EUROPEAN COMMISSION Brussels, 18.12.2020 SWD(2020) 376 final COMMISSION STAFF WORKING DOCUMENT Commission’s recommendations for Finland’s CAP strategic plan Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Recommendations to the Member States as regards their strategic plan for the Common Agricultural Policy {COM(2020) 846 final} - {SWD(2020) 367 final} - {SWD(2020) 368 final} - {SWD(2020) 369 final} - {SWD(2020) 370 final} - {SWD(2020) 371 final} - {SWD(2020) 372 final} - {SWD(2020) 373 final} - {SWD(2020) 374 final} - {SWD(2020) 375 final} - {SWD(2020) 377 final} - {SWD(2020) 379 final} - {SWD(2020) 384 final} - {SWD(2020) 385 final} - {SWD(2020) 386 final} - {SWD(2020) 387 final} - {SWD(2020) 388 final} - {SWD(2020) 389 final} - {SWD(2020) 390 final} - {SWD(2020) 391 final} - {SWD(2020) 392 final} - {SWD(2020) 393 final} - {SWD(2020) 394 final} - {SWD(2020) 395 final} - {SWD(2020) 396 final} - {SWD(2020) 397 final} - {SWD(2020) 398 final}



Contents 1.Commission’s recommendations for Finland’s CAP Strategic Plan 1.1Foster a smart, resilient and diversified agricultural sector ensuring food security 1.2Bolster environmental care and climate action and contribute to the environmental- and climate-related objectives of the Union 1.3Strengthen the socio-economic fabric of rural areas and address societal concerns 1.4Modernising the sector by fostering and sharing of knowledge, innovation and digitalisation, and encouraging their uptake 1.5Recommendations 2.Assessment of agriculture and rural areas in Finland 2.1Support viable farm income and resilience across the EU territory to enhance food security 2.2Enhance market orientation and increase competitiveness including greater focus on research, technology and digitalisation 2.3Improve farmers’ position in the value chain 2.4Contribute to climate change mitigation and adaptation, as well as sustainable energy 2.5Foster sustainable development and efficient management of natural resources such as water, soil and air 2.6Contribute to the protection of biodiversity, enhance ecosystem services and preserve habitats and landscapes 2.7Attract young farmers and facilitate business development in rural areas 2.8Promote employment, growth, social inclusion and local development in rural areas, including bio-economy and sustainable forestry 2.9Improve the response of EU agriculture to societal demands on food and health, including safe, nutritious and sustainable food, as well as animal welfare 2.10 Cross-cutting objective on knowledge, innovation and digitalisation

1.Commission’s recommendations for Finland’s CAP Strategic Plan In the framework of the structured dialogue for the preparation of the common agricultural policy (CAP) strategic plan, this document contains the recommendations for the CAP strategic plan of Finland. The recommendations are based on analysis of the state of play, the needs and the priorities for agriculture and rural areas in Finland. The recommendations address the specific economic, environmental and social objectives of the future CAP and in particular the ambition and specific targets of the Farm to Fork Strategy and the Biodiversity Strategy for 2030. As stated in the Farm to Fork Strategy, the Commission invites Finland, in its CAP Strategic Plan, to set explicit national values for the Green Deal targets , taking into account its specific situation and these recommendations. 1.1Foster a smart, resilient and diversified agricultural sector ensuring food security Agriculture in the EU’s northernmost regions is costly, and characterised by low profitability and a limited variety of crops. Structural problems linked to unfavourable growing conditions and long distances lead to higher production costs, and consequently the agricultural sector is heavily dependent on public support. The CAP and national support schemes play a fundamental role in Finland; without income support, the average income per worker would be negative. Contrary to the positive trend on average at EU level, agricultural income per worker is decreasing in Finland. To ensure food production, therefore, the agricultural sector continues to need strong and targeted income support that takes into account regional differences. Increasing the profitability of agriculture and stimulating farm income and productivity are key issues. Even though farm investment is more significant in Finland as compared to other Member States, the annual downward trend in labour productivity requires attention. Export markets are difficult to find due to the long distances to markets, a lack of sufficient and stable supply of volumes and poor price competitiveness. The sector needs to overcome such hurdles through investments that stimulate productivity and add value to food products. Considering the structural development of livestock and dairy farming, investments are needed especially in grassland and feed production. Investing in processing and marketing would help offsetting, at least partially, the high primary production costs. Some of the key factors to promote and export could be related to the innovative solutions, assisted by research and cooperation. Finland could also make use of the advantages the country enjoys such as pure natural environment, the low use of pesticides in agriculture, low use of antimicrobials and higher animal welfare standards. Awareness raising of these typical advantages of Finnish agriculture related to the sustainable production could be considered. In this context, EU quality labelling could play a role. Finland should promote access to finance for farmers. This could include the use of financial instruments for medium-sized enterprises, which sometimes face obstacles in accessing finance for investments to add value. Medium-sized farms represent the largest group of farms in Finland and can lead the future development of the sector, so it is vital that they secure access to finance. The food supply chain is characterised by the strong presence of farmers’ cooperatives in the primary production and processing of milk and meat. Concentration of supply is low in other primary production sectors, though. In contrast, producer organisations (POs) are rare and cover so far only a part of the fruit and vegetable sector. The wholesale and retail sectors are strongly concentrated, and have increased their share of value in the food chain in recent years at the expense of primary producers. Finland could therefore explore how to foster POs, particularly in sectors with a low presence of cooperatives. 1.2Bolster environmental care and climate action and contribute to the environmental- and climate-related objectives of the Union Although Finland performs well according to many environmental indicators, there is still room for improvement, especially on ammonia emissions, biodiversity and water quality. Indeed, taking both the National Air Pollution Control Programme (NAPCP) and projected emissions into account, Finland is at high risk of not reaching its ammonia emission reduction commitments for 2020-2029. To achieve the Green Deal targets, Finland should step up its efforts in certain areas. Given the sensitive sub-arctic and arctic nature, the environmental care is of utmost importance. Certain biodiversity targets show unfavourable trends: in particular, the Farmland Bird Index shows a decrease. Similarly, Finnish national assessments of bird species associated with agricultural habitats show a downward trend, although less severe. The CAP can play an important role in achieving the EU’s Biodiversity targets, in line with the Prioritized Action Framework for CAP funding. Keeping water bodies in good status and reducing coastal water pollution is a priority for Finland through maintenance of buffer zones to reduce eutrophication and improvement of habitats. Further investments are needed to protect wetlands, peatlands and grassland, and for manure management (particularly to reduce ammonia emissions). It is also essential to maintain open areas to promote biodiversity and carbon capture. The indicators for climate change mitigation and adaptation are rather positive in Finland. However, agriculture’s share of greenhouse gas (GHG) emissions (including cropland and grassland) in relation to the rest of the economy remains at a significantly higher level than the EU average. Finland manages a very valuable carbon sink at EU level, thanks to its considerable forestry sector and forest cover (the highest forested area in the EU as a percentage of total land area), as well as its carbon-rich soils. The country should therefore focus on maintaining this carbon sink. Peatlands, which cover roughly a third of Finland’s land area, are a major source of GHG emissions, and emissions from cropland and wetlands are increasing although slowing down in the last 10 years.

