Modelling environmental and climate ambition in the agricultural sector with the CAPRI model

During the last 30 years, the Common Agricultural Policy has increased the importance given to improving the environmental and climate performance of the European agriculture, as confirmed by the Future CAP proposal. Furthermore, the Green Deal strategy outlined a comprehensive approach to facilitate the transition towards sustainable food systems that links in a holistic approach all actors in the system, a path sketched out in the Farm to Fork (F2F) and Biodiversity (BDS) Strategies. Reflecting this ambition, this report was a contribution to the 2030 Climate Target Plan impact assessment, based on one of the main models used by the European Commission for agricultural policy analysis (the CAPRI model), which can incorporate some of the policies put forward for accelerating the transition towards sustainable food systems. The report presents a modelled scenario of an ambitious implementation of the CAP reform proposals to measure the effects on EU agriculture including four quantitative targets put forward in the F2F and BDS strategies already reflected in the recommendations of the Commission to the Member States on their CAP Strategic Plans. These targets were selected as the ones with the greatest potential to affect agricultural environment and production. Moreover, those are the targets to which the CAP can provide specific contribution.The analysis includes a reduction of the risk and use of pesticides, a reduction of nutrient surplus, an increase of area under organic farming, and an increase of area for high-diversity landscape features. The impacts are modelled under three scenarios. One is a status quo scenario assuming no change in the CAP compared to its implementation during 2014-2020. The other two scenarios include a potential implementation of the CAP post 2020 legal proposal targeting these objectives, both with and without the targeted use of Next Generation EU funding.However, the report does not constitute an impact assessment of the strategies as such; the modelling scope does not include all of the strategies’ measures (e.g. food waste reduction targets, dietary shifts, organic action plan) which would alter the impacts reported. Not all policies that affect the transition are captured by this model. Other analytical approaches and tools are necessary to arrive at a more complete picture of the potential impacts of this transition. As these two strategies propose a comprehensive approach to move towards sustainable food systems, their inclusion requires additional assumptions to capture positive synergies between the different initiatives and additional tools to cover the limitations of the modelling approach used. Therefore, impacts should be considered representing an upper bound of the full impact of the strategies as they are partial in scope (mainly covering the supply side) and incomplete (as the required future changes in consumer behaviour are not captured in the model). Based on the assumptions made and taking into account the limitations of the analysis, modelling results indicate that reaching these four targets under the current CAP implementation achieves significant environmental benefits in the form of reductions in greenhouse gases and ammonia emissions as well as in gross nutrient surplus, though the extent in terms of positive environmental and economic benefits is not fully quantified. Results also show a decline in EU production and variations in prices and income for selected agricultural products, albeit in different degrees. This impact can be lowered by approximately one-fifth when a CAP implementation in line with the 2018 Legal Proposal and targeted to accelerate the transition to a more sustainable agriculture is assumed. The new CAP implementation also increases the positive performance of the agricultural sector in environmental terms. In both scenarios, the impacts on international markets are limited. In both scenarios, the potential to further reduce these impacts is underestimated by the fact that not all initiatives, measures and resulting synergies covered by the strategies are considered. For example, reductions in production associated with shift to organic agriculture could be mitigated with the implementation of the organic action plan. Lower livestock production could have less impact on prices and trade when accompanied by a shift towards more plant based diets and the reduction of food waste. The positive impact could also be enhanced via accelerated technological development and efficiency improvements likely to occur by 2030. Moreover, the exercise assumes that the EU acts alone. Because of this assumption, a significant part of the gains in terms of emissions in the EU is leaked to other world regions. However, as part of international climate agreements also non-EU countries have commitments to reduce GHG emissions, incorporating this to the analysis would reduce the leakage and negative impacts for the EU. Last, the report does not provide information on all the benefits derived from those targets for both the agricultural sector and the wider society, as these are not captured in the model. As such, the analysis presented is not intended to be used as the sole basis for decision-making and it would not be in any case appropriate for this purpose.The lessons learned from this report are important from a policy perspective. The agricultural sector will have to go through a challenging transition and this study – with all its limitations – shows the magnitude of the challenge. The report shows that, when it comes to the supply side, the Future CAP legal proposals provide opportunities for implementing