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 EUROPEAN COMMISSION 
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SEC(2011) 1154 final/2 
  
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COMMISSION STAFF WORKING PAPER 
EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 
 
Common Agricultural Policy towards 2020 
{COM(2011) 625 final} 
{COM(2011) 626 final} 
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{COM(2011) 628 final} 
{COM(2011) 629 final} 
{SEC(2011) 1153 final}  
 
EN 2   EN Agriculture is at a crossroads and in th e headlines: EU agriculture and its Common 
Agricultural Policy (CAP) are no exception. Challenges, impacts and solutions worldwide vary, but a common theme is also em erging: sustainability is at the core of 
solutions. This is why the overarching objective for the future CAP should be sustainable competitiveness to achieve an economically viable food production sector, in tandem 
with sustainable management of the EU's natural land-based resources. 
Previous reforms of the CAP were mainly dr iven by the need to respond to challenges 
that were primarily endogenous  to agriculture, from huge su rpluses to trade agreements 
or food safety crises. They have served the EU well both in the domestic and in the international front. But many of the challenge s EU agriculture faces  today are driven by 
factors beyond its control, and requ ire much broader policy responses. 
The future CAP should no longer be a policy th at addresses the activity of a small, albeit 
essential, segment of the EU economy, but one that impacts on more than half of the EU 
territory and all of EU consumers, and is of  strategic importance for food security and 
safety, the environment, climate change and te rritorial balance. This would also enable 
the CAP to enhance its contribution to th e Europe 2020 strategy. What such a policy 
direction would imply is the focus of this report.  
1. P
ROBLEM DEFINITION  
Over the last two decades, the CAP has underg one a substantial reform process, which 
reflects the changing societal concerns related notably to the environment, food quality 
and safety, territorial balance, as well as to the evolving needs of the EU economy. As a 
result of this process, the CAP provides t oday the general framework that allows the 
policy to address competitiveness and sustaina bility challenges of agriculture and rural 
areas across the EU territory. This framew ork takes the form of two complementary 
pillars.1 
Pillar I includes instruments related to the functioning of agricultural markets and the 
food supply chain (Council Regulation (EC) No 1234/2007) and to direct payments 
(Council Regulation (EC) No 73/2009) conditional upon statutory management requirements and good agricultural and environmental conditions.
2 Combined, these 
measures provide a fundamental layer of support to EU farmers, creating the basis for keeping sustainable farming in  place throughout the EU. Pillar  I measures are mandatory 
for Member States and, with very few exceptio ns, there is no co-financing. This ensures 
the application of a common po licy within the Single Market, monitored by an integrated 
administration and control system (IACS). 
Pillar II – rural development policy (Council  Regulation (EC) No 1698/2005) - includes 
measures that aim at improving the competitiv eness of the agriculture sector, delivering 
specific environmental public goods and prom oting the diversifi cation of economic 
                                                
 
1 For detailed characteristics of CAP instruments and their evolution see a series of Policy briefs of 
DG AGRI http://ec.europa.eu/agriculture/ana lysis/perspec/app-briefs/index_en.htm.  
2 As defined in Annexes II and III of the Regulation (EC) No 73/2009. 
 
EN 3   EN activity and quality of life in rural area s. These measures are largely voluntary, 
contractual in nature, co-finan ced and delivered within a st rategic framework which links 
policy action to European, nationa l, regional and local needs. 
The above framework responded to the challeng es EU agriculture faced during the past 
two decades. However, for the policy to re main relevant, the framework under which it 
functions has to prove itself capable also to address the main challenges which EU 
agriculture is expected to face in the cu rrent decade: economic, environmental and 
climate change pressures as well as the territorial aspects of the policy. 
In the economic front, agriculture faces today a global deterioration in its terms of trade. 
In recent years in particular, this has been more pronounced. During the 2004-2010 
period, the average level of world agricult ural prices increased by 50% from its 
corresponding level in 1986- 2003; by comparison, energy prices jumped by 220% and 
fertiliser prices by 150%, while exhibiting at the same time the highest degree of 
volatility of the past three decades. 
Stable higher prices could provide clear ma rket signals to the sector. However, high 
volatility, the slowdown in  factor productivity growth (land,  energy, fertiliser, labour), 
the uneven and asymmetric transmission of price changes in the food supply chain and 
the declining share of agriculture in the va lue added of the chain are expected to put 
additional pressure on farm profitability in th e EU, and require substa ntial investment in 
more productive methods for the sector to adjust in a sustainable manner. 
In the environmental front, the main drivers af fecting the environmental sustainability of 
agriculture relate to intens ification of production in some  areas with abandonment and 
under management of land in others, as well as changing land use patterns and 
agricultural and forestry practices. The CAP plays an important role in maintaining 
sustainable agriculture across the EU territo ry and in promoting environmentally and 
climate friendly practices. 
The environmental sustainability of farming is  related to farmer decisions about whether 
to produce and what and how to produce, while market prices do not reflect the 
externalities linked to ag ricultural produc tion and in many cases the supply of 
environmental public goods is insufficient. Th is is particularly important as modern 
farming puts many pressures on the environmen t. By contrast, certain farming systems 
and practices, such as extensive livestock a nd mixed systems, traditional permanent crop 
systems or organic farming, ar e particularly favourable for the environment and climate 
objectives. 
The CAP should respond to these challenges by better integrating its objectives with 
other EU policies and adjustin g its measures accordingly. The EU biodiversity strategy to 
2020 requires further integration of biodiversit y in key sectors such as agriculture and 
forestry in order to meet the ambitious EU headline target. The Europe 2020 Strategy 
establishes the reduction of gr eenhouse gases as one of the EU's five headline targets. In 
the Climate and Energy Package, the EU also committed to increase renewable energy uses in order to reach a 20% share in total EU final energy consumption in 2020. 
Finally, with respect to social challenges, the primary sector stil l represents 4.9% of 
value added (and more, if related (food)  industry is considered) and 15.7% of 
 
