Overview of Development of Organic Food and Farming in the CEE: Elements for a Regional Action Plan

The economic transition of the Central and Eastern Europe (CEE) resulted in rather drastic changes of the agricultural sector. Food production and food consumption in CEE have declined considerably since 1989. The high prices of agri-chemicals and low prices of agricultural produce forced farmers to reduce agricultural inputs or refrain from using them altogether. This resulted in a drop of fertilisers and pesticides use by more than 50% in comparison with 1990. However, this shift was not the result of a designed agri-environmental policy, but rather the consequence of an evolution from state economy to market economy. The current low-input farming as practised in the CEE is not necessarily environmentally friendly. The reduction of agri-chemical inputs (or refraining from using them altogether) unless complemented by better management can also degrade the environment. Therefore it is not surprising that the results of several studies point to agriculture as the biggest source of water pollution and biodiversity threat of the region. At the same time, to improve the agricultural practices seems to be the most effective strategy and the cheapest way of reducing the environmental pollution and nature degradation in the CEE. Organic farming offers an interesting contribution in solving the environmental and economic problems of the CEE’s food and agriculture sector. Currently, organic farming has been practised at some 250.000 ha of the CEE’s farmland, with a tendency of further growth. The existing calculations from the region show that a share of as little as 10-20% of organic farming in the total agricultural production already exhibits benefits for the national economy and reduces the environmental costs/degradations of the agricultural production. However, a stronger development of organic farming in the CEE is possible only through the governmental support. The official agricultural policy in most CEE countries aims at restoring agri-chemical inputs to the pre 1990 level. With the exception of some pioneering efforts, the CEE countries have no developed agri-environmental policy and offer relatively little support to organic farming. Ironically, the conversion subsidies for organic agriculture sometimes co-exist with the subsidies or (partial) tax relief for agri-chemicals. Majority of the CEE policy makers supports organic agriculture primarily rhetorical, while their policy and budgets rarely mirror their interest and commitment for the subject. To enable further development of organic agriculture in the CEE it is suggested to develop a regional action plan. A mix of policy instruments (regulative, economic, informative, institutional and voluntary) should be put in place to facilitate implementation of this regional action plan. The plan should also address the tactics of involving various stakeholders, as well as the financing sources and progress monitoring mechanisms

Contribution of organic agriculture to macro-economic and environmental performance of the countries with economies in transition

The current agricultural operations cause a number of environmental and socio-economic problems and raise substantial ethical doubts. The call for the shift of the present agricultural paradigm and practices is acknowledged all across Europe. Ten years after the economic transition, the agricultural sector in Central and Eastern Europe (CEE) still undergoes essential transformation. In spite of the policy efforts to restore the pre 90 inputs, low-external input agriculture prevails in most CEE countries. The transition to a market economy caused a huge price disparity between the agricultural commodities and agricultural inputs. The high prices of agri-chemicals and low prices of agricultural produce forced farmers to reduce agricultural inputs or refrain from using them altogether. However, this shift was not the result of a designed agri-environmental policy but rather the consequence of a socio-political evolution from state economy to market economy. The low-external input agriculture as it is practised today in the CEE is not truly sustainable. It results in poor economic returns and often cause a whole spectrum of environmental/nature degradations (e.g. soil erosion, nutrients leaching, etc.). Organic agriculture is improved and more sustainable form of low-external-input agriculture. Currently some 380.000 hectares of the agricultural land in the CEE are being farmed according to the organic agriculture principles and standards. The existing calculations from the region show that a share of as little as 10-20% of organic farming in the total agricultural production already exhibits benefits for the national economy and reduces the environmental degradations induced by the agricultural production, notably the nitrogen losses. If the external costs of agricultural production were internalised, the organic farming exhibits even greater environmental and economic benefits

