COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS The CAP towards 2020:  Meeting the food, natural resources and territorial challenges of the future
Date: 2010-11-18
Institutions: European Commission
Subjects: common agricultural policy, food safety, human nutrition, natural resources, reform of the CAP

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EUROPEAN COMMISSION 

Brussels, 18.11.2010 
COM(2010) 672 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

The CAP towards 2020: 

Meeting the food, natural resources and territorial challenges of the future 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

The CAP towards 2020: 

Meeting the food, natural resources and territorial challenges of the future 

1. 

INTRODUCTION 

The Common Agricultural Policy (CAP) is confronted with a set of challenges, some unique 
in nature, some unforeseen, that invite the EU to make a strategic choice for the long-term 
future of its agriculture and rural areas. To be effective in addressing these challenges, the 
CAP needs to operate within the context of sound economic policies and sustainable public 
finances contributing to the achievement of the objectives of the Union. 

In preparation for this Communication, the Commission organised an extensive public debate 
earlier in 2010 that concluded with a conference in July 20101. The Council discussed during 
four  successive  Presidencies  the  reform,  the  European  Parliament  (EP)  adopted  an  own-
initiative report on the post-2013 CAP2, and its link with the Europe 2020 Strategy and both 
the  Economic  and  Social  Committee  and  the  Committee  of  the  Regions  (CoR)  have  come 
forward with position papers. 

In the course of these discussions, the overwhelming majority of views expressed concurred 
that the future CAP should remain a strong common policy structured around its two pillars. 
In broad terms, the views expressed recommended the following strategic aims: 

•  To preserve the food production potential on a sustainable basis throughout the EU, so as 
to  guarantee  long-term  food  security  for  European  citizens  and  to  contribute  to  growing 
world  food  demand,  expected  by  FAO  to  increase  by  70%  by  2050.  Recent  incidents  of 
increased  market  instability,  often  exacerbated  by  climate  change,  further  highlight  these 
trends and pressures. Europe's capacity to deliver food security is an important long term 
choice for Europe which cannot be taken for granted.  

•  To  support  farming  communities  that  provide  the  European  citizens  with  quality,  value 
and diversity of food produced sustainably, in line with our environmental, water, animal 
health and welfare, plant health and public health requirements. The active management of 
natural  resources  by  farming  is  one  important  tool  to  maintain  the  rural  landscape,  to 
combat biodiversity loss and contributes to mitigate and to adapt to climate change. This is 
an essential basis for dynamic territories and long term economic viability. 

•  To maintain viable rural communities, for whom farming is an important economic activity 
creating  local  employment;  this  delivers  multiple  economic,  social,  environmental  and 

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5,600  contributions  were  received  in  the  public  debate  and  the  Conference  assembled  over  600 
participants. 
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2010-
0286&language=EN&ring=A7-2010-0204 

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territorial  benefits.  A  significant  reduction  in  local  production  would  also  have 
implications  with  regards  to  greenhouse  gases  (GHG),  characteristic  local  landscapes  as 
well as more limited choice for the consumer. 

Agriculture  is  an  integral  part  of  the  European  economy  and  society.  In  terms  of  indirect 
effects, any significant cut back in European farming activity would in turn generate losses in 
GDP and jobs in linked economic sectors – notably within the agri-food supply chain, which 
relies  on  the  EU  primary  agricultural  sector  for  high  quality,  competitive  and  reliable  raw 
material  inputs,  as  well  as  in  non-food  sectors.  Rural  activities,  from  tourism,  transport,  to 
local and public services would also be affected. Depopulation in rural areas would probably 
accelerate. There would therefore be important environmental and social consequences.  

Reform of the CAP must also continue, to promote greater competitiveness, efficient use of 
taxpayer resources and effective public policy returns European citizens expect, with regard to 
food  security,  the  environment,  climate  change  and  social  and  territorial  balance.  The 
objective  should  be  to  build  more  sustainable,  smarter  and  more  inclusive  growth  for  rural 
Europe. 

