EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 21.4.2009 
SEC(2009) 451 
  
COMMISSION STAFF WORKING DOCUMENT 
accompanying the 
  
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Towards a better targeting of the aid to farmers in areas with natural handicaps 
   
Impact Assessment Summary  
  
 
{COM(2009) 161 final} 
{SEC(2009) 449} {SEC(2009) 450} 
 
EN 2   EN COMMISSION STAFF WORKING DOCUMENT 
Impact Assessment Summary  
Towards a better targeting of the aid to farmers in areas with natural handicaps 
1. PROBLEM DEFINITION  
In place since 1975, the aid scheme to farmer s in Less Favoured Areas (LFA) provides a 
mechanism for supporting the continuation of farm ing and thus maintaining the countryside in 
mountain areas, in less favoured areas other than mountain (the so-called 'intermediate LFAs' ) 
and in areas affected by specific handicaps.  
The intervention logic of LFA payments - now called Natural Handicap Payments (NHP) - 
was revised in 2005, in order to improve th eir contribution to the EU Sustainable 
Development Strategy, and following the discrepa ncies flagged up by the Court of Auditors in 
2003, namely as concerns the delimitation of intermediate LFAs.  
However the new legal framework for NHP remains to be completed since in 2005 the 
Council did not reach an agreement on a po ssible Community wide system for a new 
classification of areas with natural handicap s other than those which are mountainous in 
character and than those with specific handicap s, in line with the new policy objectives. The 
scope of the current review exer cise is therefore to complete the process starte d in 2005, while 
not precluding future developments in policy design for beyond 2013. 
The problems that need to be tackled are: 
• The inconsistencies of the current delimitation of intermediate LFAs, partially based on 
socio-economic indicators, with the revised objectives of the NHP scheme, focussing on 
land management instead that on socio-economic objectives;  
• The extreme diversity of the criteria us ed by the Member States for designating 
intermediate LFAs, implying a lack of transparen cy that might lead to unequal treatment of 
beneficiaries;  
• The insufficient targeting of the aid on the areas most in danger of land abandonment.  
It is noted that Article 37 of Regulation (EC) No 1698/20051 introduced a change as far as 
concerns the payment calculation. This provisi on, that will enter in force when the LFA 
review will be concluded should make a s ubstantial contribution to enhancing the 
effectiveness of the aid.  
                                                 
1 Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European 
Agricultural Fund for Rural Development (EAFRD) - OJ L 277, 21.10.2005, p. 1.  
 
EN 3   EN 2. SUBSIDIARITY  
The current exercise is not a major reform pro cess, but the updating of an existing scheme set 
within the Common Agricultural Policy. Its scope is limited to adapting the LFA delimitation and payment system in line with the polic y objectives defined by the Council in 2005.  
A simplification potential is implied in the obj ectives of the revision, as a consequence of 
improved transparency of the area delim itation through common objective criteria.  
3. O
BJECTIVES  
In response to the problems listed ab ove, the aims of the revision are: 
• To adapt the intermediate LFA delimitation a nd payment system in line with the land 
management approach decided in 2005; 
• To improve the transparency and objectivity  of the area delimitati on throughout the EU; 
• To increase the targeting and the effectiveness of the aid in areas wh ere the danger of land 
abandonment is greatest. 
Data limits do not allow the Commission to pr esent a legislative proposal underpinned by 
thorough analysis of a possible new delimitation system at this stage. The information 
necessary to assess the outcome of a new delimitation approach at detailed scale is only available – or can be collected – at national level. It is therefor e envisaged to pave the way for 
a subsequent legislative proposal  by the following three steps: 
(1) Adoption of a Commission Comm unication describing the stat e of play and invitation 
to the Member States to simulate the application on their territory of possible common 
criteria for delimiting areas with natural handicaps other than those which are 
mountainous in character and than those with specific handicaps; 
(2) Transmission of the Member States' simula tions to the Commission in autumn 2009; 
(3) Finalisation of the impact assessment and el aboration of the legi slative proposal as 
soon as possible, following reception of Member States' simulations.  
4. P
OLICY OPTIONS  
Four review options were identified and submitted to public consultation on 22 May 2008:  
Option 1: Status Quo+  
Area designation 
In this scenario the Member States would be asked to remove the so cio-economic indicators 
currently in use for delimiting LFAs and to identify the criteria they deem the most 
appropriate for defining natural handicaps aff ecting agriculture. The Member States using 
index systems might be allowed to contin ue using them, having removed the socio-
economic indicators embedded into these syst ems. The other Member States would be 
 