EN 4   EN employment in predominantly rural areas. This is where the role of agriculture can be 
particularly important, not only directly but also indirectly - thr ough the generation of 
additional economic activities with strong multip lier effects, most not ably with the food 
processing, hotels and catering, and trade sectors.  These sectors in turn have further high 
links with the rest of the rural economy, t hus helping among others remote rural areas, 
which have the most limited access to general services, such as schools, primary health care and banking. 
1.1. The EU value added of the CAP 
The added value of the CAP is in its ability to: 
– respond effectively to transnational goals and cross-border challenges such as 
mitigating climate change, enhancing biodi versity and contributing to economic and 
social cohesion, the development of the Single Market and the EU trade policy, 
through a common set of rules, principles and objectives; 
– ensure a more efficient use of the budgetary resources of the Member States vis-à-vis 
the coexistence of nationa l policies (e.g. compared to a single common policy, 27 
different policies would have been more co stly and certainly less effective inducing 
different levels of intervention, a major risk for distortion of competition); 
– help to develop a competitive and balanced European agriculture from an 
environmental and territorial point of vi ew, which contributes  positively to the 
competitiveness of the EU food supply chain and trade, and enhance the cohesion of 
rural areas by encouraging initiatives fa vouring their economic and social growth. 
2. T
HE MAIN POLICY OBJECTIVES OF CAP  REFORM  
For the CAP to address the economic, environmental, climate change and territorial 
challenges, the objectives are to adapt th e current CAP framework along the following 
lines: 
(1) Gearing the CAP measures towards increasing the pr oductivity and the 
competitiveness of the agricultural sector by:  
- improving the functioning of the advi sory system and creating networks 
(of farmers, advisors, researchers,  food operators, consumers etc.) for 
knowledge creation and transfer and favouring innovative approaches in 
granting funding for projects for rural development measures 
- encouraging pro-competitive joint acti on among farmers in order to foster 
efficient use of resources, pr oduct development and marketing 
- provide incentives to use risk management instruments and active 
prevention strategies 
(2) Improving the environmental and climate change performance of the CAP by: 
 
EN 5   EN - increasing the number of agricultu ral areas which ar e under agricultural 
practices providing environmental and climate action benefits and 
encouraging the take-up of more a dvanced agri-environmental measures 
by Member States and farmers; 
(3) Enhancing the effectiveness and efficiency of the policy by: 
- rebalancing the direct payment suppor t to better reflect income support 
objective and environmental performance 
- reducing the disparities in direct payment support levels between Member 
States and farmers. 
3. POLICY OPTIONS  
Following a wide public debate and a series  of own initiative positions from EU 
institutions and particular Me mber States, three coherent policy scenarios (adjustment, 
integration and re-focus) have been formulat ed to feed the decision-making process by 
exploring the continuum of po ssible policy evolutions in a holistic approach that also 
looks at the potential interactions and synergies betw een the main lines of policy 
intervention, while every element is i ndividually assessed in specific annexes. 
• The adjustment scenario focuses on adjusting the CAP in a limited way by 
emphasizing those elements that work well in today's CAP and addressing the major 
shortcomings of the current policy fr amework without making any fundamental 
changes to the policy. 
• The integration scenario has the purpose of  improving the targeting of CAP support to 
the objectives of the policy, especially by better integrating the contributions of 
different policy elements, which includes th e introduction of new elements into the 
policy framework as well as substantial changes to structure of the policy. 
• The re-focus scenario narrows down the focus of policy intervention of the CAP to 
environmental and climate change aspects wh ile it is assumed that production capacity 
can be maintained without support through the reliance on market signals and the 
objective of contributing to the vitality of ru ral areas and territori al balance would be 
met by other Community policies. 
These scenarios are cross-cutting approaches that each address the three broad policy 
objectives of the future CAP described in the previous section. They do, however, place 
different weights on the thre e objectives and are based, to a certain extent, on different 
approaches with respect to the necessity of policy intervention. 
In doing so, these scenarios also address in di fferent ways the essential risk that stems 
from the absence of policy intervention, market  failures, and the co nsequent risk that 
stems from wrongly targeted policy interventio n, policy failure. The latter risk formed 
the basis for discarding other policy scenar ios that were presented during the public 
consultation. 
 