To  achieve  this,  in  line  with  the  Budget  Review  Communication3  and  with  its  market 
orientation,  the  future  CAP  should  contain  a  greener  and  more  equitably  distributed  first 
pillar  and  a  second  pillar  focussing  more  on  competitiveness  and  innovation,  climate 
change  and  the  environment.  This  would  allow  EU  agriculture  to  release  its  latent 
productivity potential, notably in the new Member States, and contribute to the Europe 2020 
objectives. Targeting support exclusively to active farmers and remunerating the collective 
services they provide to society would increase the effectiveness and efficiency of support 
and further legitimize the CAP. Ensuring controllability of measures proposed together with 
continued work on simplification of the policy are other essential elements in achieving these 
aims. All this needs to happen within the constraints of limited budgetary resources and taking 
into account the severe impact of the economic crisis on agriculture. 

2. 

THE CAP REFORM PATH 

The main objectives of the CAP set out in the Treaty of Rome have remained the same over 
the years. However, the reform path of the CAP since the early 1990s has led to a completely 
new policy structure. 

The challenges addressed relate to agriculture's productive capacity, the increasing diversity 
of  agriculture  and  rural  areas  following  successive  enlargements,  and  the  demands  by  EU 
citizens  on  the  environment,  food  safety  and  quality,  healthy  nutrition,  animal  health  and 
welfare, plant health, the preservation of the countryside, biodiversity and climate change. At 
the  same  time,  the  instruments  to  achieve  the  objectives  have  also  changed  considerably. 
Today, they are structured in two complementary pillars, with annual direct payments and 
market  measures  making  up  the  first,  multi-annual  rural  development  measures  the  second 
pillar. 

The introduction of direct payments has been a lever for consistent market-oriented reforms, 
enhancing  the  competitiveness  of  the  agricultural  sector  by  encouraging  farmers  to  adapt  to 

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The EU Budget Review - COM(2010) 700. 

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market  conditions.  Decoupled  direct  payments  provide  today  basic  income  support  and 
support for basic public goods desired by European society. 

Because of this greater market orientation, to a large extent the market measures, which were 
the main instruments of the CAP in the past, today provide merely a safety net only used in 
cases of significant price declines. 

Rural development aims at promoting competitiveness, the sustainable management of natural 
resources,  and  the  balanced  development  of  rural  areas  by  more  specific  and  targeted 
measures. It gives Member States flexibility to address the issues of most concern within their 
respective  territory  with  co-financing.  Other  CAP  initiatives,  such  as  quality  policy, 
promotion and organic farming, also have an important impact on farmers' situation. 

Together, the present set of policy measures results in what is the main contribution of the 
CAP  –  a  territorially  and  environmentally  balanced  EU  agriculture  within  an  open 
economic environment. Delivering more public benefits in future will require a strong public 
policy  because  the  goods  provided  by  the  agricultural  sector  cannot  be  adequately 
remunerated and regulated through the normal functioning of markets. 

Withdrawing public support would lead to greater concentration of agricultural production in 
some  areas  with  particularly  favourable  conditions,  using  more  intensive  farming  practices, 
while  the  less  competitive  areas  would  face  marginalisation  and  land  abandonment4.  Such 
developments  would  result  in  increased  environmental  pressures  and  the  deterioration  of 
valuable  habitats  with  serious  economic  and  social  consequences  including  an  irreversible 
deterioration of the European agricultural production capacity. 

3. 

WHAT ARE THE CHALLENGES? 

3.1. 

Food security 

The  primary  role  of  agriculture  is  to  supply  food.  Given  that  demand  worldwide  will 
continue rising in the future, the EU should be able to contribute to world food demand. 
Therefore it is essential that EU agriculture maintains its production capacity and improves it 
while  respecting  EU  commitments  in  international  trade  and  Policy  Coherence  for 
Development. A strong agricultural sector is vital for the highly competitive food industry5 to 
remain an important part of EU economy and trade (the EU is the leading world exporter of, 
mostly  processed  and  high  value  added  agricultural  products)6.  It  should  encourage  the 
synergies between crop and livestock farming, e.g. in proteins. Moreover, EU citizens demand 
high quality and a wide choice of food products, reflecting high safety, quality and welfare 
standards,  including  local  products.  In  this  context,  the  issues  of  access,  availability  and 
acceptability of healthy food and nutritional efficiency have also become more apparent. EU 
agriculture finds itself today in a considerably more competitive environment, as the world 
economy  is  increasingly  integrated  and  the  trading  system  more  liberalized.  This  trend  is 
expected  to  continue  in  the  coming  years,  in  view  of  the  possible  conclusion  of  the  Doha 
round negotiations and of the bilateral and regional agreements at present under negotiation. 

