Environmental Integration in the EU Agricultural Policy

ENVIRONMENTAL INTEGRATION IN THE EU AGRICULTURAL POLICY

Leif Bach Jørgensen, Jette Hagensen, Christian Ege Jørgensen, Knud Vilby, Klaus Bonderup Petersen and Gunver Bennekou

The Environment of tomorrow is created today

ISBN: 87-92044-41-7

Published by:

Text: Leif Bach Jørgensen, Jette Hagensen and Christian Ege Jørgensen from The Danish Ecological Council. Knud Vilby, Klaus Bonderup and Gunver Bennekou from the committee/agriculture group in The Danish Ecological Council

Det Ecological Council

Layout: DesignKonsortiet, Hanne Koch

The Environment of tomorrow is created today

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This report is made with financial support from a Danish agricultural fund (“Promilleafgiftsfonden for landbrug”) and from Ministry of Science, Technology og Development

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Table of contents Preface

Part D: CAP - The Common Agricultural Policy

1 Introduction · 5

12 Common Agricultural Policy in the EU · 32 12.1 Contents and reforms of Common Agricultural Policy 12.2 Financing and payments under CAP 12.3 Development and perspectives of Common Agricultural Policy

2 Summery · 7 Part A: Results 3 Conclusions, recommendations and perspectives · 14 3.1 Environmental problems of agriculture 3.2 A scenario for the solution of the environmental problems 3.3 Further perspectives 3.4 The European Level 3.5 CAP and Third World countries

Part B: The structure and economy of agriculture 4 Structure and ecocnomy in Danish and European agriculture (not translated) 4.1 Agriculture in the EU 4.2 Economy and development in Danish agriculture 5 Globalisation · 24 5.1 International trade and trade agreements 5.2 Environment and localisation of production

Part C: Environmental sustainability (not translated) 6 7 8 9 10 11

Nature and biodiversity Eutrophication from the agriculture Agriculture and greenhouse effect Pesticides Animal welfare Organic farming

13 Increased environmental integration in CAP · 41 13.1 Reforms of the Common Agricultural Policy (CAP) 13.2 Final CAP Health Check 13.3 Impacts ofthe Health Check 13.4 The period until the reform 2013-20 13.5 Impact of other policy developments 13.6 WTO back in business 13.7 EU and the World’s poor. Increasing hunger threat

Part E: Scenario 14 A common solution to Danish agriculture’s environment problems – a scenario · 52 14.1 The purpose of the scenario development 14.2 Methods 14.3 Summary of the environmental targets of the scenario 14.4 Choice of instruments 14.5 Effect calculations and meeting the target 14.6 The costs calculations from Institute of Food and Resources Economics 14.7 Management and usage of nature/wildlife areas 14.8 The financing of environmental goals via the CAP 14.9 Discussion on compensations for the farmers 14.10 The employment effects of the scenario

Annex: Background notes concerning the scenario (not translated

Preface This report is a translation of the most important chapters – 1, 2, 3, 5, 12, 13, 14 from the report “Miljøintegration i EU’s landbrugspolitik” (126 pages, in Danish). Also an English summary of the report is available on www.ecocouncil.dk.

The report is written by Leif Bach Jørgensen, Jette Hagensen, and Christian Ege. Knud Vilby, Gunver Bennekou, and Klaus Bonderup have also contributed with chapters.

The scenario in chapter 14 is based on a) for the nitrogen part: a report, written for this project by The Institute for Food and Resource Economics at The University of Copenhagen – refered to as FOI – www.foi.dk. b) For the climate part: a report “Agriculture and Climate”, written for the Ministry of Food by FOI and the Faculty of Agricultural Sciences at Aarhus University – www.agrsci.dk.

Financial amounts in the report are given in Danish currency (kroner/DKK). Few central amounts are also given in Euros. In the summary report all amounts are given in Euros. The Danish krone is tied to the Euro.

1 Euro is 7,5 DKK. Christian Ege, The Ecological Council January 2009

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Chapter 1: Introduction from production. But several parties claim that the EU agricultural support continues to work as a massive, indirect export subsidy due to the fact that it permits EU farmers to sell their goods on the world market at prices not covering full production cost. By this, profitability of investments in agricultural production in poor countries is impaired.

The EU Common Agricultural Policy is in the midst of a process of change. Surplus stocks of the past and the heavy burden on the community budget – and on nature and environment – has made the need for radical change clear, not least after the enlargement by twelve new Member States. For decades, intensive agricultural production has driven out valuable natural areas in Europe, caused eutrophication and fish deaths in, among others, the inner Danish waters, and pesticide residues in food and groundwater. In some regions structural developments have reached an extent where animal husbandry can be considered as an industry, whereas agriculture in other regions is dominated by traditional small family farms.

In the light of these global problems it is a huge challenge to ensure sustainable agriculture and rich and diverse nature in all parts of Europe with its many different economic, social and natural conditions. In many parts of the EU there is a trend towards steeply increasing large-scale production, which may have fatal consequences for nature and environment.

Livestock ethics are under pressure, not least in large populations. In a country such as Romania 3 to 4 million small farms of less than 3 hectares will merge in the coming years to increase efficiency, leading to considerable effects on employment and social structure as well as on nature and environment. The Common Agricultural Policy must span huge differences both in socioeconomic terms and in relation to nature and environment.

As a consequence, objectives today for the Common Agricultural Policy are different from the original objectives aimed at ensuring sufficient food for people and a reasonable income for farmers. New focus is on nature and environment, food quality, animal welfare and sustainable rural development along with compliance with international requirements, for example to the effect that the EU policy must not cause trade distortions. These objectives are fundamentally different so rethinking of the entire Common Agricultural Policy is called for, along with associated policies at national and community level.

In Denmark we have today around 21,000 large efficient farms and around 24,000 small farms (below 30 hectares). Denmark is one of the countries of Europe where agriculture takes up most space, leaving little to nature. We have relatively many coastal zones and vulnerable groundwater resources, so there is a need for strict regulation of nutrients and pesticides.

Concurrently, global problems such as climate change and food security crisis have come high on the agenda, making the need for crosscutting political vision and sector integration obvious. Climate policy is a field where this need is very clear. Agricultural contribution to greenhouse gas emissions and agriculture’s options for contributing to a reduction in these emissions are now getting on the political agenda.

In all European countries agriculture has a major impact on nature and the environment. Birds living in agricultural zones decline rapidly. In the Eastern European countries many birds are now facing larger threats than before accession to the EU. This is due to agricultural intensivation. Nitrogen discharges from agriculture are increasing in the new Member States and the use of pesticides is on the increase.

The food security crisis increases poverty and hunger for many poor communities worldwide, contributing to instability. At the same time, western countries see increasing problems relating to obesity and sicknesses such as diabetes etc. Also in this field there is a need for integrating political objectives and instruments. One such example is to promote conversion to less animal food, not least in the light of continuous population growth.

Efforts to mitigate these massive challenges are ongoing, and agricultural and environmental policies of the past decades have carried fruit in some areas.

At European level the number of organic farms has increased, though only up to a level of a few percent.

In Denmark, aquatic environment plans have halved nitrogen loss and reduced emissions of greenhouse gases by almost one third since 1990. But still, nature suffers from nutrient loads, biodiversity is decreasing and the use of pesticides has increased in Denmark in recent years.

Lengthy world trade negotiations in the WTO contribute to setting the framework for the EU agricultural policy. At the moment, agriculture is one of the key issues in these negotiations. The massive EU agricultural support is still accepted when it is decoupled

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The Common Agricultural Policy has been adjusted through the so-called Health Check, but this is far from sufficient. There is a need for far more extensive reforms in order to adapt the agricultural policy to present and future challenges. These challenges are huge. The agricultural policy must be seen in a global perspective and in the light of financial, social and environmental reality.

With this report on environmental integration in the Common Agricultural Policy, the Danish Ecological Council puts focus on the need for a holistic approach to the different environmental problems in agriculture, its support schemes and global contexts.

We also clarify fields of conflict and problems calling for more in-depth discussion and scrutiny in order to arrive at good political solutions liable to ensure sustainable agricultural and food production, a diverse nature and environmental consideration in the broadest sense and in a globally responsible context.

We take Danish conditions as a starting point, but contextualise it at the European level.

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Chapter 2: Summary Part A: Results

and nature, a new common agricultural policy must also consider the integration of global food safety and agriculture in developing countries. A common agricultural policy must support agriculture in Third World countries as well as international agricultural research. The support must cover efforts to increase production and sustainability in developing countries, and it must extend the efforts to include a reduction in the negative consequences of climate changes.

Chapter 3 of the report contains main conclusions, recommendations and perspectives.

It will be possible to develop a Danish, environmentally sustainable, agricultural production that can be financed within the framework of a 20% modulated EU agricultural policy, combined with national cofinancing in the same order of magnitude as the current one.

Part B: The structure and economy of agriculture

Characteristics of the sustainable development: Marine areas gradually achieve good ecological quality.

The total area of natural habitats will be enlarged and take up one third of Denmark.

The environmental quality of the terrestrial environment is improved through a reduction in fertiliser and pesticide usage.

Ground water will be less contaminated by nutrients and pesticides.

Agricultural emissions of climate changing greenhouse gases will be reduced by 30%.

A description is given of Danish and European agriculture, in terms of structure and economics and in relation to globalisation.

Chapter 4: There are numerous differences between agricultural practices in the various EU member states. 42 % of the total land area is managed as agriculture. More than 50 % is ploughed every year, but the yields vary considerably. Cattle farming has gradually declined over the years, whereas milk production tends to be stable. In countries like Denmark and Sweden, one dairy cow generally produces more than 8 tonnes of milk per year, while in Romania it is only 3 tonnes. European agriculture is generally characterised by small family units. 85 % of all farms are smaller than 20 hectares. Countries like the Czech Republic, England and Denmark have the biggest farms, while small farms dominate Southern Europe and the newer member states. 12.4 million Europeans work with agriculture. This adds up to 5 % of the total work force. In Denmark this figure is 3 % and in Romania 33 %.

In order to attain this level of development, agricultural activity and the variety of environmental effects need to be analysed and evaluated as a whole. It is also important for preference is given to multi-effect tools and measures. A scenario that may safeguard the wanted development has been developed, and it can be financed through a redistribution of the EU agricultural support funds combined with national co-financing that does not exceed the current practices.

The Ecological Council has developed the scenario as an input to the forthcoming Danish “Green Growth� plan. It is about taking a comprehensive look at the complexity of problems that define the necessary efforts.

Until the mid-fifties, Danish agriculture only had a limited effect on the environment. Production was generally based on relatively closed ecological cycles, but starting in the fifties, industrialised farming developed and became increasingly dependent on fossil energy, fertilisers, pesticides and medical products. With an extensive import of animal feeding stuff and exports especially of pig products, the number of pigs has more than doubled. During the same time, the number of cattle is down nearly 50 %.

The number of employees is down 10% from 1950.

Agricultural exports contributed to more than 50 % of all Danish exports in the fifties; in 2006 the figure was 11 %. Agriculture contributed with only 1,6 % of the total gross factor income in Denmark in 2006. A total of 7300 million DKK was paid in subsidies to

At the same time, the scenario is a contribution to the further development of European agricultural policies. Although the scenario is Danish, it is an example that illustrates how the European Common Agricultural Policy (CAP) must ensure harmony between agricultural production, habitat/wildlife management and environment protection. The review of environmental effects and problems in Europe illustrates how agricultural activity is the main cause of the common nature- and environment problems that only vary in extent and depth.

In addition to the aspects concerning environment

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sufficient, as the EU25 import more than they export (when measured in tonnage). Today, the EU uses 2.2 times more than the available “bio-capacity” within the EU’s own land- and agricultural areas.

Danish farmers. This is close to one third of the agricultural gross factor income.

Chapter 5: As part of the World Trade Organisation (WTO) negotiations, efforts are made to liberalise the international market for agricultural commodities and to do away with competing and commercially distorting forms of economical support systems.

There is a particular focus on agricultural support in the EU and the USA. They are both very comprehensive and both greatly affect other countries’ access to their very important markets. The WTO demands have had a significant impact on the changes made in the EU agricultural support system. These still account for 40 % of the total EU budgets and therefore represent a major distortion. An open market is a dilemma for many Third World countries. Generally, their development is totally dependant on the possibility of exporting their own agricultural goods. But at the same time, one of the open market's obvious risks is cheaper agricultural goods being exported into these countries and negatively influencing the production and development. WTO negotiations collapsed during the summer of 2008, and although there are attempts, it is still uncertain whether or when new negotiations may be resumed.

Part C: Environmental sustainability: Agricultural production has a series of unintentional, mostly negative side effects that are significant to nature and the environment, eutrophication, the climate, pesticide use and animal welfare. These effects can be minimised through the introduction of more sustainable cultivation techniques promoted through legislation, either nationally or in the EU. In the following chapters, the Danish Ecological Council presents proposals on perspectives and possibilities for dealing with these questions. Also, a description of organic farming is presented, including an evaluation of the extent to which the ecological sciences may offer an answer to the environmental challenges.

Chapter 6: The room for natural habitats in Denmark is very limited. In the 1850s, about 60-70 % of the land was extensively used grasslands, carrying a reasonably rich and well-populated plant and wild life. Today, agriculture is responsible for the cultivation of app. 62 % of the land. Moors and wetlands have largely been claimed for agricultural purposes, resulting in the remaining nature increasingly being subjected to pressure from surplus nutrients and pesticide contamination. There is little room left for natural habitats and wildlife in Denmark. Nature has been broken up, scrub vegetation has taken over the un-grazed areas affected by nutrients from the intensive agricultural activity and remaining smaller biotopes are left unprotected. In Denmark, as well as in other parts of Europe, nature is under pressure from urbanisation and the development of new infrastructure. The intensification of farming and the increased specialisation reduces both the amount and quality of wildlife and natural habitats. And biodiversity is declining; this has been measured and evaluated in birds and butterfly populations that otherwise would have inhabited regions with extensive agriculture.

The global localization and development of agriculture is greatly influenced by energy prices and by changes in the agricultural support principles. A fall or decline in energy price levels may promote productions that are otherwise not profitable. Beyond this, increasing energy prices may influence the selection of goods and products that can be transported over long distances cost-effectively. This is important for the transport of agricultural commodities. The forthcoming climate negotiations are likely to focus on CO2-intensive production and transportation. This may influence the localization of agricultural products and encourage the consumer’s choice of locally produced goods, as opposed to those transported over long distances. However, this is of minor importance unless international duties are introduced to increase price levels for transportation based on fossil fuels. Historically, the EU agricultural policy has encouraged local food productions that could not have competed without it. An example is the termination of support that makes sugar production less profitable in the EU, whereas sugar-exporting countries would benefit from improved possibilities of bringing sugar into the EU. The animal production in the EU is grossly based on the imports of feeding stuffs, for instance from Brazil and Argentine.

The cornerstone of nature conservation today is expressed in Natura 2000. It refers to the EU Bird Protection directive and the Habitat/wildlife directive. There is also a Danish Nature Protection and Conservation Act that includes rules for preserving habitats and wildlife, regulations of $ 3-areas and targets set by the UN Biodiversity Convention for bringing the biodiversity reduction to a halt before 2010. Natura 2000 areas constitute 8.4 % of the total Danish land areas, and they are especially intended to protect habitats and species that are relevant in a European context. The Danish nature protection and

In Denmark, the total import of feeding stuff amounts to roughly 3-4 million tonnes per year, or more than 500 kg per person. This intensive import of feeding stuffs is the reason why the EU is not self-

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conservation efforts further include areas that are considered essential from a Danish point of view, but the protection does not give assurance of clear-cut goals and timeframes. The Biodiversity Convention is the most far-reaching, but - in spite of the time limit of year 2010 - it covers unimplemented fields.

hane (CH4) and nitrous oxide (N2O or ‘laughter gas’) are emitted from agricultural fieldwork and from animal farms. CO2 emissions due to agricultural energy consumption and cultivation can lead to a build up and a degradation of organic matter in soils and plants.

There are several means and tools at hand when it comes to the protection of the Natura 2000 areas and biodiversity. The Ecological Council emphasizes that there is a lot of room for improvement, especially through a process of extensification in agriculture and by further developing habitat/wildlife management tools.

In Europe, the agricultural emissions of methane and laughter gas contribute to more than 10 % of the total climate changing greenhouse gases. In Denmark this figure is somewhat higher, namely 14 % in 2006. But these figures only cover the methane and laughter gas, while neither CO2-emissions from energy consuming machinery nor carbon-loss from soils is included. The total amount of greenhouse gases from agriculture is estimated to be 27 % and 18.2 % (measured as CO2-equivalents), in 1990 and 2006, respectively. The reduction during this period is a result of improved utilisation of fertilisers following the implementation of the First Water Protection plan, a lowered emission of nitrous oxide and reduced losses of CO2 from cultivated soil.

Chapter 7: Agricultural loss of nutrients leads to eutrophication of aquatic systems and problems with groundwater, lakes, coastal zones, and natural ecosystems, e.g. moorlands.

Today, there is still a considerable loss of nutrients due to Danish agriculture. Farming activity is largely responsible for nitrogen contamination and for considerable parts of the phosphorus surplus. In Danish agricultural fields, less than 60 % of the nitrogen is utilised, and between 73 – 90 kg N is lost per ha. The ways in which these losses influence the environment is dependent on the fate and pathways of the nitrogen: Is it leaching towards the groundwater?

Will it run directly towards surface waters? Or is it eventually metabolised into free nitrogen, ammonia or laughter gas (a nitrous oxide – N2O)? The environmental load of nitrogen from Danish arable soils is higher than the 55 kg per ha European average.

Beyond this, nitrogen is also lost as ammonia from stables and fertiliser storages. In regions that are densely populated by animal farms, ammonia emissions are generally much higher than tolerated. A surplus of phosphorus leading to a soil accumulation of phosphorus followed by leaching into the aquatic systems is also typical of Danish farmland.

Until now, agricultural discharge has not been a part of a common EU regulations or of the Kyoto protocol.

But it is expected that non-quota sectors like agriculture and transport will have to reduce their emissions by 2020: In Denmark, the rate has to be cut by 20 % compared to 2005. Today, agriculture contributes with biomass – primarily as straw – corresponding to about 75 % of the sustainable energy production in Denmark. The potential is much larger, either in the form of biogas production from farmyard manure and plant materials, or as an increased combustion of straw or energy crops directly used for energy production.

The laughter gas emissions may be reduced through the improved utilisation of fertilisers. This will also lead to reduced nitrogen leaching into the aquatic environment. It is estimated that an improved utilisation of fertilisers will reduce the N2O loss by 25-50 %, provided that the nitrogen standard (national maximum of nitrogen application) is similarly restricted. Degasification of farmyard manure in biogas plants may reduce the emissions of methane and nitrous oxide. BAT-technologies in stables and pigpens may further reduce the ammonia evaporation by 50%, and thereby also reduce the emission of nitrous oxide. This will have a positive effect on the climate as well as on natural habitats. The methane is mainly a result of metabolism and feeding stuffs in animals, especially cattle. This emission may be reduced by altering feeding practices involving improved feeding stuff utilisation and technical stable improvements. There are a number of ways for agriculture to achieve a reduction in energy consumption and CO2-emissions, for instance improved

Many initiatives have been taken to reduce nitrogen leaching. In Denmark, a number of Water Environment Protection plans have been introduced.

The newest one is from 2004 and has not yet been implemented. The EU agreed to a Water Framework directive in 2000.

In future regulations, the agricultural use and discharge of nutrients should be regulated to meet the targets of ‘good ecological conditions’ set by the Water Framework directive, and to ensure that the tolerable levels of natural habitats are wholly respected.

Chapter 8: Agriculture also contributes to the Greenhouse effect. Potent greenhouse gases like met-

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Until 2002, reductions in agricultural usage were actually noted during the second of these action plans. Due to the lack of clearly defined, focused goals, the targets set by the Third action plan for 2009 have presently not been reached. There is still a chance of this happening, e.g. by increasing duties, banning some rather strained crop rotation practices, and/or by encouraging new technologies like injection applications or computerised application techniques.

insulation and climate controls in greenhouses. The carbon dioxide accumulation in soils and plants may be enhanced through cultivation that increases humus contents, and by expanding forests and grassland areas.

Climate changes will have an influence on future agricultural crop selections.

It is the Ecological Council's opinion that agriculture will have to reduce its net emissions of climate changing greenhouse gases by at least 30 % by 2020. This is entirely possible through the initiatives presented here. Among the most important are the tools and measures that aim to reduce nitrogen-related emissions and create possibilities for a reduction in carbon-loss. This includes an increased assimilation of carbon into soil and plant materials.

Chapter 10: Husbandry animal welfare is mostly described in terms of both positive and negative experiences and influences on animals. Pain, illness, conflicting or abnormal behaviour and chronic stress are normally categorised as negative, whereas rest, sleep, care of offspring and of skin are parts of a positive pattern. Over the years, a number of EUdirectives have been developed, especially for poultry and swine's physical living conditions. In Denmark, more ambitious regulations are enforced for the same animal groups, and in ecologically managed husbandries more space is given to animals, letting them move out into the open. And they have regular supplies of roughage for swine and cattle. Allocation of economical support is conditioned by compliance with the national standards for animal welfare.

Chapter 9: deals with the pesticides that may be harmful to both nature and man.

More than 400 individual pesticide chemicals are used in European agriculture. In Denmark, only 76 different chemicals are accepted for spraying purposes and 8 may be used in seed dressings. There are numerous observations on pesticide residue found in ground water and open waterways, including drinking water wells in Denmark and in the rest of Europe. Due to the extensive use of pesticides, it is now difficult to locate areas that are pesticide free.

It is recognised that improved animal welfare may be contradictory to climate change considerations in the sense that open-air admittance may call for more intensive fertilisation and, consequently, a risk of methane formation. It is the same case with the increased use of roughage, although this is healthier for the ruminants' digestion.

Food product contents are continuously monitored, and a considerable number of European food products are contaminated by pesticide residues. In general, the pesticide content in Danish fruit and vegetables is lower than in imported products, for instance from Spain and the Netherlands.

A directive on Plant Protection preparations has been in force since 1991. This is an attempt to harmonise all the regulations of active pesticide ingredients in the EU.

Chapter 11: Ecologically managed farming is, environmentally speaking, a more positive alternative to conventional agricultural practice as there is no use of pesticides and it boasts a holistic view on the handling of processes and cycling of nitrogen in the agricultural eco-system. Ecologically managed agriculture has increased steadily from the eighties until 2002, both in acreage and in the number of farms. It is now increasing again after a short plateau, and production and sales are on the way up. By 2007, about 5.9 % of farms were ecological and 5.6 % of the agricultural area was ecologically managed. Danish ecological agriculture practice was made an active part of the Water Protection as early as 1994, and was thereby integrated into the common agricultural support system.

Some chemicals have been restricted in Denmark due to the risk of contaminating the vulnerable Danish groundwater. In addition to this, a series of three pesticide action plans have been enforced in Denmark in order to reduce the application rates.

There are often more and richer natural values connected to ecological farming compared to conventional practices. This has been demonstrated through bird counts and in uncontaminated aquatic environments in ecologically managed farmland. In regards

In 2007, Danish agriculture used 3316 tonnes of active pesticide chemicals. The number for Europe as a whole was 200.000 tonnes. In Denmark, pesticide usage is reported in volumes of active ingredients as well as in frequencies of application. This is to measure them in relation to official recommendations.

Both of them have decreased over a number of years, but the numbers have now started to rise again.

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channelled - by a so-called modulation – into the Rural Development policy (‘Pillar 2’). Rural development policy includes support for innovation in the agricultural sector serving nature and environment objectives, for quality of rural life and for local action groups. This does however require national co-financing. In addition to the mandatory modulation, it is possible for individual countries to decide that a greater proportion of direct aids may be used for rural policy. This is called voluntary modulation and has not yet been coerced by the Danish government, meaning that Denmark has not yet exploited the opportunities provided by the EU for increased farmrelated protection of nature and environment.

to nitrogen, there is no unambiguous answer as to the influence of ecological farming, due to the fact that discharges may be greater from some farms than others. Similarly, the answer to the effect of climate changing greenhouse gas emissions is not clear-cut. An increase in soil cultivation may increase CO2 emissions, whereas the omission of fertiliser application will reduce the energy use for fertiliser production and frequently also result in lowered emission of laughter gas. When measuring the effects on climate per kg of food products, those organically grown food products, where the yield pr. hectare is considerably lower compared to the conventionally grown, will often loose to the conventional products.

The European agricultural market is still protected by a duty amounting to more than 20 % on agricultural products, in contrast to the 3-4 % that is added to industrial products.

Organically managed agriculture follows more stringent requirements when it comes to animal welfare.

Some examples are spacious rooms in stables and pens, as well as access to fresh, open air. It is still undergoing a dynamic development, particularly in order to meet climate and nature protection requirements.