For land use, land-use change, and forestry (LULUCF), Finland should explore different interventions to reduce emissions, for example, through carbon farming approaches that remunerate rewetting of peatlands, or adequate and climate adapted production methods on organic soils. While organic farming has been developing positively in recent years, there is still some way to go to achieve the Farm to Fork target. 1.3Strengthen the socio-economic fabric of rural areas and address societal concerns Finland has vast rural, sparsely populated areas with long distances. Managing the strong existing depopulation trend and improving the vitality of rural areas as attractive places to live require investments in rural infrastructure services and livelihoods outside farming. Efforts to promote generational renewal should be strengthened including better access to financing and the low number of female farm managers. Addressing youth unemployment and inactivity in rural areas in general is important as well to tackle the depopulation challenge. Protecting agricultural workers, especially in precarious, seasonal and undeclared jobs, will play a major role in delivering on the respect of rights enshrined in legislation which is an essential element of the fair EU food system envisaged by the Farm to Fork Strategy. Compared to the EU average, the situation in Finland regarding animal welfare practices and the use of antimicrobials is rather positive. Finland has taken significant initiatives on these issues and the indicators reflect this positive situation, which needs to be maintained, and where possible, further improved. There has been a significant increase in the overall use of pesticides (as measured by HRI1), due to the use of urea in forests. However, there is a decreasing trend in HRI1 for agricultural use. Promotion of sustainable use of pesticides, in particular ensuring the uptake of integrated pest management, is needed to meet the Green Deal target. Finland should also make an effort to shift towards healthier diets, as it has a very high incidence of non-communicable diseases due to dietary risk factors. 1.4Modernising the sector by fostering and sharing of knowledge, innovation and digitalisation, and encouraging their uptake Finland is an innovative and knowledge-oriented society with a strong emphasis on digitalisation and research. However, the distances are long due to low population densities. This may be the reason why the Finnish agricultural knowledge and innovation system (AKIS) is relatively fragmented although strong. Finland should strengthen coordination, cooperation and interactions between AKIS stakeholders. A particular focus should be on links between public and private advisors, on their training and skills and on advisors providing innovation support services. Ensuring knowledge flows between all AKIS actors by capturing individual innovative ideas would support the setting up and implementation of individual European Innovation Partnership (EIP) innovation projects and speed up innovation. Finland is characterised by large, sparsely populated areas and Next Generation Access (NGA) broadband connection in rural areas is very low. Public support is therefore necessary to attain the Green Deal target of 100% fast broadband coverage by 2025. 1.5Recommendations To address the above interconnected economic, environmental/climate and social challenges- the Commission believes that the Finnish CAP strategic plan needs to focus its priorities and concentrate its interventions on the following points, while adequately taking into account the diversity of Finnish agriculture and rural areas, including Åland Islands: Foster a smart, resilient and diversified agricultural sector ensuring food security ·Increasing the income and profitability of the farming sector by promoting productivity-increasing investments and addressing the financing gaps. Improving the targeting of direct income support, by applying, for example, the complementarity redistributive income support for sustainability and the reduction of payments. ·Enhancing the value-added of agricultural production, for example by better promotion of the intrinsic product qualities and fostering the use of organic and (EU) quality labelling and highlighting sustainable production methods. ·Fostering cooperation to innovate, and to add value to products through investments and promotion of Producer Organisations in sectors with low PO presence. Bolster environmental care and climate action and to contribute to the environmental- and climate-related objectives of the Union

·Improving biodiversity, in line with the new actions of the Biodiversity Strategy, in particular the status of habitats and protected species, farmland birds and wild pollinators by enhancing the conservation of habitats, such as grasslands, peatlands and other wetlands through protective measures in line with the Prioritized Action Framework for CAP funding. ·Strengthening the efforts in reducing ammonia emissions, in particular from the livestock sector, to meet the national emissions reduction commitment. This could be tackled, in particular, through investments in manure management and in the development and application of appropriate technologies. ·Increasing the area under organic farming, contributing to the EU Green Deal target by promoting consumption and uptake of organic production, as well as by addressing needs in research and innovation for organic production. ·Promoting climate change mitigation: special focus should be on forests and carbon-rich soils (peatland and cropland), in order to enhance the current carbon sinks and reducing greenhouse gas emissions. Further attention is also needed for reducing methane emissions in line with the Methane Strategy, for example, by promoting biogas production. ·Promoting climate adaptation and increase resilience via targeted investment and improved management. ·Increasing nutrient use efficiency in line with the related EU Green Deal target, and limiting the leaching of nutrients affecting coastal areas and Baltic Sea. ·Fostering sustainable forest management, enhancing multifunctionality, forest protection and restoration of forests ecosystems to reach good condition of habitats and species linked to the forests in order to enhance ecological services and biodiversity, and to build resilience to threats such as climate change impacts. Strengthen the socio-economic fabric of rural areas and address societal demands ·Promoting the diversification of the rural economy and infrastructural development in rural areas, making use of increased coordination of knowledge and innovation and a further strengthened integration of the related actors. ·Continuing efforts in promoting the generational renewal, including the current CAP support to young farmers, and stepping up the access to finance and land by further developing adequate support measures.

Fostering and sharing of knowledge, innovation and digitalisation in agriculture and rural areas, and encouraging their uptake ·Promoting and investing in the expansion of NGA broadband in rural and remote areas, in line with the EU Green Deal target of 100% fast broadband coverage by 2025. In doing so it will be important to ensure synergies with other EU and national funds. ·Enhancing the Agricultural Knowledge and Innovation System by sustained investment in coordination and cooperation between its actors and organisations.

