Marginal Farmers and Agri-Environmental Schemes: Evaluating Policy Design Adequacy for the Environmental Fallow Measure

This paper examines the factors affecting farmer's participation in an agri-environmental scheme (AES) in marginal areas implying few changes in the traditional farm management (environmental fallow). The enrolment theoretical micro-economic model reveals that farmers` (extrinsic) factors as well as decision maker's (intrinsic) factors are important for farmer's participation, without disregarding the role of social capital. The farm and farmer characteristics (intrinsic factors) as well as the influence of the social capital have been tested trough the specification and estimation of an adoption model for dry-land marginal farmers in Granada (southern Spain). 300 farmers with cereal dry-land specialization have been surveyed in order to identify factors influencing their enrolment decision and to derive scheme design modifications to improve the AES success, understood as participation rate. Due to the fact that the effects of applying this measure do not have significant effect on the food and animal production, the participation decision is hypothesized to be mainly driven by the farmer's attitude reflecting the importance of the social capital in order to educate farmers. Nevertheless, AES interaction with other agricultural policies, such as LFA compensatory payments, restraints the possibility of this scheme's success specially when these payments imply greater financial resources. Further research is needed to see whether this same pattern holds when considering AES implying a more intensive change in the farm management.Agri-environmental policy, participation, marginal areas, policy design, Environmental Economics and Policy,

Re-considering Agri-Environmental Schemes premiums: the impact of fixed costs in sign-up decisions

Current EU legislation states that premiums for agri-environmental schemes must be calculated based on forgone profit and additional costs. This approach has been implemented for the last decades without much success in farmer uptake, a situation that might even worsen as the 20% additional payment as incentive for participation has been excluded in the new EU Rural Development Framework 2007-2013. This paper tries to explain why supply side estimated premiums might not suffice to assure farm profitability investigating the role that fixed costs have on adoption. A farm profit maximizing model is proposed where fixed and transaction costs are split from variations in marginal profit. This model is then developed to identify the potential barriers to adoption associated with the presence of fixed compliance costs. A sample of farmers eligible for an agri-environmental scheme entailing a land-use change is used to test whether the theoretical models are valid for explaining adoption decisions. Two different econometric specifications are used to identify the role of fixed costs, one assuming that uptake and surface decisions are governed by the same variables and another distinguishing both decisions. Estimation results show that there is an adoption barrier derived from the initial farm technical assets and know-how affecting the fixed compliance costs of introducing the new crop. Therefore not compensating for fixed costs can curtail agri-environmental policy success. In addition, there is an adoption barrier derived from transaction costs which are reduced in the presence of social networks.Agri-environmental schemes, fixed costs, adoption, Environmental Economics and Policy,

Fixed costs involved in crop pattern changes and agri-environmental schemes

Agri-environmental schemes are the main policy instrument currently available in the European Union to promote environmentally friendly farming practices. Nevertheless, the adoption rate of these measures is still limited. This paper develops a profit maximizer theoretical framework to explain the farmer’s sign-up decision and the area to put under an agri-environmental measure characterised by a change in the crop pattern. The application concerns an agri-environmental measure awarding the introduction of alfalfa in cereal farms in Natura 2000 designated areas of Aragon (Spain). The econometric specification accounts for both the upper censoring of the enrolled area, constrained by the available eligible area, and the self-selection of contractors according to the extra-profit of their enrolment. To test the absence of fixed costs of enrolment, a simple tobit with a lower and an upper bound, that corresponds to the non fixed costs situation, is compared to the censored model with selection. Estimated specifications based on the enrolled area do not provided normally distributed residues and are not suitable to carry out the likelihood ratio test. Estimated specifications based on the share of enrolled area in the eligible area provide normally distributed residues. The likelihood ratio test rejects the absence of fixed costs. Technical factors as well as social capital variables are taken into consideration as determinants of technical and transaction costs. Estimation results show that there is an adoption barrier derived from the know-how affecting the fixed compliance costs of introducing the new crop. In addition, there is an adoption barrier derived from transaction costs which are reduced in the presence of social networks. These results suggest that a non linear payment mechanism or auctions might be suitable to ensure a better coverage of Natura 2000 eligible areas by the contracts, with a limited increase in related public expenditures.agri-environmental scheme, land use, fixed costs, transaction costs, qualitative and limited dependent variable model

La componente ambiental en la PAC

In this chapter is described the evolution of the agri-environmental policy in the European Union. In particular the main measures applied in each member state are presented as well as a reflection of the future of the agri-environmental policy with an special focus on the CAP Post 2013 proposal.JRC.J.4-Agriculture and Life Sciences in the Econom

Las preferencias discontinuas en los experimentos de elección: impacto en el cálculo de la prima de los programas agroambientales

En los experimentos de elección se presupone que los individuos consideran todos los atributos que describen un bien a la hora de escoger su opción preferida. Sin embargo, existe evidencia de que los individuos pueden obviar algún atributo. Este trabajo investiga el impacto derivado de las preferencias discontinuas en las estimaciones de la compensación necesaria para acogerse a la medida agroambiental relativa a la siembra de leguminosas en secano. La consideración de las preferencias discontinuas mejora la bondad de ajuste de los modelos, sin embargo únicamente afecta de manera significativa a la compensación demandada por uno de los cuatro atributos no monetarios que definen el programa agroambiental para la submuestra de los agricultores no participantes y en dos atributos para la submuestra de participantes en el programa agroambiental.Experimento de elección, medidas agroambientales, modelo logístico de parámetros aleatorios, precios implícitos, preferencias discontinuas., Agribusiness, C25, C52, Q12, Q18.,