Chapter 13: The CAP reform from 2003 was last revised by the so-called “Health-check” which was accepted by the EU Council of Ministers in November 2008, with effects until 2013. At this time, a major revision is expected. The elimination of the “Fallowing scheme”, the out-phasing of milk quotas and the further transfer of funds from direct agricultural support to the rural development (including requirements that up to 10% of national grants have to be used for environmental quality purposes, product development or marketing) are all essential elements of the Health-check. In addition, the requirement for Cross-compliance is maintained in a simplified form, albeit with new requirements that safeguard the environmental improvements gained from the ‘Fallowing scheme”. Yet it is feared that the abolition of the fallowing (the reason why Denmark has already reclaimed 83,000 hectares for cultivation), may have significant negative impacts on nature quality, the aquatic environment and biodiversity. It is expected that the Health-check's consequences of the environment will be both modest and difficult to measure.

Part D: CAP - The Common Agricultural Policy When looking into the future, there are many opportunities for the environment and for nature to be ensured and safeguarded within a common European agricultural policy, without losing the global perspective.

Chapter 12: Historically, the purpose of European agricultural policy has been to ensure European food supplies through increased productivity, by protecting the internal market and securing the farmers' income levels. Food production has increased dramatically in Europe over the years, and the various agricultural reforms that characterise European agricultural policy now mainly focus on keeping the level of agricultural support under control.

Simultaneously, there has been a growing demand for the liberalisation of the world food trade. Previous export and production support mechanisms have been modified. The export support has declined substantially, and in 2006 it only represented a quarter of the support given in 1993. Today, the direct agricultural support is largely granted as so-called “Single farm payments” given pr. hectare of farmland (“Pillar 1”), independent of crop selection or production volume. The payment conditions are that farmers comply with a number of regulations and rules related to the environment, animal welfare and health. This is called “Cross-compliance”.

In regards to the evaluation of terms and trends for future agricultural policies in the EU, CAP's share of the total agricultural budget is expected to decrease, whereas the efforts in the environmental and climate sectors are expected to expand. But there will be no fundamental changes before the new reform in 2013. However, the ‘power play’ surrounding the new reform has started, and there are significant differences between the 27 member countries' interests. The Danish Government's vision for "Green Growth" is, among other things, aimed at a high level of environment and nature protection as part of modern agricultural production, and at the development of an environment and nature protection plan for

A smaller share of today's agricultural subsidies is

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framework for nature/wildlife is expanded to sufficiently meet the requirements for biodiversity and tolerable exposure levels.

Denmark by 2020. The chance for agriculture to become an economically important producer of "public benefits" is discussed. In government terminology, this is expressed as "environment, ecology, food safety, animal welfare and nature protection”. In this context, possibilities for agriculture to become ‘nature/wild-life managers’ are even discussed.

Finally, the development of EU agricultural policies is also dealt with in relation to global food production and the responsibility for Third World countries.

The IFRE has estimated the budgetary and economic welfare costs for the instruments suggested by the Ecological Council. The results are expressed as costs of reduced discharge of kg nitrogen into the sea and reduced emission of kg CO2. The trend is that the instruments that are the most cost-effective in relation to nitrogen emissions (i.e. the catch-cropping and extensification of low lying organic soils) are also cheap for climate gases – and it's vice versa for the least cost-effective. However, the principle of costeffectiveness may in some cases be contradictory to the holistic approach. This justifies the use of less cost-effective instruments in some cases. The IFRE has calculated the total cost of an increased catchcrop practice - including the introduction of extensification - to a total of 1.458 million DKK. The cost of a conversion to organic practices is highly dependent on the market development during the conversion period. In the estimate made by the Ecological Council, the cost per hectare matches the present ecology support level. A 30% reduction in pig production is really intended to be an advantage for agriculture (as pig production has been a downhill business over the last few years), but this "gain" is not included in the total cost calculations. Also, an introduction of BAT has not been included in cost calculations, as there is existing legislation. An example is how investment in new production has already become a part of the structural change in agriculture.

In Chapter 14, The Ecological Council has developed a scenario for Danish agriculture where the objectives for nature, environment and climate are dealt with and discussed in order to find a common solution using only a few instruments. The scenario is financially assessed by the Copenhagen University Institute of Food and Resources Economics (IFRE). It is important to emphasize that the IFRE does not have any responsibility for the draft instruments and implementation scenarios developed by The Ecological Council.

In order to reach the primary goals concerned with nature and biodiversity, water quality, climate and pesticides by 2020, a series of instruments are selected and expected to guarantee the overall objectives.

Among the general tools for agricultural operations are the increased use of ‘catch-crops’, which may be applied to a further 30% of all arable areas in crop rotation, while another 20% will be have to be managed according to ecologically defined principles. In addition to this, 430,000 hectares have to be withdrawn from the present cultivation practice, especially in regions where the loss of nitrogen and phosphorus is highest, in order to undergo extensification for compliance with tolerable levels. Prior to the selection, low-lying organic soils in riverbeds are suggested for continuous grass growing along rivers and lakes, as cultivation-free strips or protection borders. Wetlands may be constructed and well-drained areas may be afforested or changed to serve continuous grass growing. A 30% reduction in pig production has been proposed, and BAT (Best Available Technology) is to be consistently implemented in stables, resulting in a 50% reduction in ammonia emissions. Subsidies introduced as means for supporting permanent pastures are also amongst the suggestions.

In short, the estimated total costs of The Ecological Council scenario amount to 2.232 million DKK per year. The scenario covers the targets set for the protection of nature and aquatic environment as well as for climate protection. It is to be financed through a modulation of 20% of the EU-agricultural support in addition to national co-financing that does not exceed the current levels.

Out of these proposed actions, effects are calculated regarding nitrogen discharge into the sea. This also includes effects related to greenhouse gas emissions from agriculture. For the further targets, qualitative assessments are made. It is hereby indicated that the proposed instruments will reduce the agricultural inputs of climate gases by 30%, that nitrogen discharges in the sea are reduced by 40% and that the

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PART A Results

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Chapter 3: Conclusions, recommendations and perspectives 3.1 Environment agriculture problems

Agriculture is still a trade and occupation that meets a number of basic needs in society. In the Ecological Council, we agree with the CAP’s objective: Farmers must have a reasonable standard of living, comparable to other professions in modern life. This is therefore the basis on which we will draw conclusions from the report, discuss possible solutions and paradoxes, as well as offer our perspectives for the future of agriculture.

3.1.1 Nature sets the limits The decline in biodiversity has not been stopped.

Important plans have been initiated to protect the most vulnerable wildlife areas in the EU. Intensive implementation work has been initiated at local levels. But the targets for biodiversity require that initiatives are taken beyond the Natura 2000 areas – nature needs room and space! The value of terrestrial nature and wildlife has increased through extensive management of the less valuable cultivated land areas, and by improving the natural values of the agriculturally exploited areas. This could happen through the maintenance or re-establishment of fences, hedgerows and other small biotopes. The planning of nature protection development – at a farm level as well as regionally – should be given public support.

From an environmental point of view, management and agricultural practices were grim in Danish Agriculture in the eighties. Although considerable progress has been made since then, radical changes and improvements are still needed. However, a better integration of environmental needs and a drastic reduction in the emission of climate changing greenhouse gases are no longer symbols of a distant Utopia. Instead, they are realistic options for Danish agriculture: • Both space and conditions are available for nature to maintain biodiversity.

• Objectives of the Water Framework directive can be achieved with known instruments.

• Agriculture can reduce its greenhouse gas emissions by more than 30%.

• Pesticide usage and applications can be reduced significantly.

• Animal welfare can be improved.

What we need are natural and wildlife habitats to which the public has free access and can enjoy the countries natural values. All of this requires both planning and expertise. The future nature and wildlife planning needs to deal with Natura 2000 areas, with the land in close vicinity to the cities, and with the open land – i.e. making room for nature and wildlife as well as for the public.

The tools are available and the economic costs can be covered by EU agricultural support funds. These can be supplemented by national co-financing that does not exceed the levels granted so far in support of environmental protection.

The airborne eutrophication in nature is not only caused by agriculture, but also by energy production, industry and transport. Protective efforts are needed from all sectors. Tolerable limits define the level of maximum impact of atmospheric nitrogen exposure.

This, in turn, sets limits for animal production, transport and energy production. The problems may be reduced technologically, for instance by introducing catalysts on aerial exhausts from barns, automobiles, power stations etc., but it may also be necessary limits production, especially in animal husbandry.

Support should be given to cover the reduced income for farmers due to the new land use needed to make sustainable agriculture profitable in Denmark. This will ensure that a new environmentally friendly mode of operation can provide a healthy economy for the farmers in question.

Throughout the latest fifteen years, Denmark’s forestry plan has aimed to double the Danish forest area, but the country is still falling behind. We therefore suggest a reactivation of the plan and a confirmation of the targets for forestation. From the short-term perspective, the forests will contribute significantly to an increase in recreational possibilities for the population. The longer-term perspective is the new forest hosting a considerable part of biodiversity – provided that both forestation and proper forest management are accounted for.

It is not enough to solve Danish problems. Danish agricultural management cannot be assessed independently from EU agriculture as a whole.

Responsibility for global agricultural development and food production should also be taken throughout the EU. This is reflected in a number of elaborate conclusions presented in this chapter. The analysis shows that Denmark has the potential to lead the development.

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because an increase in groundwater nutrient contents can lead to eutrophication of surface waters in lakes, fjords and marine areas. This is especially relevant in regions with sandy soils that are usually less drained than loamy and clayey soils. The efforts to protect groundwater must also include protection of vulnerable groundwater resources by way of forestation, extensification and/or pesticide free cultivation.

In other parts of the arable land, the introduction of catch crops and a reduction in pesticide uses may be good and necessary instruments for protection against undesirable leaching processes.

The role of agriculture in relation to the natural habitats and wildlife is important, as it is the cause of recent years’ impoverishment. Agriculture is also important as a designer of future nature, one that secures the future growth of open land.

3.1.2 Eutrophication – Targets of the Water Framework directive can be achieved through existing and familiar tools and instruments.

It has been a long and tough haul to achieve the present 50% cut in agricultural nitrogen put forward in the Second Water Quality plan. As for the Third Water Quality plan, the results were not satisfactory in terms of a reduction in nitrogen discharges. This is not surprising as the plan is based on voluntary efforts. There have actually not been any significant reductions in nitrogen leaching since 2003. A reduction in the agricultural surplus of phosphorus usage has been achieved, but not a reduction in phosphorus discharge. This is due to the fact that the acreage of non-cultivated, protective border zones has been reduced rather than, as it was stipulated, enlarged.

3.1.3 It will be possible for agriculture to reduce its greenhouse gas emissions by more than 30% Agriculture contributes significantly to climate changing greenhouse gas emissions. In fact, it is equal to the emissions caused by transport. There is a close correlation between the use of nitrogen and the contribution to greenhouse emissions. As far as the Danish Water Quality plans are concerned, these have so far (beyond the 50 % reduction in nitrogen losses) led to a 30 % reduction in agricultural greenhouse gas emissions. But as with eutrophication, this development was brought to a halt by 2003.

The Water Framework directive requires that these reductions are fulfilled in order to achieve the goal of an ‘ecological good condition’ in our wetlands and open aquatic systems. The utilisation of agricultural nutrients must improve, and there is a need for a further 50% reduction in nitrogen leaching. The evaporation of ammonia, which has only been marginally reduced, has to diminish considerably. The phosphorus leaching also has to be reduced through a decrease in surplus uses and by special efforts and measures in ‘phosphorus-risk zones’. Until now, only general use regulations have been introduced, while in the next phase, far more efforts need to focus on the most efficient means and instruments.

It is therefore not surprising that the instruments used to further reduce nitrogen losses also will lead to a reduction in greenhouse gasses. According to our scenario’s calculations, the proposed instruments alone will result in a reduction of the agricultural greenhouse gas emissions by approximately 30 %.

This does not include the great possibilities in using biomass for energy purposes.

Aarhus University’s Faculty of Agricultural Sciences and Copenhagen University’s Institute of Food and Resources Economy published a report in December 2008, proposing a series of tools and instruments to be applied within the agricultural sector. Here are some of them: • Withdrawal from cultivation of low-lying organic soils • Application of after-cropping • Increased utilisation of agricultural biomass for energy production, either through direct use or biogas production • Increased feed utilisation efficiency

The reclaiming of land throughout the past century has created agricultural land on low-lying soils and seabeds. This has happened to achieve a quick flow of water, through drainage, pumping, establishment of pipelines and canals. It has led to great volumes of nutrients being drained out, leaving the land with reduced agricultural value. A considerable part of today’s necessary reduction can be achieved by extending the agricultural efforts in these areas. A further and inexpensive reduction of nitrogen losses can be achieved through an introduction of catchcrop practices on the arable cropland in normal rotation.

In the Ecological Council’s scenario, the focus is on instruments with synergy potential in regards to the protection of nature and environment. Beyond this, the university report deals with a number of other initiatives that could potentially lead to even greater consequences.

Groundwater plays an essential role in the aquatic environment; In part because we need to protect our drinking water reservoirs and resources, and also

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3.1.5 Animal welfare can be improved

The report indicates that the reduction potential for agriculture by far exceeds the 30 % represented in the National Danish target for the non-quota sector.

If a global agreement is achieved in Copenhagen in 2009, the EU has committed itself to extend the total reduction target from 20 % to 30 %. If this happens, the Danish targets for the non-quota sector will also increase from 20 % to 30 %. Beyond the agricultural contributions, the non-quota (non-ETS) sector also includes traffic and individual household heating. As a 30% reduction in traffic may prove difficult to achieve by 2020, it holds a significant advantage in the case that agriculture can contribute with more than 30 %. There are available instruments are at hand that are only useful from a business point of view or with modest economical support. An example is the chance that biogas production from farmyard manure and other agriculturally produced organic materials will take place to a far greater extent in the future.

Animal welfare regulations are enforced both in the EU and within the national agricultural policies, but the requirements are insufficient. The increasing demand for organically produced food indicates there are many consumers out there who are willing to pay extra for food produced in a careful and considerate manner. It may not be the responsibility of society as a whole to pay for improved animal welfare, but society is obliged to formulate the demands for improvements in the agricultural animal husbandry. Farmers must be held responsible for ethical and welfare-related production, and they must also pay for food production based on acceptable animal conditions. The improvement of existing labelling practices is a prerequisite. Aside from the organically produced food products, it is practically impossible to know whether or not the food on the market is produced under acceptable animal welfare conditions. If the price of animal welfare were to be carried by goods produced in Denmark, the result would be retailers and consumers finding the cheapest, imported discount products.

3.1.4 The pesticide usage can be reduced!

We have experienced a continued reduction in environmental pesticide contamination the last ten to twenty years. This is because many formulations have been banned as environmentally unwanted, particularly due to their leaking into the groundwater. There is still a considerable amount of pesticides in nature, for instance in the aquatic flora and fauna.

This leads to a decrease in the feeding possibilities for wild animals, birds and insects due to the disappearance of the weed flora. Until 2002, the application rate of pesticides (expressed in frequencies) was quantitatively reduced. Since then, it has actually been increasing. This is partly due to the fact that climate changes increased pest damages, without any protection measures being taken. The Third Pesticide Action plan stipulates an application frequency of 1.7 as target for the year 2009. Instead, it has increased to 2.5.

There are difficulties in introducing more stringent requirements for animal welfare: Many of them have to be regulated at EU level, and the member states’ views on this differ greatly. Where it is possible, CAP has to settle the regulations as a cross-compliance issue contributing to the improvement of animal welfare.

3.1.6 Demands for further development of ecologically managed agriculture Ecologically managed agriculture is a good and valid alternative to conventional agriculture in a number of ways. It boosts animal welfare, and reduced medication leads to lower medical residue levels in food.

As there is no use of pesticides dissipating into the atmosphere or the aquatic environment, heightened nature and wildlife values and greater biodiversity are seen in and around ecologically managed farmland.

The Ecological Council’s scenario proposes a reduction in the the over-all area sprayed by 30 % through extensification and extended ecological farming practices. There is great potential further for a reduction in spray frequencies on the remaining acreages, provided that more efficient instruments are introduced. This could be a higher duty on pesticide chemicals, more adequate crop rotations or extended use of BAT (best available techniques) in relation to spray equipment and demand-regulated application rates.

It has not been possible within the present project to give reliable estimates of application frequencies and dosage levels to be achieved by these measures.

However, there are societal demands on agriculture for which the organically version does not offer advantages compared to conventional agriculture.

Ecologically managed agriculture was introduced as an instrument in the Second Water Quality plan, but the organic management practices had an insufficient focus on the loss of nutrients, and did therefore not adequately protect the aquatic environment.

Also, there are no clear-cut and obvious advantages in relation to climate change protection, even though ecological management does cut the emission of greenhouse gases.

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Historically, ecologically managed agriculture presents itself as a dynamic discipline, ready to meet new demands and adapt to new knowledge. By increasing the focus on nature’s value, aquatic environment and climate needs, ecologists have been able to develop production and to present organic farming as a convincing, problem solving tool. They can offer principles of farming with improved instruments, like lower animal density and taking advantage of the extensification process. In this way, the ecological management practice may have a far greater role to play in solving the environmental problems created by conventional agriculture.

The scenario indicates that the main part of a problem can be solved in a comprehensive way, and that a number of synergistic effects are found through utilising the right instruments. Some fundamental and problematic arrangements and decisions have been made during the development of Danish agriculture: The intensive reclaiming of land that took place during the 1900s and the unfortunate practices used in the handling of farmyard manure are but two examples. By focusing on these problem areas, it has been possible to find common solutions to environmental problems.

In previous analyses, costs for the prevention of climate changes have been individually calculated, as have the protection of the aquatic environment and the restoration of natural values. However, these are all problems with causes in common, and coordinated solutions have to be introduced. In this report, we attempt to tie the problem areas together and to search for joint solutions. This leads us to advantageous and fruitful solutions in which the costs are balanced out by a number of positive effects.

3.2 A scenario for the solution of the environmental agriculture problems 3.2.1 The need for a holistic outlook The scenario instruments are primarily selected with reference to goals and targets set for nature protection, nutrients and climate change controls. We have evaluated the instruments based on their level of synergistic effects. At the same time, we have used the most stringent targets to determine the application of the individual tools. An example is how one third of the Danish area has been selected by referring to the tolerable levels for the natural habitat and wild life, which in turn has determined the extensification process and to which degree one should take arable land out of cultivation.

3.2.2 The scenario’s instruments and tools The solutions proposed in this scenario are limited by an unavoidable simplification and by the fact that the scope has been limited to a few, important instruments with the following results:

Ways, means and tools General measures • Catch-cropping on further 30% of the cultivated acreage • Ecological practices on 20% of cultivated acreage • 50% reduction in ammonia emissions from pig farms through improved BAT-practices

600.000 ha1 400.000 ha

Regional/Local measures • Removal from / extensivation of agricultural land use - Lowland soils (river valleys, buffer zones & wetlands) - Rising forests - Grasslands

430.000 290.000 100.000 40.000

Subsidising nature protection via grazing or mowing

474.000 ha

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ha ha ha ha

There will of course be a need for local evaluations and local anchoring in local situations in the forthcoming nature and water protection plan, and we realize that we may have skipped important individual aspects or overlooked specific problems in our general evaluations. We do however trust that the further development of expert knowledge and technologies may find necessary, intelligent solutions locally.

the size and availability of open grasslands. Grazing larger, well-rounded areas could give advantages, while smaller, less accessible acres may entail considerable costs. Subsidies may therefore have to be differentiated to ensure that all areas are managed adequately and that is profitable for the farmer to deal with the management. Our liberal estimate is 1000 DKK per hectare.

3.2.3 The price of implementing the scenario

The price of going into organic farming as proposed, including nature management and protection, is projected to be 774 million DKK per year. A full implementation of the scenario will cost app. 2200 million DKK (290 mio. Euro).

The Copenhagen University’s Institute of Food and Resources Economics (IFRE) has calculated the costs in farmers’ income per cultivated hectare based on an implementation of the proposed changes compared to the earlier use of the farmland. The reduction in incomes due to an extensification of arable land and the proposed catch-crop practice has been estimated to reach app. 1500 million DKK.

3.2.4 The costs will be covered by the EU Agricultural policy The Ecological Council proposes that 20 % of the EU Agricultural support through mandatory modulation should be transferred from the present direct support to the Rural Area policy, and that the increased funds are used in support of the for nature and environment protection objectives proposed in this scenario. This adds up to about 1500 million DKK per year from the EU towards the financing of the scenario instruments, or about 70 % of the total cost.

The IFRE has calculated the pig production to be a losing trade to which a reduction in the present stock will present itself as an economical advantage.

However, this is a picture of the branch as a whole.

The IFRE points to the possibility that a positive balance may be achieved by the most efficient parts of the sector, and that the present structural changes may in fact lead to the closure of the less-efficient production sites.

Until now, about 500 million DKK have been used for the co-financing of Rural Area policies per year, Beyond that, support have been given to the implementation of aquatic environment plans, forestation, environmental projects, establishment of National parks etc.

The introduction of BAT in stables will in many cases present an economical advantage to animal producers. Investments in new stable equipment and techniques are typically made in conjunction with environmental authorisations, and are thereby considered integral parts of the total production investments. In light of this, the costs of reduced animal production and introduction of BAT in stables are not considered extra burdens.

The Ecological Council scenario can therefore be financed without any additional public expenses to the Danish nature and environment protection efforts. But there may be farmers who experience a certain decline in agricultural support - unless they get backing that covers their additional environmental efforts in addition to support that is the basis for new production forms on their extensively managed farmlands. The scenario does not evaluate whether single payments could or should be given under Pillar 1.

According to the IFRE calculations, ecologically managed production sites will show better economical results than conventional ones, provided that the normal organic subsidy is included. Increased, certain price levels for organically labelled products will determine an increased market share. The IFRE estimates that a three- to fourfold increase in ecologically managed farmland will create a demand for an increase in production support. But other public policies may provide incentives to the growth of the organic markets, too. An example could be the increased application of organic food within governmental establishments and services. This has made us settle at an increased ecological farm management cost of 750 DKK per hectare, the same as today.

The transferred supporting funds should be used an agricultural support that covers additional costs or lost land earnings: It should enable farmers to cultivate their land in profitable ways.

3.2.5 The basis for a cost-effective instruments choice The IFRE institute has not only calculated the costs of instruments, but also the cost-efficiency of the individual instruments by relating them to the effect

IFRE’s calculations have found the costs of habitat and wildlife management to be highly dependent on

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related to natural values - and how a delimitation of such practices should be proposed.

on the aquatic environment and the climate. This represents an important tool for identifying the best economical instruments for reducing nitrogen leaching or greenhouse gas emissions.

Other paradoxes may deal with animal welfare vs. environmental protection. From a welfare point of view, open-air management is obviously recommendable. However, for cattle farming, such practices will lead to an increase in greenhouse gas emissions from the grassland, and a harvesting followed by feeding in the stables (whereby the manure can be collected) may be preferable.

In the calculations presented in the scenario, IFRE found that a series of instruments have high cost efficiencies in relation to a reduction in nitrogen leaching. The extensification of low-lying organic soil and catch- crop practices on arable soils are two examples. In the climate report’s calculations, these instruments are also deemed attractive, but only if carbon balances of soils are included when it comes to catch crops. From a comprehensive point of view, it therefore seems appropriate to apply these instruments.

We have also looked at the possibilities of new technologies in modernized and spacious stables offering solutions that cause minimal environmental concern. This does however raise concerns regarding the question of mass production units in relation to animal welfare.

We have chosen to include the extensification and the forestation of arable soils as they are found to represent high costs for the aquatic environment and climate. This inclusion is necessary in order to ensure the protection of natural qualities and biodiversity.

As instruments, they are found to be relatively expensive when related to the aquatic environment and climate. But the positive effects on nature are not included, in spite of their significance as important scenario parameters. We have therefore chosen to give priority to the selection of arable land as a part of the comprehensive picture.

Climate change predictions have pointed at weaknesses in ecologically managed farming. Calculations on the impact of individual food products on climate change indicate that organic food products represent an augmented impact (expressed per kg of produced food) in cases when the yields of organic production are lower than for conventionally grown commodities. This seems especially evident in potato, vegetable, pig and poultry production.

Most of these paradoxes are related to the climate change problem. But the scenario calculations also indicate that the greenhouse gas emission potential for reduction is considerable enough to evade the paradoxes. Accordingly, it has not been necessary to compromise in individual cases in order to meet the requirements in others. The paradoxes do however indicate that a number of questions still need to be investigated for the best solutions to be found.

3.2.6 Contradictions and paradoxes The analysis of the scenario has revealed a number of paradoxes, and some of the environmental targets and instruments may seem contradictory. We’d like to mention a few of them: Ruminants’ discharge of intestinal methane contributes considerably to agriculture’s climate changing greenhouse gas emissions. From a climate protection point of view, it makes sense to recommend a reduction in cattle stocks. On the other hand, ruminants make great use of clover grass field roughage and the extensively managed areas needed to re-establish the biodiversity - both indispensible parts of ecologically managed farming. In terms of protecting the climate, using the biomass from extensively managed fields may be an option, for instance through harvesting biomass for biogas production.