· 2.Assessment of agriculture and rural areas in Finland The agricultural sector in Finland is characterised by the use of modern technology, environmental and animal welfare standards and practises above the EU average but also by significant profitability challenges. The growing season is short, costs are high, distances long and the variety of crops very limited. The income would be negative without public support. Contrary to the average European trend, the agricultural income per worker is decreasing. Finland has a strongly negative trade balance for food. The total labour force engaged in agriculture is declining much faster than the EU average. The number of farms is also declining. Sparsely populated Finland is one of the most rural countries in Europe and rural areas are facing an increasing depopulation. Adequate services and infrastructures, such as the NGA broadband, should be ensured. 2.1Support viable farm income and resilience across the EU territory to enhance food security Finland has the most northern agricultural production, the shortest growing season and the lowest population density in the EU I combined with long distances. The sub-arctic and arctic production conditions result in low yields, high production costs and a limited variety of crops suitable for the Finnish growing conditions. In this context, CAP and national support are of key importance for farm income in Finland. The CAP support, together with the national support play a significantly more important role in realising an income comparable to the EU averages: total CAP support forms 58% of the agricultural factor income in Finland II , of which direct payments are about 34% of the agricultural factor income in Finland in 2018 while the European average is around 24% III . In addition, the rural development payments (especially the payment for Areas facing Natural Constraints (ANCs) paid throughout the entire territory) play a key role. Without income support, average income per worker would be negative IV at EUR -11 368 per full time worker. Even with support, the income per worker in agriculture remains at 42% of the average income in the economy V . The annual return on assets has been negative between 2000 and 2018 VI leaving the farmer with an average hourly salary of EUR 5.4 and the farms having on average EUR 28 000 negative balance after deducting the costs of production that have been growing. The entrepreneurial income reaches 33% of the target VII . Between 2010 and 2015, the agricultural income per worker followed a downward trend in Finland, contrary to the European average. In 2019, agricultural factor income per worker in real terms was approximately EUR 23 000 (equal to 48% of the average wage in the whole economy VIII ), whereas in most similar economies (in terms of GDP per capita) the agricultural factor income tends to be higher IX . Between 2010 and 2018, the income of farm households has decreased, whereas it has increased in households relying on non-agricultural entrepreneurial income or salaried employment X . 76% of farmers have experienced difficulties related to the costs of production and 34% to access to land XI . The income per worker is above the national average for pig and poultry farms. Income fluctuates around the Finnish average for dairy, arable and livestock farms. Except for horticultural farms, CAP support is essential to provide farmers a positive income XII 19.2% of direct payments are used to provide coupled support to certain sectors XIII . Income per worker is increasing with farm size XIV with on average, income being the lowest for farms between 10 and 30 hectares. In the category smaller farms (5-10 hectares), 16 % of farms are owned by farmers of more than 65 years of age, with a very limited turnover XV . At the EU level, in 2017, the 20% biggest beneficiaries (in amount) still receive about 80% of total direct payments XVI . In Finland, the direct payments are less concentrated with a ratio of 57% of direct payments being received by 20% of farmers XVII . However, physically smaller farms (below the national average) receive slightly less than the average direct payment per hectare in Finland XVIII . Farm income compared to the rest of the economy (average 2016-2018) The income variability is high in arable crops and in mixed livestock. Phyto-sanitary losses are compensated in Finland from the state budget XIX . Risk management measures under Rural Development Programme are not being implemented in Finland XX . However, the high level of cooperation between farmers strengthens their market position and facilitates an adaptation to changed business conditions such as weather or markets. Source: Directorate General for Agriculture and Rural Development. CAP context indicators C.25 Agricultural factor income and CAP context indicator C.26 Agricultural entrepreneurial income. Income based on EUROSTAT [ aact_eaa04 ], [ aact_ali01 ] and [ aact_eaa06 ], adding back the compensation of employees to the entrepreneurial income and divided by the total number of annual working units. Note: 2019 data estimated. The Average wage in the economy based on EUROSTAT [ nama_10_a10_e ] thousand hours worked using employees domestic concept and [ nama_10_a10 ], item wages and salaries.

2.2Enhance market orientation and increase competitiveness including greater focus on research, technology and digitalisation The particular characteristics of the Finnish agricultural sector and its Nordic location brings a number of constraints with it that do not allow Finnish farmers to compete with other European countries based on quantity. The climatic conditions and shorter growing seasons result in a higher production costs and the need to compete based on quality through high value added products and innovation. The low use of antimicrobials and high animal welfare standards are examples that contribute to a higher value added. Because of its dependence on imports, the Finnish agri-food trade balance is negative and this negative balance is even increasing further over time. Based on data for 2018, slightly more than 50% of the total agri-food imports come from the Netherlands, Germany, Sweden and Denmark. Its agri-food trade balance with countries outside the EU is slightly positive, mainly due to exports of raw hides, skins and furs (37% of the total agri-food exports value in 2018) XXI , followed by milk powder (which form another 11%). The main export destinations are Sweden and China (forming 25% of total exports in value) XXII . With 30% of the total agricultural output, dairy is the most important sector in Finland, followed by fruit and vegetables production, cereals and cattle (each around 12% of total agricultural output in value) XXIII . Despite the importance of cereal production, crop production is not very competitive in the international market. Finland’s main competitive advantage are in efficient livestock production and greenhouse production. However, only circa 15% of protein crops