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See Scenar 2020 – Prospective scenario study on agriculture and the rural world. 
Food  Industry  represents  13.5%  of  total  employment  and  12.2%  of  gross  value  added  of  European 
manufacturing Industry. 
Agri –food exports represent 6.8 % of total EU exports. 

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This  represents  a  challenge  for  EU  farmers,  but  also  offers  an  opportunity  for  EU  food 
exporters.  Therefore,  it  is  important  to  continue  to  enhance  the  competitiveness  and 
productivity of the EU agriculture sector. Favourable in the medium-term, the perspectives for 
agricultural markets are expected nonetheless to be characterised by greater uncertainty and 
increased volatility.  

Moreover,  the  future  CAP  will  operate  in  the  aftermath  of  an  economic  crisis  that  has 
seriously  affected  agriculture  and  rural  areas  by 
to  wider 
macroeconomic developments affecting its cost of production. After a decade of mere income 
stagnation,  agricultural  income  dropped  substantially  in  2009  adding  to  an  already  fragile 
situation of an agricultural income significantly lower (by an estimated 40% per working unit) 
than that in the rest of the economy, and income per inhabitant in rural areas is considerably 
lower (by about 50%) than in urban areas. 

them  directly 

linking 

3.2. 

Environment and climate change  

Agriculture  and  forestry  play  a  key  role  in  producing  public  goods,  notably  environmental 
such  as  landscapes,  farmland  biodiversity,  climate  stability  and  greater  resilience  to  natural 
disasters such as flooding, drought and fire. At the same time, many farming practices have 
the potential to put pressure on the environment, leading to soil depletion, water shortages and 
pollution, and loss of wildlife habitats and biodiversity. 

Although  GHG  emissions  from  agriculture  in  the  EU  have  decreased  by  20%  since  1990, 
further efforts are possible and will be required to meet the ambitious EU energy and climate 
agenda. It is  important  to further unlock the agricultural sector's potential  to mitigate, adapt 
and  make  a  positive  contribution  through  GHG  emission  reduction,  production  efficiency 
measures  including  improvements  in  energy  efficiency,  biomass  and  renewable  energy 
production, carbon sequestration and protection of carbon in soils based on innovation.  

3.3. 

Territorial balance 

A  growing  number  of  rural  areas  have  become  increasingly  driven  by  factors  outside 
agriculture due to diversification of their socio-economic structure. Nevertheless, agriculture 
remains an essential driver of the rural economy in much of the EU. The vitality and potential 
of  many  rural  areas  remain  closely  linked  to  the  presence  of  a  competitive  and  dynamic 
farming  sector,  attractive  to  young  farmers.  This  is  particularly  the  case  in  predominantly 
rural  areas  where  the  primary  sector  represents  around  5%  of  value  added  and  16%  of 
employment,  and  in  the  new  Member  States  where  it  is  important  to  consolidate  the  recent 
gains in productivity and fulfil the full potential of agriculture. In addition, agriculture plays 
an  important  role  in  rural  areas  through  generating  additional  economic  activities,  with 
especially  strong  linkages  with  food  processing,  tourism  and  trade.  In  many  regions 
agriculture is the basis of local traditions and of the social identity. 

4. 

WHY DO WE NEED A REFORM?  

The  CAP  has  evolved,  but  further  changes  are  necessary  in  order  to  respond  to  the  new 
challenges notably: 

•  to address rising concerns regarding both EU and global food security, 

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•  to enhance the sustainable management of natural resources such as water, air, biodiversity 

and soil, 

•  to deal with both the increasing pressure on agricultural production conditions caused by 
ongoing  climatic  changes,  as  well  as  the  need  for  farmers  to  reduce  their  contribution  to 
GHG emissions, play an active role in mitigation and provide renewable energy, 

•  to  retain  and  enhance  competitiveness 

increasing 
globalisation,  and  rising  price  volatility  while  maintaining  agricultural  production 
across the whole European Union, 

in  a  world  characterized  by 

•  to make best use of the diversity of EU farm structures and production systems, which has 
increased  following  EU  enlargement,  while  maintaining  its  social,  territorial  and 
structuring role, 

•  to  strengthen  territorial  and  social  cohesion  in  the  rural  areas  of  the  European  Union, 

notably through the promotion of employment and diversification, 

•  to  make  CAP  support  equitable  and  balanced  between  Member  States  and  farmers  by 
reducing  disparities  between  Member  States  taking  into  account  that  a  flat  rate  is  not  a 
feasible solution, and better targeted to active farmers, 

•  to  pursue  the  simplification  of  the  CAP  implementation  procedures  and  enhance  control 

requirements and reduce the administrative burden for recipients of funds. 