EN 4   EN required to develop a system of soil and climate criteria adapted to their situation. The 
Commission would have to assess the appropria teness of the system used by each Member 
State in relation to the obj ectives of the NHP scheme.  
Eligibility Rules 
The Member States would have the possibility to fix eligibility rules at farm level in order to 
target the aid to specific farming systems in  the framework of their RDP programmes. The 
Commission would have to assess that such cr iteria are objective, non discriminatory and 
consistent with the objectives of the measure and the international commitments of the EU.   
Options 2, 3 and 4 are all bui lt upon the same area delim itation method, based on eight 
common bio-physical indicators identified by a pa nel of soil, climate and land evaluation 
experts co-ordinated by the Joint Research Cent re. The definition and the application of the 
criteria are discussed in the Communicati on that this Executive Summary accompanies. 
Option 2: Common Criteria 
Area designation 
Intermediate LFAs would be designated by usin g the common bio-physic al criteria listed in 
the annex to the Communication. 
Eligibility Rules 
The Member States would have the possibility, in the framework of their rural development 
programmes, to fix eligib ility rules at farm level in order to  target the aid to specific farming 
systems. The Commission would have to asse ss that such criteria  are objective, non 
discriminatory, consistent with the objectives  of the measure and with the international 
commitments of the EU.  
 
Option 3: Eligibility Rules 
Area designation 
Intermediate LFAs would be designated by usin g the common bio-physic al criteria listed in 
the annex to the Communication. 
Eligibility Rules 
The Member States would be required to fix ap propriate rules in order to target the support 
to extensive farming making a positive contribution to sustainable land management by 
excluding intensive farming systems from the aid. The Community legislation would 
provide a basic framework for the eligibility crit eria indicating the principles and the type of 
criteria to be used for excl uding intensive farming systems (e.g. maximum livestock density, 
average yield, standard gross margin). On th is basis the Member States would choose the 
most appropriate indicators and set the relevant thresholds within their Rural Development 
Programmes. The eligibility rules should be obj ective, non discriminatory, consistent with 
the objectives of the measure and with the international commitments of the EU.   
 
 
EN 5   EN Option 4: High Nature Value 
Area designation 
This option would imply a more ta rgeted delimitation of areas: only areas classified as High 
Nature Value (HNV) farmland within areas a ffected by natural handicaps would qualify as 
LFAs.  
The delimitation of intermediate LFAs would first  be operated according to the same 
method used for options 2 and 3, on the ba sis of the common bio-physical. The areas 
resulting from this first delimitation would subse quently be further reduc ed in order to cover 
only the areas classified as HNV farmland, defined as those areas in Europe where 
agriculture is a major (usually the dominant) land use and where agriculture supports or is 
associated with either a high species and habitat diversity, or  the presence of species of 
European, and/or national, and/ or regional concern, or both.  
Eligibility Rules 
Member States would have the possibility to fix eligibility rules according to transparent, 
objective and non discriminatory criteria cons istent with the objectives of the measure.   
In all the options payments would be calculated on the basis of the additional costs and 
income foregone related to the handicap in the areas concerned, respecting minimum and 
maximum amounts fixed by the Council. 
5. ASSESSMENT OF IMPACTS  
5.1. Data limits and difficulties in assessing Option 4  
As mentioned, this analysis is limited by the fa ct that appropriate data are only available at 
national level. At this stage, the assessment can  only provide indications and extrapolations of 
the types of impacts expected from the review ; the further progress of  the review exercise 
relies on the simulations to be  done by the Member States.  
Significant and objective obstacles exist for the assessment of option 4 'High Nature Value'. 
The process of identification of HNV indi cators within the Common Monitoring and 
Evaluation Framework for Rural Development is not enough developed at this stage and is 
progressing at very diverse pace in the different  Member States. In these circumstances, it is 
extremely difficult to establish an outline framework joining natural handicap and HNV 
indicators that could be used as a basis for the assessment.  
In the absence of sufficiently clear indicatio ns on the HNV indicators , it seemed therefore 
appropriate not to consider Option 4 for the shor t term, without discardi ng its plausibility for 
the long-term perspective.  
 