used for animal feed are grown in Finland XXIV . Improving this ratio could improve the productivity and competitiveness of farming. Increasing productivity is important to boost the competitiveness of the sector. The total factor productivity, measuring the efficiency of inputs and output, stagnated in Finland and even decreased between 2009 and 2013 but follows a positive trend since 2013. The total factor productivity in 2018, measured as a 3-year moving average index where the EU value in 2005 equals 100, is higher in Finland (117) than the EU average (110) XXV . In terms of cost and revenue structure, the total agricultural output has decreased in Finland with 20% between 2012 and 2018, while the costs have only reduced by 10%, reducing the total entrepreneurial income received by the sector XXVI . The agricultural labour force expressed in full time working units has decreased significantly in recent years. The labour force decreased by 39% between 2005 and 2019, and most importantly the trend accelerated in more recent years (-23% between 2014 and 2019 (versus -7% at EU-27 average) XXVII . The decline in the labour force is also reflected in the decline in the number of farms in Finland, which between 2005 and 2016 decreased from about 70 600 to 49 700 farms. At the same time, the average farm size increased from 32 hectares in 2005 to 46 hectares in 2016 XXVIII . Labour productivity is about equal in Finland to the EU average between 2017 and 2019 (98% of the EU average). However, the annual growth rate of the labour productivity is negative in Finland between 2012 and 2017 with 1.1%, whereas at EU level it is increasing with 3.1% per year during the same period XXIX . The total factor productivity in poultry, pig and greenhouse farms is higher than average in Finland XXX . Investments are essential to boost productivity in the sector. In terms of farm investments, there is a slight decrease in investments from EUR 1.1 billion to EUR 970 million between 2012 and 2018. Nonetheless, farm investments, measured by the gross fixed capital formation, still equal 87% of the gross value added in agriculture, which is considerably higher than the EU-27 average (31%) XXXI . Most investments are made on livestock farms and dairy farms in the west of Finland. Under the current Rural Development Programme, 7.3% of holdings have received support for investment in restructuring and modernisation, which is the one of the highest in the EU XXXII . Nevertheless, a lack of financing of between EUR 47 million and EUR 162 million was identified for the Finnish agriculture sector. This is low compared to other EU Member States. Mainly medium-sized farms between 20 and 100 hectares face difficulties accessing finance. This financing gap is concentrated on medium and long-term investment lending XXXIII . Taxes Feeding stuffs Product subsidies Seeds Rents Cost and revenue structure of agricultural income (real prices in million EUR) in Finland Energy Interest Other costs Labour Other subsidies Plant/animal protection Non-agricultural secondary Animal output Entrepreneurial income Crop output Agricultural services output Fertilisers Source: EUROSTAT. [ aact_eaa01 ] 2.3Improve farmers’ position in the value chain In the Finnish dairy and meat sector, most farms are organised through cooperatives. The largest cooperative collects 80% of the milk and the second largest 9.5% XXXIV . In the meat sector, the two largest cooperatives together have between 60 and 80% market share XXXV . There are five cereal cooperatives, but their market share is relatively small XXXVI . Since animal husbandry represents 62.5% of the value of primary agricultural production in Finland XXXVII , the role of the cooperatives in Finnish agriculture is of pivotal importance. None of the cooperatives has a recognised PO status; they could be encouraged to seek recognition. There are only four recognised producer organisations accounting for 19% of the marketed value in the Fruit & Vegetable sector (50% at EU level). Altogether, the recognised POs represented 2% of the total value of the agricultural production in 2016 XXXVIII . No IBO (Interbranch Organisation) has been recognised so far. Only few products are under EU quality schemes XXXIX . In 2018, Finland had 1 744 food and drink processing companies. Most of them were small, 1 634 small enterprises employing less than 50 people and the vast majority employing less than five people. Nevertheless, a small number of large or medium sized companies dominate the production structure. The 20 largest companies represented circa 50% of the EUR 9 912 million turnover in 2018. The milk and meat processing were the most concentrated with one milk and two meat processing cooperatives dominating their respective markets. In 2017, 46% of the turnover of the food industry was in milk and meat processing. Hence, these cooperatives have a strong position in the Finnish food industry as a whole XL . Against the differentiated processing industry stands a concentrated retail structure. The two major retail groups had an 82.5% market share in 2018. The third group has been present in Finland since 2002, and had a market share of 9.6% in 2018. The increasing market share of private labels of these retailers has reinforced their market power vis-à-vis the large food processing companies XLI . The share of value added in the food chain captured by the retailers has increased from 2008-2017 XLII . The share of the value added in the food chain for primary producers is decreasing over time in Finland (from 32% in 2009 to 26% in 2017), but still slightly above the EU average of 23% XLIII . As the share of processing has remained relatively stable or slightly decreased, the share of the food and beverage distribution (retail) has increased XLIV . The use of EU quality labels scheme in view of improving the position of farmers in the value chain and of responding to consumers’ demand for high quality products should be further explored. Food and beverage consumer services Primary producers % for primary producers – EU-27 Food and beverage distribution % for primary producers (right axis) Food and beverage manufacturing Value added for primary producers in the food chain in Finland (in million EUR) Source: European Commission. CAP indicators – Data explorer . CAP Result indicator RPI_03 Value for primary producers in the food chain.