Vulnerability of Water Resources

Water is a critical natural resource. It is used for drinking water, agriculture, wetlands services, and the production of hydroelectric energy, amongst others. Croatian fresh-water resources are abundant - indeed they are among the richest in Europe. Therefore, water resources are not considered a limiting factor for development in Croatia. However, while there is no shortage of water per se for use in Croatia, problems do exist. - First, a large amount of pumped water is wasted, which leads to lost revenue of up to EUR 286 million (0.9% of GDP) per year and increased GHG emissions resulting from the additional use of electricity for pumping. - Second, farmers often face water shortages at certain critical times of the year’s growing season and, in general, the soil lacks moisture. Croatia uses a small fraction of the water resources available (about 1%). However, climate change may stress some of the systems that depend upon freshwater. This may be especially important in terms of wetlands services and hydroelectric generation. Wetlands services include nutrient and pollutant removal from water, providing habitat for biodiversity, providing timber and providing hunting areas. During 2000-2007, 50% of all Croatian electricity production was from hydropower. The Croatian energy sector is potentially vulnerable if climate change results in reduced river flows – which is likely given the predictions of climate models simulating a drier Croatia. Reductions in hydroelectric generating capacity would thus reduce the nation’s level of energy security. For example, in 2003 and 2007, droughts caused significant losses in production compared to the average. This resulted in increased costs for electricity production of perhaps EUR 39-46 million in 2003 and EUR 102-120 million in 2007. Future decreases in hydroelectric production due to reduced runoff and river flows may require lost production to be offset by domestic or imported electricity. Both of these options are more costly than hydropower. It is important to note that increases in costs for electricity production would have multiplier effects throughout the economy. Climate change is likely to have impacts on the water cycle in Croatia. This could include more droughts, which will affect agriculture and natural environments – especially wetlands. It could also result in decreased river flows, and perhaps even lower levels of ground water, which is used for drinking. Flood severity and drinking water quality/ quantity may also be affected by climate change, though more research is necessary to investigate these possibilities. Wetlands are particularly important component of water regime in Croatia. They provide a variety of ecosystem services: fishing, forest management, grassland farming, recreation, flood protection, carbon storage and regional climatic stabilization, water regime regulation and habitat for a number of plant and animal species, etc. Aquatic and wetland habitats providing important ecological services are particularly vulnerable to changes in the quantity and distribution of precipitation. Climate change is most likely to negatively affect these services. Ecosystem services, while ubiquitous, are very hard to value without undertaking original research. In particular, it is difficult to measure the economic value of biodiversity – which is an important aspect of Croatia’s environment. One ecosystem service – nutrient removal – can give us some idea about the magnitude of the economic importance of wetlands. This service involves wetlands and floodplain areas assimilating pollutants (for example Nitrates and Phosphates) and rendering them relatively harmless to the environment. The value of this service can be determined either by analysing the type of pollutant damage avoided, or the costs saved by not having to remove these pollutants by waste treatment. Using the results from a WWF study (1999) the average value of the nutrient removal service (i.e. waste assimilation) of the floodplain and wetlands area of the Danube basin is EUR 250 per hectare per year. Using this estimate, the annual value of the nutrient removal service of 391,000 hectares of wetland habitats in Croatia would be EUR 98 million (1999 EUR value). The value of other ecosystem services – and possibly the damages caused to them by climate change– could also be substantial. These other services include timber production, hunting land and grassland production. These three services total approximately EUR 1,000 per hectare per year (though this amount still does not include all ecosystem services, such as landscape values, GHG mitigation, fishing, etc.). Depending on the scenario of sustainable land use, the payment that society should provide for the ecosystem services of the Lonjsko Polje Nature Park wetlands was estimated at EUR 20-600 per hectare per year. Assuming that the value of these three services is about EUR 1,000 per hectare, per year for all Croatian wetlands, the value of these services at the national level would be EUR 391 million. Adding the previous value of EUR 98 million for nutrients removal, the total value of the combined ecosystem service would be about 2.36% of the average annual GDP in the period 2001-2005 (EUR 488 million)

Partnering for Farmland Biodiversity Conservation: Civil Society and Farmers Working Hand-In-Hand