These are the reasons why we do not to propose a reduction of the cattle stocks in this scenario. For the time being, we suggest further research to find out where the manufacturing of plant materials for biogas production will be the most advantageous when

3.3 Further perspectives 3.3.1 The Food production: Quality and extent The fundamental requirements of agriculture are connected to food production: What we all want is sufficient, quality food.

Food production is market driven, with governments and the EU in the roles of ‘controllers’ of quality, environment and health. Consumers who want cheap food products influence production.

Compromises are often seen in relation to both qua-

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3.3.2 Is the development of structural changes happening too fast?

lity and health, for instance in the production systems where animal welfare is inadequate and characterized by high mortality rates and medication practices that leave medical product residues in animal food products. Also, it is not satisfactory that considerable amounts of pesticide residue are still found in vegetable food products1. What we need is a stronger coordination between: •

•

•

•

The recent structural development in Denmark has taken place over a very short time. The agricultural policy that regulates maximum farm sizes has frequently been amended, in intervals of only a few years. The family-sized farms have become part-time enterprises or have been merged into larger farms.

The gap between the structure of Danish agriculture and conventional Southern or Eastern European small-sized farming is increasing, and the structural changes spawn advantages as well as disadvantages.

Farmers who prefer and choose quality, healthy food and the environment over cheap food production The Government and EU being promoters of food safety and environment protection via regulation, control and labelling practices (voluntary agreements are insufficient) Consumers who accept information on environment, health relations and animal welfare and are willing to accept labelling and information without merely going for the lowest possible price.

Retailers who are willing to give preference to the sales of quality products by not substituting Danish quality food for lower quality, potentially salmonella infected import products.

The development of greater farm sizes welcomes new technological possibilities. Investments are made in new stables, whereby BAT (i.e. Best Available Technology) options may considerably reduce the evaporation of ammonia and emission of greenhouse gases. The greater production units may enable the biogas production from farmyard manure to become profitable. Through this, the methane evaporation can be reduced and the availability of nutrients to plants can be improved. Possibilities for improved animal welfare are created, and the working conditions for farm workers can be bettered. New machinery may be introduced for an increased utilisation of fertilisers, while satellite controlled application of fertilisers and pesticides can be introduced upon demand.

Also, there is a world market for quality food products. This market is ready to accept products from an efficient, market-oriented Danish agricultural production.

Disadvantages, for instance connected to unacceptable risk of hoof-damages in the stables or too many ‘loser-cows’ in the herd, do exist, but there are possibilities of technological solutions and improvements here, too. How far is it possible to go? Multi-story stables, including nutrient- and offal-controlled handling practices placed in industrial urbanised areas?

Combustion of the fibre-content of the manure?

The animal production in Denmark has reached a volume that passes nature’s level of tolerance. It has often been stated that our highly efficient agriculture contributes to the fight against global food deficiencies. However, this must be done sustainably in order for nature and the environment to be passed on to future generations in good condition.

Also, the climate sets limits. For global food production to be sufficient and climate effects from agriculture to be sustainably reduced, we as consumers are required to reduce our consumption of animal meat and meat products. Danish agriculture should therefore not deliver pigs and dairy products to the global market if the production is unsustainable. This is the reason we propose a reduction in overall animal production. A reduction in cattle stock has already taken place, and as we still need to breed cattle as part of our land management, we suggest a Danish pig production reduction of 30 %.

On the other hand, it will be difficult to find substitutes for the farmer’s direct contact to animals or for the visual control of insect pests, weeds etc. in the fields. Can planned spraying programmes substitute the spraying upon demand? Can video surveillance identify animals under stress in the stables? The family farm tradition will disappear as a valuable and appreciated form of life, while rural areas will be depopulated.

There is a need for comprehensive evaluations of societal, environmental and ethical problems, and to discuss the limit as to how far this may go. All of these are problems and questions that cannot be solved by the market forces.

1 See: Hans Nielsen, Letter to the Minister of Food on pesticide residues in food. From the Ecological Council in January 2008 (in Danish) (www.ecocouncil.dk/Artikler/Landbrug

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emerged. These industries not only found it profitable to accept the environmental requirements as strictly regulatory matters, but also to look at them as the demands of the future. This made them able to make use of an environmental profile as a commercial marketing tool.

The Common Agricultural Policy (CAP) and the Rural Area policy both contain aspects that may maintain valuable cultural life and extensive agricultural traditions. The growing demand for nature protection may be the basis for a new niche in which open nature can be grazed and sustained as part of the primary production. The economic input from CAP may contribute in making this a profitable part of the production.

This is also going to happen in agriculture. Ecologically managed agriculture is an example. But other farmers are also taking the lead, for instance in the establishment of environmentally friendly stables, through engagement in nature planning and environmentally friendly products. However, the development is slower and the producers who apply clean technology claim that customers are just not that interested. In this situation, the agricultural organisations do not appear to be proactive in regards to finding solutions to the problems.

3.3.3 The multifunctional agriculture Farmers still play an important role as food producers and partners in the national economy. But as we have presented here, there is also a number of matters that society has to urge agriculture to consider.

Agriculture has to develop in order to become multifunctional. Agriculture must safeguard our groundwater and groundwater resources. It must manage the natural values and protect nature development in the open, arable land. And agriculture must also take action in the protection against climate changes, as well as contribute to energy production through biomass.

The industrialisation of agriculture means that it has to be regulated in its relation to the environment in the same way as it is the case for industrial producers: Through firm environmental requirements, combined with strict time limits for meeting targets and a consequential fine system in cases of noncompliance with demands. Voluntary agreements are insufficient: This was especially apparent in the lack of support towards the Third Water Protection plan and the agreement on set-side. The same was true for the new legislation on the approval of livestock farms passed by the Danish Parliament in 2006.

Unfortunately, this legislation is not up to speed on the possibilities of introducing cleaner technology (BAT) in animal husbandry.

All this leads us to the conclusion that there is a need for radical changes in the farmers’ self-image and notions, including the understanding of the environmental consequences of their trade. Agriculture cannot be controlled by and managed from a desire to produce the most and the cheapest possible.

Farmers will still have to develop their future enterprises from a rational business economy point of view – but there is a need for CAP to develop in a way that makes supporting funds able to contribute to the profitable development that is necessary in other parts of the society.

3.3.5 Governmental ‘Green Growth’ plan Neither Water Protection plan nr. 3, Pesticide Action plan nr. 3 nor the voluntary agreements with agriculture have to any practical extent fulfilled their objectives. There is a need for further instruments.

Current information indicates the necessity of increased coordination in the planning of different environmental aspects. This is also the government’s intention, and a comprehensive ‘Green Growth’ plan is planned for the spring of 20092. On November 16 2008, the Prime Minister launched a new green profile. It was specifically related to the climate, but he also pointed to an action plan for nature protection.

This included greater natural habitat and wildlife areas as well as a reduction of nitrogen and phosphorus losses, for instance through the introduction of market-based instruments. This seems to indicate governmental will to reach the goals through more efficient instruments and tools.

3.3.4 Environmental regulation of agriculture and agricultural accept of environmental problems It took a long time to reach the Water Protection plan’s goals, especially due to the fact that agriculture in fact was in opposition to the problem solutions solution. In contrast, the industries did solve the problems connected to their discharges of nutrients into the aquatic environment within a few years. This was in spite of the fact that the costs of their muchneeded actions were a lot higher per saved kilo of nitrogen and phosphorus than the case was for agriculture.

Within industries, the “polluter-pays-principle” was used for water environment problems. Following this trend, a considerable number of pro-active industries

2 The plan was published 30 April 2009 – but this was after this report was finalised

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3.4 The European Level

all economic development as the surplus consumption of energy and climate changing greenhouse gas emissions in the EU and other industrialised regions downgrade the agricultural prospects and the general standard of living in many developing countries.

They are negatively influenced by parts of the commercial policies because the EU pressures them to open their markets to agricultural product imports, even though the poorest countries lose the benefits of their preferential agreements on the EU market.

There are big differences among the European countries on both the structures and the environmental impacts of agriculture. The focus of this report is mainly the integration of environmental regulation in relation to Danish agriculture. However, the EU Common Agricultural Policy (CAP) implies that conditions as well as problems will become more and more comparable and uniform over time.

The CAP also negatively influences developing countries, as poor farmers have to compete with European farmers who receive considerable economical production support. A new common agriculture policy must therefore integrate and consider global food safety as well as agricultural development in Third World countries. Based on the EU policies’ directly and indirectly influencing the standard of living and production conditions in developing countries, it is impossible to define societal benefits and environmental qualities as internal exclusive EU values: They need to be redefined as global, public values.

According to the think-tank “Notre Europe”, one of Europe’s problems is the lack of focus on agricultural environment efforts and the questionable effects of it. If one were to generalize, the analysis of Notre Europe claims that in spite of the reduction in direct support and consequential pressure reduction in regards to intensifying the production, the environmental consequences have been mixed or disappointing. It is also said that many general indicators for European development continuously point to a worsening of the problems. The numbers of problems mentioned include losses of grazing land, biodiversity, wetlands, birds-counts, water quality, rural landscapes and soil fertility.

It has never been possible to justify the fact that industrialised country farmers, by virtue of their governmental support, should have production conditions that are out of proportion with conditions in most other countries. In tact with environmental deterioration and climate change affecting more and more people, developing and supporting the global food safety contributing to a reduction in global hunger will become central criteria for European agricultural policy.

Following the reforms and the latest status check, there has been a transfer of direct support funds (‘Pillar 1’) to rural area development (‘Pillar 2’). This has created possibilities for stronger environmental and climate protection efforts. However, many decisions are left to the national parliaments to make.

Among the options is article 68, the option to set priorities for the application of funds. This means that that we have no way of being certain about theses possibilities being used for a greater environmental integration.

It is not possible for the EU to singlehandedly develop a Common Agricultural Policy (CAP). It has to be part of a common global food policy, and a coordinated policy must therefore also support the developing countries, including an increased support of food safety and of international public agricultural research. This support will have to include programmes to increase sustainability, productivity (especially in developing countries) and efforts aimed at reducing the negative consequences of climate change.

Today, the direct support given to the EU-farmers is based on the cross-compliance principle: They are only entitled to receive support if they comply with the specified rules and regulations. It would definitely be more beneficial for the environment to introduce the principle of farmers delivering positive public benefits, for instance in regards to environmental and climate related improvements, as a condition for receiving support. This might ensure a reformed agricultural policy that promotes environmental and climate-related efforts all over Europe. It would guarantee that supporting policies are not in conflict with the WTO-rules.

1 See: Hans Nielsen, Letter to the Minister of Food on pesticide residues in food. From the Ecological Council in January 2008 (in Danish) (www.ecocouncil.dk/Artikler/Landbrug 2 The plan was published 30 April 2009 – but this was after this report was finalised

3.5 CAP and Third World countries Agriculture in developing countries is both directly and indirectly affected by the development in the EU. The countries are negatively influenced by the over-

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PART B The structure and economy of agriculture

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Chapter 5: Globalisation 5.1 International trade and trade agreements

nal support and the EU market opening (customs tariff reduction). However, the gap between the EU and the US and requirements from, for example, Brazil and India for customs tariff reduction and further decrease in subsidies in the US has been substantial.

A new international agreement on agriculture has for years been a focal issue in World Trade Organisation negotiations1, and these negotiations reflect a new and far more global view on agricultural production, trade, and food security frameworks.

Consideration for WTO negotiations has been a key driver in the process of agricultural reform in the EU.

It has been decided that EU export subsidies are to be phased out by 2013. In the negotiations about the CAP a key effort will be made to remove the remainder of the EU rules seen to be in conflict with WTO rules. At the same time major efforts will be made to reduce total costs of around DKK 400 billion (53 bill.

Euros) in 2008. As it is discussed in Chapter 12 one of the basic ideas is that support to EU farmers from 2013 shall be given for special efforts they make in relation to environment, nature management, reduced climate impacts etc.

WTO attempts to make a new framework agreement on agriculture have focused on three issues or pillars in the former so-called Uruguay Round’s agreement on agriculture: 1. Market access (including phase-out of tariffs and opening of markets for trade in agricultural products, however with special rules on particularly sensitive goods) 2. Export competition (and thereby phase-out of export subsidies and other support measures distorting free and equal competition) 3. National support (including subsidies for farmers and nationally guaranteed prices etc.).

WTO and EU reforms Even if WTO negotiations have been marked by endless delays and several collapses, of which the latest in summer 2008, WTO principles have extensively affected the reforms of the CAP, including primarily: 1) partial phase-out of direct export subsidies for EU agricultural products and 2) extensive, though so far only partial delinking of agricultural support from direct production support and transfer to non-production related single farm payment in the form of area aid.

The aim has been to create more equal terms and higher and more expedient production at a more liberal and global market for food and other agricultural products.

Doha Round The latest negotiation round in WTO has been going on for more than seven years since the WTO’s fourth Ministerial conference in the Qatar capital of Doha, hence the name Doha Round. Being meant to have special focus on the needs of developing countries, it was called a Development Round. There were large expectations for the negotiations, which were planned to be finalised in 2005. Since then negotiations have collapsed again and again, most recently in summer 2008. Immediately this was seen as the final collapse and it was uncertain whether negotiations would continue in this set-up. During autumn 2008, however, explorations restarted and a certain optimism was expressed regarding resumption of real negotiations.

The two forms of support have clearly been anticompetitive and trade distorting to the benefit of EU

Box 5.1 WTO WTO (World Trade Organisation) was formed in 1995 after failure in previous attempts to form a global organisation on trade. WTO works to create transparency, predictability and equal treatment of all members in the international markets.

WTO builds on and replaces GATT negotiations. 151 states are WTO members today and further 31 states have observer status (source: www.wto.org).

In the course of time certain results have been achieved in the agricultural field. The US and the EU have mutually accepted the American reduction in inter1 See text box

24

farmers, and they have been in fundamental conflict with WTO principles. The reform process in the EU has reduced the number and extent of problems in the EU with respect to WTO, but it has not eliminated them.

Box 5.2 Green, blue and amber boxes Green box means agricultural support measures considered as minimal or nontrade distorting. It covers for example delinked income support, environmental support and support for regional development, but not direct price support.

The reforms of EU agricultural support have contributed to a liberalisation of trade in agricultural products. However, this liberalisation means that large efficient developing countries exporting agricultural products (for example Brazil and Argentina) will now have market advantages in the EU, whereas small producers in many of the least developed countries, among others in the ACP Group2, will lose the advantages prevailing under the preferential schemes (see later).

Blue box means agricultural support measures that may have a trade distortion effect, but also contain production reducing measures, for example the former area aid combined with the set-aside scheme. Several products in the blue box are accepted in the WTO definition of products that are not distorting trade.

Since the first negotiations WTO has maintained the principle of �Single Undertaking� meaning consensus not voting, i.e. all agreements must be made in one continuous negotiation process. Agreements in the agricultural field are thus part of general negotiation rounds with a total package of agreements on trade in industrial products and services (NAMA)3, along with issues such as antidumping, intellectual right, standardisation etc.

Amber box means agricultural support measures that are directly promoting production and distorting trade, for example price support and support linked to production volume.

The WTO concept has been subject to critique, among others due to the fact that rich states can much better afford to have large negotiation delegations than poorer countries, and that there has been a tendency of arm-twisting of weaker countries. 4 WTO Ministerial conferences are followed closely by both business organisations and NGOs and many of the summits have been met with vivid demonstrations by NGOs and groups of poor farmers.

on agricultural support are based on assessments whether support is defined as being within a green, blue or amber box, respectively. Agricultural support in the amber box is generally distorting trade and therefore in conflict with WTO. Green box support is minimal or non-trade distorting, while the blue box covers categories in-between (see box 5.2). Basically, reform efforts have aimed at moving as much as possible of support towards the green box.

But even if WTO is criticised there is general concern that a final WTO negotiation collapse will have more losers than winners. The general feeling is that an agreement will give far better long-term options to develop and strengthen agricultural production and that it will be negative if a collapse leads to international trade being governed only by bilateral agreements paving the way even more for dictates from the largest and strongest states.

Even if the reforms in the EU so far have transferred several support types to the green box there is still critique of the consequences on trade of the EU support, including some of the elements in the green box. The British organisation ActionAid has suggested that production costs for wheat in the EU are above the intervention price and that the EU wheat production is thereby only profitable because farmers receive area aid. Single farm payment is thus contributing to upholding and promoting production in the EU even if it is delinked with regard to different types of production.5

Three boxes of agricultural policy Agricultural support is not just an EU phenomenon.

For example, the US administration also gives extensive agricultural support. International discussions

2 African, Caribbean and Pacific Group of States. More than 70 states, many of which are former European colonies. Since the 1970s this group of states has had special agreements with the EU. 3 Non-agricultural market access negotiations or NAMA is a common denominator for trade agreements on industrial products 4 www.landbrugsraadet.dk/view.asp?ID=10795 5 Among others, Christian Friis Bach, DanChurchAid, at hearing in the European Affairs Committee on CAP 6.2.2008 and Kenneth Haar: Status: Setback in Hong Kong, Dec. 2005, and conc. ActionAid: Danish Association for International Cooperation: The CAP

25

countries a special agreement on duty and quota free market access for all products unless arms, the so-called ”Everything but arms” agreement. Up to 2009, however, there have still been barriers in the form of exceptions for sugar and rice.8 As mentioned, the EU has also since the 1970s had preferential schemes for the ACP Group.

EU export subsidies, still amounting to EUR 1.1 billion in 2008, are grouped in the amber box and clearly in conflict with WTO rules.

The blue box constitutes a problem of its own, among others because it contains a number of technically very complicated support schemes that according to many statements are so difficult to handle that this by itself can have anti-competitive and trade distorting consequences.

With the gradually larger opening of the EU market for import, developing countries under preferential schemes are paradoxically affected in a negative direction. The preferential schemes have given the countries access to sell agreed quotas of agricultural products to the EU at the EU’s highest guaranteed prices. In the wave of liberalisation market prices decrease, and efficient large farms in, for example, Latin America, enter the EU market. Therefore negotiations between the EU and the ACP states on economic partnership agreements (EPA) now also deal with the question of how to compensate these countries for their losses in EU exports in parallel to liberalisation.

Poorest countries For many poor countries agriculture is the only way to increase welfare both through trade with other countries and not least to provide food for the countries’ own population. After the dramatic food price increases in 2008 FAO estimated that global hunger had increased considerably and that 923 million people today suffer from malnutrition.6 Development of the agricultural sector is crucial to reduce hunger.

The number of permanently undernourished people in the world has for many years been almost constant, though with a slightly decreasing trend. The increase of 2008 brings the figure up to the same level as in 1990. Expressed in share of total world population, however, the rate has decreased from back then, because total population is higher today.

Developing countries have different interests and are therefore organised in different groups under WTO. Under the long WTO negotiation process on agriculture more than 20 different country coalitions have been in play. The G-20 group, covering the largest economies of the world, both among industrialised and developing countries, has become increasingly important in negotiations, even if the group is characterised by internal disagreement on central issues.

G-20 comprises India, Brazil, China and South Africa.

The developing countries under G-20 push to change the agricultural policy of the rich countries, but they do understand that the poorest countries need to protect sensitive sectors and agricultural products.

They have played a key role in the attempt to find compromises between industrialised and developing countries, but have been under critique from the poorest developing countries.

The 50 poorest countries account for only 0.4 % of international trade, and this share has even been on the decrease in recent years7. However, another feature of the poorest countries is that what they can sell is primarily raw materials, including agricultural products. Therefore it is crucial for many of them to have market access for their agricultural products to the EU and other industrialised countries. They also have a need for being able to protect their home markets against import of cheap agricultural products from foreign countries while developing their own agriculture. Conditions in the different countries differ much, but it is obvious that a number of the poorest countries have a parallel need of developing their domestic production, improving their export possibilities, and maintaining their right to protect their home market for sensitive products. For these reasons, among others, the Doha Round has been called a trade and development round. Support for development is a precondition for a number of countries to benefit from better trade conditions.

G-90 covers countries of the African Union, the ACP Group and the LDS Group (least developed countries)9. This is a weaker group, must larger and more inhomogeneous. It comprises countries with partially opposite interests, since some countries are agricultural exporters, while others are permanent importers.

The EU has given the 50 least developed and poorest

Rich countries have exploited the different interests

6 7 8 9

FAO ”Food Outlook” November 2008 www.landbrugsraadet.dk/view.asp?ID=10795 Until 2006 this also applied to bananas Den Globale Markedsplads p. 49

26

trade barriers for producers and countries unable to comply with requirements. But the labels are also a support for producers liable to achieve benefits on the international market.

of the developing countries. Negotiations have been marked by the fact that the G-20 group with strong, dominating developing countries such as India, Brazil and China have played an increasingly important role. Other weaker developing countries have sought influence through alliances in this group of countries. In 2008, furthermore, negotiations were marked by the food crisis. Strong developing countries introduced national rules to protect their home market against too large price increases on food. India introduced, among other measures, export restrictions.

Food security had come higher on the political agenda.

Requirements and premiums for specific qualities of production may enhance more sustainable production. A positive example is organic farming in Uganda, supported among others by Swedish SIDA. It has turned out that thanks to well planned organic production it has been possible to increase yields per hectare farmed as well as the price per unit produced. Farmers have had a double gain: higher price per kilo and larger harvest11. This and other examples have contributed to enhancing focus on the possibilities that exist for developing a more organic and sustainable food production in many regions.

British OXFAM used Haiti as an example of a really bad result of liberalisation in poor developing countries10. IMF and the World Bank forced in 1995 Haiti to liberalise its rice import. This led to massive import of cheap American rice subsidised by US agricultural support. Haiti’s self-sufficiency dropped and today Haiti imports 80 % of its rice. Therefore the population was hit hard by food price increases in 2008. More than half of the population is undernourished and in rural areas 80 % live below the national poverty line.

New requirements for standards, which the poorest countries have a hard time complying with but which can ideally foster new opportunities, have become a new dilemma in trade negotiations. This has led to the requirement that special ”poverty clauses” are introduced demanding analyses of the impact of new standards and rules for the poorest countries and leading to them being assisted in complying with such standards.

Standards, patents and increasing requirements for environment and ethics Traditional protectionism in rich industrialised countries has decreased in recent years, but it has not disappeared. From the viewpoint of developing countries there are still massive distortions harming the poorest. In addition many countries are today concerned about what some call a special kind of “green protectionism”. Increasing requirements are set for quality, control and conditions of production for imported products. Standards for food security, environment and animal welfare etc. are difficult to meet in a number of developing countries in lack of good conditions of production and developed national standardisation and supervisory bodies. Plant patents and protection of intellectual rights can also act as barriers hampering production and trade conditions of poor countries. The EU in general has a reputation of being quite bureaucratic in its administration of different trade schemes, and this may make it difficult for some developing countries to utilise otherwise advantageous schemes.

Agricultural support and development aid Agricultural support in rich countries is several times higher than development aid from those same countries. Also, agricultural aid constitutes a far smaller rate of total development aid than it used to, and financing of international, public agricultural research has been neglected for years.

Climate change causes a further pressure on agriculture in developing countries. According to assessments from the UN International Panel on Climate Change agriculture in tropical zones will be deeply affected by climate change. We will see more and longer periods of draught and heavier rain and flooding.

There is a need for research in changed cultivation conditions and for investments in measures reducing the adverse effects of climate change.

One of the decisive differences between conditions for farmers in rich countries compared with their colleagues in poor countries is that farmers in the EU and the US are far better educated and have far better advisory services at their disposal than farmers in poor countries. Also, agricultural support means that farmers in Northern countries can invest in produc-

Increasing consumer requirements regarding respect of environment, nature, livestock ethics and workers’ rights under, for example, certified organic, fair trade and FSC labelled products, may develop into new

11 See, for example, www.nugamu.org.ug

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Despite preferences in relation to the EU the poorest developing countries have not been able to increase their exports, and the aim of the EPA negotiations is to set up a number of regional agreements on free trade to create a more dynamic development in trade. The ACP Group of around 70 countries is divided into six regions with each their agreement. The purpose is increased free trade between the developing countries and between the EU and those countries. Negotiations have been delayed, but the first regional agreement was signed in 2008. EPA negotiations are affected by some of the same problems as WTO negotiations, including the concern that developing countries are flooded by cheap agricultural products from abroad, liable to destroy the establishment of national production. Negotiations on transitional schemes and special regard for sensitive products are therefore crucial.

tion in the certitude that they have both basic financial support from the state and – until recently – guaranteed high prices for most crops.

Small farmers in poor developing countries have neither education nor capital, and they have no certitude of prices for the products they produce. If risks of draught or flooding increase the risk of failure of crops they have to be extremely cautious as to investments in better production. If they have to borrow for investments and harvest fails the consequence is often that they are forced off agriculture and in worst case end up as beggars.