2.4Contribute to climate change mitigation and adaptation, as well as sustainable energy In 2018, agricultural emissions of greenhouse gasses (GHG) (excluding cropland and grassland) in Finland amounted to 6.5 million tonnes of CO2 equivalents, representing about 11.2% of total GHG emissions in Finland (EU 27 average 10%) and around 1.7% of the total EU GHG emissions from agriculture. Emissions from agriculture decreased by 12.5% between 1990 and 2018, which is under EU average of 20.6%. However, since 2013 no further reduction has been recorded. XLV The most important source of GHG emissions in non-CO2 agriculture in Finland is agricultural soils (54.4%) followed by ruminant enteric fermentation (31.7%) while emissions from manure management account for 11.1% of emissions in this sector. XLVI In Finland, the land use, land use change and forestry (LULUCF) sector is of particular importance not only in terms of carbon sinks but also in terms of emissions. In 2018, LULUCF sector as a whole was a net CO2 sink of 10.3 million tonnes mainly resulting from the large total forest area. At the same time, emissions from cropland (mainly drained organic soils/peatland) amounted to 8.1 million tonnes of CO2, an increase of 48.5% since 1990. During the same period emissions from grassland have decreased by 18.7% to 0.73 million tonnes and from wetland increased by 58.8% to 2.1 million tonnes. XLVII These changes show the importance of land use management to control emissions. When including the LULUCF sector, emissions from high organic soil content peatland fields are over 50% of total agriculture emissions, with fields cleared in forestland (i.e. deforested land) having the highest emissions. The cleared peatland area has increased circa 2.5% between 2000 and 2018, mostly for the use of cattle farming in Northern Finland. Therefore, particular attention to the land use patterns related to animal husbandry are a key component in the emissions reduction strategy XLVIII . On the other hand, in terms of carbon sinks Finland has the second highest mean organic carbon content in soils in the EU XLIX and, with nearly 30%, the highest percentage of peat soils in the EU L . Finland has the highest share of forests and other wooded areas in the EU LI , 76% of the Finnish territory is forest and other wooded land while the EU 27-average is 45% LII . Since potential sequestration is limited by this already high level of storage, efforts to limit carbon loss, preserve below ground stocks and improve above ground carbon sinks (including materials) should therefore be targeted. The share of agriculture in the production of total renewable energy in Finland is low (2.7%), well below the EU-28 average (12.1%). However the share of renewable energy production from forestry is considerable (74.1%, well above the EU average of 40.3%), thus bringing the share of agriculture and forestry in total renewable energy production to about 76.8% LIII . However, the biogas production from anaerobic fermentation (animal slurries and of waste in abattoirs, breweries and other agro-food industries) is 0.98 gigajoule per LSU which is much lower than EU average of 3.93 gigajoules per LSU LIV . Energy consumption in agriculture and forestry in relation to the total final energy consumption in Finland is equal to the EU average (2.7%). However, the use per hectare, with 28.1 kilograms of oil equivalent per hectare is the fourth lowest of the EU. The percentage of use of energy in the food processing industry in Finland (1.7%) is below the EU average of 2.9% LV . Finland's Climate Act (approved in 2015) stipulates that the Government approves a national plan on adaptation at least every ten years. The National Climate Change Adaptation Plan 2022 was published in 2014 replacing the National Adaptation Strategy from 2005. Many sectors have climate change adaptation plans and actions, the water sector being the most advanced LVI . In the current Governmental Programme Finland has set a target of carbon neutrality by 2035. The measures for the reduction of emissions on swamps and peatlands and the increase of the carbon sinks are included in the programme LVII . Finland’s National Forest Strategy, adopted by the Government in February 2015 and updated in 2019, specifies the main objectives for forest-based business and activities until 2025 LVIII . Climate change is expected to lengthen the growing season and possibilities to cultivate certain crops in more northern altitude. However, climate change brings also challenges in relation to droughts, new pests, plant diseases and adverse weather effects with the related side-effects in agriculture LIX . Cropland Grassland EU-27 % of agriculture (incl. Emissions from cropland and grassland) in total GHG emissions (incl. LULUCF) % of agriculture (incl. emissions from cropland and grassland) in total GHG emissions (incl. LULUCF) % of agriculture in total GHG emissions (exc. LULUCF) Agriculture Total Greenhouse gas emissions from agriculture (including and excluding LULUCF) in Finland (in million tonnes of CO2 equivalents) The Finnish forestry resources are growing. Roughly half of the CO2 emissions from the fossil-based energy production are sequestrated by forests and wood products. Climate change is lengthening the growing season and the growing forests sequestrate more carbon. However, the climate change is also bringing more pests, new species, changing the forest compositions and damages caused by storms LX . Source: European Environmental Agency. As in EUROSTAT [ env_air_gge ] 2.5Foster sustainable development and efficient management of natural resources such as water, soil and air According to many international rankings, Finland performs well regarding the sustainable development and the management of natural resources. For example, according to some studies, Finland counts first on the World’s cleanest air LXI LXII . Finland’s landscape is characterized by forests and lakes. Circa 76% of the Finnish land is covered by forests and other wooded land, having the largest forest coverage in Europe LXIII . 7.5% of the Finnish territory is of wilderness reserve LXIV . Finland ranks amongst the most water rich in the World LXV and counts on 168 000 lakes (minimum of 500 m2) LXVI . Livestock density is rather low compared to the European average (0.5 per hectare) LXVII LXVIII . Concerning air, agriculture causes 89.5% of ammonia (NH3) emissions in Finland from which livestock causes a major part (87.9% of agriculture) LXIX . Cattle forms the largest source (56.4%) of ammonia emissions in agriculture LXX . The ammonia emissions from agriculture have decreased in recent years LXXI . Finland has a moderately low emission of NH3 per hectare compared to the rest of the EU in the South of Finland, and around EU-average in the rest of Finland LXXII . However, based on a detailed Commission assessment of the National Air Pollution Control Programme (NAPCP) and projected emissions LXXIII , Finland is found to be at high risk of non-compliance with its ammonia emission reduction commitments for 2020-2029 and also at medium risk of non-compliance with the ammonia reduction commitment for 2030 and beyond LXXIV . As regards soil in Finland, the soil has a total organic carbon in arable land of 636 Mega tonnes, which is one of the highest in the EU. The mean soil organic carbon content is 61 g/kg in 2015 LXXV . However, the carbon content has diminished in mineral soils since mid-1970’s. This is partly due to the relatively young age of the fields, but changes in agricultural practices have also contributed LXXVI .

