Exploring the CAP Eco-Scheme for Dutch Dairy Farmers: Are Grant Recipients More Sustainable?

The European Union’s latest common agricultural policy (CAP) aims to minimise the negative consequences of agriculture on the environment and climate. This ambition has been translated into the introduction of eco-schemes, which stimulates farmers to transition to sustainable agriculture. This paper answers three questions regarding the operation of the eco-scheme for livestock farming in The Netherlands. First, who are the recipients of the eco-scheme grants? Second, how have EU grants developed over time for these recipients? Third, do eco-scheme recipients farm more sustainably? To answer these questions, we conducted an empirical analysis based on administrative and microeconomic data, which included indicators to measure sustainable farming practices. Our results show that most recipients of the Dutch eco-scheme are dairy farmers and that larger farms receive relatively more grant funding per hectare. The introduction of the eco-scheme marked a shift toward less grant funding for income support and more to encourage sustainable farming practices. This has triggered a significant downturn in the financial situation of many Dutch dairy farmers. Dairy farmers who score higher on sustainability indicators on average benefit more from the eco-scheme, although there is also a substantial share of dairy farmers who have benefited financially but score relatively low on sustainability. These insights contribute to the further improvement of the EU’s agricultural policies toward a successful transition to more sustainable agriculture.