From 2005 to 2007 maize harvest in Malawi more than doubled after a reduction by 80 % in fertiliser prices and in cost of hybrid maize seeds by more than 90 % thanks to subsidies12. The growth of production was so large that it financed subsidies, and Malawi was in a position to sell their surplus to the World Food Programme WFP. This trial emphasises how very fine results can be obtained when the economic risk is removed or reduced considerably.

5.2 Environment and localisation of production Globalisation of trade and production means that production is relocated according to the best conditions. This often means much longer transport with the associated environmental impacts, and this is in contrast to the idea that production and consumption to the largest possible extent should take offset in local conditions, including local cultivation conditions and local climate.

General demands for increased production in developing countries in order to increase food security and economic growth combined with the wish of combating the effects of climate change will probably lead to larger understanding of the need for investing dramatically both in agricultural research and agricultural production in developing countries.

It will also lead to demands for a change in the balance between support to EU and US farmers on the one hand and support to developing countries where a very large proportion of total population is still dependent on agricultural production on the other.

Therefore the discussion of localisation of food and agricultural production both between different EU Member States and between the EU and the rest of the world will become more important. This localisation is increasingly affected by a large number of conditions in addition to those dealing with cultivation climate and accessibility of agricultural soil. Important factors are energy prices, costs of labour and intermediate products, as well as national and local regulation on environment and working environment; but also nature and extent of agricultural support.

Economic Partnership Agreements (EPA) Concurrently to the WTO process and among other things due to the difficulties encountered in negotiations focus has been put more on bilateral trade agreements covering also agriculture. The EU Commission is involved in negotiations on economic partnership agreements (EPA) with the ACP states. EU agreements with countries in this group have for many years been in conflict with WTO rules, since the agreements have given special preferential schemes on the EU market for a group of developing countries whereas other countries (including other developing countries) have met barriers for export into the EU. To a large extent, these schemes have comprised agricultural products.

Changes in principles for agricultural support lead to changes in breeding and cultivation patterns in the EU; for example, production of sugar and rape in the EU has decreased sharply due to the agricultural support reform. Support to closure of fruit growing farms in Denmark has also meant that a larger proportion of apple consumption is based in imports, leading to larger transport costs.

Relocation of production through agricultural support

12 Africa Renewal. October 2008. Published by the UN

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that the EU is not self-sufficient due to the large import of animal feed, or in other words occupies too large areas compared to the volume of food produced. In EU-25 (i.e. EU before the latest enlargement) imports are slightly higher than exports.

Agricultural support has contributed to having food production in the EU which would otherwise not be competitive. Beet sugar production is an example of such production. But agricultural support can also cause production to be relocated out of the EU or between EU Member States. Analyses from, for example, the Danish Institute of Food and Resource Economics show that EU agricultural support in Denmark has been capitalised in the form of very high prices of soil and farms. This means that it is expensive to invest in new production in Denmark, but concurrently large capital gains have enabled some farmers to invest in cheaper soil in, for example, Eastern Europe, both in new Member States and in non-EU Member States. These investments have been profitable, among others because investors have benefited from cheaper labour, cheaper soil and in some cases less stringent environment and working environment legislation in some countries. This shift has led to extension of pig farming in eastern countries and to pigs from Denmark being slaughtered for economic reasons in countries with lower labour costs. This development also leads to an increase in transport. In 2008 around 13 % of Danish pigs were slaughtered at slaughterhouses outside Denmark.

According to EEB the EU consumes ”bio-capacity” by a factor 2.2 of its land. In the entire EU there is only 2.2 hectares available per capita, but the EU ”consumes” 4.9 hectares per capita14.

It is conscious EU policy to opt for production of value-added food and to import cheap intermediary products in the form of animal feed and fertiliser.

But this policy increases total transport needs and has in addition a number of other environmental impacts.

Relocation caused by changes in agricultural support, trade policy, energy prices, environmental legislation etc. covers both direct primary agricultural production and food industries as illustrated by the higher rate of slaughters of “Danish pigs” outside of Denmark.

Transport costs are environmental costs Transport costs are also environmental costs. The price of transport affects production localisation. But transport costs must be related to other costs. The classic discussion regards production of vegetables based on heated greenhouses in Denmark and Northern Europe. An analysis of total energy consumption shows that production in Denmark and Northern Europe causes more impacts than production in Southern Europe, even when transport is included.

Overall it is estimated that this change has led to larger environmental burdens from pig production.

Generally, large parts of EU animal production are based on import of animal feed. Denmark imported in 2007 animal feed for 6.5 billion DKK (870 million Euros), which is close to a 50% higher value than 10 years back13. Imports are stated in monetary terms, not in volumes, but a conservative estimate leads to total imported volumes of 3-4 million tonnes or more than 500 kilos per capita per year.

Calculations are extremely complex. Energy consumption and greenhouse gas emissions are not comparable, since climate impacts depend on the energy form used and of any alternative uses. The analysis also changes – as indicated by Danish greenhouse cultivators – if greenhouse heating (as seen in many parts of Denmark) is based on excess heat from combined power and heating plants and when

Agriculture in Denmark and the Netherlands is totally dependent on imports of animal feed from large agricultural areas outside Europe. Animal feed to Denmark primarily comes from South America, including Brazil and Argentina.

According to European Environment Bureau (EEB) the general environment and climate problem relating to EU agriculture is

13 14 15 16 17

Figure 5.3 Energy consumption in MJ/kg in production and transport of vegetables15 Tomato Greenhouse - DK 16 Average 42 Greenhouse - NL 17 36-284 Open air – Southern Europe + truck 9 Open air – Southern Europe + air 21

Capsicum 56-165 47-373 9 21

Lettuce 11-121 9 21

Cucumber 38-54 24-100 9 21

Source: Danish Agricultural Council EEB Vision European agriculture 2008-2020 i/s Økoanalyse, 1996, updated 2003: http://www.ecofoods.dk/transport/dansk_undersoegelse.htm.

Only energy for heating. Lettuce is harvested all year. Tomato, cucumber and capsicum from March to November.

Total energy consumption. Harvest: lettuce and capsicum all year. Tomato: March-November. Cucumber: all year except December

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again relatively low after a record summer 2008. At the same time the International Energy Agency predicted, however, that long-term trends would be increasing oil and energy prices and that oil prices would again hit the $100 per barrel mark19 to increase during the next decades up to $ 200 per barrel.

this heat cannot be utilised more expediently for other purposes. Finally it is important to note that consumption of vegetables is in any event better for environment and climate than beef consumption.

The EU is importing increasing volumes of food transported by air from countries outside of Europe, and air transport of food is gaining ground in the discussion of environmental considerations in food production. British Soil Association, who is in charge of the major part of organic certification in Great Britain, conducted in 2008 a public hearing about how to relate to air transport of food18. According to Soil Association only 1 % of food imported into Great Britain is transported by air, but contributes to 11 % of total CO2 emissions associated with food distribution in Great Britain. It was considered to stop organic labelling of food transported by air. The result of the hearing, however, was a recommendation for continued acceptance, among others since it would otherwise hit a number of African producers not having alternatives today to air transport to Europe.

The acceptance was, however, conditional upon these food products complying with ethical and/or fair trade standards.

The EU Commission is paying increasing attention to the effects on production of this development. At a meeting in Brussels in June 2007 the Commission launched a discussion of how higher energy prices and the associated higher transport costs will affect the localisation of production as well as distribution and consumption patterns.

Relocation of CO2 intensive production (including the associated CO2 intensive transport) seems to be entering the agenda of climate talks. A proposal to include CO2 accounts in import and export of goods, including agricultural products, in connection with the international climate talks has been tabled20. In this context it has been discussed to develop a toolbox of tools ensuring that global and regional trade agreements contribute to reduced emissions of greenhouse gases.

It is presumed that the discussion of environmental impacts associated with air transport of food – both regarding imports and exports into and out of the EU – will increase along with national and international climate policy focusing increasingly on transport.

Local localisation The British discussion about continued acceptance of organic food transported by air shows that increased public awareness and concern for climate issues will contribute to putting pressure on negotiations. This is also reflected in more general consumer campaigns, for example in Great Britain, to buy and consume local goods at the expense of imported goods21.

These campaigns take offset in environment and climate concerns and not primarily – as some generations ago – in respect of stimulation of national and local employment.

Energy prices affect production This is not intended to be a systematic review of consequences and causes of relocation, but this field will get increasing attention along with increasing focus on climate respect, new trade agreements and energy price developments.

At the turn of the year 2008/9 energy prices were

18 19 20 21

www.soilassociation.org/airfreight Dagbladet Information 10 November 2008 John Nordbo, head of climate section, WWF Denmark. Meeting in Copenhagen May 2008.

Jakob Illeborg: Danmark set udefra (in Danish). Gyldendal 2008. (pp. 114-115)

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PART D Common Agricultural Policy

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Chapter 12 Common Agricultural Policy in the EU 12.1 Contents and reforms of Common Agricultural Policy

Boks 12.1 Objectives of Common Agricultural Policy (Article 33 of the EC Treaty) 1. The objectives of the common agricultural policy shall be: a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour; b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; c) to stabilise markets; d) to assure the availability of supplies; e) to ensure that supplies reach consumers at reasonable prices.

In a historic perspective the purpose of the Common Agricultural Policy, CAP, was to ensure food supply in Europe by increasing production and protecting the inner market. Another purpose was to ensure farmers an income in line with the surrounding society and ensure consumers food at reasonable prices. In the first many years the policy comprised first and foremost price and market support in the form of intervention, export subsidies and tariff protection.

The CAP was a success in the first decade – the objective of increased production and low food prices was very much achieved. Increased productivity led to the EU from the mid 70s being self-sufficient in a large number of agricultural products. From having been in a situation with lack of agricultural products the situation was now one of surplus production, which was purchased by the EU through the intervention systems – creating the notorious giant grain stores, butter mountains, and wine lakes.

reform launched with the MacSharry reform of 1992 was thus motivated by several factors, including budgetary considerations, the need for new targets of balanced production and respect for nature, environment, animal welfare, and sustainable rural development.

The share of agricultural support of the EU budget peaked in 1985, attaining 70 % of overall budget, primarily in the form of intervention, export subsidies and special product support systems. The extensive

Box 12.2 Intervention: Farmers were guaranteed a minimum price for a number of agricultural products. The price was fixed every year by the Council of Ministers, and if market prices were lower than this price the EC/EU bought the products and placed them in surplus stocks until destruction or sale at prices often far below production costs.

Tariffs and export subsidies: The six original EC Member States used to have different tariffs. In the EC a common high import tariff was introduced and exports were subsidised. Thus, European farmers were protected against foreign competition and they could still export their agricultural products despite the high prices of agricultural

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Product support systems: From the outset, the CAP market mechanisms comprise especially dairy, beef and veal as well as cereal products which were at that time the primary agricultural products of the EU. As the EU was enlarged the CAP came to cover also product groups such as olive oil, fruit, wine, sugar, tobacco and vegetables.

Along with the increasing surplus production food stocks grew, leading to destruction of food or dumping on poor markets. This led to the realisation that the purpose of the agricultural policy in the EU had outlived its usefulness. During the 1980s several measures were taken to reduce production, such as support for set-aside of production land and reforestation. This was done not least to reduce the burden on the EU budget.

Box 12.3 Set-aside The EU decided to support set-aside further to the surplus production of the 1980s. Mandatory set-aside was decided in 1992 and remained in force to a varying extent up to 2007. In 2008 mandatory set-aside was suspended, partly due to high cereal prices and food crisis, partly because a termination of the set-aside obligation was already an issue in the debate on the Health Check of the EU agricultural support scheme. In November 2008 it was decided that the set-aside obligation will cease completely from 2009.

MacSharry reform The MacSharry reform of 1992 was the first step in a considerable shift in EU agricultural policy. It carried out a reduction in guaranteed prices – for example by 30 % for cereals and 15 % for beef. Instead area aid was introduced with a fixed support amount per hectare regardless of crop yield, but with a varying rate for different crops. Livestock premiums were introduced for cattle and sheep with a fixed amount per mother or slaughter animal. Pig production was not supported directly, but indirectly it was supported through support to feed production and in certain periods through export subsidies.1

lar 2 of the EU agricultural policy. The reform was important in relation to the WTO agreement of 1994 when tariffs for agricultural products and the EU export subsidies were reduced by an average of 36 %, an important step towards more free trade.

The MacSharry reform also introduced mandatory set-aside and an active rural development policy, thereby paving the way for what was to become pil-

Agenda 2000 A new agricultural policy, Agenda 2000, was adopted in 1999, entering into force from 2000. Now, sector

See more about the set-aside scheme in section 12.1.1.

Box 12.4 Single farm payment Direct support was changed with the reform in 2003 to the so-called single farm payment, where support is decoupled from production, as subsidy is paid per hectare regardless of crop and volume of production. Payments of support depend on farmers disposing of both entitlement and eligible areas. In 2007 the rate in Denmark amounted to DKK 2,313 (308 Euros) - per hectare..2 Decoupled payment supports farmers’ income regardless of production. Decoupled single farm payment replaces in principle all former types of direct support coupled to the production of a certain product.

Decoupling subsidies Direct payments were decoupled from production. Before the reform farmers were only entitled to direct payment when they produced certain products. Direct payments therefore affected the profitability of cultivation of certain crops and breeding of certain animals which again affected business decisions of farmers. Decoupling gives farmers larger scope for producing in compliance with market demands since the duty to produce a certain product has been abolished.

Partial coupling The different countries can choose a model with partial coupling of payments making it possible to support certain forms of production, such as extensive production with suckler cow. Partial coupling may be relevant in regions where production is low but important from a socio-economic or environmental point of view. Especially the new Member States and a number of Mediterranean countries wish to maintain coupled payments since they consider it impossible for farmers to survive without them.

1 Danish Bacon & Meat Council indicates that other countries – especially the US – should also abolish their support schemes as a precondition to abolish export subsidies. Pig production also received export subsidies in 2008. http://www.danskeslagterier.dk/smcms/Danske_Slagterier/Nyhedscenter/Nyheder/11749/11813/Index.htm?ID=11813 2 Danish Food Industry Agency: Guidelines on single farm payment Dec. 2006

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Figure 12.5 EU agricultural support,

Figur 12.5 EU-landbrugsstøtte, fordeling 1990 - 2006 distribution Danmark 1990-2006, Denmark 12,00 Development schemes Udviklingsordninger mm etc.

DKKMia billion/year kr./år

10,00

Intervention purchase and Interventionsopkøb og lagring stocks

8,00

Export subsidies Eksportstøtte

6,00

Support to processing industry total Støtte i forarbejdningsled i alt

4,00 2,00

Support to environmentStøtte til farming miljøvenligt jodbrug friendly

0,00

Cattle premiums, cease of Præmie kreaturer, production etc. ophør, mm

1990 1994 1997 2000 2003 2006 Year Årstal

Figure 12.5 illustrates this development through the distribution of EU agricultural support in Denmark from 1990 to 2006. The radical shift from support primarily to export subsidies and intervention is clearly seen. One fifth was given to the processing industry, and only 7 % was paid directly to farmers as area aid or livestock premiums. In 2006 almost 85 % of support is paid directly to farmers, primarily as single farm payment. Export subsidies have decreased to one eights of total support, and intervention purchases have almost ceased.3

Area aid/single farm Arealtilskud/enkeltbetaling payment

12.1.1 Pillar 1 – Direct support

integration of environmental aspects came on the agenda. In Agenda 2000 intervention prices were further reduced and rules on voluntary modulation (transfer of means from pillar 1 to pillar 2) were introduced, entering into force from 2003 and thereby prioritising rural development policy.

Under pillar 1 direct support is paid to farmers.

Support per hectare is independent from crop and volume of production. The aim is that decoupled payments ensure farmers an income comparable to other professions regardless of production.

Decoupled single farm payment in principle replaces all previous forms of direct support, which were coupled to the production of a certain product. Pillar 1 also covers costs for a number of continued product support schemes and export subsidies.

Agenda 2000 maintained the mandatory set-aside obligation and introduced Agro Environmental Schemes highlighted by the Commission as the key strategy for integration of environmental aspects in agricultural policy.

EU-15 was to introduce single farm payment no later than 2007. The different Member States were free to choose a regional model ensuring certain products or a historical model ensuring, for example, continuation of a certain animal production, or a combination hereof. Denmark chose a combination upholding a partial historical coupling for male bovines and ewe.

In Denmark coupled support constituted in 2007 only 3 % of direct support, while the EU-15 average was 16 %.4

In the midterm evaluation of Agenda 2000 EU agriculture ministers adopted in June 2003 the hitherto most radical reform of the common agricultural policy. A shift from production support to area aid in the form of the so-called single farm payment was introduced in Member States in the period 2005-7. The new single farm payment is dependent on compliance with standards for environment, food security and animal welfare and on all agricultural land being kept in a good agricultural and environmental condition (cross compliance). The planning period runs up to 2013 and must be evaluated/adjusted in the socalled Health Check in 2008.

New Member States can choose a simpler model – SAPS – until 2010, Bulgaria and Romania until 2011.

It is being considered to extend the model until 2013.

All new Member States with the exception of Slovenia and Malta are using SAPS. This scheme entails that direct support is gradually introduced in the country in the form of payment of uniform amounts per eligible hectare of agricultural land within a national ceiling following from the accession agreements. In a transitional period national support can be added to this payment.

In the reform provisions on transfer of means from pillar 1 to pillar 2 (Rural development policy) were introduced through the so-called modulation. The purpose is development of rural districts and new measures to promote environment, quality and animal welfare.

The Council also decided to revise a number of existing product support systems, for example for milk, rice, cereals, hard wheat, starch potatoes, dried animal feed and nuts and to continue the phase-out of export subsidies.

3 Data for figure and text derive from Statistics Denmark: http://www.statistikbanken.dk/statbank5a/default.asp?w=1024 4 Both mandatory and voluntary coupled support exists for a number of products, in addition to meat production particularly rice, cotton, olive oil, tobacco, sugar, potato starch, durum wheat, hard wheat, protein crops, nuts, seeds, hops and energy crops.

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Many farmers have criticised the scheme for being extremely complicated, unnecessary and unfair. It can be very difficult for the individual farmer to grasp all 113 rules. Therefore, many farmers choose to have a check of the entire farm having agricultural advisers assisting in the identification of problems under the cross compliance requirements, making sure that all issues are in compliance.

A survey in 2007 showed that cross compliance affects farmers’ behaviour regarding the environment. 50 % of respondents confirmed that they have larger focus on environmental legislation and 39 % claimed to have changed farming in order to ensure compliance with the rules under the cross compliance scheme. The survey concludes that the risk of reduction of payments further to the cross compliance rules has a larger impact on compliance with environmental requirements than the risk of fines. It furthermore concludes that farmers have changed behaviour after introduction of cross compliance – for example concerning establishment and upholding of buffer zones along watercourses. 5

Cross compliance comprises four fields: 1. Environment: 29 requirements, for example for protection of groundwater, soil and underground against contamination, storage and spreading of animal manure, nature conservation and nutrient accounts.

2. Public health, animal health and plant health: 34 requirements, for example for ear tagging and log file for livestock, medicine and pesticide management and undesired substances in production.

3. Animal welfare: 45 requirements for stall layout, livestock management, animal feed and water, breeding methods and education requirements for farmers.

4. Good agricultural and environmental condition (GAEC): 5 requirements ensuring that all agricultural areas, particularly areas no longer used for production purposes such as set-aside and uncultivated areas, are kept in a good agricultural and environmental condition.

Failure to comply with the 113 rules leads to percentage deductions in agricultural support (both single farm payment and rural development funds) for the farmer in question, as assessed by the Ministry of Food, Agriculture and Fisheries.

The reduction is based on an assessment of the seriousness of the violation and whether the violation is intentional or an act of negligence. In the first violation the support reduction may attain up to 5 %, but in repeated and very serious cases the reduction can reach as much as 100 %.

(Ministry of Food, Agriculture and Fisheries: Guidance on cross compliance, 2008)

Figur 12.7 Udtagning til brak nonfood Figure 12.7: Set-side and non-food inog Denmark Danmark 1993 - 2008 1993 - 2008 300000 250000 200000 150000 100000 50000 0

2008

2006

2007

2005

2003

2004

2002

2000

2001

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1993

In 2007 2,366 inspection visits were carried out (4.5 % of applicants) – violations were found at around one quarter of inspected farms. A good third had their support reduced by 1-2 %, almost half of them by 3-4 % and the rest by from 5 to more than 20 %. This should be related to the fact that part of the farms were chosen based on a suspicion of violations, for example due to previous inspection visits. 6

Box 12.6 Cross compliance:

Hectares Antal ha udlagt

Cross compliance To receive agricultural support farmers must as a novelty comply with requirements for cross compliance, covering a number of rules. The rules transpose various EU directives into Danish law, for example the Natura 2000 Directives. At the moment a total of 113 requirements are in force based on existing legislation that farmers must comply with. It should be noted that there are no new requirements for farmers – in principle the cross compliance scheme simply states that current rules must be complied with as a precondition for payment of agricultural support.

Årstal Year Braklægning Set-aside

Nonfood raps Non-food rape

5 Danish Journal Jord og viden, no. 13 2007: Jannie Mikkelsen og Mikkel Høst: Krydsoverensstemmelse – til gavn for miljøet (Cross compliance – to the benefit of environment) 6 http://www.dansklandbrug.dk/Presse/Nyheder/Krydsoverensstemmelse_overtraedelser.htm

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areas being set aside for many years, natural values of those areas improved.

Furthermore, less than 2 % of violations were assessed as intentional in 2005 and 2006 - 1 and 11 % respectively of violations were repetitive. 7 However, very few recipients actually get an inspection visit indicating that the effect of the cross compliance scheme is rather preventive than a consequence of actual inspections and reductions in support.

In 2007 mandatory set-aside was temporarily suspended and in the Health Check of November 2008 it was decided to abolish the scheme completely from 2009. Due to high cereal prices in 2008 ploughing up of set-aside areas was far more extensive than expected – in Denmark 54 % of set-aside areas corresponding to 83,000 hectares was ploughed up. This happened without the introduction of sufficient compensating measures – the government made in spring an agreement with agriculture to the effect that the cease of mandatory set-aside was to be replaced by voluntary set-aside along watercourses and lakes while farmers in return had a higher nitrogen quota on less sensitive land. Farmers have however not taken up this agreement, or it has not been adequately attractive due to high cereal prices – even if large parts of the plan covered requirements that farmers would already have to comply with under the Aquatic Environment Plan III. The result is that Denmark has lost 20 % of open nature; areas that through the many years of set-aside had gained a rich nature with considerable impact on biodiversity.

Pesticide consumption has increased and the aquatic environment receives increasing amounts of nutrients from the ploughed areas. There was general consensus – also among green organisations – that the set-aside scheme was not the most efficient scheme for ensuring the environment since selection of areas set aside was not based on environmental considerations, but suspending the scheme without introducing compensating measures means that important values requiring years and years to recreate have gone lost.

Set-aside As mentioned above the mandatory set-aside scheme was introduced through the MacSharry reform as a way of reducing surplus production and intervention stocks. The mandatory set-aside scheme has been continued in the subsequent reforms and has worked from 1993 to 2008 with various protocols and set-aside rates between 5 and 10 %. Figure 12.7 shows areas set aside in Denmark. Up through the years from 1993 to 2007 between 150,000 and 260,000 hectares have been set aside. As an alternative to set-aside it has been possible to grow non-food crops – the lower curve illustrates the area of non-food rape ranging between 10,000 and 34,000 hectares. 8 Originally the set-aside scheme was not attributed a major environmental impact. Set-aside was rotational, so that areas set aside changed from one year to the next, and it was hardly expected that the scheme would have a long life. But as the scheme continued and set-aside became permanent it gathered ground on the environmental policy agenda.

Set-aside was incorporated in the Aquatic Environment Plans and in wildlife and nature management of farms. It became possible to focus set-aside along watercourses and lakes in view of reducing loss of nutrients and pesticides to the aquatic environment, and along with the same

Box 12.8 Compulsory modulation Transfer of funds from direct payment under pillar 1 to measures for rural development under pillar 2.

Modulation became compulsory in 2005. Member States must transfer 3 % in 2005, 4 % in 2006 and subsequently 5 % annually up to 2012. There is, however, a “basic allowance” for each farmer of EUR 5,000. The limit amount means that countries where structural development is not very advanced, i.e. with many small farms, is less affected.

Modulation requires 50 % national co-financing.

Voluntary modulation according to article 69 Member States may voluntarily transfer up to 10 % of direct aid from pillar 1 to pillar 2 under consideration of a number of restrictive conditions.

Voluntary modulation does not require national cofinancing (cf. Council Regulation 378/2007). Voluntary modulation has been limited to only apply to ”direct payment” so market-related costs are excluded (export subsidies etc.).

Transfer of aid under article 69 is used for specific sectors in Greece, Spain, Italy, Portugal, Slovenia, Finland and the UK – and in Sweden for all sectors.