By responding to these challenges, the CAP will also contribute to the EU 2020 Strategy in 
terms of: 

•  Smart growth – by increasing resource efficiency and improving competitiveness through 
technological  knowledge  and  innovation,  developing  high  value  added  and  quality 
products;  developing  green  technologies  and  using  information  and  communication 
technology, investing in training, providing incentives for social innovation in rural areas 
and improving uptake of research; 

•  Sustainable  growth  –  by  maintaining  the  food,  feed  and  renewable  production  base, 
ensuring sustainable land management, providing environmental public goods, addressing 
biodiversity  loss,  promoting  renewable  energies,  fostering  animal  and  plant  health, 
increasing  resource  efficiency  through  technological  development  and  using  results  of 
research,  further  reducing  emissions,  enhancing  carbon  stocks  and  fully  developing  the 
potential of rural areas; and 

•  Inclusive  growth  –  by  unlocking  economic  potential  in  rural  areas,  developing  local 
markets  and  jobs,  accompanying  the  restructuring  of  agriculture  and  supporting  farmers' 
income to maintain a sustainable agriculture throughout Europe7. 

This means green growth in the agricultural sector and the rural economy as a way to enhance 
well being by pursuing economic growth while preventing environmental degradation. 

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The  CAP  in  particular  will  provide  contributions  to  the  EU  flagship  initiatives  on  "Low  carbon, 
resource efficient Europe", "Innovation Union", and "An European Platform against Poverty". 

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5. 

OBJECTIVES OF THE FUTURE CAP 

The three main objectives for the future CAP would thus be: 

Objective 1: Viable food production 

•  to contribute to farm incomes and limit farm income variability, recalling that price and 
income volatility and natural risks are more marked than in most other sectors and farmers' 
incomes and profitability levels are on average below those in the rest of the economy8. 

•  to improve the competitiveness of the agricultural sector and to enhance its value share in 
the  food  chain,  because  the  agricultural  sector  is  highly  fragmented  compared  to  other 
sectors  of  the  food  chain  which  are  better  organised  and  have  therefore  a  stronger 
bargaining  power.  In  addition  European  farmers  face  competition  from  the  world  market 
while also having to respect high standards relating to environmental, food safety, quality 
and animal welfare objectives requested by European citizens. 

•  to  compensate  for  production  difficulties  in  areas  with  specific  natural  constraints 

because such regions are at increased risk of land abandonment. 

Objective 2: Sustainable management of natural resources and climate action 

•  to  guarantee  sustainable  production  practices  and  secure  the  enhanced  provision  of 
environmental public goods as many of the public benefits generated through agriculture 
are not remunerated through the normal functioning of markets. 

•  to  foster  green  growth  through  innovation  which  requires  adopting  new  technologies, 
developing new products, changing production processes, and supporting new patterns of 
demand, notably in the context of the emerging bioeconomy.  

•  to  pursue  climate  change  mitigation  and  adaptation  actions  thus  enabling  agriculture  to 
respond to climate change. Because agriculture is particularly vulnerable to the impact of 
climate  change,  enabling  the  sector  to  better  adapt  to  the  effects  of  extreme  weather 
fluctuations, can also reduce the negative effects of climate change. 

Objective 3: Balanced territorial development  

•  to support rural employment and maintaining the social fabric of rural areas. 

•  to improve the rural economy and promote diversification to enable local actors to unlock 

their potential and to optimize the use of additional local resources. 

•  to allow for structural diversity in the farming systems, improve the conditions for small 
farms  and  develop  local  markets  because  in  Europe,  heterogeneous  farm  structures  and 
production systems contribute to the attractiveness and identity of rural regions. 

Achieving  all  these  objectives  will  require  that  public  support  to  the  agricultural  sector  and 
rural  areas  be  maintained.  Policies  set  at  European  level  are  therefore  needed  in  order  to 

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Source:  European  Commission  -  DG  Agriculture  and  Rural  Development,  based  on  Eurostat  data  on 
national and agricultural accounts. 