Estrategias para incrementar la participación en programas agroambientales: el papel del capital social

El carácter voluntario de los programas agroambientales hace que su éxito dependa del grado de aceptación por parte de los agricultores. La decisión de participación es compleja, ya que está condicionada por una gran variedad de factores. Este estudio amplía el análisis de la elección de la mejor alternativa de gestión para una explotación agraria en presencia de programas agroambientales analizando de manera explícita el papel que juega el capital social. Los resultados señalan la importancia de este concepto, tanto en medidas con escasos requisitos de cambio como en medidas más exigentes para los agricultores.Programas agroambientales, adopción, capital social, Agricultural and Food Policy, Q12, Q58, C25,

The influence of the Common Agricultural Policy on agricultural landscapes

Agriculture is both a large‐scale user of land and a provider of landscapes. The adaptation of agricultural practices to local conditions has led to a wide variety of "cultural landscapes" in Europe. The Common Agricultural Policy being a major driver of land use and farming practices change in Europe, it also affects landscapes. The report analyzes how the CAP design and implementation have influenced the agricultural landscapes. It provides a catalogue of CAP measures that have been and are currently influencing landscapes are presented, as well as the expected effects derived from the proposal for the post 2013 CAP. It differentiates between Pillar 1 and Pillar 2, and between measures with a direct focus on landscapes vs. non‐targeted measures which also have the potential to have an influence (positive or negative)). The olive and livestock sectors, where the influence of CAP on landscape is of particular interest, are also analyzed. By providing a list of the potential influences of the CAP on the landscape elements and structures valued by EU citizens, this report provides a knowledge base to support an effective CAP policy design in the direction of improved landscape management, an important component of EU project towards a more sustainable agriculture.JRC.J.4-Agriculture and Life Sciences in the Econom

The rural-urban spillovers of EU structural policies in Cordoba, Spain

The European Union's Regional Policy and Common Agricultural Policy share a common objective of balanced regional development; in practice, they are implemented in very distinct ways as regional policies mainly focus their strategy on urban development while the CAP Pillar 2 is based on a program which is specifically targeted at rural areas. Understanding the origins of economic growth in rural and urban areas is at the core of the debate on territorial convergence and the future of both policies. This paper assesses the impacts of Regional and Rural Development Programmes on the Spanish economy of Cordoba using a bi-regional CGE model in order to shed light on their capacity to fulfill the objective of balanced regional development.JRC.J.4-Agriculture and Life Sciences in the Econom

An EU-Wide Individual Farm Model for Common Agricultural Policy Analysis (IFM-CAP)

This report presents the first EU-wide individual farm-level model (IFM-CAP) aiming to assess the impacts of CAP on farm economic and environmental performance. The rationale for such a farm-level model is based on the increasing demand for a micro-simulation tool able to model farm-specific policies and to capture farm heterogeneity across the EU in terms of policy representation and impacts. Based on positive mathematical programming, IFM-CAP seeks to improve the quality of policy assessment upon existing aggregate and aggregated farm-group models and to assess distributional effects over the EU farm population. To guarantee the highest representativeness of the EU agricultural sector, the model is applied to every EU-FADN (Farm Accountancy Data Network) individual farm (around 60 500 farms). The report provides a detailed description of the IFM-CAP model prototype in terms of design, mathematical structure, data preparation, modelling livestock activities, allocation of input costs and the calibration process. The theoretical background, the technical specification and the outputs that can be generated from this prototype are also briefly presented and discussed. The report also presents an application of the model to the assessment of the effects of the crop diversification measure. The results show that most non-compliant farms (80 %) chose to reduce their level of non-compliance following the introduction of the diversification measure owing to the sizable subsidy reduction imposed. However, the overall impact on farm income is rather limited: farm income decreases by less than 1 % at EU level, and only 5 % of the farm population will be negatively affected. Nevertheless, for a small number of farms, the income effect could be more substantial (more than –10 %).JRC.J.4-Agriculture and Life Sciences in the Econom

The EU-Wide Individual Farm Model for Common Agricultural Policy Analysis (IFM-CAP v.1): Economic Impacts of CAP Greening

This report presents the first EU-wide individual farm level model (IFM-CAP) aiming to assess the impacts of CAP towards 2020 on farm economics and environmental effects. The rationale for such a farm-level model is based on the increasing demand for a micro simulation tool capable to model farm-specific policies and to capture farm heterogeneity across the EU in terms of policy representation and impacts. Based on Positive Mathematical Programming, IFM-CAP seeks to improve the quality of policy assessment upon existing aggregate and aggregated farm-group models and to provide assessment of distributional effects over the EU farm population. To guarantee the highest representativeness of the EU agricultural sector, the model is applied to every EU-FADN (Farm Accountancy Data Network) individual farm (83292 farms). The report provides a detailed description of the first IFM-CAP model version (IFM-CAP V.1) in terms of design, mathematical structure, data preparation, modelling livestock activities, allocation of input costs, modelling of the CAP post-2013 and calibration process. The theoretical background, the technical specification and the outputs that can be generated from this model are also briefly presented and discussed. Model capability is illustrated in this study with an analysis of the EU farmers' responses to the greening requirements introduced by the 2013 CAP reform.JRC.D.4-Economics of Agricultur