## 2 Literature Review  
### Overview of CAP and CC Adaption Measures for Regional Agri-Food Activities  
Through the years, successive reforms of the CAP have progressively included more environmental objectives and as a result, required policy instruments to tackle them. To this end, CAP payments for Less Favored Areas (LFAs) were first introduced in the 1970s, having a compensatory role for lower incomes earned by farmers located in disadvantaged areas and achieving various levels of success [10, 11, 12]. These payment structures were also developed to foster environmentally advantageous agricultural activities, as their implementation could limit farmland abandonment while preserving landscape and biological diversity and [13]. Agri-Environment Schemes (AESs) were introduced from the 1980s in the Netherlands and the United Kingdom in specific areas of environmental interest, with the intent to support producers who were voluntarily implementing environmentally friendly farming practices [14]. In 1992, these AESs became mandatory, with half of their financing needs being supported by EU resources, helping the agri-foods sector's adaptation to the novel economic and agronomic conditions [13]. The CAP \"Health Check\" [15] of 2009 extended the thematic coverage of AESs by adding climate objectives, coupled with an increase in the co-financing rates coming from the EU's budget, while the aforementioned AESs were from 2015 renamed Agri-Environment and Climate Schemes (AECSs). The striking differences in environmental conditions among EU member states were part of the reasoning for delegating the design and implementation aspects of AESs and AECSs to decentralized state authorities, as they were deemed more suited for addressing regional issues and incorporating local interests and preferences into environmental objectives and practices. Despite the voluntary nature of farmers' participation and the compensation being limited to \"_incurred costs and/or for- gone income_\", these instruments covered about a quarter of EU agricultural area in the early 2010s [13]. During the previous phase of the CAP (2014-2020), environmental issues were addressed through a combination of measures in both Pillar 1, including cross-compliance and direct payments to farmers to help with volatility in market prices and adverse weather conditions, and Pillar 2, which intended to promote a more balanced territorial development and a sustainable agri-food sector, as well as enhancing competitiveness and innovation [16]. Indeed, the second pillar of CAP specifically focuses on rural development, as it aims to support the sustainable development of rural areas by providing funding for a wide range of initiatives, including measures to promote economic diversification, improve infrastructure and public services, and enhance the natural and cultural heritage of rural areas. The funding provided under this pillar was intended to support rural development projects that are in line with the EU's broader environmental and climate objectives, and was designed to be flexible in order to meet the specific needs and priorities of individual regions. The related measures were based on mixed compensation structures and can be understood as an explicit acknowledgement of the trade-offs between product competitiveness and environmental objectives, as the latter can result in elevated production costs. During the last decade, ongoing research has emerged regarding the common agricultural policy in response to climate change [17], as well as the regional importance of such agricultural policies, with a special focus on the contribution of the EU CAP to protect biodiversity from global and unprecedented climate changes reported in Europe [18].