Agriculture has been Macedonia’s backbone for centuries and has always played an important role in Macedonian society. By maintaining landscape and biodiversity through the ages, Macedonian farmers have been the true guardians of an important national treasure – biodiversity. They have been the invisible hand managing landscapes, agricultural habitats and enabling farm-linked biodiversity to provide a range of ecosystem services. Pollination; pest, disease, flood and fire regulation; preservation of genetic resources; and the provision of food, fibre, natural medicine, pharmaceuticals and appealing landscapes are only a few of these services. Agricultural biodiversity under threat Many of the Macedonian landscapes and habitats that are important for conservation have been created by centuries-old practices of extensive grazing and low-input small-scale cropping practices. There is a very strong inter-linkage between farming, biodiversity and maintenance of traditional agricultural landscapes. However, depopulation of farming communities and their ageing, together with the introduction of agricultural machinery and intensive animal husbandry in fertile plains has drastically decreased the number of livestock in marginal areas. Most of these are mountainous regions with poor soils, but with species-rich grassland and other valuable ecosystems. Macedonian agriculture has also become “less mobile”. Traditional pastoral grazing systems, flocks and shepherds are nowadays more a tourist attraction than a common sight. A reduction of livestock density results in less moving and grazing, leading to land abandonment and changes in land use. The area of farmland of high natural value and the mosaic of habitats for wildlife in Macedonia has been shrinking due to an invasion by shrubs and other pioneering vegetation. This process results in the growth of coarse vegetation, leads to the development of semi-woody species and eventually closed canopy forests. Such ecosystems have substantially lower biodiversity value than fragmented agricultural landscapes, notably natural grassland. They harbour less bird, butterfly and plant species than managed grassland. Enhanced natural succession also causes a higher risk of fire because the excess biomass is not subject to grazing pressure. If not adequately addressed, the problem of land abandonment and natural succession in Macedonia will cause irreversible damage. The expansion of intensive agriculture in the lowlands is another threat to agricultural biodiversity. Land drainage, removal of hedges and other field margins, usage of pesticides and fertilisers are leading to a decline in agricultural biodiversity and provision of related ecosystem services. Agri-environment programmes promise vs. farmers’ reality The EU has introduced agri-environment programmes and payments to stop and to reverse these kinds of negative trends. In the accession process, Macedonia is required to design its own agri-environment programmes, compatible with the Common Agricultural Policy. These programmes encourage farmers to continue practising environmentally friendly measures or introduce those that are not economically attractive, but essential from the environmental and biodiversity point of view. Agri-environment payments are an instrument through which society rewards farmers for the public goods and services they provide, as the market does not recognise their values. However, Macedonian farmers have to be aware of this opportunity and to be prepared for benefiting from agri-environment programmes. For various historical, socio-economic, administrative, and other reasons, in Macedonia – as in some other countries – the human and social capital for administering and implementing agri-environment programmes is limited. The uptake in these programmes in Macedonia is likely to be slow and on a limited scale due to the following obstacles: 1. Farming in Macedonia, notably in high-nature-value areas is practiced predominantly by small-scale, (semi)-subsistence, elderly and poorly educated farmers. They have limited entrepreneurial skills, financial power and technical know-how. Besides, many operate in the most marginal areas (from an agriculturalist perspective) and under difficult weather conditions and socio-economic realities. 2. The majority of such farmers are outside of the mainstream economic and administrative systems. They produce mostly for themselves and their extended families, selling their surplus products locally for cash, without any receipts or VAT charged. They are not obliged to practice bookkeeping and are not subject to income tax. The farmland they use, especially grasslands – as well as their livestock is rarely included in the Land and other Registers. These farmers are the “outlaws” of the official systems and as such are not eligible for EU area-based support schemes such as agri-environment payments. Those few such farmers who would like to become a part of the official systems and register their land and livestock, face complicated, unresolved land ownership and land use issues – sometimes going back several generations. 3. Products (cheese, milk, “kashkaval”, salami, etc.) that are produced in a traditional way do not necessarily meet the respective national or newly harmonised EU sanitary, veterinary or hygiene standards, making their sale through mainstream marketing channels virtually impossible. 