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ensure  fair  conditions  with  a  common  set  of  objectives,  principles  and  rules.  Also,  an 
agricultural  policy  designed  at  EU  level  provides  for  a  more  efficient  use  of  budgetary 
resources  than  the  coexistence  of  national  policies.  In  addition  to  single  market  concerns, 
several  other  objectives  are  better  addressed  at  trans-national  level,  e.g.  cohesion  across 
Member States and regions, cross-border environmental problems, and global challenges such 
as climate change, water management and biodiversity, animal health and welfare, food and 
feed safety, plant health and public health as well as consumer interests. 

6. 

REFORM ORIENTATION 

6.1. 

Future instruments 

All  potential  options  of  the  future  CAP  imply  changes  in  present  CAP  instruments.  This 
section explores how instruments could be defined in order to respond in a more efficient way 
to the above objectives. 

Direct payments 

The necessary adaptations of the direct payment system relate to the redistribution, redesign 
and  better  targeting  of  support,  to  add  value  and  quality  in  spending.  There  is  widespread 
agreement  that  the  distribution  of  direct  payments  should  be  reviewed  and  made  more 
understandable  to  the  taxpayer.  The  criteria  should  be  both  economic,  in  order  to  fulfil  the 
basic  income  function  of  direct  payments,  and  environmental,  so  as  to  support  for  the 
provision of public goods.  

The  use  of  a  single,  flat  rate  direct  payment  was  one  of  the  proposals  floated  in  the  public 
debate. However, agricultural producers face very different economic and natural conditions 
across the EU which advocates for an equitable distribution of direct aids. 

Thus  the  question  is  how  to  reach  an  equitable  distribution  that  reflects,  in  a  pragmatic, 
economically  and  politically  feasible  manner,  the  declared  objectives  of  this  support,  while 
avoiding  major  disruptive  changes  which  could  have  far  reaching  economic  and  social 
consequences in some regions and/or production systems. A possible route could be a system 
that limits the gains and losses of Member States by guaranteeing that farmers in all Member 
States receive on average a minimum share of the EU-wide average level of direct payments. 

The future of direct payments to be granted to active farmers could be based on the following 
principles, taking up the concept proposed by the European Parliament: 

– 

Basic  income  support  through  the  granting  of  a  basic  decoupled  direct  payment, 
providing a uniform level of obligatory support to all farmers in a Member State (or 
in a region) based on transferable entitlements that need to be activated by matching 
them  with  eligible  agricultural 
land,  plus  fulfillment  of  cross-compliance 
requirements.  Introducing  an  upper  ceiling  for  direct  payments  received  by  large 
individual  farms  ("capping")  should  be  considered  to  improve  the  distribution  of 
payments  between  farmers.  Disproportionate  effects  on  large  farms  with  high 
employment  numbers  could  be  mitigated  by  taking  into  account  salaried  labour 
intensity. 

– 

Enhancement  of  environmental  performance  of  the  CAP  through  a  mandatory 
“greening”  component  of  direct  payments  by  supporting  environmental  measures 

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applicable across the whole of the  EU territory.  Priority  should  be given  to  actions 
addressing both climate and environment policy goals. These could take the form of 
simple,  generalised,  non-contractual  and  annual  environmental  actions  that  go 
beyond cross-compliance and are linked to agriculture (e.g. permanent pasture, green 
cover, crop rotation and ecological set-aside). In addition, the possibility of including 
the requirements of current NATURA 2000 areas and enhancing certain elements of 
GAEC standards should be analysed. 

Promotion  of  the  sustainable  development  of  agriculture  in  areas  with  specific 
natural  constraints  by  providing  an  additional  income  support  to  farmers  in  such 
areas  in  the  form  of  an  area-based  payment  as  a  complement  to  the  support  given 
under the 2nd pillar. 

In order to take account of specific problems in certain regions where particular types 
of farming are considered particularly important for economic and/or social reasons, 
voluntary coupled support, may continue to be granted, within clearly defined limits 
(with support based on fixed areas, yields or number of heads). 

A simple and specific support scheme for small farmers should replace the current 
regime in order to enhance the competitiveness and the contribution to the vitality of 
rural areas and to cut the red tape. 

Simplification  of  cross  compliance  rules  by  providing  farmers  and  administrations 
with  a  simpler  and  more  comprehensive  set  of  rules  without  watering  down  the 
concept of cross compliance itself. The inclusion of the Water Framework Directive 
within the scope of cross compliance will be considered once the Directive has been 
implemented and the operational obligations for farmers have been identified. 