the production-related targets of the Green Deal. By comparing the impact of four F2F and BDS strategies’ targets under an unchanged CAP and a CAP reflecting the ambitious implementation of its reform proposals the report identifies the potential impacts of the Future CAP proposal with respect to selected environmental indicators, production, income, prices and trade. However, the report also points towards areas where such a transition faces bigger challenges, for which we need effective instruments to support the sector during the transition. Some of these instruments are alreadt the focus of other complementary policy initiatives. Furthermore, it allows the identification of gaps where additional steps would be needed so that Green Deal targets are met and the transition towards sustainable food systems accelerated. Finally, the results confirm the need for global solutions to the global challenge of climate change.The report also highlights that the current modelling tools need improvements to help us prepare future impact assessments. Significant gaps exist in capturing in agro-economic models how the demand side of the food chain would respond to the required changes in demand and the supply side. Even when the analysis reported focuses on the supply side and captures most of its nuances in a satisfactory manner, some improvements are needed. For example, additional developments are needed to capture the positive feedback in yields resulting from the enhanced ecosystem services provided by improved biodiversity. In addition, while some technologies are captured in the model there are additional measures that could be introduced to further reduce the environmental impact of production; thus minimizing the trade-off between meeting targets and production impacts.In addition, the assumptions about the impacts on farm management and yields of the reduction in pesticide use and the increase in organic farming do not capture potential beneficial side effects beyond the agricultural sector (e.g. health benefits). These limitations are partly driven by the lack of comprehensive farm-level data, which results in the assessment of the relationship between farming activity and the environment in an aggregated regional level. The Commission’s proposal to move from a farm accountancy data network (FADN) to a farm sustainability data network (FSDN) will be instrumental in addressing these limitations as it would allow the better understanding of which practices work best, and within which regional and sector environment.As far as the demand side is concerned, this analysis does not incorporate the ambition related to food waste reduction, the move towards different diets or the demand side promotion of organic and sustainably produced food. Such changes would require the development of other modelling approaches incorporating assumptions on future consumer behavioural changes that cannot be captured with analyses of past consumer behaviour. In this area, data availability is an issue whose resolution would require the cooperation of the retail and processing industry. In addition, one also has to consider the magnitude of the scenario shocks (i.e. distance from baseline values to aspirational targets). Models are calibrated to a common vision of the future and their predictive performance may be decreased in extreme cases. When dealing with systemic changes, other research tools such as foresight and propective can be used in a complementary manner to inform some of the parameters that could reflect novel practices and busness models that could be developed by farmers to adapt to the new sustainable food systems paradigmAs part of its commitment to provide better scientific evidence for policy making, the JRC is working to improve knowledge on the effects (including potential co-benefits) of the measures implemented, develop the model to improve the representation of pesticides and organic farming, and explore avenues to incorporate the impact of food waste reductions and changes in diets. As for the latter, improvements on environmental and human health expected from the accelerated shift towards sustainable food systems need to be quantified using other tools. In addition, a comprehensive assessment should also incorporate a full food systems approach incorporating other phases of the food value chain and changes in consumer preferences and behaviour. The upcoming proposal for a legislative framework for sustainable food systems will require a comprehensive impact assessment. This impact assessment will have to be able to evaluate the ambition laid down for an enhanced environmental, climate and health performance of the EU’s agricultural sector as part of the broader food system. While agro-economic models will be an integral part of the tools for such an evaluation, the present exercise has identified areas where additional efforts are needed, especially in the need to capture the environment not only as a restriction for agricultural production but also as an input. The current modelling approach focuses on the trade-offs between environmental protection and agricultural production based on past experience, failing to capture the positive synergies that a better environment brings associated. These limitations are not specific to the CAPRI model. Other analyses that have looked into the impacts of some of the initiatives put forward in the strategies using other models (Beckman et al. 2020; Guyomard et al. 2020) also faced them. Ongoing research and analysis can shed light on more positive synergies associated with a better environmental footprint, thus improving the capacity of the model to capture the targets and using additional methods to estimate the benefits.