In 2018, 70% of agricultural land is under commitments to improve soil under Rural Development Programme which is one of the highest in the EU (EU average 12% in 2018) LXXVII . There is no severe risk of soil erosion by water in Finland LXXVIII . However, 23% of arable land is left bare during winter LXXIX . Finland could share experience and good soil management practices and their associated benefits as well as lighthouse examples with other EU countries through participation in research, innovation and demonstration activities available under the forthcoming Horizon Europe Mission on soil health. As to water, ground water quality is one of the best ones in the EU with 98.8% of monitored water stations reporting high quality regarding nitrates concentration and 1.2% being of poor quality in 2015-2017 LXXX . Nitrates in groundwater are one of the Europe’s lowest (0.6 mg/l of annual mean concentration in 2000-2017) while the EU average is 18.8 mg/l LXXXI . Finland has the second best situation in the EU as regards nitrates in freshwater -surface waters with 98.2% being of high quality in 2015-2017 LXXXII . The potential surplus of nitrogen on agricultural land has been at the EU average of 49 kg in 2015 LXXXIII . In rivers, the nitrate level for 2000-2017 is 0.3 mg/l while the European average is 1.72 mg/l LXXXIV . In general, the state of lakes and rivers is stable but the state of coastal waters has deteriorated LXXXV . The phosphorus levels are more than 80% lower than in 1990, and are stable between 3.6 and 4.0 kilograms per hectare. In 2019, 68% of the rivers and 87% of lakes are in excellent or good condition but only 13% of the coastal waters LXXXVI . In terms of the Water Framework Directive (WFD), not all water bodies are in good status yet and agriculture is identified as the second biggest pressure. Better integration of water objectives in other policy areas such as agriculture, is needed to achieve the requirements of the WFD and synergies should be optimised with polices including the CAP LXXXVII . In this context, a special attention is to be paid to the Baltic Sea. Eutrophication is among the most influential and long lasting environmental pressures in the Baltic Sea. At least 97% of the region was assessed to be below good eutrophication status, including all of the open sea area and 86% of the coastal waters. Indicators reflecting nutrient levels were generally furthest away from good status. Long term trends shows signs towards improved eutrophication status in the westernmost Baltic Sea. Although signs of improvement are seen in some areas, effects of past and current nutrient inputs still influence the overall status LXXXVIII . The nitrogen and phosphorous emissions have decreased significantly over past 30 years. However, this trend has recently discontinued. Regional differences occur as livestock and crop productions are concentrated in different areas LXXXIX . The share of agricultural land under Rural Development commitments to improve water management is 83%, which is one of the highest in the EU (EU average 12% in 2018) XC . Agriculture puts pressure on water quality and several measures have been recommendedto reduce the pollution from nutrients and pesticides originating from agriculture XCI . More than half of nutrients originating from human action and ending up in waters are from agriculture. Especially challenging is the period outside of growing season XCII . There are no particular problems with respect to water stress conditions in Finland. Only 0.4% of the total agricultural areas is irrigated (EU-27 average 6.5% in 2016) XCIII . The water exploitation index (WEI+), which estimates the total water use relative to the renewable freshwater resources, is under 0.5% in most areas in Finland. In the Kokemäenjoki-Archipelago Sea-Bothnian Sea river basin, the index was 5.55% in 2015 XCIV . This indicates that there is no water stress in Finland as the exploitation remains below 20%. Potential surplus of phosphorus on agricultural land (in kg P/ha/year) EU-27 GNB for Nitrogen Potential surplus of N and P on agricultural land in Finland Kg P/ha/year Kg N/ha/year Potential surplus of nitrogen on agricultural land (in kg N/ha/year) Source: European Commission. CAP context indicator C.40 Water quality. Based on EUROSTAT [ aei_pr_gnb ] 2.6Contribute to the protection of biodiversity, enhance ecosystem services and preserve habitats and landscapes Different indicators provide an understanding of the status and past trend for biodiversity in agricultural land. These indicators sketch different trends, for which some are unfavourable for biodiversity. For example, the farmland bird index has declined over time being 79 in 2018 (2000 = 100), where the long-term trend is less steep than the EU28-average (81 in 2018) XCV , the farmland bird index shows a steep decrease in recent years from 102 in 2015 to 79 in 2018 XCVI . Similarly, a downward trend, although less severe, is shown in Finnish national assessments of bird species associated with agricultural habitats, although showing a slight increase in 2020 XCVII . Moreover, in terms of conservation status of agricultural grassland habitats, 25% of habitats are in favourable status. However, 66.7% classifies as unfavourable-bad during 2013-2018. This is a small improvement compared to the period 2007-2012 when 69.2% of habitats were classified as unfavourable-bad XCVIII . Terrestrial Natura 2000 area in Finland (in 2019) covers 13% of total land area. XCIX . Most of the grassland habitats have been assessed as requiring additional efforts to optimize their management regime. 75% of the grassland habitats are reported to be affected by one or more agriculture-related pressure or threat C . However, the share of permanent grassland and meadows is only 1%, being one of the lowest in the EU (EU average 31%) CI . This is obviously due to climate conditions. Nonetheless, the total grassland area has increased from circa 400 000 hectares in 1990 to over 600 000 hectares in 2018 CII . The continuation of agriculture is essential in Finland for maintaining an open landscape, and an evaluation has pointed out the particular importance of grassland maintenance to maintain and improve biodiversity CIII . Moreover, different landscape features have a positive effect on biodiversity. A JRC study performed in 2015 estimated a coverage of agricultural land by landscape features equal to 5.3% of the agricultural area in Finland, which is the highest in the EU (on average 0.6%). In addition, 11.2% of the agricultural areas is fallow land in 2018, which is the second highest in the EU where it is on average 4.1% CIV . The current CAP period 2014-2020 contains different measures that can contribute to improving biodiversity. With this respect, under the current greening obligations around 25 000 hectares fall under the ecological focus area obligation in Finland. 78.6% of the ecological focus area is land laying fallow, while the other 21.4% are nitrogen-fixing crops CV . In addition, 14% of agricultural land is under commitments supporting biodiversity and/or landscapes under Rural Development, which is slightly lower than the EU average 15% CVI . Organic management practices can also be beneficial for soils and biodiversity. The share of organic farming area in Finland equals 13.1% of the total agricultural area in 2018 (EU average 8.0%). The share of organic area shows a positive trend CVII . In 2019, circa 280 000 hectares were under organic production commitments and the Rural

Development Programme 2014-2020 budget allocation had been overcommitted. About one third of commitments are in animal production. Despite the increase, the programme target of 355 000 ha will not be reached CVIII . The number of organic producers slightly increased from 4 316 in 2012 to 4 665 in 2017, but the area increased. The share of animals held by organic farmers increased from 2013 to 2018, mainly for sheep and to a lesser extent also for cattle CIX . The Finnish Government has decided to update the national strategy on organic production CX . Besides agricultural land, forestry plays a very important role in Finland. 76% of the territory is forest or other wooded area CXI . The growing stock of wood is growing steadily in the Finnish forests CXII . The share of forest area (including transitional woodland-shrub) that is protected under Natura 2000 in 2018 is 8.1% (EU average 30.4%) CXIII . Protected forests constitute 2.9 million hectares (13% of forests) CXIV . Finland has the biggest share of strictly protected forests (class 1.1 - no active intervention) counting 9% of forest and other wooded land whereas the EU-28 average is 2.2% CXV . % of agricultural area under organic farming % of area under organic farming in the EU-27 Hectares under organic farming Area under organic farming in Finland Compared to the other regions, the conservation status of forest habitat types as listed in Annex I of the Habitats Directive is worse in the Boreal region, with 82.4% of the 17 habitat types reported for in the region in unfavourable-bad condition and 17.6% is in unfavourable-inadequate condition CXVI . Finland reports on 11 Annex I habitats for the Boreal region and 5 for the Alpine region, covering an area of approximately 45 000 km² of which 40.74% is in unknown condition and 28.31% is in a condition that is not good CXVII . Pursuing monitoring efforts to complement this data set is essential. However, there is a considerable potential for restoration of the approximately 11 000 km² of Annex I forest habitats that are currently reported in bad condition and part of the 15 800 km² in unknown condition CXVIII . In particular, restoration measures targeting such peat rich habitats as western taiga (habitat 9010, 1 000 to 3 000 km² in bad condition) and bog woodland (habitat 91D0, at least 6 000 km² in bad condition) would in addition contribute to climate-related targets CXIX .