4. Agri-environment payments compensate for additional costs and/or income foregone associated with the implementation of the respective measures. But they do not fully take into account negative agricultural externalities and reward farmers for positive externalities by providing them an additional incentive – an extra, above the costs occurred and/or income foregone. 5. Very few Macedonian farmers have agricultural or education in nature conservation. A vast majority relies only on practical experience and tradition; and they are not sufficiently aware of the ecosystem services they provide and their value for society as a whole. For most of them farming is not their deliberate choice but an inevitable job – a survival strategy. Many of them are likely to perceive agri-environment as an externally imposed concept that has little to do with their harsh reality and their priorities. Environmental NGOs can help to remove barriers preventing a better uptake of agri-environment programmes The above-mentioned issues are serious obstacles for the enrolment in agri-environment programmes. However, examples from EU Member States facing similar problems, notably Romania, Bulgaria and some Mediterranean countries show that barriers preventing uptake in agri-environment schemes can be removed if a creative approach is applied and social consensus reached. Building farmers’ capacities by providing them various forms of technical and administrative assistance and by setting up an appropriate legislative framework, social/institutional structures and facilities can increase farmers’ participation in agri-environment programmes. The feasibility of establishing various forms and institutional settings for collective agri-environment schemes can be explored. In this case a group of small-scale farmers can jointly apply for agri-environment payments (e.g. by setting up a co-operative or through the help of the municipality, etc). Taking part in a collective agri-environment scheme would not only relieve individual farmers from administrative burdens. It is also likely to be more effective and more profitable. Moreover, in many cases, this might be the only way for small-scale farmers to benefit from agri-environment payments. Environmental NGOs can play a vital role in assisting both farmers and society to understand high-nature value farming and agri-environment programmes. Their members are often well educated, enthusiastic young experts who will potentially over time evolve into opinion leaders and/or decision makers. Environmental NGOs can act as catalysts between farmers, policy makers and society. By increasing understanding, informing and educating various stakeholders they can reinforce farmers’ position and create a win-win situation for all social groups. Environmental NGOs can work on informing both farmers and citizens why it is important to protect biodiversity and how this can benefit them. Protection of biodiversity can only succeed if all stakeholders actively understand and support the conservation vision and objectives set by agri-environment programmes. Policy makers should create an enabling environment for this to happen and NGOs can significantly influence them. However, as policy makers often tend to neglect the needs of small farmers – at the expense of “big producers” – environmental NGOs can act as their guardians and make policy makers and civil society more aware about the "hidden" values they provide. Society often tends to develop an attitude of underestimation towards people living in marginal rural areas. Many people – not only in Macedonia – still think that only “losers” choose to live in these areas, i.e. only those who are not “good” or “competent” enough to find their place elsewhere. The attitude that farming is an occupation chosen by those who are not capable or who are not able to do anything else still prevails today. However, those who have that kind of attitude tend to forget that their economic prosperity and welfare is also due to the hard work of those living in remote rural areas and providing the ecosystem services mentioned in the beginning of this Chapter. Environmental NGOs can lobby to put these kinds of issues higher on the political agenda. Through information dissemination, awareness raising, education, demonstration projects, campaigns, etc., they can enlighten citizens and policy makers about the importance of (agricultural) biodiversity and the ecosystem services provided by marginalised farmers. Besides, NGOs can also serve as watchdogs securing that legislation aiming at protecting agricultural biodiversity is put in place and enforced. Further, NGOs can build networks, coalitions and alliances of like-minded individuals and organizations. They can establish a forum of different yet commonly concerned actors and initiate dialogues across differing perspectives and players. The strengthening of social and human capital in order to ensure a smooth and large-scale uptake of agri-environment measures in Macedonia is a long-term and complex process. It requires understanding and co-operation between relevant stakeholders, a constant exchange of information and capacity building. (Small-scale) Macedonian farmers can continue providing the ecosystem services that are so vital to society only if society is willing to reward them for their hard and honest work. Environmental NGOs are there to help and facilitate that process. This very project has paved the road to a long-lasting partnership between Macedonian farmers, environmental NGOs and policy makers

