions for the implementation of this Regulation, the implementing powers should be conferred on the Commission to adopt implementing acts without applying Regulation (EU) No 182/2011 approving the CAP Strategic Plans and the amendments thereof.

(140) The Commission should adopt immediately applicable implementing acts where, in duly justified cases relating to solving specific problems while ensuring the continuity of the direct payments system in the case of extraordinary circumstances, imperative grounds of urgency so require. Moreover, in order to solve urgent problems occurring in one or more Member States while ensuring the continuity of the direct payments system, the Commission should adopt immediately applicable implementing acts where, in duly justified cases, extraordinary circumstances affect the granting of support and jeopardise the effective implementation of the payments under the support schemes listed in this Regulation.

(141) Regulation (EU) No 228/2013 of the European Parliament and of the Council (32) and Regulation (EU) No 229/2013 of the European Parliament and of the Council (33) should remain outside the scope of this Regulation, except where some of their provisions are explicitly referred to.

(142) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States but can rather, by reason of the disparities between the various rural areas and the limited financial resources of the Member States, be better achieved at Union level through the multiannual guarantee of Union financing and by concentrating on clearly identified priorities, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(143) Regulations (EU) No 1305/2013 and (EU) No 1307/2013 should therefore be repealed.

(144) In order to ensure the smooth implementation of the measures envisaged and as a matter of urgency, this Regulation should enter into force on the day following that of its publication in the Official Journal of the European Union,

HAVE ADOPTED THIS REGULATION:

TITLE I

SUBJECT MATTER AND SCOPE, APPLICABLE PROVISIONS AND DEFINITIONS

Article 1 Subject matter and scope 1. This Regulation lays down rules on: (a) general and specific objectives to be pursued through Union support financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) under the common agricultural policy (CAP) as well as the related indicators; (b) types of intervention and common requirements for Member States to pursue those objectives as well as the related financial arrangements; (c) CAP Strategic Plans, which are to be drawn up by Member States and which set targets, specify conditions for interventions and allocate financial resources, according to the specific objectives and identified needs; (d) coordination and governance as well as monitoring, reporting and evaluation. 2. This Regulation applies to Union support financed by the EAGF and the EAFRD for interventions specified in a CAP Strategic Plan drawn up by a Member State and approved by the Commission, covering the period from 1 January 2023 to 31 December 2027 (‘the CAP Strategic Plan period’).

Article 2 Applicable provisions 1. Regulation (EU) 2021/2116 and the provisions a