The UK and Portugal were allowed in 2007 to transfer 20 % of national ceilings in voluntary modulation.

7 Ministry of Food, Agriculture and Fisheries: Kontrol med krydsoverensstemmelse 2006 - Årsrapport, 2008 (Control of cross compliance 2006 – annual report) 8 http://www.statistikbanken.dk/statbank5a/default.asp?w=1024

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ding to article 69 of ”the horizontal regulation” from 2003 allows transfer of up to 10 % from pillar 1 to pillar 2 – in Denmark this corresponds to around DKK 750 million (100 million Euros). The UK and Portugal were allowed in 2007 to transfer 20 % of direct payments, but the European Parliament opposed to the scheme and prevented through a number of bindings in article 69 that the scheme was further expanded. A number of EU Member States transfer to a limited extent aid to specific sectors, but the Danish government has chosen not to use the option of having more funds to rural development policy and the nature and environment field. Voluntary modulation does not require national co-financing.

Continued market schemes The following products are now covered by one common market scheme: cereals, pork, eggs and poultry, fruit and vegetables, bananas, wine, diary, beef, rice, olive oil, edible olives, sugar, dried animal feed, processed fruit and vegetables, tobacco, flax and hemp, hop, seeds, sheep and goat meat and other agricultural products for which there is no specific market scheme. The market schemes work under pillar 1 together with the remaining part of export subsidies.

12.1.2 Pillar 2: Rural development policy Funds are transferred from pillar 1 to pillar 2 (Rural development policy) through so-called modulation.

Modulation means reduction of direct agricultural support which is instead transferred to pillar 2. The purpose is development of rural districts and new measures for promotion of environment, quality and animal welfare.

Modulating funds are re-distributed among Member States according to agricultural area, agricultural employment and GDP. Member States must as a minimum, however, receive at least 80 % of the amount caused by modulation in this state.

Denmark, for example, only received 80 %.9

In principle there are two forms of modulation: compulsory and voluntary. Compulsory modulation (also called graduation) is imposed in all EU Member States simultaneously. Voluntary modulation accor-

The following box describes objectives and contents of the rural development policy:

Box 12.9 Objectives of Rural development policy 1. Improvement of the competitiveness of the agricultural and forestry sector through restructuring, development and innovation 2. Improvement of environment and countryside through land management 3. Improvement of quality of life in rural areas and promotion of diversification of economic activities Four axes of Rural development policy: •

Axis 1 (min. 10 % of RDP funds): Innovation and development in agriculture, including possibility of support to environmental technology.

•

Axis 2 (min. 25 % of RDP funds): Nature and environment, including possibilities of aid to AES, organic farming, forestry, forestation, forest agriculture, Natura 2000 and Water Framework payment, nature plans, grazing associations, establishment of wetlands, windbelts, non-productive investment (e.g. public acquisition of land).

•

Axis 3 (min. 10 % of RDP funds): Quality of life in rural areas, including possibility of support to nature planning, recreational facilities / promotion of tourism, maintenance and upgrading of natural and cultural heritage, national parks.

•

Axis 4 (in principle up to 5 % of RDP funds): Community Action Groups (CAGs), promoting the purposes within a development plan prepared by the CAG (and not in opposition to the local plan) agreed by the CAG; this may be nature and environment purposes, but also a variety of other issues; the CAG may also apply for funds through schemes under axes 1, 2 and 3.

9 Ministry of Food, Agriculture and Fisheries in: Note on implemented and future initiatives to phase out EU agricultural aid, 2007

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12.1.3 Customs protection Figur 12.10: 12.10 Modtagere i EU-15 Figure Recipients af of landbrugsstøtte agricultural support in 2005 - fordelt efter beløbsstørrelse EU-15 2005 distributed by amount of payment

16

68 11

14

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The proposal from WTO in the Doha Round suggested that the tariff should be reduced most in the fields where it is highest today, and this is especially for animal products, particularly beef. If the tariff is between 0 and 20% it should be halved. If it reaches between 20 and 50% it should be reduced by 57%, and if the rate exceeds 75% it should be reduced by two thirds.10

Total payment EUR billions mia.inEUR

20

Number of farms in category – ‘000. (logarithmic scale)

Furthermore, the EU market continues to be under customs protection. In the agricultural field the EU tariff rate has been reduced by 36% over the last years, but it is still around 22.8% on average for all agricultural products. In comparison, the rate applying to industrial products is around 3-4% on average for all industrial product groups.

Støttekategorier i 1.000 EUR Amountbeløb received per category Modtaget pr. kategori i mio. EUR in EUR billions;

of farms in each support ANumber ntal landbrug i hver støttekategori - i tusinde category in thousands

2004, after which it increases by 5 % annually up to 2007, and then by 10 % annually. The ten new Member States will be fully phased into the agricultural support schemes in 2013 and Bulgaria and Romania in 2016. The new Member States have the possibility of supplementing with national aid schemes up to EU-15 level.

12.2 Financing and payments under CAP The CAP has always been the largest entry of the EU budget. In 1985 the CAP accounted for almost 70 % of the budget, but in 2008 the share is down to 42.6 % corresponding to EUR 55 billion. Of this 75 % is paid under pillar 1, while just below 24 % goes to Rural Development Policy under pillar 2. Around 2 % is paid for environment and fisheries activities.11

The 2003 reform furthermore introduced a principle of financial discipline to the effect that the budget cannot be exceeded. If there are indications of such exceedance direct aid will be reduced. Since costs for the new countries will increase up to 2013 this may be necessary under pillar 1.

Since 1988 the EU budget has been established under financial frames for the periods 1988-92, 1993-1999, 2000-2006, where important policies such as ESA, AES and pillar 2 have been introduced. The present budget period of 2007-2013 will be adjusted in the ongoing Health Check and future reforms in the following budget period 2014-2020 will be discussed in parallel.

In 2007 it was still 16 % of total direct payment which was paid as coupled aid. In Denmark there was only coupled payment for male bovines and ewe and the share reached a good 3 %. This is due to the fact that a number of countries have chosen to use partially coupled aid protecting socio-economically or environmentally important regions with less efficient production results. Three quarters of coupled aid in 2007 was thus voluntary and was paid as partially coupled aid.12

In connection with the extension of the EU by first ten Central and Eastern European countries it was agreed in 2002 to reduce the EU agricultural budget by only letting the budget ceiling increase by 1 % annually in current prices, decoupling it from inflation. This is expected (with an annual inflation rate of 2 %) to lead to a decrease in total agricultural costs of 1 % annually up to 2013.

One of the primary aims of the CAP has always been to ensure European farmers a reasonable income.

However, the distribution of aid is extremely distorted. As it appears from Figure 12.10 75 % of farms (3.6 million farms below EUR 5,000 aid) only receive a good 13 % of aid (in 2005). Less than 2 % of farms (94,000 farms) receive more than EUR 50,000 – toget-

For the ten new Member States the level of agricultural support was set at 25 % of the community level in

10 Lars Erik Skovgård: Indviklet handelskabale som næppe går op, Berlingske Tidende, Business.dk, 22/7-2008.

11 Ministry of Food, Agriculture and Fisheries: Note on development of EU agricultural budget, January 2008 12 Same source

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CAP’s History

Figure 12.11

Challenges, objectives and instruments • Start of Common Agricultural Policy • Improved standard of living: intervention, tariffs and export subsidies to ensure higher prices • Self-sufficiency in food: increased productivity through product support systems - surplus production - increasing environmental problems - de-population of rural areas • Direct aid to farmers, decoupling of aid • Reduced production through set-aside, phase-out of market schemes and export subsidies • Cross compliance as precondition for aid • Rural development policy: Development of rural areas and environmental aid - food crisis, global lack of food - increased requirements from developing countries for market access, free trade - structural development, capitalisation of aid schemes • Suspension of set-aside scheme • Increased modulation • Further decoupling and abolition of market schemes and export subsidies - conflict between large, efficient farms and smaller, extensive farms

her they receive 30 % of agricultural aid. In Denmark the trend is the same – only here structural developments are more advanced and farms are larger. Just below 40 % of applicants receive less than EUR 5,000– together this amounts to 6 % of aid. 7 % of farms get more than EUR 50,000 – they receive more than 36 % of aid.13

small farms are hit less hard. Within EU-15 this meant in 2005 that 13.5 % of all payments avoided modulation. Actual reduction of aid therefore only reached 3.3 % of payments (EU-15 2005). In Denmark the actual modulation reached 3.9 %.14 New Member States must only use modulation when their aid reaches the EU-15 level after 2013.

The large distortion of aid distribution means that the CAP loses part of its legitimacy in relation to the income equalisation effect since an excessive part of the aid goes to the largest farms. And the picture is even worse when we look at those actually receiving aid. The aid is capitalised through land prices, so that those owning the land at the time of implementation of the aid get the benefit. Farmers renting land or buying land subsequently will pay a price covering both the cultivation value of the land and its potential for aid – so they have very little benefit from the EU aid.

In the period 2000-2006 Denmark received an average of DKK 827 million/year (110 million Euros) for Rural Development under pillar 2 – of this DKK 577 million/year was used under the second axis (nature and environment). By the end of 2006 the Danish government and its support party agreed due to the requirement for national co-financing only to receive around DKK 560 million in both 2007 and 2008 – and by that to only use around 60 % of the frame.

Denmark received DKK 560 million/year, of which around DKK 308 million/year for nature and environment (55 %).15

As mentioned 5% compulsory modulation has been introduced in all countries – though with payments less than EUR 5,000 exempt from modulation. This means that countries with a relatively large part of

13 Processing of data from annex 3 to Ministry of Food, Agriculture and Fisheries: Note on development of EU agricultural budget, January 2008 14 Annex 4 of Ministry of Food, Agriculture and Fisheries: Note on development of EU agricultural budget, January 2008 15 Danish support under pillar 2 has been informed by Jørn Jensen, Danish Agency for Spatial and Environmental Planning

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12.3 Development and perspectives of Common Agricultural Policy

•

The history of the Common Agricultural Policy is dynamic. Objectives and instruments have changed along with structural changes of production (partly created or driven by the CAP) and global and environmental challenges. In Figure 12.11 the most important steps of developments are illustrated.

•

• But despite numerous reforms and attempts to change the set-up, the CAP is facing a number of challenges and problems that have not yet been solved: •

•

•

The Rural Development Policy contains good instruments to reward farmers making an extra effort for nature and environment. But allocated means are totally insufficient. Heavily increased modulation is called for if the CAP is to ensure that environmental objectives are achieved.

CAP legitimacy to the surrounding society is poor.

If farmers are to continue to receive aid it is necessary that social objectives are attained.

The CAP still fails to ensure that farmers in developing countries can enter the European market and compete at equal terms with European farmers.

New reforms are in the pipeline, the Health Check has just been adopted and global problems are still waiting for a solution. In the next chapter the possibility of integrating environmental aspects and global challenges in the Common Agricultural Policy is discussed.

The objective that the CAP is to ensure European farmers a reasonable standard of living has not been attained – or at least only for the most efficient part of farmers. The aid schemes are capitalised through the price of land so that the aid goes to land owners at the time of implementation of the aid.

Consumers get cheap food – but prices are low due to highly efficient agriculture, where food quality and health have second rank.

Through the cross compliance scheme a system has been introduced where aid depends on compliance with a number of requirements for environment, health and animal welfare. The principle is good, but the scheme is complicated and insufficient for ensuring compliance with the requirements. The Danish Ecological Council believes that agricultural aid under pillar 1 should be given to farmers complying with current national and EU statutory requirements: - EU Directives: IPPC16, Nitrate Directive, NEC17, Habitat and Bird protection Directives as well as the Water Framework Directive should be implemented in all Member States so that national rules comply with the objectives of the directives.

- It should be ensured in a simplification of the cross compliance requirements that these cover all key areas of the above directives and laws.

- Requirements should be simple, quantifiable and controllable.

16 On approval of particularly polluting facilities, including certain livestock enterprises 17 On air pollution by i.a. ammonium where countries must comply with overall reduction targets, measured in tonnes of emissions

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Chapter 13: Increased environmental integration in CAP 13. 1 Reforms of Common Agricultural Policy (CAP)

The Commission’s final proposal for a Health Check came in spring 2008 and with a number of amendments the proposal was adopted by the EU Council of Ministers in November 2008. The Commission set the stage for relatively few and minor amendments, all taking the direction of continued liberalisation and further development in transferring funds from pillar 1 (direct aid) to pillar 2 (rural development aid).

The modest amendments that were proposed turned out in the end to be even more modest in the final compromise decision of the Council.

Objectives of Common Agricultural Policy (CAP) reforms have been - to make schemes more liberal and market oriented, - to freeze and in the long term reduce total costs and their share of the global EU budget, and - to increase respect for nature and environment and in doing so focus on agriculture’s role in nature management.

The main contents of the Health Check as proposed and later adopted are as follows2:

The last objective has gained weight over the years, both due to the fact that environmental and nature management is easier to place in the Green box as WTO accepted and non-trade distorting and because intensified agricultural production has caused a large number of problems. At EU level a report from the think-tank ”Notre Europe”1 discusses loss of grassland, loss of biodiversity, fewer wetlands, reduced bird population, poorer water quality, deteriorated landscapes, and reduced fertility. Problems vary between the regions, but according to Notre Europe many indicators point in the wrong direction, and environmental efforts have not been adequately focused. The think-tank establishes the fact that reforms have been unable to solve a number of problems.

Abolition of set-aside: Proposal: The requirement for arable farmers to leave 10 percent of their land fallow is abolished. This will allow them to “maximise their production potential”.

Result: The proposal was adopted. In Denmark the Folketing had already adopted a temporary abolition of the set-aside scheme with effect for 2008.

Phasing out milk quotas: Proposal: Gradual phase-out of milk quotas up to April 2015. Proposal for five annual quota increases by each 1 % from 2009/10 to 2013/14.

Result: Adopted.

Shifting money from direct aid (pillar 1) to Rural Development (pillar 2): Proposal: Currently, all farmers receiving more than EUR 5,000 in direct aid have their payments reduced by 5 % and the “saved” money is transferred into the Rural Development budget (pillar 2). The Commission proposed to increase this rate by 13% by 2012 and an additional cut of 3 % for payments above EUR 100,000 a year, 6 % for payments above EUR 200,000 and 9 % for payments above EUR 300,000.

Result: It was agreed that further 5 % of direct aid will be transferred to the Rural Development budget so that the total rate in 2013 will be 10 % (against proposed 13 %). Aid to the largest farms receiving today more than EUR 300,000 a year is only cut by 4 % of the amount beyond EUR 300,000. Also, significantly less funds are transferred from pillar 1 to pillar 2 than proposed by the Commission. The funding obtained in this way may be used by Member States to reinforce programmes in the fields of “climate

13.2 Final CAP Health Check The latest CAP reform from 2003 contained a revision clause forming the basis for the Health Check conducted in late 2008 and taking its first effects in early 2009. The Health Check concerns the period up to 2013, when current agreements cease. In the period from 2009 to 2012 an actual revision of the schemes will take place and a genuine reform must take effect from 2013. Agriculture commissioner Fischer Boel tabled in November 2007 a proposal for a Health Check in the form of a mid-term evaluation of the CAP after the 2003 reform. The term Health Check was politically important, stressing that this was not to be yet another reform, but only adjustments of the reform process that had already been started.

1 CAP reform beyond 2013. An idea of a longer view. www.notre-europe.eu 2 http://ec.europa.eu/agriculture/healthcheck/index_en.htm. Proposal for Council Regulation COM (2008) 306/4 and Communication IP/08/1749 of 20 November 2008 on the political agreement on the Health Check.

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13.3 Impacts of Health Check

change, renewable energy, water management, biodiversity, innovation linked to the previous four points” but also for “accompanying measures in the dairy sector”. Thus, it is not decided in beforehand how these funds will be spent.

Seen from the public hand in Denmark the Health Check was unsatisfactory. In the Danish government’s contribution to the budget review3 it is said, among others, that ”CAP spending has gradually been turned away from distorting production-linked subsidies towards production neutral direct payments. The most significant effects of agricultural subsidies, however, are the artificially high price of agricultural land and the postponement of necessary structural reforms. Therefore direct subsidies should be phased out completely. This should be possible by the year 2025.”

Assistance to sectors with special problems (so-called 'Article 68' measures): Proposal: Member States may retain 10 % of the national aid for environmental measures or improving the quality and marketing of products. The Commission proposed to introduce more flexibility, so the money would no longer have to be used in the same sector, but also for example in disadvantaged regions or for insurance schemes for natural disasters etc.

Result: The proposal was adopted. One single support scheme can only use up to 3.5 % or around one third of the 10 %.

Agriculture commissioner Fischer Boel assessed in November 2007 (before formal presentation of the proposal for the Health Check) that full implementation of the proposal would mean a reduction in direct aid by 22 % before 2013. At that time she warned Denmark against being too drastic in its attitude to abolish aid too quickly. Fischer Boel says that there is also a need for a CAP after 2013, if not agricultural aid will be re-nationalised and we would run the risk of a development where nothing can be regulated to the benefit of environment, nature and animal welfare.

Decoupling of support: Proposal: The Commission proposed to remove the remaining payments coupled to certain forms of production with the exception of the so-called suckler cow premium.

Result: Coupled support to energy crops ceases.

Further decoupling of direct aid will take place no later than 2012.

The Danish government’s requirement for full decoupling of all direct aid does not mean that the government is against a CAP, but it wishes this policy to focus on “ensuring public goods such as the environment, ecology, food safety standards, animal welfare, and rural development”.

Intervention mechanisms: It was decided to abolished intervention for pig meat and set it at zero for barley and sorghum. For wheat, butter and skimmed milk powder intervention purchases will still be made.

Cross Compliance: Aid to farmers is as mentioned linked to the respect of environmental, animal welfare and food quality standards. Farmers who do not respect the rules face cuts in their support (as hitherto). It was decided to simplify principles by withdrawing standards that “are not relevant or linked to farmer responsibility”.

It was also decided to add new requirements to retain the environmental benefits of set-aside and improve water management.

The impacts of the Health Check will be modest, both in terms of economy and environment.

However, the Danish government negotiator has chosen to be positive to the compromise. Minister for Food, Agriculture and Fisheries Kjer Hansen says5 in a press release entitled ”More environment in agricultural aid” that ”we have landed as expected since the different countries have been very far from each other, but we are on the right track. We will have more market-orientation, larger focus on environment, and a reduction in direct aid. At the same time milk quotas and set-aside schemes will be phased out.”

Other measures: A reduction was made in requirements for national co-financing of funds transferred to Rural Development Policy. An improvement was agreed in investment aid to young farmers. As part of Rural Development this aid was increased from EUR 55,000 to EUR 70,000 per farmer.

3 4 5 6

Fischer-Boel writes in her blog 24 November6 that when asked whether “the glass is half-empty or halffull” with regard to the Health Check she actually thinks the glass is at least three-quarters full – however she would have appreciated more money for

Danish government’s contribution to the 2008/2009 Budget Review, 14 April 2008.

Dagbladet, Roskilde Tidende, d. 17.11.2007 Press release from Ministry of Food, Agriculture and Fisheries 20 November 2008 Blogs.ec.europa.eu/fischer-boel/cap-health-check-a-compromise-deal-with-substance

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long-term decisions aimed at protecting the environment and hindering negative climate impacts. In the Communication from the Commission on the Health Check it is noted under cross compliance that “new requirements will be added to retain the environmental benefits of set-aside and improve water management”. Measures will be taken in both fields, but instruments do not appear from the published texts.

rural development. She is pleased that EU dairy producers can raise their “sales to a growing global population which loves dairy products”.

As of now (1 December 08) there is not yet an official assessment7 of total economic impacts of the Health Check. The daily Danish paper Morgenavisen Jyllands-Posten has calculated economic impacts for Denmark, and they are very modest – farmers will lose 4 % of direct aid up to 2012. DKK 290 million (39 million Euros) will be cut in aid, which was in 2007 at DKK 7.2 billion (960 million Euros). 5 % more will be transferred to rural development funds. Of this, some of the money can “return” to farmers. The use of funds depends on the use of article 68 in Denmark.

Increased cuts for the largest farms hit a total of 51 farmers, losing together DKK 1.8 million. This should be related to the fact that in 2007 600 Danish farms received each more than DKK 1 million in direct payments.

Article 68 of the Commission Regulation’s chapter 5 on ”Specific support” has got special weight and is expected to become even more important in future9.

Article 68 reads that Member States may decide by 1 August 2009 at the latest to use from 2010 up to 10% of their national ceilings to grant support to farmers for: (i) specific types of farming which are important for the protection or enhancement of the environment, (ii) for improving the quality of agricultural products, or (iii)for improving the marketing of agricultural products;

Environmental impacts of the Check are also difficult to quantify. On the one hand, concrete decisions will increase environmental impacts from agriculture in the short term, but on the other hand there are longer term declarations about increased respect for the environment.

In addition, funds can be used to address specific disadvantages affecting farmers in the dairy, beef, sheep and goat meat and rice sectors in economically vulnerable or environmentally sensitive areas. As a novelty contribution to crop insurance premiums and mutual funds for animal and plant diseases are also mentioned.

The abolition of permanent set-aside means that more land will be cultivated. This will lead to larger greenhouse gas emissions, larger consumption of pesticides and larger leaching of nitrogen and phosphorous from agricultural land. In Denmark the Folketing anticipated the EU decision and adopted a halt in set-aside taking effect from 2008. This meant that from 2007 to 2008 83,000 hectares of set-aside land came back into production. A memo from the Faculty of Agricultural Sciences and the National Environmental Research Institute (both University of Aarhus)8 established the above negative impacts as well as a further negative impact on nature in general, among other things because cultivation removes biological corridors for both flora and fauna that have an impact on biodiversity.

Fischer-Boel writes in her comment to the final compromise that moving extra funds to rural development (the extra 5 %) can help tackle the challenges of “climate change, water management, renewable energy, biodiversity, certain kinds of innovation, and difficulties in the dairy sector”10.

The press release from the Danish Ministry of Food, Agriculture and Fisheries only mentions that the extra 5 % can be used for ”new challenges of environment, climate change, renewable energy and innovative solutions to these problems”11. It is not mentioned that the funds may also be used, for example, in the dairy sector.

The decision to increase milk quotas will lead to an increase in milk production and – all other things being equal – cause increased emissions of greenhouse gases (methane) from cattle.

Overall, it is assessed that the EU Council of Ministers in adopting the Health Check has made some decisions that will increase environment and

This should be seen in the light of more unclear

7 Jyllands-posten 21 November 2008 8 Memo of 20 August 2008 9 Under proposal for Council Regulation COM (2008) 306/4 10 Fischer-Boel blog. See above 11 Press release from Ministry of Food, Agriculture and Fisheries 20 November 2008

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members, EU agricultural aid is a new issue, and for many it was an important argument for membership. It has contributed to transferring large funds to countries far poorer than EU average. Basically, new Member States do not wish to change this fact. By contrast, they wish full equal rights.

climate problems from agricultural production in the short term. At the same time, financial frameworks have been set up for a larger effort for promoting respect for environment and climate. But whether the framework will really be used for the purpose will depend on national decisions in the different EU Member States and on the announced new requirements for cross compliance.

In the old EU the more liberal and reform-friendly countries are typically found in Northern and Central Europe, while the reluctant and (according to Danish understanding) more conservative are found in the Southern part, especially in the Mediterranean countries. Those countries are marked by many small farms that have more difficulties in coping with liberalisation.

13.4 Time up to reform 2013-20 With the amendments following from the Health Check the present CAP will run up to 2013. Gradually, the CAP share of the total agricultural budget will decrease below the present level of around 40 %, and gradually changes will be introduced nationally and at EU level, among others based on increasing economic framework for environment and climate efforts, but fundamental change will not happen until 2013.

These conflicting interests will mark the fights, and it will be hard to reach compromises. It is not a matter of fact to ascertain who will be for or against reforms. Among the new members the Czech Republic, Estonia and Latvia have seen developments leading to them being seen as reform-friendly.

Concerning the old Member States there are also in several places conflicting interests within the countries. France is often described as conservative in issues relating to agriculture, but this is partly due to the fact that France has internal problems. In Northern France agriculture is similar to Danish, Dutch and German conditions, while Southern France has a Mediterranean situation. Spain is also little predictable. In some fields Spain’s attitude towards liberalisation and market developments is similar to that of the Danish government.

The struggle about what will happen then has already started. In the course of 2009 a new EU Parliament and a new EU Commission will take their seats, and in 2010 budget negotiations will start, expected to be decided and adopted in 2012. Fischer Boel has expressed her concern that finance ministers will decide the framework for the agricultural policy. Therefore, there will be endeavours to settle the contents before the battle of the budget starts.