– 

– 

– 

– 

These  changes  in  the  design  of  direct  payments  should  go  hand  in  hand  with  a  better 
definition and targeting of support to active farmers only, responding to the criticism of the 
European Court of Auditors. 

Market measures 

The public debate revealed a broad consensus on keeping the overall market orientation of 
the  CAP  while  also  maintaining  the  general  architecture  of  the  market  management  tools. 
Indeed the 2009 dairy market crisis highlighted the important role that existing mechanisms 
play in supporting the market in times of crisis. However, some specific adaptations appear 
necessary,  most  notably  in  streamlining  and  simplifying  instruments  currently  in  place,  as 
well as in introducing new policy elements with respect to the functioning of the food chain. 

Potential  adaptations  could  include  the  extension  of  the  intervention  period,  the  use  of 
disturbance  clauses  and  private  storage  to  other  products,  and  other  revisions  to  enhance 
efficiency  and  improve  controls.  Such  market  measures,  and  in  particular  the  intervention 
instrument,  should  only  be  used  as  a  safety  net  in  case  of  price  crisis  and  potential  market 
disruption.  A  proposal  for  a  revised  quality  policy  will  be  presented  by  the  end  of  2010  to 
improve  possibilities  for  farmers  to  communicate  specific  qualities  or  attributes  of  their 
product to consumers9.  

9 

See  COM(2009)  234  on  quality  products  and  the  forthcoming  report  on  the  application  of  the  new 
organic farming Council Regulation (EC) No 834/2007. 

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The removal of dairy quotas will take place in 2015. Legal proposals are to be tabled shortly 
on the basis of the recommendations of the High Level Expert Group on Milk to enable long-
term planning, and thereby ensuring stability, for the dairy sector. In the sugar and isoglucose 
sectors, the current regime is set to expire in 2014/15. Several options for the future, including 
a non-disruptive end of the quotas at a date to be defined, need to be examined to bring about 
increased efficiency and greater competitiveness for the sector. 

Finally,  improving  the  functioning  of  the  food  supply  chain  is  necessary.  Long  term 
prospects  for  agriculture  will  not  improve  if  farmers  cannot  reverse  the  steadily  decreasing 
trend in their share of the value added generated by the food supply chain10. Indeed, the share 
of agriculture in the food supply chain has decreased from 29% in 2000 to 24% in 2005, while 
over the same period the share of the food industry, wholesale and the distribution sector have 
all increased. 

Without well-functioning transmission of market signals, the long-term prospects of the farm 
sector and its share of the value added generated by the whole food chain are in jeopardy. Key 
issues of interest relate to the current imbalance of bargaining power along the chain, the level 
of competition at each stage in the chain, the contractual relations, the need for restructuring 
and  consolidation  of  the  farm  sector,  transparency,  and  the  functioning  of  the  agricultural 
commodity derivatives markets. 

Rural Development 

As an integral part of the CAP, rural development policy has proved its value by reinforcing 
the sustainability of the EU's farm sector and rural areas – economically, environmentally and 
socially. 

There  are  strong  calls  for  the  policy  to  continue  to  fully  integrate  the  constraints  and 
opportunities of the environment and climate change and to deliver a wide range of benefits 
for farming, the countryside and wider society and contribute to: 

•  the  competitiveness  of  agriculture:  by  promoting  innovation  and  restructuring  and  by 

enabling the farm sector to become more resource efficient; 

•  the sustainable management of natural resources, by taking care of the environment and 
agriculture's  resilience  to  climate  change  and  the  countryside,  and  maintaining  the 
production capacity of the land; 

•  the  balanced  territorial  development  of  rural  areas  throughout  the  EU  by  empowering 
people in local areas, building capacity and improving local conditions and links between 
rural and urban areas. 

Within  this  framework,  environment,  climate  change  and  innovation  should  be  guiding 
themes that steer the policy more than ever before. For example, investments should lift both 
economic  and  environmental  performance;  environmental  measures  should  be  more  closely 
tailored to the specific needs of regions and even local areas such as Natura 2000 and HNV 
areas;  measures  to  help  unlock  the  potential  of  rural  areas  should  pay  close  attention  to 
innovative  ideas  for  business  and  local  governance.  The  new  opportunities  of  local 
development such as alternative distribution channels which add value to local resources need 

10 

"A better functioning food supply chain in Europe" – COM(2009) 591, 28.10.2009. 