Source: European Commission. CAP context indicator C.19 Agricultural area under organic farming. Based on EUROSTAT [ org_cropar_h1 ] and [ org_cropar ] Source: Directorate General for Agriculture and Rural Development. Based on EUROSTAT for land laying fallow and Joint Research Centre based on LUCAS survey for estimation of landscape elements. * Linear elements considered here: Grass margins, shrub margins, single trees bushes, lines of trees, hedges and ditches. This estimation is to be taken with caution because of methodological caveats. 2.7Attract young farmers and facilitate business development in rural areas Only 4% of farm managers is below 35 years old in 2016 after a decline from around 9% between 2005 and 2013). This is considerably below the EU average of 5.1%. Moreover, the share of women in the total number of farm managers below 35 years is 9% in Finland, the 4th lowest in the EU (figures from 2016) CXX . This shows a worsening trend in farmer ages in recent years in Finland CXXI . The share of farm managers below 35 years of age with at least a basic level of agricultural training (50%) is higher than the share of total farm managers in Finland (45%), with both figures being higher than the EU-average level. However, the share of young farm managers with full agricultural training in Finland is below the EU average. The general tendency of increasing average economic farm size over time in Finland is more pronounced in holdings with farm managers between 25 and 34 years old, which, in 2016, have on average the highest economic farm size CXXII . Section 2.2 already mentioned the financing gap in the Finnish agricultural sector. Although the overall gap is low compared to the EU-27, access to finance for some viable farming enterprises in Finland might still be a challenge CXXIII . This counts in particular for young farmers, whose debt burden is often higher than that of other farmers due to the loans taken to finance taking over the exploitation. CXXIV . Due to weak the profitability perspectives and improved employment opportunities in other sectors agriculture has not attracted young people CXXV . The business demography, expressed in the birth rate of enterprises in rural areas is with 6% the lowest among the Member States for which data is available CXXVI . Share of farm managers < 35 years by gender in Finland Ratio < 35 y.o />= 55 y.o. (right axis) Share of female farm managers < 35 years Share of farm managers below 35 years – EU-27 Share of male farm managers below 35 years CAP support can contribute to reduce the entry barriers to the sector, in particular for new entrants. 7.6% of farmers receive direct payments top up for young farmers. The total Rural Development Programme funding in Finland was EUR 145.9 million for the setting up of around 2 700 young farmers in the period 2014-2020. This objective would result in a rather high share compared to other EU MS (4.6% of agricultural holdings) CXXVII , but at the end of 2019 there were 1 519 farmers with approved financing for setting up. This means that the target will not be reached before the end of the programming period CXXVIII . Source: EUROSTAT. [ ef_m_farmang ] 2.8Promote employment, growth, social inclusion and local development in rural areas, including bio-economy and sustainable forestry Finland has among the highest share of rural areas in the EU, covering 82% of the total territory. Rural areas host 39.5% of the population (2019), with a downward trend (-1.1% between 2015 and 2019) CXXIX . In the Degree of urbanisation (DEGURBA) classification Finland shows the lowest figures in the EU in terms of area under urban centres (0.1%) and the urban clusters (0.7%). The area under rural grids is the highest (99.3%) CXXX . Shrinking regions are located more in the east and north of the country, whereas some rural areas around urban agglomerations continue to grow CXXXI .The old-age dependency ratio is one of the highest in the EU: in 2019 the ratio is 38.4% in Finland (with less than three working age people for every person aged 65 or over) CXXXII . The employment rate in Finland increased over time and was 73.2% (age group 15-64 yr.) in 2019 in rural areas (68.4% at EU-27), which is close to the total employment rate in Finland CXXXIII . However, the unemployment rate for young people (age 15-24) in rural areas is considerably higher (16.1% in 2019) than the Finnish average (5.8% in rural areas for the age group 15-74) CXXXIV . The age structure in rural areas is unfavourable in terms of dependency ratio. Rural areas count for 37% of employment in Finland; although this figure is slightly decreasing, it is still rather stable, as well as the employment in the primary sector, which counts for 7.3% of the jobs (2016) CXXXV . In fact, the agriculture sector is one of the least recruiting sectors in the economy CXXXVI . Other business activity than farming is an essential income source to many farmers, of whom 29% engaged in business activities outside farming in 2018, not counting salaried employment CXXXVII . This percentage has decreased slightly from 2013. The GDP per inhabitant in purchasing power standard in rural and intermediate areas is well beyond the EU-27 average. While the GDP per capita in the whole of Finland (EU-28=100, average 2013-2015) is 110.9%, the rural areas record 94.2% CXXXVIII . The poverty rate, i.e. the rate of people at risk of poverty or social exclusion, does not differ much between rural and urban areas CXXXIX (the poverty rate is 17% in rural areas in 2018 (24% at EU-27),) but remains generally stable over time CXL CXLI . Availability of public and private services is also under pressure in many rural areas, including the transport network and services CXLII . Under the two current Rural Development Programmes for Finland (Mainland and Åland), 70% of the rural population is covered by local development strategies. By this, Finland exceeds the targets initially set (around 48% of the population) CXLIII . Community Lead Local Development (LEADER) -groups operate in all rural areas CXLIV .