In the second semester of 2011 Poland holds the presidency of the EU. But Poland will be against radical changes of the CAP and budget cuts. Considerable aid to Polish farmers was a key issue under negotiations on Polish accession to the EU. The new Members States entered the EU under a phase-in scheme and area aid is still lower than in the old Member States. While the Danish government requires phase-out of direct agricultural aid many new Member States, by contrast, require full support in line with the old EU members.

In 2006 France headed a memorandum backed by thirteen countries in Eastern and Southern Europe advocating the establishment of insurance schemes by partially public financing through pillar 2 – to counter also the market risks associated with abolition of production aid. Article 68 now mentions the possibility to support insurance schemes and shows how entirely new elements can be integrated in agricultural aid as part of reforms.

Denmark will take over presidency after Poland on 1 January 2012. Denmark pushes for change, which should also give financial savings. Next president after Denmark will be Cyprus, having modest capacity and experience. Therefore, much will depend on Denmark and it does not facilitate matters that Danish presidency follows directly upon the Polish term.

Reforms can take different directions, and reformeager countries are not necessarily the same as those who advocate climate and environment and larger integration of environmental issues in agricultural policy. The wish for a more market oriented, liberal and cheaper CAP may be in conflict with the wish that agriculture must comply with climate and environment requirements, since this presupposes a rather high level of regulation and control. The conflict between market orientation and environmental concerns is also seen in the attitude of the Danish government.

Crisscrossed interests Many interests are present in the EU of 27 Member States. Classic conflicting interests are seen between north and south and between east and west. Most new Member States are from Eastern Europe, while the old members are found in the west. For the new

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Box 13.1 Danish government’s vision on green growth In 2008 the Danish government presented the mandate for a ministers’ committee creating a”Green growth vision”12. The objective is to arrive at a vision ”combining a high level of protection of environment and nature with modern and competitive agricultural production”. The ministers’ committee is to table an environment and nature plan Denmark 2020, but also prioritise objectives for growth-oriented agriculture. Overall, a green growth strategy is to be prepared and netogiated with the political parties in spring 2009. This strategy is to form the basis for a professional review of Danish agriculture’s conditions of growth and challenges in the coming 15 years, ”Danish Agriculture 2022”. The ministers’ committee has seven members, and the chairman is not the environment minister, nor the minister for food, agriculture and fisheries, but the minister for economic and business affairs.

Prioritised objectives for the environment and nature plan are as follows: • further reduction of leaching of nitrogen and phosphorous • further improvement of physical state of watercourses • significant reduction of pesticide impacts on humans, animals and nature • reduction of agriculture’s CO2 emissions • securing biodiversity • more, and more accessible, nature • development of instruments securing real environmental impacts and efficient use of resources.

Prioritised objectives for growth-oriented agriculture are as follows: • Denmark should retain its position as one of the world’s leading agro food centres – ”Agro Food Valley” • increased competitiveness at all levels, including ownership, financing, establishment and sale • agriculture must be an industry managing environment and nature in a responsible and exemplary manner, which is known and respected for its high level of animal welfare • organic farming must have good framework conditions, and expedient development at market terms must be supported • Denmark as a gourmet nation thanks to production of quality food • agriculture must be part of Danish experience economy thanks to its contribution to tourism etc.

• smoother and more efficient administration of agricultural regulation, including faster environmental approvals.

The mandate also mentions investments in research and technology in order to turn Danish agriculture into a ”green technology lab” and supplier of non-fossil energy as well as enhanced innovation and development of technologies, including environmental technologies, food security and animal welfare.

A press release from the Ministry of Food, Agriculture and Fisheries draws the attention to the environmental objective, but it also mentions that the vision for the future of Danish agriculture is ”enhanced competitiveness at all levels”.13 The aim is to combine environment and climate concerns with efforts for trade and industry development such as faster environmental approvals and smoother regulation of agriculture. It will be difficult for Denmark to be a front running nation with climate efforts and environmental protection, when the aim is to have higher competitiveness at all levels. Lack of efforts in other countries will make it difficult for Denmark to take the lead, since it may hamper competitiveness.

12 Mandate 18 August 2008 13 Press release from Ministry of Food, Agriculture and Fisheries, 11 October 2008.

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goods”. In the wording of the Danish government this is defined as ”environment, ecology, food safety standards, animal welfare, and land management”.

Agriculture ministers versus finance ministers In many EU Member States we will see a struggle between food and/or agriculture ministers on the one hand and finance ministers – the ministers for the budgets – on the other. EU agricultural aid is paid by tax payers and finance ministers wish to reduce costs and thus income taxes. Reductions of agriculture’s substantial aid will make it easier to reduce taxes. Therefore, many finance ministers will push to obtain a significantly lower agricultural budget. By contrast, many agriculture ministers will be against cuts, and discussions up to the Health Check showed that Agriculture commissioner Fischer Boel is on the side of the agriculture ministers. She has called attention to the risk that finance ministers will decide, but she has also said that there is no guarantee that the aid check will still arrive in the mailbox.

Also the EU Commission focuses on agriculture producing public goods to a higher extent. Politicians and civil servants engaging in the coming fight are studying the above Article 68 of the proposal for a Health Check of agricultural aid.

Environment, climate, food quality and water quality become four key words if the provisions of article 68 are to be developed into covering an even larger part of general agricultural policy. But we will see extensive disagreement as to the extent to which article 68 should also be used for special support of those parts of agriculture that are merely having general difficulties.

In her speeches she has stressed that agricultural aid in future must be motivated by societal needs. It is not only given for the sake of farmers and must in future pay respect to needs for • mitigating and adapting to climate change • securing water resources • exploiting beneficially the potential for bioenergy, and • protecting biological diversity

13.5 Impact of other policy developments Negotiations on the CAP after 2013 will be affected by other national and regional policy developments than direct agricultural issues, and global developments will affect EU policy in a number of fields.

Discussions will probably also be marked by the fact that today many people consider it more important to have an efficient and well-working food industry than to support individual farmers, which are an ever decreasing minority. Farmers in most countries have less direct political power than they used to.

Agricultural aid must therefore be motivated by other concerns, and in this context food industry and derived economy and employment are very important.

A new climate agreement to follow up on the Kyoto agreement is to lead to far higher reduction targets for emissions of greenhouse gases, and since agriculture accounts for close to 15 % of total emissions this will mean that there will be much higher focus on reduction of agriculture’s contribution.

At the same time, international developments in both energy and food prices will affect the development of agricultural policy. In autumn 2008 energy and food prices decreased steeply after dramatic increases in early 2008. Most prognoses, however, still indicate that the long-term price level for both energy and food will be significantly higher than in the past. This causes some difficulties, but in the longer term also makes it easier to phase out direct agricultural aid.

New concept: public goods In the Danish government’s contribution to the revision of the EU financial framework it is enhanced that the CAP in future must ”focus on ensuring public goods”. This notion will become far more integrated in the political language and discussions than we know it today.

The declared objective of the Health Check has been to make it easier for community farmers to follow market signals. General liberalisation of parts of the agricultural policy has led to world market developments having far larger impacts on production than in the past. Also, developments are marked by the fact that the EU area is a market that is hardly growing and which has almost completely “saturated consumers”.

The concept of ”public goods” is not precisely defined. Political efforts generally aim at ensuring people’s public goods such as social security, education and health. Increasingly, this concept is also used in relation to international efforts, and the concept of global public goods such as freedom from hunger and the right to education is gaining ground.

In the future it will be an important impetus for agricultural aid that agriculture is producing ”public

The EU Commission has commissioned a scenario

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study14 determining that the lack of demographic development in the EU means that there will not be general growth in demand for food in the EU. On the contrary, it can be expected that along with affluence developments sale of high-quality and luxury products will increase. This development is to create economic growth for EU’s own food producers, and the study can be read to the effect that where agricultural schemes used to secure individual farmers and rural development, focus is now increasingly on food processing industries.

Europe”, which was established in 1996 on the initiative of former Commission president Delors. ’Notre Europe’ suggests to change the CAP from 2013 to the effect that aid should no longer be a matter of course or a right of farmers not violating certain bans, but only something to be granted if they comply with a number of positive requirements. ”What you get depends on what you do” should be the guiding principle. The study is entitled ’CAP reform beyond 2013’16, and it concludes that reforms in the past years have made aid more reasonable, but there are still problems to be solved. There is still loss of biodiversity, wetlands disappear, water quality deteriorates in several places, there are fewer birds, and soil fertility decreases in many places. Environmental efforts have not been sufficiently targeted.

Increasingly, the development of two different food markets is being mentioned: the market for necessary purchases or basic products and the market for luxury products. In a liberalised market the EU will meet fierce competition on the market for basic products of standard quality. Expensive labour and many years of capitalisation of agricultural aid into high prices for property mean that standard products can be produced at a lower price elsewhere.

The think-tank sees it as a problem that many efforts have been in the form of control and punishment and that the largest land owners get most, whether or not they are acting to the benefit of society and environment. Instead a system should be introduced rewarding social agriculture. The system should be simple and based on three criteria:

Even with a general increase in world market prices for basic food the market will send powerful signals that the EU increasingly must opt for luxury and high-quality products, including highly refined food.

Market signals and the wish for a more sustainable and environment-friendly agriculture pull in some fields in the same direction. This is seen for example in the growth of the market for organic food and increasing political interest in this area. The EU Commission presented in June 2004 a plan of action for organic food and organic agriculture,15 and even if the organic sphere still only takes up a small corner of the general agricultural policy, its importance is growing.

1. Support to agriculture delivering positive environmental efforts within rural nature, biodiversity and natural resources. Payment is linked to conditions accepted by the farmer. Support cannot be subject to trade, so capitalisation of support is avoided.

2. Support to agriculture in less favoured or remote rural areas. Regional development support to mountain farmers etc. to ensure survival of noncompetitive agriculture in less favoured regions.

3. Green support. Special support to agriculture using particularly environment-friendly cultivation methods, opting for organic farming or in other ways contributing to reducing the ecological footprint of agriculture.

Agriculture as nature protecting or nature destroying agent Agriculture traditionally has had the role of manager of natural values. This role has come under increasing pressure since intensified agriculture has led to reduced biodiversity, poorer water quality and a number of other environmental problems. Legislation and EU provisions have sought to limit agriculture’s negative impact on nature, but results are not particularly efficient.

’Notre Europe’ is just one among several think-tanks, organisations and lobbying groups who strive to ensure together with research institutions and individual researchers that the political fight will not only deal with money. It must also deal with the EU’s relationship with global agriculture and global food problems as well as with development of a form of agriculture with far less climate and environment impacts. European Environmental Bureau (EEB) is an umbrella organisation of 140 European environmental organisations (including Danish Society for

In the work to reform the CAP efforts will be made for reversing this trend, refocusing on agriculture’s potentially positive role. One example of such an attempt is a move from the think-tank ”Notre

14 Scenar 2020 – Scenario study on agriculture and the rural world. http://ec.europa.eu/agriculture/publi/reports/scenar2020/index_en.htm 15 COM (2004)415 16 Jean-Christophe Bureau and Louis-Pascal Mahé: CAP reform beyond 2013. An idea for a longer view. Published by Notre Europe. www.notre-europe.eu

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ment is entered before the final negotiations of a CAP 2013 reform it will also affect these negotiations to a large extent. The Danish Agricultural Council assessed before summer 2008 that a collapse in the WTO would lead to a large number of cases under the Dispute Settlement Understanding in view of attacking those elements of the CAP that are still seen as being in conflict with the WTO rules19. The EU has an interest in early continuation of negotiations to prevent such a course, but also to be able to take advantage in the negotiations of the positive changes that have been achieved in the CAP reforms.

If real negotiations are not resumed for several years it will be difficult to use the “old reforms” as a proof in negotiations of the EU’s good intentions.

Nature Conservation and the Ecological Council). The EEB has published a 2008-2020 vision paper for European agriculture17.

It points out that the EU is not self-sufficient in food today, since livestock is highly dependent on imports.

The EEB requests the EU to become really self-sufficient as a European contribution to global food security. One of the means suggested by the EEB is that the EU reduces animal feed imports and that consumers reduce consumption of meat and other animal products as well as dairy products. This will contribute to a reduction of agriculture’s negative impact on climate. The EEB suggests to develop special sustainability criteria and that targets are set year by year to increase the share of agricultural production complying with these criteria so as to reach 100 % by 2030.

Criteria should also cover organic agriculture, today not covered by rules on energy and fuel.

13.7 EU and the world’s poor.

Increasing hunger threat

According to the EEB agricultural aid should be designed to give special incentives for farmers producing according to those sustainability criteria. In this way the EEB proposal, similar to the proposal from ”Notre Europe”, is more marked by the carrot than the stick. ”What you get depends on what you do”.

In recent years there has been increasing pressure on global food production. For several years growth in consumption has been larger than growth in production and world food stocks have been very small. An increasing demographic pressure combined with growing wealth in a number of developing countries (with China in the lead) and increasing use of food as a biofuel have created shortage and put an upward pressure on prices. As mentioned in Chapter 5 this development led in 2008 to a dramatic growth in the number of permanently malnourished people worldwide according to FAO, and eventually it must be seen as impossible to attain the UN millennium target of reducing by half hunger worldwide by 2015 (against 1990).

13.6 WTO back in business WTO negotiations have played a significant role in the entire CAP reform process (see Chapter 4). Since the collapse of summer 2008 it has been unclear whether the Doha Round would still have a future.

However, during the entire autumn of 2008 there have been explorations between the parties, and the finance crisis may have been an impetus for new negotiations. The finance crisis has caused fear of a new wave of protectionism worldwide, and some of the major powers in negotiations have felt that a positive outcome of the Doha Round may reduce this risk. Late November it was announced that there were plans of a new WTO ministerial conference by the end of 2008.18 The meeting is planned at the initiative of the G20 Group and the Asia Pacific Economic Cooperation group (APEC) with membership of the US, China and Japan.

The hunger issue will mark discussions of the CAP reform and global public goods. How is it possible to prevent increasing inequality and a situation of 900 million people suffering from hunger in a world that is also marked by excessive consumption?

The argument that Danish agriculture in a time of hunger and increasing food prices should produce more food was part of the reason why the Folketing abolished the set-aside scheme in Denmark already before the EU Health Check. One of the counterarguments was, however, that due to large animal feed imports the EU is not even self-sufficient in food. EU agricultural production does not contribute to eradicate hunger in the world; by contrast it contributes to creating a far too high pressure on agricultural resources and land in developing countries.

It is to be expected that after the latest collapse quite some time will pass before a general global agreement can be made, but a new active negotiation process will affect reform discussions. If an agree-

17 European Environmental Bureau (EEB). Vision European agriculture 2008 – 2020. www.eeb.org 18 Reuter telegram 23 November 2008 19 www.landbrugsraadet.dk/view.asp?ID=10795

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2008-2010. The budget conciliation was to be approved by the EU Parliament in December 2008. By then, almost six months will have passed from the proclamation on an extraordinary EU emergency measure.

In the coming negotiations there will be heavy demands that ”public goods” in an EU agricultural context should also be ”global public goods”. The EU praises itself of its international role, and the argument will be that the EU has a duty to help strengthen agriculture and food security beyond the EU.

Funds are very modest compared with needs. In return, the budget conciliation indicates that most funds are so-called additional, which means ”new money” leading in practice to larger transfers to developing countries.

In the above-mentioned contribution to the budget review the Danish government discusses the challenges created by globalisation to be faced by both internal and external policies of the EU. The contribution argues for far larger research support in the EU, but also for “allocating larger funds in the EU budget for supporting development activities in view of contributing to the global need for mitigation of climate change.”

This fight about the grant of the emergency billion illustrates how difficult it will be to ensure recognition of ”global public goods” as part of a new view on the CAP as an element of a global sustainable agricultural policy. It also shows, however, that in the Commission and in some Member States there is growing awareness about the fact that we cannot reform and develop the CAP without respect of the global agricultural and food situation.

Support to agriculture in the affluent EU was once again in 2008 set off by new requirements for global economic efforts to combat hunger. FAO DirectorGeneral Diouf made an appeal in November 2008 that world leaders should meet next year to find US$ 30 billion yearly for an effort to create a new global agricultural deal eradicating hunger.20 He compared this figure with total agricultural aid in the OECD countries, reaching in 2007 according to FAO US$ 365 billion. Different calculation models have been used, but published costs of the CAP were in 2008 EUR 55 billion, corresponding to some US$ 70 billion. So the CAP costs yearly more than double of what FAO Director-General would find sufficient for global eradication of hunger.

EU special responsibility In a number of fields the EU has direct co-responsibility for present and future difficulties for developing countries’ agricultural production and food security (see also Chapter 5): • Climate change will hit hard in the tropics where conditions for agriculture will become more difficult due to more and longer periods of draught and more flooding. The primary reason for climate change is emissions of greenhouse gases and excess consumption of energy in the rich part of the world. The rich world has created the new problem to be handled in the poor world.

• Even if EU agricultural aid is less distorting than it used to be the distortion has not disappeared.

Export subsidies are still granted, and European farmers – by contrast to their colleagues in developing countries – still enjoy a very large public basic aid making investments and innovation possible to an extent that poorer farmers do not know.

• Over a number of years developing countries have lost giant amounts due to US and EU protectionism and general unequal conditions on the world market.

• Liberalisation of the EU agricultural schemes and market schemes probably leads to a higher global agricultural production, but the poorest developing countries having had special preferential schemes on the EU market will be hit negatively.

• Negotiations on economic partnership agreements (EPA) between the ACP countries and the EU aim at liberalising and opening markets in a

Battle of EUR 1 billion Both EU Commission President Barosso and Agriculture commissioner Fischer Boel argued in 2008 that the EU has a responsibility for assisting global agriculture and for needing special efforts in the light of the high food prices. Mr Barosso proposed in July that EUR 1 billion be spent from the agricultural budget for a kind of global agricultural emergency aid. An important part of the argumentation was that the high food prices caused a number of savings in agricultural aid and therefore unspent funds could be diverted to poor countries. The proposal, which was supported by Mrs Fischer Boel, was caught in a fight of four months, despite the fact that the agriculture commissioner had argued that the support was to be allocated very quickly so it could already from the coming cultivation season contribute to reducing some of the problems having arisen in many parts of the world. Finally, the billion was granted, but only as part of a budget conciliation in November21, and with funds from three budget years:

20 FAO 19. november 2008 21 ”Deal reached on food aid”. 22. november 2008. EuropeanVoice.com

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number of poor developing countries, creating fear that cheap food imports will threaten food security and harm agricultural development in some of the most vulnerable developing countries.

This development emerges in parallel to international aid for agriculture and agricultural research in developing countries having been on the decrease for a number of years.

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PART E Scenario

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Chapter 14: A common solution to Danish agriculture’s environment problems – a scenario 14.1 The purpose of the scenario development

•

In part C of this report we presented agriculture’s environment problems related to a number of issues: natural habitats & wildlife and biodiversity, eutrophication, climate, pesticides and animal welfare. The different topics normally appear to be distinctly separate – i.e. different subject areas, that are dealt with separately within environment research as well as in public administration. There is also a general tendency among NGOs to deal with agricultural environment problems as separate topics.

•

The scenario must deal with the multitude of environment problems and as far as possible outline a common solution to these.

The common cause-effect relationships, tools and instruments must be selected on the basis of the synergy between their effects relative to the individual environmental issues.

The Copenhagen University Institute of Food and Resource Economics (FOI) has contributed with calculations of the economic consequences of the scenario1. The Ecological Council has formulated the purpose of the calculations as follows:

In the following chapter we will attempt to consider the problems as a whole- holistically. Although in chapter C we did analyse the individual environmental problems, i.a. the reason for the increasing significance of the individual problems. However, there are common features among the different environment problems and their cause-effect developments – of which a few examples are given below:

•

We have described the way in which significant reclaiming of land have been made throughout the 1900’s through drainage and pumping, considerably expanding the size of Denmark’s cultivated land area. The cultivation of these areas has led to problems related to discharges of nutrients into aquatic environment. Likewise, large amounts of carbon dioxide (CO2) have been released after storage in the often humus-rich soil, and the use of fertilisers has further contributed to the release of climate-changing greenhouse gases. As far as natural life and biodiversity are concerned, a number of valuable wetlands and meadows, the habitats of a large number of species, have disappeared.

14.2 Methods

•

The calculations will illustrate the total societyand business-related costs of the implementation of the scenario proposed for the reduction of nitrogen discharges into the environment.

The costs will be related and evaluated against possible further modulation of the funds from the EU agricultural support system.

The scenario presents a suggested common solution to environment problems caused by Danish agriculture. The significance and validity of the results on a European level are primarily related to the need for a common view on environmental problems, in which the synergy-effects are given preferential weight.

2006 is taken as the basis for our evaluation of reduction targets. In certain cases, however, an average covering more years has been applied – which is then directly indicated. The agreed horizon for the planning period is for targets to be reached by 2020 at the latest. Several of our individual targets are based on already existing legislation, regulations or conventions with shorter horizons – as in the case of the Water Framework directive, which requires targets to be fulfilled by 2015, and the Biodiversity Convention requiring that targets are met by 2010.

Another example is related to the systems used for handling farm yard manure. Although in recent decades, considerable improvements have been made and new technologies exist that help reduce the problems – the fact is that a number of problems still exist related to eutrophication of the terrestrial and aquatic environments, as well as in relation to greenhouse gases.

The fulfilment of targets will be based on planning dominantly relating to concrete local and regional conditions, as laid down in the water- and nature protection plans. The targets per se are determined by concrete analyses, and the most efficient and cost-

In the development of the scenario, the Ecological Council has had in mind that:

1 Carsten J. Nissen, Alex Dubgaard, Ole Bonnichsen & Jens Abildtrup; Economic Consequential Analyses of Environmental Instruments in the Agricultural Sector (in the Danish language). LIFE, Copenhagen University, January 2009

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14.3 Summary of the environmental targets of the scenario

effective tools and instruments have been selected on the basis of models and analyses in the individual regions. In the interest of clarity, we have attempted to apply as few targets and instruments as possible in our scenario. For the implementation of plans it is then possible to select those instruments which are most suitable under local conditions, still keeping an eye on the over-all purpose.

In part C of the present report a number of goals has been specified within the individual environmental topics. The most important goals can be summarised as follows: Nature and biodiversity • The targets of the habitat- and bird-protection directives for Natura 2000-areas must be fulfilled • The targets of the Biodiversity Convention must be fulfilled, regionally as well as locally • One third of the Danish area is to be set-aside for nature/wildlife purposes • The tolerable levels for nature must be respected • The emissions of ammonia must be reduced by 50%.

The scenario has been developed to enable FOI to calculate costs and cost-efficiency in relation to nitrogen leaching and discharges. Nitrogen has been selected because the FOI-institute in parallel to the present work also has had the task of carrying out similar calculation concerning instruments for the reduction of climate-changing greenhouse gases for the Danish Ministry of Food. The Ecological Council has calculated the effect of the instruments in relation to the nitrogen leaching to the aquatic environment – calculations which are then commented upon and used in the FOI-report. Subsequently, the Ecological Council has calculated the effect of instruments in relation to greenhouse gases – calculations which have then been checked and commented upon

by FOI after finalisation of the Ministry of Food report.

Aquatic environment • The Water Framework directive requirements for ‘good ecological conditions’ in the aquatic environment are to be fulfilled • The leaching/discharge of nitrogen into the aquatic environment is to be reduced by 40% • Reduction of the leaching of phosphorus

The cost of implementing the proposed instruments is independent of the environmental effects to which they are related – e.g. the cost of one hectare of land being set aside is the same without regard to the effects on the aquatic environment, on nature/wildlife or on climate. Thus, the calculated costs apply to the further assessment of the total cost of implementing the scenario instruments. In contrast to this, the cost efficiency of instruments in the two reports has been calculated in relation to nitrogen and CO2 equivalents – which is discussed in more detail in connection with the presentation of the results.

Climate • Emissions of greenhouse gases (measured in CO2 equivalents) from agriculture must be reduced by 30% by 2020 Pesticides • The use of pesticides is to be reduced – both in terms of active ingredients and the frequency of application3.

The first three of these targets are related to nature and biodiversity. They are intended to improve nature’s quality in the EU-prioritised Natura 2000 areas for which the environment laws and regulations require nature protection plans that specify concrete measures within the protected areas and for the remaining parts of Denmark. The scenario does not directly deal with the concrete initiatives to protect threatened species individually or with plans for extension of the recreational facilities. As our starting point we rather evaluate the over-all framework for the development in nature – i.e. that nature needs space and coherence, that eutrophication has to be reduced in terrestrial ecosystems to a level not exceeding tolerable limits, and that there is a need for a comprehensive management with efforts which will maintain the nature/biodiversity values in the open land.

Slightly more than 1,500 million DKK has been budgeted for the implementation of the national Third Water Protection plan (VMP III) until the year 2015. It is uncertain, however, to what degree the national VMP III will be implemented. It rather looks as if it will be replaced by the water plans2 that must be made according to the water framework directive.

Later in this chapter, in relation to financing our scenario, we will include the funds already reserved for the VMP III in the discussion.