EN 6   EN With respect to the analysis of the effects of  these scenarios, the reference is the status 
quo, which does not address the policy shortcom ings identified in problem definition and 
the counterfactual scenario of  having no policy at all, which is expected to lead to 
significant income and environmental problems.3 
The scenarios are presented on the basis of im plied changes in the three main lines of 
policy intervention, namely market meas ures (Council Regulation (EC) No 1234/2007), 
direct payments (Council Regulation (EC) No 73/2009) and rural development policy 
(Council Regulation (EC) No 1698/2005). 
Table 1: Outline of main policy option s by scenario and policy instrument 
 Market instruments 
(Council Regulation 
(EC) No 1234/2007) Direct Payments 
(Council Regulation 
(EC) No 73/2009) Rural Development 
(Council Regulation (EC) 
No 1698/2005) 
Adjustment: 
Emphasizing the 
CAP's achievements and addressing major 
shortcomings Streamlining and 
simplification of existing instruments 
Improving farmers' 
cooperation within 
competition rules. Redistribution; 
enhanced cross compliance Moderate increase in budget; 
used for competitiveness/innovation or environment 
Integration: 
Improving the 
targeting of the CAP to its objectives Streamlining and 
simplification of 
existing instruments 
Focus on food chain 
and improved bargaining power of farmers (3 sub-
options) Redistribution; new 
direct payment 
architecture; "greening" 
Enhanced cross 
compliance; capping; small farmer scheme; young farmer scheme Redistribution between 
Member States 
Innovation, climate change 
and environment as guiding principles; 
Reinforced strategic 
targeting and common 
strategic framework with 
other funds 
Re-focus: 
Limiting the scope 
of CAP interventions to environmental 
aspects Abolished Phased-out Substantially increased 
funding; focus on climate change and environment 
 
                                                 
3 http://ec.europa.eu/agriculture/analysis/external/scenar2020ii/index_en.htm 
 
EN 7   EN 4. ASSESSING THE IMPACT OF ALTERNATIVE POLICY OPTIONS  
The adjustment  scenario assumes the continuation of the principles of the current policy 
framework based on market-orientation. It is expected to allow farmers, prompted by 
market signals, to make better use of ava ilable policy instruments to increase their 
competitiveness, while redistributed direct payments among Member States would shield 
them from excessive income fluctuations in a more effective and equitable manner throughout the EU. Redistribution of direct payments within  Member States (regional 
model) would allow higher support for more environmentally beneficial agricultural 
areas and limit land abandonment, but increased  economic pressure would likely drive 
towards intensification production in the most fertile regions. Rural development 
measures would continue to address wider rura l issues, but the role of agriculture in the 
economy, employment and growth or  rural areas would diminish. 
The integration  scenario proposes an enhanced policy framework geared towards 
support for competitiveness, sustainable deve lopment and innovation in the sector and 
aimed at fostering conditions under which farm ers, either individually or collectively, 
would be better able to face upcoming econom ic and environmental challenges. Direct 
payments would provide a stable income, lead ing not only to more  balanced, effective 
and equitable redistribution but actively targeting certai n beneficiaries (small-scale 
holders, farmers in regions with natural constrai nts, sectors at risk, new entrants etc.). A 
greening component would also promote certain basic environmental practices 
throughout the EU, focusing principally on those farms, often most competitive, which have moved away from such practices as we ll as those which are c onsidering abandoning 
them in the light of current economic pressures. 
In re-focus  scenario, a phasing out of direct paymen ts would lead to strong restructuring 
in the sector and much larger and more cap ital intensive farms. Pr oduction intensification 
in the most fertile regions and land abandonm ent in less advantageous areas would have 
negative environmental consequences. Fo cusing policy on rural development-type 
environmental measures would alleviate th ese problems, but would not contribute to 
enhancing the sustainability of agriculture over the whol e EU. Phasing out of direct 
payments would lead to failure of many ag ricultural holdings and would put additional 
pressure on the viability of rural area s with higher unemployment and migration. 
4.1. Administrative burden  
Certain components of a new model for direct  payments, such as capping, the definition 
of "active farmers" and the "greening" coul d potentially be burde nsome with additional 
control requirements. On the other hand, the small farmer scheme would substantially 
reduce the administrative demands from the application for and granting of direct 
payments to such beneficiaries. 
The removal of the current overlap between agri-environmental acti ons available under 
specific support in the Pillar I and in rural development and a uniform solution for coupled support would lead to simplifica tion. However, the introduction of a possible 
approval process by the Commission could be more burdensome, mainly for the Commission services. 
 