With the highest share of forests and other wooded land in land cover in the EU-27, the forest sector plays an important role in ecological and economic terms. Whereas the sector demonstrates stable figures as to employment, the productivity increased significantly between 2005 and 2017, being now the highest in EU-27 CXLV . Already in 2012, the Finnish bio-economy had a share of 12% (EUR 23.5 billion) of the value added of the national economy, build up mainly by the forestry and the agri-food sector (36% and 16.6% thereof respectively). There are 17 849 operating business units listed as engaged in bio-economy, of which 3 147 in agriculture CXLVI . Finland has a dedicated bio-economy strategy, with defined goals to generate new economic growth and new jobs from an increase in the bio-economy business and from high added-value products and services while securing the operating conditions for the nature’s ecosystems. Furthermore, the strategy shall push the Finnish bio-economy output up to EUR 100 billion by 2025 (from EUR 60 billion in 2011) and create 100 000 new jobs CXLVII . The government has earmarking funding for bio-industry development, including research, pilot projects and investment support CXLVIII . The update of the Finnish bio-economy strategy is scheduled to be completed in 2021 CXLIX . Development of sectorial turnover in the bioeconomy (Finland, 2008-2017) (million EUR) Source: JRC: https://datam.jrc.ec.europa.eu/datam/mashup/BIOECONOMICS/index.html 2.9 Improve the response of EU agriculture to societal demands on food and health, including safe, nutritious and sustainable food, as well as animal welfare Antimicrobial resistance (AMR) is a priority area for the Farm to Fork strategy. In Finland, all veterinary medicinal products (VMPs), that contain antimicrobials, are prescription-only medicines, which are available either from pharmacies on veterinarian prescription or directly from veterinarians. Veterinarians are allowed to dispense medicines for the treatment of animals under their care. The tenth ESVAC Report in 2020 states that the use of VMPs in Finland with 18.7 mg/PCU (2018) is well below the EU average of 118.3 mg/PCU CL . Medicated feeds may either be produced by feed mills or imported into Finland, but always require a prescription from a veterinarian. Production and imports of medicated feeds must be reported to the Finnish Food Authority in accordance with the Decree on Medicated Feeds (10/EEO/2008). Animal welfare is another priority area for the Farm to Fork strategy, and essential for the sustainability of food systems. It is critical, therefore, that Finland devotes adequate resources to implementing EU rules in the above areas. As regards implementation of the EU legislation, the Finnish competent authority has a strategic approach to enforcement of the EU requirements, makes efficient use of resources and supports a high degree of consistency in inspections. The competent authority has also established certain animal welfare indicators in its official controls CLI . Ensuring the safety and proper use of pesticides and its controls on their use is integral to sustainable food production. Figures published by EUROSTAT show an upward trend for HRI 1 indicating the use and risks of pesticides (plus 44%) for 2011-2018, the highest among Member States and compared to minus 17% EU average. However, this trend is due to the use of urea in forestry CLII with a decreased trend for the indicator in agriculture CLIII . Finland will need to meet the Green Deal targets against this background. Finland has very high overweight and obesity rates CLIV and has a high burden from non-communicable diseases due to dietary risk factors expressed as disability-adjusted life year (DALYs) per 100,000 population attributable to diet CLV , which are influenced by a number of dietary factors. Furthermore, Finland has a low consumption of fruits and vegetables CLVI . Efforts should focus on shifting towards healthy sustainable diets, in line with national recommendations in order to contribute to reducing overweight and obesity rates and the incidence of non-communicable diseases while simultaneously improving the overall environmental impact of the food system. This would include focus on moving to a more plant based diet with less red meat and more fruits and vegetables, whole grains, legumes, nuts and seeds. HRI 1 in Finland HRI 1 for EU-27 EU-27 Sales in mg/PCU in Finland Harmonised Risk Indicator 1 for pesticides in Finland (2011-2013 = 100) Sales of veterinary antimicrobial agents marketed mainly for food-producing animals in Finland The Finnish waste prevention programme (2017-2023) CLVII gives some attention to food loss and waste occurring at the primary production level and the early stages of the supply chain. Further efforts are expected in the upcoming national food waste prevention programme, as required by Article 29(2a) of the Waste Framework Directive 2008/98/EC. Source: DG AGRI after ESVAC, Tenth ESVAC Report (2020) Source: EUROSTAT [aei_hri] 2.10 Cross-cutting objective on knowledge, innovation and digitalisation Agricultural training of farm managers below 35 years (left) and total farm manager population (right) in Finland Basic training EU average Full training EU average Managers with basic agricultural training Managers with full agricultural training Finland has been investing in knowledge and innovation with an aim to be a leading innovative country CLVIII . Finland ranks amongst the best in various international rankings measuring innovations CLIX and education CLX Finland scores also highest in the Digital Economy and Society Index (DESI) 2020 of the European Commission CLXI . Finnish farmers have a higher level of education than the EU average. In 2016, 45% of the total farm managers attained basic or full agricultural training. This share, however, decreased compared to 2013. The difference between EU and Finland is bigger in the group with at least basic level of agricultural training (34.4% compared to 22.7% in EU-27), whereas compared to the EU, the share of farmers that attained full agricultural training CLXII is almost similar to the EU-average (11.4% compared to 9%, 2016) CLXIII . Whereas in Finland the share of farm managers below 35 years of age with at least a basic level of agricultural training (50%) is higher than the share of total farm managers (45%), it should be noted that the share of 'young' farm managers with full agricultural training in Finland is lower compared to the EU average CLXIV [see section 2.7]. Source: EUROSTAT [ ef_mp_training ] During the current programming period, several European Innovation Partnership (EIP) Operational groups were set up in Finland focussing on various aspects of cereal production and storage, cattle feed, forestry and digitalisation (10 EIP groups in total) CLXV . The budget programmed on training, advice and cooperation projects (EIP) in relation to the total public spending under EAFRD is slightly higher than the EU 28 average, but also decreased during the programming period CLXVI . While Finland has a high coverage of mobile broadband subscriptions, CLXVII one of the highest 4G coverages CLXVIII , including the rural mobile 4G broadband coverage CLXIX and the share of individuals with at least basic digital skills in rural areas CLXX tackling the NGA broadband coverage in rural areas (below EU average) remains a challenge. The rural NGA coverage/availability is 9.12% in households in 2019 while the EU average is 59.3% CLXXI . The lack of incentive for market players to invest in the sparsely populated areas is evident. Finnish AKIS is strong but relatively fragmented CLXXII . As regards advisers, in January 2019, 765 farm advisers and 199 service provider organisations were registered in the farm adviser register of the Finnish Food Authority CLXXIII . In 2019, a major part of advice as given under the RDP 2014-2020 concerned animal welfare. CLXXIV Farmers have been mainly satisfied with the provided under the RDP 2014-2020. In the future programming period the research and advice should be better interlinked in order to disseminate faster new information CLXXV . The National Rural Network (NRN) is active and well organised in Finland. Numerous events are taking place with different themes. Network is positively considered by the persons working on the implementation of the RDP CLXXVI .