EU Commission delays new CAP environmental rules to boost EU grain production

• The European Commission proposed to delay some environmental rules of the new Common Agricultural Policy (CAP) by one year to 2024
• EU farming ministers and the European Parliament had asked for the measure because it could increase the EU's grain production in light of the war in Ukraine
• Environmentalists warned that the exemptions will have a limited impact on markets while damaging the environment

The European Commission has agreed to delay new environmental rules of the Common Agricultural Policy (CAP) to increase the EU's grain production and plug the trade gap left by the war in Ukraine

On 22 July, the Commission proposed to postpone the new crop rotation and fallow land requirements that farmers were supposed to follow under the next CAP by one year - from 2023 to 2024. The proposal would exempt farmers from two basic Good Agriculture and Environmental Conditions (GAEC) for receiving CAP direct payments - GAEC 7 and 8 - and aims to free up agricultural land and boost the EU's grain production. In practice, this would allow farmers to keep producing the same crop on a specific plot of land in 2023 - except for maize and soybeans - while they would not have to keep at least 4% of their land out of production for biodiversity purposes until 2024.

The EU executive already introduced similar exemptions to the CAP's current rules on Ecological Focus Areas (EFAs) for the year 2022, which allowed farmers to grow crops on land that was lying fallow this year but failed to increase the EU's grain production due to dry weather. Nevertheless, European farming groups had been pushing to extend these exemptions and members of the European Parliament and EU farming ministers also backed the measure as a way to guarantee food security.

The Commission clarified that their proposal was made in reaction to "a request from EU member states" and estimated that the measure could bring an additional 1.5 million of farmland into production, depending on the specific choices made by member states and farmers. "Every tonne of cereals produced in the EU will help to increase food security worldwide," the EU executive claimed, pointing to "strong risks and uncertainties" for the global food system stemming from the Ukraine war.

The Commission's proposal will now be formally adopted by EU member states in the Council before entering into force.

Environmental concerns

EU Agriculture Commissioner Janusz Wojciechowski has been pushing for the CAP exemptions and finally managed to win over the other Commissioners on the last day before their summer break. On Twitter, the EU's farming chief said "it is fundamental that the EU contributes to covering the production gap to address the global shortage of wheat and help address global hunger".

However, European environmental groups and green policymakers have sharply criticised the CAP exemptions for watering down the EU's climate and sustainability ambitions. NGOs had written to the Commission to oppose any delays to the green rules and argued that this is a " false solution" because it will have a limited impact on EU food production while causing serious environmental damage. The green groups highlighted that crop rotation and fallow land are crucial to protect soils and on-farm biodiversity and play an important role in ensuring long-term food security.

In response to the proposal, Guy Pe'er, a conservation biologist, also warned that "this is not only the least effective way to enhance food production, but also the most risky from a food security perspective".

In reaction, the Commission admitted that the GAEC measures are important to preserve soils and on-farm biodiversity, but emphasised that the derogations are temporary and "strictly necessary to address the global food security concerns". The EU executive also explained that maize and soybeans were excluded from the proposal because these crops are typically used for animal feed instead of food.

Commissioner Wojciechowski also claimed that their proposal was a "careful balancing" between short-term food security needs and the EU's long-term sustainability goals. Other EU officials emphasised that the Commission is still "fully committed" to the European Green Deal's objectives and member states will be required to promote other environmental measures under their CAP Strategic Plans.

The EU executive also stressed that it has launched several other policy measures in recent months to address the food security concerns from the war in Ukraine, including through an EU food security plan to support their own farmers and a solidarity lanes plan to help Ukraine export its agri-food products.

Posted 26 July 2022 by Pieter Devuyst, News Analyst, S&P Global Commodity Insights

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.