EN 6   EN 5.2. Transparency and targeting of the aid 
The Status Quo+ option would la rgely maintain the lack of transparency, objectivity and 
scientific ground for the classi fication criteria, and the dange r of unequal treatment of 
beneficiaries the current system of delimitation has been criticised for. 
Both Option 2 and 3 would improve the transparen cy and accountability of  targeting due to a 
common delimitation system. The absence of a co mmon approach for further targeting the aid 
through eligibility rules under Op tion 2 poses the threat of support not being sufficiently 
concentrated; however, compared to Option 3 it provides more opportunity to respond to local needs.  
5.3. Socio-economic impacts  
The main type of socio-economic impact expect ed from the LFA review regards farm income 
in the areas concerned by the new delimitation and payment system. The information available at this stage does not allow identifyi ng the areas that would be  affected by a change 
of LFA status under th e options identified.  
In synthesis, it can be considered that the negati ve impact of a loss of LFA status for an area 
following the application of new delimitation cr iteria would vary according to the importance 
of the LFA payment in the farm income. In this regard, Status Quo+
 appears to be the option 
with the most limited impact, as it does not enta il significant changes compared to the current 
delimitation. 
Under Options 2 and 3  changes in the area delimitation affecting farms' income both 
negatively and positively are possibl e, but cannot be assessed at this stage because of the lack 
of appropriate data. In any case, the lo ss of the LFA payment would have extreme 
consequences and lead to a negative income situ ation (in terms of farm net value added) in a 
limited number of cases (3% of total beneficiaries). 
The introduction of a common framework for the national eligibility criteria envisaged in 
Option 3 , would concentrate the aid on extensive farming systems which are less profitable 
and present a higher risk of land abandonment. It  is thus likely to have a positive impact on 
the farms with low income and a high degree of dependency on the LFA aid.  
– It should also be mentioned that  in a number of Member Stat es, farmers can benefit from a 
series of advantages (e.g. lower taxes base d on national legislation) because they are 
located in LFA, even if they are not LFA beneficiaries stricto sensu . A change in LFA 
status for these areas can have considerab le effects on farms' income, although these 
cannot be assessed at EU level.  
– At the present stage of the analysis it is not known whether and where there would be 
farmers who will no longer benefit from LFA support as a result of the annulment of the 
socio-economic criteria. The probability and the dimension of such cases should be 
assessed on the basis of the simulations that should be provided by the Member States in 
autumn 2009. In that context, it should be considered: 
– If the other CAP measures availa ble in the region, for instance  under Axis 3 of the relevant 
Rural Development Programme, can compensate for the socio-economic handicaps up to now covered by the LFA support; 
 