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to be seized. Support for developing direct sales and local markets should also be important. 
Addressing the specific needs of young farmers and new entrants will be a priority. 

For  the  policy  objectives  to  translate  into  results  on  the  ground,  effective  delivery 
mechanisms  are  of  paramount  importance.  The  current  strategic  approach  would  be 
strengthened  by  setting  quantified  targets  at  EU  and  then  at  programme  level,  possibly 
coupled with incentives to be studied, such as for example performance reserve. Such a shift 
towards  a  more  outcome  based  approach  would  best  steer  the  policy  towards  EU  priorities 
and  show  what  it  actually  achieves.  The  set  of  indicators  in  the  Common  Monitoring  and 
Evaluation Framework should be both simplified and improved for this purpose.  

For  the  sake  of  efficiency,  it  will  be  essential  to  strengthen  the  coherence  between  rural 
development policy and other EU policies, while also simplifying and cutting red tape where 
possible. To this end, a common strategic framework for EU funds may be envisaged. 

In  terms  of  instruments,  a  wide  range  of  tools  would  remain  useful,  from  investments  and 
infrastructure  to  payments  for  ecosystem  services,  support  for  LFA,  environmental  and 
climate  change  measures,  support  for  innovation,  knowledge  transfer  and  capacity  building, 
business  creation,  social  and  institutional  development  fostering  production  methods  with  a 
link  to  local  specificities  and  considering  specific  needs  of  Member  States  to  increase  their 
economic  efficiency.  Improvements  may  consist  in  better  linking  measures  together, 
especially  with  training,  creating  packages  to  address  the  needs  of  specific  groups  or  areas 
(e.g.  small  farmers,  mountain  areas),  facilitating  the  collaboration  of  farmers  to  achieve 
connectivity  of  landscape  features  for  biodiversity  and  climate  change  adaptation  ('green 
infrastructure'),  or  offering  incentives  such  as  preferential  aid  intensity  rates  for  improved 
targeting. 

In  addition,  a  risk  management  toolkit  should  be  included  to  deal  more  effectively  with 
income uncertainties and market volatility that hamper the agricultural sector's possibility to 
invest  in  staying  competitive.  The  toolkit  would  be  made  available  to  Member  States  to 
address  both  production  and  income  risks,  ranging  from  a  new  WTO  green  box  compatible 
income stabilization tool, to strengthened support to insurance instruments and mutual funds. 
Coherence with other CAP instruments, in particular market instruments, will be ensured for 
new instruments introduced.  

As  regards  the  distribution  of  rural  development  support  among  Member  States,  the  use  of 
objective criteria should be considered, while limiting significant disruption from the current 
system. 

It is also essential to further strengthen and simplify the quality (including organic farming) 
and  promotion  policies  in  order  to  enhance  the  competitiveness  of  the  agricultural  sector. 
Finally, the Innovation Union initiative should also allow new approaches to achieve the goals 
of the Europe 2020 Strategy for a smart, sustainable and inclusive economy11. 

Overall architecture 

The instruments of the future CAP should continue to be structured around  two pillars: this 
was also the overwhelming view expressed in the public debate and was clearly favoured by 
the Council, the EP and the CoR. The first pillar would contain the support paid to all farmers 

11 

Including the innovation partnership "agricultural productivity and sustainability". 

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on  a  yearly  basis,  whereas  the  2nd  pillar  would  remain  the  support  tool  for  community 
objectives giving the Member States sufficient flexibility to respond to their specificities on a 
multi-annual, programming and contractual basis. In any case, the separation between the two 
pillars  should  bring  about  clarity,  each  pillar  being  complementary  to  the  other  without 
overlapping and focussing on efficiency.  

6.2. 

Broad policy options 

Three broad policy options, reflecting the main orientations of the public debate without being 
mutually  exclusive,  merit  further  consideration.  They  are  presented  here  as  indicative  of 
potential  paths  whose  impact  will  be  analysed  before  final  decisions  are  made.  All  three 
options are based on a two-pillar structure (with a different balance between pillars).  

Option 1  

This  option  would  introduce  further  gradual  changes  to  the  current  policy  framework.  It 
would  build  upon  the  well-functioning  aspects  of  the  policy  and  focus  on adjustments  and 
improvements in the area of the most significant criticism to the CAP, i.e. the issue of equity 
in  the  distribution  of  direct  payments  between  Member  States.  This  option  would  ensure 
continuity  and  stability  with  the  current  CAP,  thus  facilitating  long-term  planning  for 
operators along the food chain. 

