- Agriculture is an important sector that provides both economic and non-economic benefits. While it supports over 22 million jobs in Europe, many farms are not economically viable without support. - Direct payments to farmers have multiplier effects that support rural economies. They also allow farmers to provide non-market public goods like landscape management, biodiversity, climate action, animal welfare, cultural heritage, and food security. - However, declining prices and need for intensification threaten the supply of these public goods. Future CAP policy should have a stronger focus on incentivizing the provision of public goods through targeted, measurable agri-environmental programs centered in Pillar I.

1. Farming & the Delivery of Public Goods
Prof. Thia Hennessy
Dpt of Food Business, University College Cork, Ireland

2. Overview
• Agriculture an important sector
• Economic benefits
• Non-economic benefits
– Public goods
• Policy solutions

3. Importance of European
Agriculture
• 11 million farms – 22 million workers
– Another 22 million in related sectors
• Source of employment in rural areas
• Output value >€220 billion
• However – low economic viability of farms

4. Importance of direct payments

5. Importance of direct payments

6. Direct payments not just for
farmers
• Supports production
• Multiplier effect (agriculture larger)
• Upstream and down stream effects
• Regional multiplier
– Low level of leakage
• Renwick (2013) Irish case
– Return to €1 of direct support €2.7 in output and
€1.7 in household spending

7. It’s not all about the money!

8. Non-Market Value of Farming
• Non-market goods - public goods
• Characteristics of a public good
– Non-excludable
– Non- rival
– Subject to a free rider problem
– Hence a market failure exists
• State intervenes to guarantee supply

9. Typical Public Goods
1. Landscape management
2. Biodiversity
3. Climate Action
4. Animal Welfare
5. Cultural and heritage protection
6. Food Security
“Collectively ecosystem services”

10. Supply of public goods
• Related to types of farming and practice
– Intensity and land management
– Farm type and size (pasture based)
• Many factors negatively affect provision
– Decreasing and volatile prices
– Need for intensification
– Lifestyle choice

11. Landscape Management

12. Landscape Management
• Maintaining original landscape character
• Land abandonment
– Spread of scrub and wildfires
– Soil degradation
• Appropriate landscape management can
– Protect soil fertility
– increase resilience to flooding
– Carbon sink

13. Biodiversity

14. Biodiversity
• Traditional farming systems protect
indigenous flora and fauna
– Grazing & hedgerows can protect habitats
– Specific-breed and habitat links
• Intensification and abandonment contribute to
loss of biodiversity
– Farmland bird numbers down 48% since 1980 –
Bird monitoring scheme

15. 300,000 km of hedgerows in Ireland – noticenature.ie
450,000 km of hedgerows in the UK - wildlifetrust

16. Climate Action

17. Climate Action
• Agriculture both a source and a sink for carbon
• Maintenance & promotion of carbon sinks
– Forestry
– Agroforesty
– Soils (permanent grassland)
• Market does not reward carbon efficient
production
• Climate smart farming – practices and
technologies

18. Animal Welfare

19. Animal Welfare
• Eurobarometer results suggest increasing
demand for high animal welfare standards
• Legislation sets minimum standard – performance
above this
• Declining output prices result in need to intensify
to maintain incomes
• Some intensive practices reduce animal welfare
standards
• Grass based livestock agriculture – natural form
– Scientific evidence of human health benefits to
grass based livestock products

20. Culture & Heritage
• Living countryside
– Preventing depopulation
– Protecting traditional methods
• Countryside management
– important aesthetic role
“At least 86% of the open access land in England is found in the
uplands, attracting 40 million visitors and making £1.78 billion
for local economies every year. Rural Wales attracts 19m day
visits and 2.28m overnight stayers in a year, spending a £674m
and £367m respectively. The Scottish countryside sees 2.64m
overnight stayers and 26m day visitors in a year.”
Source: NSA (2016)

21. Food Security
• Access to affordable and safe food
• Is it a concern in a time of global free trade?
• Pests, diseases, weather and climate change
in the context of growing populations
• Ensure resilient food supply chains globally
and locally

22. Ecosystem Services
“benefits humans derive from ecosystems”
Millennium Ecosystem Assessment (2006)
1. Provisioning: what is produced – food, fibre & water
2. Regulating: control of climate & disease
3. Supporting: nutrient cycles & crop pollination
4. Cultural: recreational benefits & human welfare.

23. Demand for Public Goods
• There is no market for public goods
– Hence difficult to value
• Willingness to pay studies
– Large experimental studies (expensive)
– Subject to criticism – although widely accepted
– Stated preference V’s revealed preference
• Value transfer studies

24. Valuing of Public Goods
• Valuing landscape aesthetics
• DG Joint Research Centre
– (Ciaian and Gomez y Paloma 2011)
• Reviewed 33 EU studies “valuing agricultural
landscape” across 11 EU countries
• Average value of €142 per hectare

25. Some relevant examples
• Valuing ecosystem services in mountainous
Spain (Bernues et al 2014)
• Willingness to pay
– >50% for prevention of fires
– 20% for protection of biodiversity
– 20% for locally produced food
• Price willing to pay 3 times the current agri-env
payment

26. Supply and demand for
public goods
Source: Cooper et al 2009

27. Policy Intervention required

28. Future design of CAP
• Greening in Pillar I & Voluntary Agri-environmental
programmes in Pillar II
• Weaknesses
– Pillar I (low requirements)
– Pillar II (optional)
• Public goods need to be protected
– Pillar I

29. Future design of CAP
• Time specific contract
– Measureable outcomes
– “Contract service provision” – Rise Foundation (2017)
• New policy to focus on
– Climate change focus essential
– Maintaining permanent grassland
– Suite of climate smart technologies
• Nutrient management plans
• Manure management

30. Conclusions
• Direct payments support farmers & wider economy
• Farming provides non-economic benefits (public goods)
• Many trends threaten the delivery of public goods
– Supply and demand imbalance
• By definition should be supported by state
• Priority for CAP reform
• Central to Pillar I
• Targeted and measureable outcomes

31. Thanks for your attention