EN 7   EN – Whether possible ways of ensuring a smooth transition to the new delimitation should be 
put in place.  
5.4. Viability of rural communities 
In areas where farming remains the backbon e of local economy a change in the LFA 
delimitation and/or in the payment system is likel y to have significant impacts on their overall 
development.  
Some farming communities are more vulnerabl e than others to decline because of the 
production system, limited value added, the size of holdings a nd a peripheral location. In 
several cases the vulnerability of the producti on system is a consequence of the natural 
conditions, therefore enhancing the targeting of th e aid to the areas most severely affected by 
natural handicaps can have positive impact s on the overall viabili ty of the area.  
In the cases where the decline is not linked to  the presence of natural handicaps, measures 
aiming at fostering the competitiveness of the agricultural sector, promoting diversification 
and setting up integrated bottom-up development strategies seem to have more chances of 
being successful than a payment compensa ting farmers for the natural handicaps.  
5.5. Environmental effects  
An area delimitation based upon a homogeneous set of bio-physic al criteria throughout the 
European Union would increase the probability  of focusing the aid on extensive farming 
systems because the area designation is unambiguously linked to natural handicaps hindering agriculture. For this reas on Options 2 and 3 are more  efficient than Option 1. 
Option 2 would leave up to the Member States  the choice of setting eligibility conditions 
linked to land management requirements. The area delimitation based on common biophysical 
criteria should direct the aid to areas pre dominantly characterised by extensive farming and 
NHP beneficiaries would have to respect cross compliance. However, the effectiveness of the 
scheme could be hampered by an insufficient targ eting of the aid, in particular in areas where 
intensive farming systems, normally associated with greater environmental risk, coexist with extensive farming systems. Under Option 2, NHP contribution to  sustainable land 
management and to the environmental targets of the EU would therefore depend on the implementation made by the Member States.  
Compared to Option 2, Option 3 in cludes further requirements in  terms of farm management 
practices and would limit NHP support to those farming systems which make a specific 
positive contribution to sustainable land manage ment. However, the payment would not cover 
the commitments going beyond the baseline but would only compensate for farmers' additional costs and income foregone related to the handicap. Option 3 appears therefore as 
the option having the highest potential to c ontribute to environmen tal objectives, provided 
that the aid scheme is implemented in harm ony with the other Axis 2 measures. A well 
balanced implementation of Opti on 3 requires on the one hand that  farmers should not be paid 
twice (under NHP and under othe r Axis 2 measures) for mee ting the same commitment and, 
on the other hand, that farmers in areas affect ed by natural handicaps are not discriminated 
against by being excluded from  agri-environment payments that would apply to farmers 
meeting similar conditio ns outside the region. 
 
EN 8   EN 6. COMPARISON OF OPTIONS  
At this stage of the review process there is no cl ear preference to be given to a specific option. 
However Status Quo+ is little responsive regardi ng the critical points that have been identified 
in relation to the current scheme and Option 4 ( HNV) cannot be implemented in the short term.  
It is envisaged to continue the review process as suggested in section 3 in order fine-tune the 
options and come to a preferen ce on the basis of the simulati on of the application of the 
common biophysical criteria ma de by the Member States.  
7. MONITORING AND EVALUATION  
The following indicators are envisaged for monitoring the payments to farmers in areas with 
handicaps other than mountain areas: 
baseline  Biodiversity : high nature value farmland and forestry 
Biodiversity : population of farmland birds  
input  Amount of public expenditure r ealised (total versus EAFRD)  
output  Number of supported holdings in areas with handicaps, other than mountain areas 
(division according to the type of handicap –wetland, hills…-) 
Agricultural land area supported (division according to the type of area and to the 
type of handicap)  
result  Areas under successful land management contributing to: 
improvement of biodiversity 
improvement of water quality 
mitigating climate change improvement of soil quality  
avoidance of marginalization and land abandonment  Common 
indicators  
impact  Reversing biodiversity decline 
Maintenance of high nature value farmland and forestry  
 
 
The following points should be stressed in the evaluation of the revised aid scheme: 
– To what extent have NHP helped in ensuring c ontinued agricultural land use in areas with 
handicaps, other than mountain areas?  
– To what extent has the scheme contribute d to maintaining or promoting sustainable 
farming systems? 
– To what extent has the scheme contributed to maintaining the countryside and improving 
the environment?