CAPRI RD - Modelling Regionalised Impacts of CAP Reform


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  • Britz et al – deliverable 6.3 on CAPRI-RD project website – see
  • EXPLAIN ASTERISKS – measures whose form changed between 2000 and 2007 – some combining was therefore necessary to enable strict comparison. EXPLAIN green shading: measures which are modelled in CAPRI, rather than in the CGEs.
  • The green is GOOD NEWS as implies reduced nitrate usage/loading, in many regions. Relative increases in some regions reflect increased arable as a result of decoupling, and/or more investment in pillar 2.
  • CAPRI RD - Modelling Regionalised Impacts of CAP Reform

    1. 1. Modelling the regionalised impactsof CAP reform embracing both pillars – challenging path-dependent thinking in policy discourse? Janet Dwyer, Torbjörn Jansson, Allan Buckwell, Ben Allen and Wolfgang Britz Policy symposium on CAP reform, AES Annual conference, Warwick 2013
    2. 2. Outline Taking stock of the policy options – what is on the table, what alternatives might deliver better? The challenges of ex-ante modelling: • Constructing a two-pillar CAP – the models and their scope • How to model pillar 2 impacts? • Defining the scenario – what assumptions, what rationales? Some model results – summary findings for farming, environment, rural society Comparative assessment, methodological lessons learned, and reflections on the potential of this approach, for policy
    3. 3. CAP Reform Process and options Council has an agreement on MFF (budget) and CAP reform framework – await negotiation & agreement with European Parliament (June?) Overall CAP budget cut (8% - 11%), reform retains Ciolos‟ main elements: • Convergence – slowly towards more uniform P1 payment • Greening – more widespread environmental management, beyond cross-compliance Policy options • Current proposals for greening centre on Pillar 1: ‟30% topslice and add standard conditions‟ model • Some UK critics (environment, farming, Defra) claim Pillar 2 would be better (tailoring, clearer benefit, greater efficiency)
    4. 4. Defining the scenario CAPRI already been used to model impacts of Pillar 1 Greening with convergence (Britz et al, 2013) CAPRI-RD used to model an alternative, Pillar 2 greening approach, with convergence Assume: • Pillar 1 is cut by 8%, for all Member States • Convergence implemented (MS shares as agreed by the Parliament) • 25% of resulting Pillar 1 transferred to Pillar 2 (not co-financed, no reverse switching) • Obligation to use 50% of transferred funds on environmental measures, remainder to be spent “as before” • Conservative / path-dependent Pillar 2 allocations (as per informal release); 50% only on Agri-Environment, LFA and Natura 2000 measures
    5. 5. A modelling opportunity: CAPRI-RD CAPRI: a partial-equilibrium, EU27 regionalised agri- sector model for CAP Pillar 1 impacts on farm sector, prices & markets, BUT cannot examine wider economy. Since 2000, especially following enlargement, Pillar 2 funds and impacts are increasingly significant CAPRI-RD: extend CAPRI with regional CGE approach to capture wider impacts, based on „RegFin‟ (Ruralia) SAMs built for NUTS2 regions, functional interface to allow iterative linkage between CAPRI and CGEs: both resolve together New environmental and socio-economic indicators (better suited to measuring these CAP impacts), under development within the modelling framework
    6. 6. Model components CAPMOD = agricultural supply model for EU: fixed prices, assumes profit max, 61 production activities, 276 independent regional models. Differentiates intensive & extensive farming; can be disaggregated by farm type globMarket = global multi-commodity market model for 40 world regions, giving price feedback RegCGE = in each region, a computable CGE represents regional economy in aggregate: 11 production sectors, consumer (household), government. Can model investment aids & wider economy impacts from Pillar 2, feed labour & capital prices back to CAPMOD Linkage between all components to enable iterative resolution
    7. 7. Model interactions Economy: Labour price Capital price Input pricesCAPMOD RegCge Agriculture: Production Input use Price index Land rent
    8. 8. Challenge: how to model Pillar 2 impacts?RD actions Explanation Measures 2007-13humCapAgr "Investment in human capital in agriculture" (training, advice, KE, 111, 114, 115, 124, farm relief, etc.) 133, 142, 143humCapRest "Investments in human capital in other sectors" (training for non- 331, 341, 411, 412, farmers/foresters, LEADER, technical assistance) 413, 421, 431, 511,InvAgr "Increase capital stock in agriculture" (farm investments, 121, 112, 131, 141, agricultural infrastructure, set-up aid for young farmers) 144demGovCns "Increase government demand for construction" (basic rural 321, 322, 323* services, village renewal, conserving rural heritage)capAgrFor "Capital subsidies to agriculture and forestry" (i.e. those 122, 125, 126 investments which cannot be separated, between these sectors)capFop "Capital subsidies to food processing" (adding value) 123incSub "Income transfers to households" (early retirement, food quality 113, 132 schemes)agriEnv "Agri-environmental measures" (for land management & non- 214, 215, 216* productive capital, costs should only cover income forgone)landSubAgr "Land subsidies to agriculture" (LFA and Natura 2000) 211, 212, 213*landSubFor "Land subsidies to forestry" (land-based, forestry environment 221, 222, 223, 224, payments) 225, 226*, 227subsServ "Production subsidies to services" (tourism, micro-business, non- 311, 312, 313 agricultural diversification of the rural economy)
    9. 9. Result 1: Land use changesGrassland Arable land Red: <-1% Yellow: no change Green: >+1%
    10. 10. Cattle herds and suckler cowsAll cattle Suckler cows
    11. 11. Agricultural incomes (% to baseline)
    12. 12. Nitrate surplus (total, % to baseline) Baseline – I. Pérez Domínguez
    13. 13. Comparing with Pillar 1 greening results: which looks better?Feature Greening with Pillar 1 (Britz et al scenario) Greening with Pillar 2 (our scenario)Suckler cows Stock numbers fall Mainly decoupling Stock numbers fall Decoupling effect c.4% drop for effect for EU27 <2% + pillar 2 EU27 ‘recoupling’Land use change Grass + 1% Arable Mainly grassland Declines 0.7%, Fewer subsidies to -0.5% UAA ~0% retention and EFA equal for crops & land conditions grassFarm Incomes Increase by around Combined effect Down by 2.5%, but 8% Budget cut 2% (NB no budget cut) EU12 up effectNutrients Very small N Combined effect Small reductions Due to less reductions productionSoil erosion Negligible impacts Not measuredBiodiversity Slightly positive Combined effect Not measured impacts,landscape No impact Not measuredGHG Small decline Small declineFarm labour Falls a little 0.7% rise Switch from land overall, falls in to labour &capital northGDP Not measured Decrease? Tiny!
    14. 14. Points for discussion Are the results plausible? What do they imply about policy choices? How far do model assumptions constrain results? Is this distorting the policy value of the work? What improvements are worthwhile? If we don‟t improve, what alternatives are there? - Thank you!