EN 8   EN Improving the targeting of payments to active farmers would require careful fine tuning 
of definitions in cooperation with Member St ates and selecting criteria at Member State 
level to be integrated into th e IACS register. This could requi re substantial administrative 
effort for them and certainly for farmers to  prove eligibility, as they would have to 
provide supplementary detailed information and possibly submit accompanying documents with their application. 
4.2. International dimension 
The successive reforms of the CAP have dimini shed substantially the distortive impact of 
the policy on international markets. All the analysed scenarios should have minimal 
effects on global markets (including on deve loping countries). This  is the combined 
result of previous CAP reforms and the presen t and expected future level of world prices 
that have turned the EU into a price-taker in agricultural markets. 
4.3. Comparison of options 
All three options aim at a more competitive,  sustainable and resilient agriculture in 
vibrant rural areas, and thus seek to bette r align the CAP to Europe 2020, notably in 
terms of resource efficiency. To this end, it will be essential to improve agricultural productivity through research, knowledge transf er and generally promoting collaborative 
approaches. Hence the importance of innovation, including the upcoming European 
Innovation Partnership on agricu ltural productivity and sustainability, as a basic pre-
condition that cuts across policy options. This cross-cutting element is  present in all three 
options, and therefore not part of the comparison below. 
In terms of budget, it is clearly the refocus  option that would in the end place the lowest 
demands on the EU budget since direct pa yments would be phased out. This option 
places priority on market orientation, a nd thus on the acceleration of structural 
adjustment in the sector towards greater prof itability of enterprise s. This option would 
also expose the sector to great er risks in terms of  market stability in the absence of 
appropriate safety nets and ri sk management tools, as well as the risk of decreased 
spending on innovation due to the pressure on farm income. Structural adjustment under 
the terms of the refocus option would come at a significant social and environmental 
cost. Income would fall by 25% and production would concentrate in the most profitable 
areas and sectors. 
Even if spending on better targeted envir onmental measures under rural development 
doubles, this would not be able to achieve sustainable land mana gement across the EU 
territory, as the policy would lose the leverage  of direct payments coupled with the cross 
compliance requirements. In addition, the negati ve social consequen ces particularly in 
areas and sectors that are most dependent on direct payments (e.g. large field crops and 
dairy farms, extensive beef and sheep and goat farms) would be such that the temporary use of axis 1 measures to support restructur ing would not be able to make up for losses 
from the phasing out of direct payments. The absence of axis 3 measures could threaten 
the rural fabric, especially in diversified ru ral economies, putting the territorial balance at 
risk. These results are not ne w, but echo similar results in the two prospective Scenar 
2020 studies. 
 