Unlocking the Future: Sustainable Agriculture as a Path to Prosperity for the Western Balkans

Unlocking the Future: Sustainable Agriculture as a Path to Prosperity for the Western Balkans is a study undertaken to try to assess the environmental and economic consequences of a shift to organic agriculture in the four Western Balkan countries: Bosnia and Herzegovina (BiH), Croatia, Montenegro and Serbia. The study aims to help policy makers and other stakeholders in the Western Balkan countries understand the potential positive impacts which could occur by investing in and designing sustainable policies for the agriculture sector. One of the innovative aspects of this study is that it examines the externalities involved in agricultural production – comparing those of sustainable (organic) agriculture and conventional (high-input) agriculture. In economics, an externality is a cost or benefit which results from an activity or transaction and which affects an otherwise uninvolved party who did not choose to incur that cost or benefit. This study takes an approach which involves the economic valuation of ecosystem services and both positive and negative externalities. The authors are quite aware of the limitations of this approach. Some things have intrinsic qualities which cannot be translated well – if at all – into monetary terms. For example, how much is human life worth? How much is the existence of a species worth? How much is clean water and clean air worth? While the study contains valuations of some of these issues, this does not imply that the authors believe that these values are accurate as such. Instead, the study demonstrates the level of scale of externalities (both positive and negative) that are currently completely unaccounted for when discussing the value added of the agriculture sector. The study has been developed in order to examine the multiple factors that go into evaluating the economic performance of agriculture beyond simple calculations of GDP. This issue is of major importance as people, businesses and governments have increasingly been realising that economic development takes place in a world with ecological and resource boundaries that impact all aspects of society. There is an imperative for a different model for development in agriculture. It is the authors’ belief that the region has a great opportunity to change this model – to move away from agricultural practices that have high negative impacts and towards an agriculture sector that is more sustainable ecologically while creating more jobs and more real value. The study takes a regional approach with differentiation of analysis according to each country. This is because the issues faced by each country related to agriculture are often consistent, and programmes to move towards sustainable agriculture could be developed on a region-wide scale. The study is organised into the following chapters: Chapter 1: Introduction discusses important global and local economic, social, and environmental issues related to conventional agricultural practices – including positive and negative externalities. It also describes the definition of sustainable agriculture to be used in the study and why this definition was chosen – focusing on organic farming. Finally, it contains a section that gives the basic information on the state of organic agriculture in each country. Chapter 2: Current Agricultural Policies in the Western Balkans provides background information about the policy and institutional frameworks in each of the four countries examined. This chapter also examines the level of subsidies for agriculture in each of the countries. Finally, this chapter examines the characteristics of each country’s agricultural sector in terms of human capacities, education, and information dissemination. Chapter 3: Research Framework and Methodology explores the objectives and relevance of the study, including summarizing the methodology and benchmark indicators used. This chapter also discusses the basic concepts behind the baseline analysed and the three different scenarios developed. Chapter 4: Setting up the Business as Usual Scenario examines the assumptions and other various aspects of the Business as Usual Scenario. Chapter 5: Setting Up the ECO and ECO+ Scenarios: A total conversion to organic farming describes the possibilities for organic farming and the assumptions that would be critical for the calculations of the impacts on the benchmark indicators. Chapter 6: The Baseline Situation discusses the results of the analysis of the baseline situation in terms of the statistical indicators related to the status of the agricultural sector in 2009 in the various countries – including economic evaluations of the impacts. Chapter 7: Development Scenarios Results contains information on the impacts of the different scenarios on the benchmark indicators. Chapter 8: Discussion on the Employed Methodology contains a discussion about the various aspects of the methodology and how they affected the calculations. Chapter 9: Summary of Key Findings and Conclusions contains a discussion of the results of the assessment and the implications for policy and practice in agriculture for the region. Chapter 10: Recommendations – the Way Forward contains concrete recommendations for policy-makers, practitioners and researchers in agriculture in the region. The study concludes with 9 key findings: Key Finding # 1: Agriculture in the Western Balkans does matter. Key Finding #2: Current agricultural policies provide a ‘low profile’ support to organic farming. Key Finding # 3: Current farming in the region does not create any real value added (= gross value added corrected for environmental externalities and public expenditures). Key Finding #4: Building soil fertility and human and social capital is the key for a wider spread of organic farming. Key Finding # 5: Conversion to organic farming provides more jobs. Key Finding # 6: Conversion to organic farming produces more food. Key Finding #7: Going organic is “greener”. Key Finding # 8: Going organic is more profitable. Key Finding #9: Business as usual is not an option