2 A water plan must be made for every water district. Denmark consists of 23 water districts 3 Frequency of application expresses the applied amount of pesticides in relation to the recommended dosage. It expresses the load on nature better than the number of tons of active ingredients

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ha. As already mentioned, it is not compulsory to set a-side in 2008, and the set-aside system will be abandoned permanently from 2009. This means, that about 50% of the now proposed rate of set-aside will be used as substitutes for the earlier set-aside areas.

The question is, however, how much space is needed? In order to quantify this, we have decided to take guidance from a series of proposals which have been presented in the public debate during recent years. The Danish Nature Council in its recommendations has concluded that one third of the agricultural land has to be set-aside or extensified, in order to respect the tolerable levels of nature4. In September 2008, the Danish Socialist People's Party (SF) published a nature planning report5, which proposes that Denmark’s combined forest and openland areas be enlarged until at least 35% of the total land area by 2050. During the negotiations in 2003 on the Water Protection Plan III it was proposed by the combined political opposition – on the basis of an initiative from the Social Liberal Party (R) – that 30% of Denmark's land area should be set-aside for nature & wildlife purposes6. With this as our background, we have in the scenario proposed a target of 1/3 of the Danish land area to be set-aside for nature purposes7. The government has so far not presented any countryside planning for the future. In a government proposal on sustainability strategies it was indicated in 2002 that ‘the space left for nature’ was insufficient - but targets for the future were not presented, as it was also not done in the Action Plan on Biodiversity and Nature Protection in Denmark, 20042009.

From our point of view, all set-aside or extensively cultivated areas shall be part of the contributions to reach the target for nature of 1/3 of the Danish land area. Accordingly, nature areas comprise ‘wild nature’ as well as land for which considerations on nature protection are prioritised higher than for agriculture.

For the ammonia emissions we are applying the targets proposed by the Danish Nature Council. They indicate that a 50% reduction is needed in order to meet the requirements set by tolerable limits in nature9.

The Water Framework directive goals are based on conditions and qualities as described for wetlands of ‘good ecological quality’. This indicates that the quantitative targets for the leaching of nitrogen will differ from one wetland to another – the exact reduction targets have to be established through analysis of the individual wetlands in combination with the specific development of wetland-plans. The Environment Agency expects that the final targets will be quite close to the Regional targets presently valid for the specific wetlands10. In order to estimate more specifically the demands for the total average reduction, we have scrutinised a number of analyses available for existing Danish wetlands. In Mariager Fjord, an estimated reduction of 24-63% in nitrogen leaching is required11, while in the case of Odense Fjord a reduction of approx. 60% is called for12. NERI, the National Environmental Research Institute, estimates that a reduction of about one third of the nitrogen-leaching into the Randers and Odense fjord systems will be needed in order to meet the targets for the inner sectors of the fjords13. In our scenario, we have – fully aware of differences between the demands of individual wetlands - made the choice of 40% as a general target.

The Danish nature areas comprises wild nature areas as well as extensively cultivated land of which nature and biodiversity is highly valued. Referring to the calculations presented in Box 6.2, a total of 991,000 hectares, corresponding to 23% of the total land area (4.309.511 ha) is to day nature as defined here, i.e. including Danish forest reserves, protected areas (so-called § 3-areas), non-rotational grass and other nature areas. Therefore, a further 10% of the Danish land area still has to be set-aside - corresponding to 430,000 ha. This constitutes 16.2% of the agricultural area8 - compared to the 5 - 8% which has presently been set aside from the rotational, agricultural land. In the year 2006 about 168,000 hectare were set-aside, while in 2003 the figure was 207,000

4 Per Christensen, Anette Reenberg, Bent Aaby, Peder Agger; Scenarios for agriculture in the future. Paper published in Vand og Jord, no. 14, 2007 and in The Danish Nature Council; The rich landscape – Nutrients from agriculture and tolerable levels in nature. A Wise Men’s report, 2002 5 SF; Nature planning in Denmark – Proposal presented to Folketinget (the Danish Parliament) in September2008 6 Social-liberal Party (Det radikale Venstre); Denmark is a lovely country – a proposal for an action plan for Danish nature. December 2003 7 The calculations on set-aside areas for fallowing, catch-crops and organic farming for this scenario are presented in Appendix A (only in the Danish edition) 8 For comparison, the Funen County scenario no. 1 and no. 2 uses set-aside percentages of 19 and 23% for the agricultural land in the Odense Fjord catchment area.

9 See note 1 10 http://mst.dk/default.asp?Sub=http://mst.dk/vand/06000000.htm 11 The County of Nordjylland (North Jutland) and Århus County; Mariager Fjord – The possible contribution, 2002 (in Danish language) - A reduction target of 50% is calculated in this report 12 A reduction of 1,200 tonnes N out of a total leaching of 2,000 tonnes – cf. also: The County of Funen-report on: Economic analysis of an integrated work-programme for Odense Fjord (in Danish language). Report with results, nov. 2006 13 NERI; Nielsen, K. et al.; Quantification of the nutrients transport from source to receiving waters, including the effects on the aquatic environment (In Danish language). Scientific report no. 455, 2003

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tion of catch crops and reduced ammonia emissions may be of general interest for the protection of groundwater. We have therefore delimited ourselves from an evaluation of initiatives which might otherwise be necessary in order to ensure the quality of drinking water and the drinking water resources in a satisfactory way.

The total discharge of nitrogen by the Danish agriculture through the fresh water system to marine waters was estimated to be in the order of 49 – 67,800 tonnes N per year for the period 2004-2006, averaging 61,000 tonnes N per year. Accordingly, a reduction of 40% of the present nitrogen leaching to marine areas corresponds to a demand for reduction in the range of 20 – 27,,000 tonnes N per year14.

The reduction target in our scenario for the agricultural contributions to greenhouse gas emissions is given as 30% of total agricultural emissions, which include changes in soil carbon-content in 2006. This corresponds to the combined targets of the 2007 EU Climate and Energy packages in the event of global agreement being achieved. This is in line with Danish reductions in the non-quota sector (which consists of agriculture, traffic and individual household heating), which can be extrapolated to 30% in relation to a global agreement. If a global agreement is not achieved, the EU total reduction targets will be 20%.

Whether targets in a final climate plan will be identical for the quota- and the non-quota sectors will not be resolved until after the Climate Summit conference in 2009 (COP 15). As long as the full target for the non-quota sector is fulfilled, the specific targets for the agricultural sector will then be a matter for the individual member states to decide.

The reduction demand for phosphorus has not been quantified and is not included in the scenario. It is not clear how much phosphorus is leaching today , and it does not make sense to specify general effects of the different instruments. The reduction of phosphorus has to be established on the basis of needs in the individual receiving waters, and the effect of initiatives needs to be evaluated on the basis of local models15.

The efforts will primarily be directed towards riskareas, i.e. areas close to water courses and lakes, soil in low-lying areas and shelving fields that lead directly onto water courses. The Water Environment Plan III involves a target for reduction by 50% of the agricultural surplus of phosphorus by 2015 with the possibility left open for a further reduction, depending on technological developments16. Although we presuppose that this will be effectuated, there may be a need for further general initiatives, e.g. for removal of the P-surplus from field management which, however, is not part of the present scenario.

We have chosen to believe that the proposed rate of set-aside will implicate such a major part of the phosphorus-risk zones, that further instruments for the phosphorus-reduction shall not be needed.

The total amount of climate-changing greenhouse gases, including emissions from energy consumption and carbon accumulation/release from Danish farmland is estimated to be in the order of 12.5 million tonnes of CO2 equivalents. The target of a 30% reduction therefore corresponds to a reduction of 3,75 million tonnes CO2 equivalents.

The Water Framework directive also includes the protection of our groundwater. In this report we have not analysed initiatives which may be needed to ensure such protection. However, we do point out the need to reduce the seepage into the groundwater, because nutrients at some later stage – possibly even after several decades – may re-emerge as a cause of eutrophication of surface waters. Some of the instruments we are dealing with may have an impact on or be directed towards a protection of vulnerable drinking water resources. These may be forestation, establishment of sustainable grassland on arable soils, organic farming and a general reduction of pesticide usage as the most important, but also the introduc-

The use of pesticides must be strongly reduced according to the scenario. We include an increased re-orientation towards organic farming, including set-aside and extensification of cultivated soils, afforestation, more wetlands, etc. All of this will reduce the application of pesticides in terms of the number of tonnes of active ingredients. But none of these initiatives will influence the application frequency, which is merely calculated for the conventional area of rotation, irrespectively of its size. We propose a number of instruments and tools for the reduction of pesticide usage. These include set-aside/re-orientation, as well as reduced spraying frequencies on the conventional rotational areas17.

14 The calculations of nitrogen leaching are presented in Appendix B. (only in the Danish edition) 15 See e.g. Wiggers, Lisbeth and Nehmdahl, Holger; Phosphate in water courses – the significance of factors in the catchment area (in Danish language). Paper published in Vand & Jord (Water and soil), Vol. 13, September 2006 and DJF-report; Phosphorus in Danish Agriculture – Circulation, losses and instruments against losses (In Danish language), written by: Hanne Damgaard Poulsen & Gitte Holten Rubæk, December 2005.

16 Agreement on the Water Protection plan (VMP III), 2005-2015, between the Danish Government and two supporting parties (Danish People’s Party & The Christian Democrats), 2. april 2004 17 The full list of instruments is in chapter 9,- only in the Danish edition

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tabel i fil for sig selv

56

14.4 Choice of instruments

dually. We will also discuss the quantification and effects-calculations, e.g. in relation to an overlapping of instruments or to the uncertainty of calculations.

The primary instruments included in the scenario are shown in the following tables. The instruments have been selected on the basis of the following considerations : * • The decision to include as few and simple instruments as possible, and • The wish to achieve the best possible synergy in relation to the variety of environmental goals.

The set-aside and extensification of land.

The first column of Table 14.2 shows the extent of agricultural land in Denmark and its overall utilisation in 200618. The second column indicates a more detailed distribution of set-aside areas, while in the third column we have calculated the change in utilisation by 2020, i.e. after 430,000 hectares have been set-aside.

The area-related instruments are divided into general and regional instruments, the general ones being regulated by national legislation. The limitations of these are partly related to a risk of ‘over-regulation’ on certain soils, and partly dependant on the efficiency of the instruments. Greater effects will often be found on such special soils from which the losses of nutrients or greenhouse gases are great. In connection with the Water and Nature Protection planning, the regional instruments are focused and regulated according to local conditions, e.g. nutrient leaching from soil in low-lying areas or climate-gas emissions from humus soils, also taking into account the goals for climate, environment and nature protection. In the scenario we emphasise the set-aside of soils as a regional instrument, while among the general instruments we only include catch-crops and organic farming, because we wish to limit the number of instruments in the interest of clarity. In the Danish Water Protection Plan III a 5% increase in nutrients’ utilisation has been included. This is an improvement which we consider feasible from the point of view of improved technology in the handling of fertilisers.

The allocation in our scenario of set-aside/extensification practices on arable land and on low-lying soils, respectively, has been based on the Odense Fjord19 scenario, in which about 2/3 of the set-aside areas are in river basins, and we have applied the same ratio between arable and low-lying areas, because the effect of leaching into the waterways generally is most pronounced on low-lying soils, which have the lowest retention.

Set-aside/extensification on low-lying soils includes establishment of wetlands, of crop-free protection borders as well as extension in the form of sustainable grassland areas. In the scenario is found widely differing N-efficiencies (varying from 26.6 to 100 kg N per hectare), while in practice a gradual transition between these instruments exists. Wetlands can be established by bringing drainage and pumping to a halt, whereby earlier wetlands are re-established.

Changing of physical conditions may also be applied in connection with waterways or streams. Reduced removal of weeds from waterways or re-establishment of river-bends may lead to a reduced water flow, which – permanently or periodically – may give rise to an overflow of the banks followed by flooding of near-by meadows. A considerable uncertainty, therefore, exists concerning both potential and calculated effects of the individual initiatives.

In October 2008, the Danish Environmental Protection Agency issued an updated map of nitrate and phosphorus classes and ammonia buffer zones as the basis for approval of animal husbandry. This has the character of regulation that applies a general instrument (without liability for the farmers) in order to deal with effects which would otherwise - in their regulation on concrete areas - only be possible with regional instruments. We consider this to be a sensible development as it may contribute to relocation of animal production to regions where it does less harm to vulnerable nature and wetlands. Later in this chapter we shall discuss an increased application of general instruments, i.a. in connection with the FOI calculations of costs of the different instruments.

The synergy of set-asides of low-lying soils is considerable. There is no doubt that the greatest effect can be achieved in relation to nitrogen and phosphorus at these sites. At the same time, valuable natural habitat/wildlife areas can be developed including migration-corridors for many plants as well as animal species. In relation to climate protection, great amounts of carbon (more than 10 tonnes CO2 equivalents per hectare per year) can be accumulated, while the reduction of nitrous oxide (N2O/laughing gas) will more or less balance against the increased methane emissions.

Thereafter, we shall review instruments we have selected, i.e. the environmental targets and the synergy effects which are connected to them indivi-

18 The source is Statistics Denmark, Agriculture 2006. Published 2007 19 Odense Fjord is on the island of Funen (Fyn)

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Table 14.2 Areas – in hectares

2006

Total agricultural area Rotational areas (including set-aside) Permanent set-aside (for nature, forest etc) Reserved for cities and roads (estimate)

Set-aside

2,710,507 2,478,674

2020 2,000,000

430,000 48,674

Set-aside/low-land extensification (ratio 2:3) Non-cultivated buffer zones along waterways and lakes Establishment of wetlands Set-aside for sustainable grassland Set-aside/extensification of arable soils (ratio: 1:3) Forestation Set-aside for grassland Non-rotational Grassland, arable & lowlands Organic farming

290,000 25,000 20 20,000 245,000

21

189,000 133,000

The set-aside of arable land will have a much smaller effect on nitrogen leaching (about 10 kg N per hectare), but this instrument is important as a means of protecting vulnerable groundwater resources. Forests and grassland-areas on arable soils may offer good conditions for other animal and plant species compared to low-lying land. A reduction of laughing gas emissions and increased carbon accumulation in grassland-areas may come about (in the order of 22.5 tonnes CO2-equiv. per hectare per year), which is considerably lower than the effect on lowlying land. Forestation, however, will lead to a greater accumulation of carbon over time.

140,000 100,000 40,000 285,000

474,000 400,000

catch-crop area will then be 720,000 hectare or corresponding to a 36% of the cultivated land in rotation.

In the FOI analysis based on a full implementation of the Water Protection Plan (VMP) III, a rate of 250,000 hectares of catch crops is anticipated – whereby the area exceeds the potential of what is available in the autumn23 with about 200,000 hectares24. This is the reason that winter crops have to be exchanged for spring crops. The FOI considers that a change from second year winter-wheat to spring-wheat is an option of relatively limited economical consequences, as the yield in second year is lower than in first year winter-wheat. As part of the economical calculations following in next chapter, we have made corrections for the higher proportion of catch-crops in spring wheat proposed by FOI after the change from second year winter-wheat fields, in order that costs connect correctly to our effect calculations25.

General tools and instruments The establishment of catch-crops is a convenient and efficient instrument in relation to the aquatic environment and to the carbon-accumulation in the soil.

A further 30% of the total rotational acreage in our scenario corresponds to a six-doubling of the catchcrop areas compared to the year of 2006 - at which time 120,000 hectare had catch-crops22. The total

The catch-crop practice will result in a more difficult situation of managing the mechanical weed-control which is normally made on the free autumn fields.

20 Water Protection plan III (VMP III) includes a requirement for 4,000 hectare wetland 21 The Danish National forest programme, 2004 requires a doubling of the Danish forest area within 80-100 years, i.e. from 11 to 20-25% of the Danish land area. In case the doubling has to follow a linear growth line, about 90,000 hectare of new forest have to be raised by the year 2020. In the scenario we have chosen a somewhat larger figure in order to accommodate the synergy with water and climate protection efforts.

22 NERI and DJF; Mid-term evaluation of the Water Protection Plan (VMP) III, December 2008 23 Meaning areas without winter crops 24 Professor Jørgen E. Olesen, University of Århus, Agricultural Sciences estimates that catch-crops potentially can be introduced on app.

640,000 hectare out of the total area of 760,000 ha, which is available during autumn – Quote from the FOI scenario calculations, page 6.

25 In our first proposal for the FOI calculations, it was the intention that our scenario should reflect a full implementation of the Water protection Plan III. The mid-term evaluation, however, indicated a very low effect to be achieved, which justifies the use of year 2006 as the basis. The expected VMP III-effect of 13% N-reduction is therefore not included in calculations, neither are the funds otherwise available for the financing of the plan. Accordingly, the FOI cost calculations include 200,000 hectares of catch-crops on fields with spring wheat in stead of second year winter-wheat, while in our calculations only 80,000 hectares are needed. The difference in reduction-costs is 113 DKK per kg nitrogen – for which we in the FOI catch-crops’ cost-calculations have made corrections by transfer of 120,000 hectare to the free autumn areas in accordance with our effect-calculation.

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significantly influence the climate paradox, in so far as also sheep are ruminants with a significant methane production28.

This will cause a practical problem, especially for the organic farming, and a minor increase in the use of herbicides within conventional agriculture – as the autumn weed-harrowing today is less significant.

In parallel we have also included a reduction of 30% of the pig production. This is a necessary consequence of the set-aside proposal which leads to a reduction of the areas for disposal of farm yard manure29.

Confronted with this, it is said by the animal husbandry farmers, that it would be possible through a continued separation of farm yard manure to be released from the maximum livestock density30, i.e. to continue the increase in animal numbers in spite of the decrease in available land for the disposal. It is indisputable that new technologies may open for a possible de-coupling of the animal production from the environmental impact, e.g. by application of manure for energy production (by combustion of the fibre content after a manure separation process). It can also be claimed that a reduction of Danish pig production will just transfer part of the production to other countries with more lenient environment policies, and this will increase the environmental impact – only in another part of the world.

As an instrument we have proposed a rate of 20% of the arable soils for organic farming26, even though the effects of this are limited in relation to aquatic environment. For the climate there is no unambiguous advantage to be gained relative to conventional agriculture. Biodiversity is generally greater in organic farming areas as a result of crop selections and the no-spraying practice. The most unambiguous environmental effects relate to the no-spray practice, which places organic farming in a strong position as an instrument of groundwater protection.

Also important are the restricted demands related to animal welfare in organic farming .

We have emphasised as a fact that organic farming is characterised by dynamic development. In particular, organic farming has tremendous potential as an instrument, which focuses on desirable environmental qualities or in cases when it is tied up with defined environmental, restrictive requirements, e.g. in regions with low animal density.

The reduction of pig production, therefore, is a necessary element in the efforts for nature protection within present technologies. Presently, there is neither documentation nor evidence that a decoupling of environmental impact from the size of animal production can function in a sustainable way. This would require a much more drastic reduction of ammonia emissions than seen until now. In our opinion, therefore, we have to reduce either cattle-stock or pig-production in order to improve the aquatic and terrestrial environments, and to follow the reduction of the rotational areas under cultivation.

Here again is a paradox in relation to climate, viz. cattle are responsible for a far higher emission of methane than pigs, while at the same time cattle are important to nature management. We have chosen to give priority to nature management because other options exist as far as emission reduction of agricultural greenhouse gases are concerned .

Support given to razing continuous grassland or other kinds of nature management is further emphasised as important in connection with an increase of the grassland acreage. Grazing is definitely the best solution for the creation of valuable open nature27, although it may present a paradox in relation to climate protection. The areas constitute a potential for harvesting material which can be used for bio-energy, e.g. willows for co-generation (heat and power) or grass in combination with farm yard manure for biogas production – while at the same time methane is emitted from the cattle. In the scenario we have chosen grazing, because alternatives already exist for meeting climate change requirements. Some of the grazing potential can be utilised by dairy cattle or for the breeding of dairy cattle, but the majority will have to be grazed by steers or beef cattle. Sheep may be an alternative, but this does not

26 The rate of 20% refers to a project presented by the Research Centre of Organic Farming and Food Systems as mentioned in Chapter 9. The acreage of organic farming in 2006 is not included in the effect calculations in Table 14.1, because the quantification of this instrument is referring to organic farming on 20% of the rotational area – including those areas, which were already organically farmed.

27 The difference is reflected in the MVJ-agreement (i.e. Danish acronym for the agreement on Environment Friendly Agriculture) concerned with management of grassland and nature areas to which support is given on 1400 DKK per hectare for the grazing and 800 DKK per hectare for hay-harvesting/grazing. (see: http://ferv.fvm.dk/Pleje_af_græs-_og_naturarealer.aspx?ID=36089 ) 28 In the year 2006, Danish cattle farming had 550,000 dairy cows and 100,000 suckling cows corresponding to more than 900,000 ‘animal units’.

29 In the year 2006 the set-aside agreement was still valid. The reduction of the so-called harmony-area equals the difference between the set-aside areas and the abandoned areas (taken out of cultivation) Harmony-area is the area required for a given number of livestock units. See note 30.

30 In Danish legislation it is a maximum number of livestock units per hectare, while in the EU (Nitrate directive) it is a maximum amount of nitrogen per hectare.

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14.5 Effect calculations and meeting the target

A 30% reduction in pig production would reduce emissions of climate-changing greenhouse gases by approx. 0.5 million tonnes of CO2-equiv. a year, and it would also considerably reduce nitrogen-leaching.

Furthermore, it would lead to reduced emissions of ammonia and, accordingly, to reduced eutrophication of terrestrial nature.

14.5.1 Calculation of the reduction of nitrogen leaching We have calculated the reduction of nitrogen in our scenario on the basis of the effects which are presented in a report concerned with the implementation of the Water Framework directive in the Odense Fjord catchment area31. This report has as its basis the scientific review made for VMP III, and we have related the nitrogen reduction to the effects of leaching to waterways, lakes or marine areas connected to the Odense Fjord catchment area. A number of other analyses of the Nitrogen-effect from different instruments calculate the effect as the reduction of leaching from the root zone32. These results, however, do not express the reduction of leaching to waterways, which can be achieved by application of the instruments on concrete areas, in so far as the retention is not included. The Odense Fjord report uses fixed values for the individual reduction possibilities, e.g. 14 kg N per hectare per year for organic farming on lowland areas. In actual case, the water plans will have to deal with local conditions, e.g. geographical and hydrological soil conditions, and in principle it will be possible to introduce the measures on fields with the greatest reduction potential and the best cost efficiency. Conditions are, therefore, that the instruments are applied in situations where the effects are the greatest, i.e. where retention is lowest.

It is to be expected that this will be the starting point, when concrete water plans have to be developed on the basis of information on and modelling of the local aquatic water systems.

We consider it realistic to set a target of 50% reduction in ammonia emissions from stables through the application of Best Available Technologies (BAT). This was already set as a target for compliance with the tolerable limits of nature, and it has also a considerable effect on the aquatic environment. Further, methane- and nitrous oxide emissions will be considerably reduced – especially if this is also in focus of the efforts.

We have not included the production of biogas in the scenario, but as mentioned in chapter 7 there is great potential for replacing fossil fuels with biogas production, e.g. from farm yard manure.

The marginal effect of the individual instruments will have a tendency to decline with time as they are applied. As an example it is not to be expected that the effect of a 10 meter cultivation-free protection zone along waterways will have twice the effect of a 5 meter zone. The efforts we propose in our scenario, however, are comparable with the efforts made in the Odense Fjord catchment area, which justifies our application of the values from the Odense Fjord report.

Values and instruments do not distinguish between soil types. This gives rise to some uncertainty, because retention differs between sandy and clay soil catchment areas, primarily due to more extensive 31 The Funen County; Economical analysis of an Integrated Action Programme for Odense Fjord. Report of results, Nov. 2006 32 Among the most important are: NERI scientific reports nr. 455, 2003, and nr. 625, 2007, as well as Report from the VMP III Working Group, 2003, and the so-called Godtfredsen-report on instruments in relation to the implementation of the Water Framework directive, 2007.

These reports refer - as does the present report – to leaching effects, although we refer to the effect as an interval in relation to a given dosage (number of hectares)

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the nitrogen. These factors constitute part of the Water Protection Plan III conditions, but they have not been included in our calculations. Taken together, it will be our conclusion that the instruments applied in our scenario will enable the Water Framework Directive targets for surface waters to be met.

drainage in clay soils areas. We have not analysed the distribution of soil types in the Odense Fjord catchment area compared to other parts of Denmark – which of course means it is uncertain whether the retention figures related to the calculated reduction of N-leaching in the Odense Fjord region are representative for the country as a whole. On the other hand, it is also important that the long-term effects from sandy soil leaching are taken into account. In these situations, surplus of nutrients will typically leach into groundwater reservoirs in which water will be stored for some considerable time before the nutrients re-emerge as a source of eutrophication in surface waters.