EN 9   EN At the other end of the spectrum, the  adjustment option  would best allow for policy 
continuity with limited but tangible improvements both in agricultural competitiveness and environmental performance, through the re distribution of direct  payments, enhanced 
cross compliance, simplification and streamlin ing of market instruments and support for 
cooperative approaches, as well as the channeling of additional resources into new challenges under rural development. The main new element in the adjustment option is the rebalancing of direct payments among and within Member States, for which different 
options have been analysed. The question is how to ensure a more equitable distribution 
and a better targeted support in line with the policy objectives while avoiding major 
disturbances. The convergence towards a flatte r rate would particularly benefit those 
Member States that are currently significantly below the EU average. 
The move towards a regional model (together with the inclusion of naked land) would 
rebalance support between farm types, especi ally in Member States currently using a 
historical model, mostly towards more exte nsive production systems. In fact, grazing 
livestock, wine and horticulture would benef it, while field crops, mixed and milk farms 
would lose from such redistribution. 
There are however serious doubts as to whether the adjustment option can adequately 
address the important climate and environmen tal challenges in the future, thereby also 
underpinning the sustainability of agri culture itself in the longer term. 
The integration option  takes the need to green the CAP a step further with the 
"greening" component of dir ect payments. The challenge is  how to design such greening 
so as to reap considerable environmental and climate change benefits and assure the 
sustainable use of natural re sources without undermining te rritorial balance throughout 
the EU as well as the long-term competitiveness of the agricultural sector and unduly complicating the management of direct payments. 
The analysis shows that this is possible although some admi nistrative burden cannot be 
avoided. The resulting negative impact on income remains moderate on average (but 
varies significantly between Member States, regions and farming systems); this negative 
impact would be exacerbated with a more ambitious crop diversif ication measure, but 
alleviated in the case of more ambitious pr ovisions for ecological focus areas, due to the 
market impact. 
The greening component would also free up fund s in rural development to be deployed 
towards more sophisticated agri-environment and climate focused measures. The combined effect of environmental and LF A measures in both pillars could thus 
significantly enhance the CAP contribution to the provision of public goods, though at 
the cost of additional admini strative efforts to manage a more complex structure and 
avoid duplication of measures. Provided that th e right balance is struck in the design of 
measures and their implementation by Member States, this option best safeguards territorial balance by addressing the long term  sustainability of agriculture and rural 
areas. 
A significant change in rural development policy is  also part of th e integration option. 
The result should be a more effective policy th at delivers results in line with the Europe 
2020 priorities under a common framework with  the other EU funds, provided that the 
possibilities are used well by Member States and regions at the le vel of programming and 
 
EN 10   EN that the closer coordination with the other funds does not remove the synergies with 
Pillar I. The distribution of rural development support would also better reflect the policy 
objectives while taking into acc ount the current distribution.  
Finally, better targeting of support by means of the different components of direct 
payments (in particular capping, the small farmer scheme and the better definition of "active farmers") can help ach ieve more effectiveness in terms of income support and 
provision of environmental public goods. For the food supply chain, th ere is a balance to 
be found between improving the bargaining  power of farmers and assuring the 
competitiveness and improved performance of the whole chain.  
The integration option would maximize the EU value added
 by best maintaining a 
sustainable agriculture throughout  the EU, addressing important cross-border issues such 
as climate change and reinforcing solidar ity among Member Stat es; this would be 
followed by adjustment and then refocus.  
In terms of cost-effectiveness , the integration option would make the best use of the 
budget by maximizing EU value added. On the other hand, the adjustment option would place equally important demands on the EU budget without the same ambition in terms 
of results, while the refocus option would produce budget savings but at the same time 
significantly reduce the scope a nd added value of EU action.  
Table 1: Comparison of options by object ive, EU value added and cost effectiveness 
 
Adjustment Integration Re-focus 
Viable food production ++ +++ + 
Sustainable management of 
natural resources and climate action + +++ ++ 
Balanced territorial development ++ +++ + 
EU value added ++ +++ + 
Cost effectiveness + ++ + 
On the basis of the above comparison, the pr eferred option is the integration option, 
followed by the adjustment option and fina lly the refocus option. This assessment 
coincides with the preferences expressed in the public cons ultation (see Annex 9). While 
the adjustment option may not be sufficiently  targeted and the refocus option too risky, 
the integration option appears to strike the right balance in progressively steering the 
CAP towards the Europe 2020 objectives, and th is balance will also need to be found in 
the implementation of the different elements. 
 
EN 11   EN 5. MONITORING AND EVALUATION OF COSTS , BENEFITS AND ACHIEVEMENT OF 
THE DESIRED EFFECTS  
In the future, it will be important to rein force monitoring and ev aluation for the CAP, 
including new elements of the design of th e policy introduced in Pillar I, such as 
greening. The future monitoring and evaluatio n system for rural development should also 
better reflect the reinforced strategic a pproach with common indicators based on 
objectives and priorities and facilitate th e use of evaluation as a management tool 
throughout the programming period. 
In addition, monitoring and evaluation for both pillars should be brought together into a 
common framework to measure the performan ce of the CAP as a whole within Europe 
2020. To this end, a process is under way for the develo pment of a common set of 
indicators linked to th e policy objectives, whic h would consist of:  
– impact indicators linked to general objectives; 
– result indicators linked to specific objectives; 
– output indicators linked to expendi ture under different instruments. 
In addition, to address data gaps, for instan ce on sustainability i ndicators, it is also 
envisaged to launch a pilot project that would create a process which, by filling existing 
data gaps of indicators at farm level, w ould allow the better mon itoring and evaluation of 
implemented reforms.