Option 2  

Another alternative would be to capture the opportunity for reform, and make major overhauls 
of  the  policy  in  order  to  ensure  that  it  becomes  more  sustainable,  and  that  the  balance 
between different policy objectives, farmers and Member States is better met. This would be 
done through more targeted measures which would also be more understandable to the EU 
citizen.  This  option  would  imply  greater  spending  efficiency  and  greater  focus  on  the  EU 
value  added.  Such  an  orientation  would  allow  to  address  EU  economic,  environmental  and 
social  challenges  and  strengthen  the  contribution  of  agriculture  and  rural  areas  to  the 
objectives of Europe 2020 of smart, sustainable and inclusive growth. 

Option 3 

Another  option  would  be  a  more  far  reaching  reform  of  the  CAP  with  a  strong  focus  on 
environmental  and  climate  change  objectives,  while  moving  away  gradually  from  income 
support  and  most  market  measures.  Providing  a  clear  financial  focus  on  environmental  and 
climate change issues through the Rural Development policy framework would encourage the 
creation of regional strategies in order to assure the implementation of EU objectives.  

The  above  options  have  clear,  but  different  advantages  and  drawbacks  in  fulfilling  the 
objectives  of  the  new  CAP  as  presented  in  this  Communication.  They  will  need  to  be 
evaluated on the basis of their economic, environmental and social impacts. 

7. 

CONCLUSIONS  

The Commission’s response to the debate on the future CAP comes in the form of the present 
Communication,  which  outlines  options  and  launches  the  debate  with  the  other  institutions 
and with stakeholders. The legal proposals will be presented in 2011. 

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The  options  for  reform  consist  of  both  major  changes  that  require  a  new  design,  and 
improvements  of  the  elements  that  have  proven  their  usefulness  in  their  current  design.  On 
this basis, the future CAP should become a more sustainable, more balanced, better targeted, 
simpler and more effective policy, more accountable to the needs and expectations of the EU 
citizens. 

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DESCRIPTION OF THE THREE BROAD POLICY OPTIONS 

ANNEX 

Direct payments 

Market measures 

Rural development 

Option 1 

Introduce  more  equity  in  the  distribution  of  direct  payments  between 
Member  States  (while  leaving  unchanged  the  current  direct  payment 
system) 

Strengthen risk management tools 

Streamline  and  simplify  existing  market 
instruments where appropriate 

Option 2 

Introduce  more  equity  in  the  distribution  of  direct  payments  between 
Member States and a substantial change in their design.  

Improve  and  simplify  existing  market 
instruments where appropriate 

Direct payments would be composed of: 

• 

• 

• 

a basic rate serving as income support, 

a  compulsory  additional  aid  for  specific  "greening"  public 
through  simple,  generalized,  annual  and  non-
goods 
contractual  agri-environmental  actions  based  on 
the 
supplementary costs for carrying out these actions, 

an  additional  payment  to  compensate  for  specific  natural 
constraints,  

• 

and  a  voluntary  coupled  support  component  for  specific 
sectors and regions12, 
Introduce a new scheme for small farms.  

Introduce  a  capping  of  the  basic  rate,  while  also  considering  the 
contribution of large farms to rural employment. 

Maintain the Health Check orientation 
of  increasing  funding  for  meeting  the 
challenges  related  to  climate  change, 
water,  biodiversity  and  renewable 
energy, and innovation. 

Adjust  and  complement  existing 
instruments  to  be  better  aligned  with 
EU priorities, with support focused on 
environment,  climate  change  and/or 
restructuring  and  innovation,  and  to 
enhance regional/local initiatives.  

Strengthen  existing  risk  management 
tools  and  introduce  an  optional  WTO 
income 
green 
stabilization  tool  to  compensate  for 
substantial income losses.  

compatible 

box 

Some  redistribution of  funds  between 
Member  States  based  on  objective 
criteria could be envisaged. 

Option 3 

Phase-out direct payments in their current form 

Provide instead limited payments for environmental public goods and 
additional specific natural constraints payments 

Abolish  all  market  measures,  with  the 
potential exception of disturbance clauses 
that could be activated in times of severe 
crises 

The  measures  would  be  mainly 
focused  on  climate  change  and 
environment aspects 

12 

This would be equivalent to today's coupled support paid through Article 68 and other coupled aid measures. 

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