14.5.2 Groundwater protection Groundwater protection is also a goal of the Water Framework Directive. As mentioned earlier, we have neither analysed the problem nor the necessary initiatives which would otherwise enable us to discuss the further necessary initiatives. The scenario implies substantial set-aside of lowland areas as well as arable soils. It would be appropriate if some of the land involved in these set-aside initiatives applied to fields above groundwater reservoirs, thereby providing better protection against contamination by pesticides and nitrates.

FOI has compared our effect calculations with information on leaching from the root zone as reported in the NERI report no. FR 625. An average retention of 67% is used in the FOI calculations, whereby they find that the effects estimated by NERI in some cases are higher than those given in our scenario. We have the assumption that instruments should be used where they have the largest effect. Based on this we should use a retention below average, meaning a higher leaching effect. This contradiction can be due to the fact that the Odense Fjord values, used by us, are lower than the values of NERI. Therefore the total effect of the scenario can be larger than found in our calculations.

14.5.3 Calculation of the reduction of climate gas emissions The effects of instruments related to the emission of greenhouse gases and to carbon-accumulation in the soil and plant-material are based on the effects calculated by the Danish Agricultural Research Centre (DJF) - in the Ministry of Food report on instruments for reduction of climate gas emissions33. The report does not deal with all the instruments we have included in our scenario. For the instruments dealing with organic farming and with the 30% reduction of pig production we have therefore used the reduction figures given in the Water Protection Plan III Working Group report from 200434.

Meeting the targets In section 14.3 we found that our target of a 40% reduction of nitrogen leaching into the aquatic environment will correspond to a leaching of 20-27,000 tonnes N per year. In the table (figure 14.1) we have calculated an effect by the scenario instruments corresponding to 22,600 t N per year.

A number of factors are not included: Water Protection Plan III includes a nitrogen-reduction of 13%. In this, effects were included from structural development and changes in the CAP, from improved utilisation of animal feeding stuff, as well as from requirements for a 5% increase of the utilisation of farm yard manure. We have anticipated that close to 50,000 hectares of agricultural land are transferred to cities, roads etc., and also that continued technological development will allow some farm yard manure to be used for biogas production before it is disposed of, which will lead to improved utilisation of

All our instruments take into account the possible increase in carbon accumulation in soils in spite of the uncertainties related to the inclusion of this subject in Denmark’s overall greenhouse gas calculations for the post 2012 period. This is because there will be a demand for ensuring the carbon reserves in soils, among other things because of the increased use of straw for energy purposes.

The estimate from the Danish Agricultural Research Centre report - of reduction of greenhouse gas emissions resulting from catch-cropping makes a dis-

33 The Ministry of Food; Agriculture and Climate – an Analysis of Agricultural Instruments for Reduction of Greenhouse Gases and its Economic Consequences. The report Part 1: Instruments for Reduction of Greenhouse Gas in Agriculture is written by Jørgen E. Olesen of the Faculty of Agricultural Sciences (DJF), Århus University. Part 2 on: Economic Consequences calculated for Agricultural instruments for Reduction of Greenhouse Gases is written by Alex Dubgaard, Kurt Hjorth-Gregersen, Carsten J. Nissen, Hanne L. Jespersen and Morten Gylling from the Institute of Food and Resources Economic, University of Copenhagen (FOI). The report contains a common summary of part 1 and part 2, as well as a common conclusion.

34 Jørgen E. Olesen is also co-author for this report on: Agriculture and Climate Changes – interactions with Water Protection plans. The Water Protection Plan III Working Group, 2004

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tinction between the effects on clay and on sandy soils. The effects are presented as 0.690 and 0.719 tonnes CO2-equiv. per hectare per year, respectively.

In our calculations we have used a mean-value of 0.7 tonnes CO2-equiv. per hectare per year. In the DJF/FOI report (cf. footnote 28) catch-crops are only used within the frames given by the existing free autumn acreage. Opposite, we – as mentioned above – in our calculations introduce catch-crops to a higher degree, which demands some shift from Secondyear winter-wheat to spring-wheat. This may lead to a marginal lower climate effect from this instrument, in so far as a certain carbon accumulation also takes place in winter wheat – an item not taken into account in our calculations.

BAT in stables, because there is no direct way for the comparison of effects from specific BAT-instruments to a total effect corresponding to 50% of the ammonia emissions35. Neither have we included the potential of a displacement of fossil fuel by biogas production from manure, or even a possible cultivation of willows for energy purposes. Both of these belong to the group of instruments which have the greatest potential for greenhouse gas reductions according to the FOI/DJF-reports (foot-note 33).

In chapter 11 we have described how organic farming does not offer an unambiguous advantages in relation to climate when compared to conventional farming. In our calculation of effects we have as our base taken a value applied by the Water Protection Plan III Working Group. There is some uncertainty involved in this as the instrument does not describe in detail whether the organic farming is based on crops, cattle or others - which is not included either in the figures from the Working group.

This result fits well with our summary of the development until now (cf. chapter 8, section 8.1). It was found that the reduction by 50% of nitrogen-leaching which resulted from the Water Protection plans also involved a reduction by one third of the agricultural greenhouse gas emissions - without in any way having focused on such reduction. It is worth while noticing that the calculations of the scenario roughly indicate the same ratio between the N-reduction of the scenario and the climate gas reductions.

Setting aside land in lowland areas does give a climate effect which is considerably different in the case of rotational fields, compared to grassland that has been sprayed and fertilised. This is reflected in the interval indicated for the climate effect of the initiative. We have no information on the distribution of the contemporary application – and the effect is therefore given as an interval.

14.5.4 Meeting the targets set for nature

It is likely, therefore, that an implementation of the scenario’ instruments will give an effect on greenhouse gas emission from Danish agriculture of at least 30% of the agricultural emissions in 2006.

As already mentioned, the scenario is composed from targets as these were found in chapter 5, namely that a cessation of the biodiversity decline will require one third of the Danish area to be set-aside or extensified in order to be managed as nature, and that ammonia emissions from stables are reduced by one half. Hereby the scenario will fulfil the requirements set by the United Nations Biodiversity Convention and the EU-Natura 2000 directives. Also, an urgently needed conversion to organic farming as well as reduction of pesticide sprayings on conventional fields will improve biodiversity. We have not further detailed the methods for reduction of the spraying on areas in conventional agriculture, but in chapter 8 and in section 14.1.6 some of the most important instruments are presented.

Forestation involves an increased accumulation of carbon as the forest grows older. Increased effects are therefore to be expected over time.

Meeting the target in relation to climate The total effect on climate from Danish agriculture has in figure 8.3 been referred to as 12.5 million tonnes CO2-equiv. in the year 2006. The reduction target of 30% has earlier been calculated as a reduction of 3.75 mio tonnes CO2-equiv. As for the implementation of our scenario, we have in figure 14.1 calculated an effect of 2,63 – 4,75 million tonnes CO2-equiv. per year.

Beyond this, efforts are needed for registration of living conditions for species and improvement of natural ecological systems. Both regional and national planning of nature management is needed in order to ensure nature protection and improvement of the accessibility of nature for the general population.

As already mentioned, there is some uncertainty connected to the calculated effects. However, we have not included any effects from an application of

35 The VMP III Working Group, as well as the FOI/DJF-reports refer to a number of effects of concrete improvements in the stall systems, e.g. the cooling of farm yard manure, coverage of the manure tanks or scrubbing (or scraping ?) the stalls. It is, however, not possible to compare these figures with a figure that indicates the effect resulting from ‘application of BAT corresponding to 50% ammonia-reduction’.

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are used in the summing up. The calculations made on set-aside/extensification of lowlands, cultivationfree protection borders and establishment of wetlands should be taken with some reservation, because for practical purposes, clear delimitation does not exist between instruments, even in cases when the effects are very different. Also, the FOI has based calculations on different levels of yields - i.e. 20% below average yields for the lowlands areas and 10% below for the protection borders and the wetlands. This distinction results in significantly different cost levels, even though it is difficult in practice to distinguish between the individual set-aside areas.

The scenario also embraces a creation of frames, which enable targets for nature protection to be fulfilled – although the further efforts needed for the satisfactory function of nature are not covered by the subsequent calculations of costs.

14.6 The costs calculations from Institute of Food and Resources Economics36 The Institute of Food and Resources Economics (FOI) has made a number of calculations concerned with instruments applied in the Ecological Council’s scenario. The calculations are made for financial economic as well as welfare-economic costs, but in our case it is the financial economic costs which are utilised, as they are the expression of the farmers’ costs of implementation of instruments. It gives the order of magnitude of the compensation or support which reasonably can be offered to the farmers for their implementation of necessary changes37.

The tendency of the FOI and the DJF/FOI reports are that instruments which have been evaluated as most cost-effective in relation to nitrogen leaching (i.e. catch-crops and set-aside of lowland areas) are also cheap in relation to greenhouse gases. And vice versa: Set-aside of arable soils is calculated as costly in both respects. Here again, however, we meet a dilemma in our attempts to deal comprehensively with cost-effectiveness in our approaches to the problems: In the FOI nitrogen-report only the effects on nitrogen-leaching have been included. The climate report includes a side-effect of nitrogen-leaching beyond greenhouse gas reductions - while neither nature-values, nor biodiversity, recreational values, considerations of groundwater protection or pesticide uses are included in these reports. In quantitative terms, it is extremely difficult to evaluate effects on natural values or recreational facilities: some economists attempt to include the effects, e.g. on the basis of a ‘willingness–to-pay” principle - although this is an extremely uncertain basis for calculations. Within our comprehensive point of view we do not find any freedom to choose among the variety of instruments, considering as an example the situation that the extent of set-aside activity has been determined by our requirement for fulfilling the tolerance limits in

FOI has calculated the costs of changes in land rent38, expressed per hectare of land. From this we have calculated the reduction costs for the instruments or the cost efficiency given as costs per kg of saved N-leaching (and in the climate report as costs per saved CO2-emission). The reduction costs may be used for a ranking of instruments according to their effect in relation to efforts (i.e. “most environment for the money”-principle), or in other words: Which instruments represent the cheapest way of achieving the desired effect? Table 14.3 shows the calculated reduction costs of reduced nitrogen-leaching as well as greenhouse gas emissions (including soil-accumulation of carbon)39.

As already described in section 14.4 we have made a correction of the catch crop area – the white rows in table 14.3 indicate the FOI calculations, while the following rows (green) indicate our corrections, which

36 At Faculty of Life Sciences, Copenhagen University 37 “The financial-economic costs are given in factor-prices applied by business in its buying and selling. They express the relevant costs applied by public authorities when these are budgeting in the cases when compensation for economic loss shall be given to agriculture or other sectors of business. The welfare-economic costs include the consideration that private consumers pay higher prizes for goods and services than business due to higher indirect taxation. The welfare-economic costs are an approximation of the changed possibilities of consumption which in the Danish society is made possible by application of the different instruments” – Quotation from the FOI-report, page 6 38 “The land rent represents the net gain of agricultural soils understood as a production-factor. It is calculated as the difference between the (sales)value of the crop and the total costs of cultivation and production of the crop – i.a. seed, fertilisers, chemicals, payment of work force (owner included), as well as depreciation and return on machinery and equipment. In principle, the land rent corresponds to the rent to be paid for a field of a certain, specified cultivation value. By estimating a given land rent, the purpose is to understand the economical effect of a changed agricultural usage of the soil, taking into account especially the intensity of cultivation. As already mentioned, the analysis is made from budget calculations and accounting data, and the change will emerge as the difference in residual income for soil ‘before’ and ‘after’ implementation of the instrument” – Quotation from the FOI report, page 7.

39 In both FOI reports the land rent has been calculated separately for clayey and sandy soils, while we had given a combined effect for the nitrogen-leaching. The reduction costs are therefore calculated as a weighted average of costs connected to clayey and sandy soils. The reasons are partly tied to our intention of describing the scenario as simply as possible, and partly that we were interested in the cost efficiency more than in the total costs.

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Table 14.3 Total financial-economic costs by implementation of the instruments Area (hectares)

Catch crops Catch crops (corrected area) Catch crops (no 2.year wheat) Catch crops ( do. – correc. area) Set-aside/extensification - lowland Not-cultivated protection borders Establishment of wetlands Forestation (arable land) Set-aside, grassland (arable land) Instruments – reduction of N-leaching Organic farming Management of nature/wildlife areas Total costs of implementation BAT in stables (not included) Reduced pig prod. (not included)

Reduction costs Aquat. env.

Climate (DKK/kg N) DKK/kg CO2-equiv. lerjord sandjord

400,000 520,000 200,000 80,000 245,000 25,000 20,000 100,000 40,000

47 47 60 60 58 52 26 503 352

606 606

62 62

14

1,640

420

Total 400,000 474,000

750 DKK per hectare 1,000 DKK per hectare -126 - +50 -1,122

-1,463

Total costs (mio. DKK) 205 267 121 48 378 65 52 503 145 1, 458 300 474 2,232 -1,683

1999-2006 have had better results and payroll capacity compared to conventional farming (economic support included). From a strictly economic point of view this should result in an increased number of conversions. The FOI argues that maintenance of ecological surplus price is tied to a rising demand in Danish and export markets to the same extent as the expansion of the organic farm production, and it is believed that an increase of the economic support will be necessary for the target of 20% organic farming to be fulfilled on Danish arable land. Presently the annual support given to organic farming is 750 DKK per hectare41. We have included a support of this size in our scenario considering that the demand may be considerably increased through a number of public policies, e.g. by requirement of increased uses of organic food products in public catering etc. There is, however, also a need for analyses as well as development of new politics contributing to the breakingdown of barriers that still exist towards further conversions into organic farming.

nature. Nevertheless, cost effectiveness still attracts some interest – although for our purpose its application is limited to a choice between instruments with much the same side-effects. Such choices are of far greater interest for the detailed planning of specific wetlands, in which more instruments may be used given the local conditions.

In our report we have concentrated on the calculation of the total cost of implementing the instruments as described40. FOI has calculated the total annual cost of establishment of catch crops and of set-aside/extensification of soils to the order of 1,458 million DKK (194 million Euros)– i.e. the amount which the farmers will earn less per year as a result of a full implementation of these instruments to the extent which is proposed in the scenario.

It has not been possible for the FOI institute directly to calculate the costs of a conversion to organic farming. It is mentioned, though, that the organic farms in the year of 2006 and (as an average) of the years

40 Please note, that calculations of the changed land rent or of the profitability of the land for the farmers are independent of the environmental targets. It is therefore irrelevant for calculations whether they are related to nitrogen or climate problems 41 Environmental financial support can be applied for by organic as well as conventional farmers in case the fields are cultivated without the use of pesticides and by applying only limited amounts of fertilisers. The support system is administered by the Ministry of Food – see: http://ferv.fvm.dk/Miljøbetinget_tilskud.aspx?ID=10730

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that the areas shall be part of the light-open land in order to restore the biodiversity. The FOI-calculations of the costs of grazing or of mowing the areas indicate a considerable variability in costs related to the accessibility of larger, well arrounded or smaller, inaccessible areas. We find reasons to believe that a major part of the areas have sizes which permit them to be managed as large units, and accordingly at costs in the low end of the interval. Further, the management of the areas under concern will be chosen and settled as the best possible – i.e. as grazing, mowing or – in cases of practical or economical difficulties – just by cutting down the biomass.

Calculations show that the pig production in 2008 was not profitable. This indicates that a 30% reduction of production will be a gain rather than a loss for society as well as for the producers. The FOI does express some reservation for this calculation, partly because price levels in pig production in recent years have been close to the bottom of the so-called ‘pigcycle’ - an average calculation over the most recent 5-year period also indicates a deficit - and partly because the production presently is undergoing a gigantic structural development, pressing the smaller farms out of business, while increased productions are seen among the most profitable. It has, however, not been possible to make any detailed economic analysis of the pig production taking these considerations into account.

There is a duality in the evaluation of extensified areas. On the one hand, there are considerable costs connected to the present management of maintaining them as light-open land. On the other, on these areas there are – even in the extensified practice of not-fertilising – considerable amounts of biomass, which by their removal will give good environmental effects, and which represent feeding-values by grazing, mowing or as biomass for energy production through biogas - or thermal power-productions. In the FOI-analysis of instruments for reduction of greenhouse gases, it is obvious that production of willow-wood for energy-production is a most relevant instrument - in volumes as well as in economic terms - and biogas-production also from other sources of biomass from extensified areas are considered of great potential interest42. We have not included these instruments in our scenario, while biomass for energy purposes should be included in future planning. In our opinion, however, we find it important also that the extent of willow cultivation is evaluated from the point of view of nature management taking thereby the nature-related values of the areas into account.

During the most recent years, a number of environmental authorisations – each valid for 8 years - have been granted within Danish animal husbandry. With these authorisations as a tool, it will be possible to introduce BAT (Best Available Technology) with effects as we have proposed in the scenario – for pigfarming, cattle breeding and other animals. It is difficult to predict the ways and to evaluate the extent to which a reduction demand in pig production will influence the structural development and the possibility for claiming BAT. Similarly, it is difficult to predict whether reductions in pig production will be driven by a market of continued, unfavourable conditions, or whether the decline will raise a demand for quota-systems, tradable permits or similar.

These are the reasons that we have not included the negative costs connected to reductions in pig production. Neither have we included the costs of introducing BAT-requirements, because these costs are considered production costs – whereby we indicate that agriculture has to be regulated according to the same principles as other production industries.

We have based calculations on an average cost of nature management of 1,000 DKK/ha. This corresponds to a total annual cost of close to 500 mio DKK. In the FOI calculations the grassland management is connected to a limited surplus from larger, easily accessible areas, while the management of hay-harvest is calculated as close to 700 DKK/ha at normal cost-levels. The costs connected to smaller and less accessible areas are considerably higher, but as already mentioned we find that such a high costlevel will be of interest only for a minor part of the areas. For comparison it is mentioned that the cur-

14.7 Management and usage of nature/wildlife areas In our scenario we have emphasised the significance of conversion of rotational, arable land to permanent grassland – in table 14.2 up to a total of 474,000 hectares. The goal for these areas is partly that the environmental impact from them has to be minimised by the no-use of fertilisers and pesticides, and partly

42 The analysis has significant institutional reservations in relation to the question whether energy production based on biomass will be included in the agricultural greenhouse gas reductions and whether accumulation of carbon (sinks) can be included in the Danish CO2account. However, from an environmental point of view this is irrelevant as focus is on the greatest possible environmental effect.

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establishment of wetlands and environmentally friendly grazing practices. To this may be added – in spite of a considerable ‘re-use’ of already granted money – the previous expenses for the Water Protection plans (The Water Protection Plan III includes national funds of more than 1000 mio DKK during 2005-200946), afforestation, National Parks, and other arrangements related to nature and new recreational areas etc.

rent agreements on support of grassland and nature/wildlife management correspond to 1.400 DKK/ha for the grazing and 800 DKK/ha for the grazing and/or mowing43.The agreements have to be differentiated after the concrete initiatives, the conditions of the areas and the degree of support that will be needed for making the management of the fields profitable. According to the FOI information, it is mentioned that the production of suckling cattle has a negative return, and that compensation must be given in case the grazing practice shall gain further acceptance.

We can therefore conclude that our scenario, which includes targets for nature, aquatic environment (including groundwater) and climate, may be financed via a modulation of 20% of the EU Common Agricultural Policy support plus a national co-financing, which does not exceed the presently applied funds !

14.8 The financing of environmental goals via the CAP The Ecological Council is expressing the opinion that European agricultural policies and the present agreements on CAP-support have to be changed in order to enable at least 20% of the total financial support to be transferred to ‘Pillar 2’ funds via compulsory modulation. The increased funds then have to be applied within the 2nd axis, i.e. land management and environmental services, and be utilised for implementation of the above mentioned targets.

To this it shall be added, that substantial funds until now have been granted for nature- and environment protection purposes from other sources, e.g. the water works that have expropriated areas and given support to environmentally friendly management in order to protect valuable groundwater reservoirs.

Such support has been financed by the consumers via the drinking-water prices. Similarly, municipalities have been co-financing new recreational areas.

E.g. in Århus, a plan has recently been adopted for a doubling of the municipal forest area47. Even private and organisational contributions have been given, and – expectedly - considerable contributions from other sources may still be given.

20% of the total support funds, incl. export support etc. was 1,759 mio DKK in the year 2006 – and 1,562 mio DKK (208 million Euros) in case export support is excluded44. In these figures exemptions for modulation of small farms are not included45. On the other hand, expenses for the remaining axes of the rural agricultural policy are included.

14.9 Discussion on compensations for the farmers

The total costs of the Ecological Council scenario were calculated to a total of 2,232 mio. DKK per year.

A modulation of 20% for environmental purposes may therefore finance 70-80% of the scenario costs, while the remaining 500-700 mio. DKK per year will have to be financed at the National level.

It is an open question whether targets can be reached by compensation of farmers through annual support agreements or whether to some extent there is a demand for regional expropriations. In the opinion of The Ecological Council farmers can be compensated as part of the European agricultural policies by strengthening the Pillar 2 as a means of raising public funds. Also, compensation must be laid down at a level which makes it profitable to initiate environmentally friendly management. Experiences

For the compulsory modulation a 50% co-financing has been required, which in the case of Denmark until now has corresponded to app. 500 mio. DKK per year. This amount has been used e.g. for the financing of the support of organic farming and “environmentally friendly agricultural production”, such as

43 For the particularly sensitive agricultural areas (Danish abbreviation: SFL-areas) it is possible to apply for management support of grassand nature-areas. Agreements are for 5 years. These arrangements were first administered by the counties, but are now under the Ministry of Food. See: http://ferv.fvm.dk/Pleje_af_græs-_og_naturarealer.aspx?ID=36089 44 Calculated from table 31 of the FOI-report 45 Within the present support system, small farms are exempted from modulation, i.e. the actually transferred amounts become smaller – cf. chapter 12. It is, however, not a reasonable expectation that small farms shall be fully compensated within a future, increased modulation of the same order of magnitude as now suggested in the scenario, because the small farms are allowed also to apply for support to their more environmentally friendly production.

46 Cf. the Water Protection Plan III-agreement: http://vmp3.dk/Files/Filer/VMP_III-aftale-endelig_.pdf 47 Information given by head of department, mr. M. Bjørn Andersen, Århus City Hall at the Wilhjelm + 7-konference in Århus, 7. November 2008

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14.10 The employment effects of the scenario

already gained from Water Protection plans, however, give rise to scepticism in relation to targets which must be reached in voluntary agreements.

There are many difficulties tied to the calculation of the employment effects of the scenario, primarily because agriculture presently is undergoing an intensive structural development leading to considerable employment reductions.

Land prices in many regions are considerably higher than the harvesting potential can account for. This is influenced by the ‘harmony-requirement’ (livestock density) – a limitation of the number of animals – measured as animal units – per hectare48. These limits push the land prices in animal husbandrydense regions upwards. It is important to notice that the demand for ‘harmony-areas’ will not be increased by the implementation of the scenario, because the reduction of total harmony-areas resulting from set-aside and extensification of agricultural soils will be compensated by a corresponding decline in animal numbers49. We have not made any detailed analyses of the demand for expropriations. It is mentioned, only, that the rating of expropriations in actual cases shall reflect the productivity of the soil in order to avoid that society is burdened by the unreasonable costs of an over-compensation for those farmers who may have to give up their land.

A reduction in the number of pigs produced will inevitably lead to a reduction of employment in the primary production as well as in downstream industries. In return, however, it seems plausible that the requirements of nature/wildlife management can lead to an increase in employment, e.g. in animal husbandries being engaged in both meat production and management of nature/wildlife areas. It is also possible that this branch may include enterprises which not necessarily follow the line of ever increasing farm sizes. It may be the field in which the family farming as a production form can survive. This is all depending of the way in which agricultural policies and support politics are tied together – in other words: It seems to be an important part of a clear change in attitude and for a highly needed political development in relation to the structural development within the agricultural sector.

The practice until now has been that the general regulation related to the Water Protection plans is considered compensation-free, whereas the regional regulation and set-asides have been compensated. As already mentioned in section 14.4, the Environmental Protection Agency has introduced nitrate-, phosphorus- and protection border maps, which has prepared the ground for local restrictions which are compensation-free. In the opinion of The Ecological Council it must be analysed whether such practice is more generally applicable. The agricultural land must be divided into zones in order to adopt more stringent management requirement. In this way the groundwater regions and areas, which from an environmental point of view have to be set-aside or extensified, will be marked. In case such zonation shall form the basis for compensation-free regulation, we are approaching the situation in which the agriculture will have to pay its own environmental costs on equal terms with other trades.

48 See footnote no. 30.

49 In 2006 the number of pigs corresponded to 1,119,883 animal units, and the total number of animals was 2,183,132 units according to official Danish statistics. A reduction of 30% of the pigs may be recalculated to app. 15% of the total animal husbandry production (measured in animal units). The reduction of the ‘harmony area’ resulting from a set-aside of 430,000 hectares of rotational areas may similarly be calculated to 17% of the total rotational area. The percentage-reduction, however, will be considerably lower in case the reduction of fallow-areas is included in calculations.

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