Reducing Emissions in Croatia – the Costs of Mitigation

In order to avoid dangerous climate change resulting from an increase in temperature of over 2oC, global GHG emissions must be cut by 50-85% by 2050. Croatia’s trajectory for emissions growth in the Business as Usual (BAU) case is estimated to result in 42 million tonnes of CO2e in 2020 – a significant increase from today. The EU has committed to reducing emissions by 20% by 2020. Croatia has committed to reducing emissions by an average of 5% for the period 2008-2012 from a baseline level of 36 million tonnes under the Kyoto Protocol. Croatia will also share at least part of the EU commitment for 2020, especially with respect to emissions from major point sources such as power plants and industrial sources. The energy sector is the largest source of GHG emissions in Croatia (73% in 2006). There are many potential measures to reduce emissions from the energy sector by 2020. It is estimated that by implementing the measures in the Energy Efficiency Master Plan, 1% of the national GDP could be saved. Emission reductions from households and the service industry could amount to almost 2 million tonnes by 2020 with a net economic benefit from energy cost savings. Industrial efficiency measures could also have a positive financial impact on companies. Producing electricity from renewable resources, increasing the efficiency of conversion and transmission, and – more controversially – moving to more nuclear power and electricity generated from burning waste, could yield significantly fewer emissions. Reducing fuel consumption in transportation through fuel-efficient vehicles, lower-carbon fuels, using biodiesel or other biofuels, or reducing car travel through better urban planning, public transportation, and traffic systems are also potential areas where emissions can be cut. The agricultural sector accounts for almost 11% of Croatian emission (2006). Agriculture can play a role in reducing direct emissions from agricultural soils and improved livestock and manure management. Agriculture also has an indirect impact on emissions due to fertiliser production and emissions from transport. Finally, agriculture can have an impact on mitigation due to land use, land use changes and forestry (LULUCF) activities related to converting arable land to grassland or forests, converting drained arable land back to wetlands, or increasing soil in carbon storage management practices. Organic farming contributes to the reduction of greenhouse gas (GHG) emissions because it reduces the consumption of fossil fuels (notably those used in fertiliser manufacturing), reduces emissions of CO2, methane and nitrogen oxides and reduces the vulnerability of soils to erosion, while at the same time increasing carbon stocks in the soil. Consequently, conversion to organic farming is considered a viable way of reducing GHG emissions. Depending on the commodity produced, organic farming emits 6-60% less GHGs than non-organic farming. Average CO2 emissions per unit area from organic beef are 57% lower than for nonorganic production. However, if there are substantially lower yields, organic farming results in higher GHGs per kg of product. Numerous studies have shown that, despite their reliance on frequent mechanical weed control, organic farming systems can increase soil organic matter stocks. Various long-term trials have shown that the annual carbon increase in soil from organic farming is 12-28%. This Report presents seven possible mitigation scenarios. They are based on different approaches and technologies that could theoretically be applied to realise mitigation effects. One of them is the“Organic 25%”scenario, assuming the conversion of 25% of agricultural land to organic farming by 2020. It envisages the same crop and livestock mix as in 2005 and the calculation is based on a study commissioned by the UNFAO and a follow-up study. It does not take into account the carbon sequestration effect of organic management. Of the seven examined scenarios, the “Organic 25%” and “Ruminants reduced by 25%” scenarios are the only two GHG emission mitigation scenarios exhibiting a positive net economic benefit (= benefits minus costs). The organic farming scenario benefits from the fact that the organic farming gross value added per hectare is comparable with that of non-organic production and because it saves public money invested in fertiliser manufacturing and transport. Estimated marginal costs per tonne of CO2e reduction in 2020 in the “Organic 25%” scenario ranges from -10 to -30 EUR. Its potential emissions reduction (excluding carbon sequestration) equals to 515 million tonnes CO2e, representing 1.7% of all Croatia’s GHG emissions in 2006. While this calculation needs further analysis, it shows mitigation costs (actually benefits) and GHG emissions reduction potential of a wide-spread adoption of organic farming. However, while potential does exist and seems achievable at no cost, there are many political, institutional, technical, and other considerations that would have to be resolved to reach this

Policy options for environmentally friendly agriculture in Central and Eastern Europe: a three-track policy approach

