Impact of CAP direct payments and their distribution on the supply for Environmental public goods in agriculture

Alessandra Kirsch, PhD student in Dijon, presented the results of her research comparing the distribution of CAP payments and farm environmental performance. It aims to assess the extent to which the distribution of direct aids of the CAP rewards the supply for environmental public goods by farming. French FADN data are used to analyse the distribution of direct aids received by three farm types: OTEX 15 (cereals and oilseeds), OTEX 45 (milk farms) and OTEX 46 (cattle farms), which represent 44% of French farms and 50% of the direct payments in the FADN sample. Eleven indicators of farm pressure on the environment available in the FADN are used to rank farms according to their overall environmental impact. They include the share of grassland, the share of protein crops, or the share of irrigated land in total agricultural area, an index of crop diversity, and information on input costs. The ranking is made in several steps: 1) ranking by indicator: points are attributed to each farm according to its rank in its type of farm decile;2) for each farm, the points attributed for each indicator are summed; 3) farms are finally ranked in quartiles calculated according to the sum of points, by type of farm. Farms ranked as more environmentally friendly have, on average, larger agricultural area and smaller arable land area, but with higher diversity of crops, and incomes equivalent to those in other farms. For cattle breeding, the best ranked group has fewer cows, and uses more grass and less silage. The income of more environmentally friendly farms is on average less variable over time. During the period 2000-13, these farms received lower payments than less environmentally friendly farm categories, but the distribution of payments is changing as the CAP reforms are implemented. Direct payments per hectare are always higher in the farm group with the lowest marks. The difference is not very important for crop farms, but it is large in dairy farming and cattle farming, where the most environmentally friendly farming group receives much lower first pillar payments. They receive higher second pillar payments, but not enough to compensate the difference in first pillar payments. Initial results on UK and German dairy farms point to larger changes in payment distribution over time, mainly due to the regional approach to allocating direct payment from Pillar I among farms.