Low-input agriculture is dominant farming style in majority of the Central and East European (CEE) countries. However, the shift from high-input agriculture as practised during the communist time to the present low-input farming was not the result of a designed policy for agricultural development but rather the consequence of a socio-political evolution from state economy to market economy. Ten years after the transition, the agricultural policies of most Central and East European countries are still at the “crossroad”. They are characterised by a diversity of visions on the further development and concepts how to implement these visions. The agri-environmental component of the current CEE’s agricultural policies either doesn’t exist or is rather vague and underdeveloped. Most of the CEE countries still aim at restoring agri-chemical inputs to the pre 1990 level. The low-input farming is not necessarily environmentally friendly since it often doesn’t pay sufficient attention to the environmental degradations caused by agricultural operations. This type of farming too can lead to severe soil erosion, declining biodiversity and building up of pests and diseases. Besides, the low-input farming is often not economically viable. To enable development of environmentally friendly agriculture in CEE countries, a three-track policy approach is suggested. Its measures should: 1. improve environmental and economic performance of the current low-input agriculture; 2. promote further development of pioneering organic agriculture, and 3. convert the remaining high-external-input regime to integrated agriculture. A mix of policy instruments (regulative, economic, informative, institutional and voluntary) should be put in place to facilitate further development of this three-track policy. The calculation from a recently finished Phare project in Bulgaria, Hungary and Romania suggests that a tree-track policy approach make an interesting policy option both from the economic and environmental point of view. A share of as little as 30% of improved low-input agriculture and organic agriculture in the total agricultural production results in gross national agricultural production values comparable to those obtained by the conventional scenario. However, when the external (environmental) costs of N-leaching are internalised into the price of the produce by charging a shadow price of €1 per kg of nitrogen leached, the sustainable scenario showed even greater economic benefit. It resulted in net national agricultural production values of 5% (Romania), 16% (Bulgaria) and 40% (Hungary) higher than by the conventional scenario. At the same time, the sustainable scenario exhibits substantially lower nitrogen leaching (45% in Romania, 34% in Bulgaria and 18% in Hungary) as compared with the conventional scenario. This nutrient emission reduction complies quite well with the targets set for nutrient reduction for the Danube River and the Black Sea. Establishment of an international facility to support national teams in preparing and implementing the-three track policy would enable a concerted action in CEE countries

Complementary Financing for Environment in the Context of Accession – Innovative Resources: National Report Croatia. A project for the European Commission (contract 070201/2006/443879/MAR/E3)

This publication is a part of a five case studies exploring the possibility to establish payment for ecosystem services (PES) schemes for biodiversity conservation in two new EU Member States and three candidate countries, namely Bulgaria, Croatia, Former Yugoslavian Republic of Macedonia, Romania and Turkey. The report forms a part of a project "Complementary Financing for Environment in the Context of Accession – Innovative Resources" (070201/2006/443879/MAR/E3) that has been carried out by the WWF Danube-Carpathian Programme and IEEP for the European Commission in 2006-2007. The report on Croatia assesses the value and discusses possibilities of payments for ecosystem services of the Lonjsko Polje Nature Park - the largest maintained inundation area in the Danube river catchment. The opportunity costs and proposed payments for environmental services (PES) in the Lonjsko Polje Nature Park have been calculated using the most likely development scenarios for the three major land use categories: grassland, arable land and forest. In all scenarios transaction costs have been taken into account. Various options have been assessed, including six scenarios assuming conversion to organic farming management: 1) Conversion of the current grazing practice to organic management. 2) Abandoned pastures conversion to organic management. 3) Conversion of current meadows management to organic. 4) Abandoned meadows conversion to organic management 5) Conversion of maize production to organic management. 6) Conversion of wheat production to organic management

Impact of Large-Scale Conversion to Organic Farming on Greenhouse Gas Emissions

This paper gives an overview of the two studies assessing likely greenhouse gas (GHG) emissions of large-scale conversion to organic farming (in Croatia and the UK) and provides an estimate of the impact a total conversion to organic farming would have on the GHG emissions of the EU-27. Organic farming does not use synthetic fertilisers. A total conversion to organic farming would thus result in cutting all GHG emissions generated by the manufacture of synthetic fertilisers, their transport, application and emissions from the soil. Besides, since organic farming usually results in the sequestration of carbon in the soil, its wide adoption would provide a substantial carbon sink in the soil. In the case of Croatia, a total conversion to organic farming would decrease GHG emissions arising from farming and farm-upstream linked sectors by 72 percent as compared to the present situation. A total conversion to organic farming in the UK would reduce the environmental and health costs generated by GHG by approximately 60 percent, while the external costs of a food basket (assuming also the use of environmentally-friendly means of transport) would fall tenfold. Finally, by adopting a full-scale conversion to organic farming, the EU-27 would seem to be able to cut its GHG emissions by 5.6 percent. This is exactly as much as the current gap in reaching the GHG reduction policy target, which EU-27 will not be able to bridge even by implementing all its planned policies and by employing best available technological means presently known