The EU agro-food sector needs to adapt to an ever-changing economic and policy environment. Following enlargement, the European Union has grown in membership to 27 countries and strengthened its position as one of the world’s largest agro-food players. Tackling the triple challenge food systems face is more difficult in the new policy context of growing environmental concerns and successive global crises. While recognising potential trade-offs with other objectives, the urgency of the climate and environmental situation means that the transition of the EU agriculture and food systems cannot be delayed. The systemic shock of the COVID-19 crisis, the war in Ukraine and its implications for food security, the need to halt and reverse the loss of ecosystem services and to adapt to climate change make improving resilience to unforeseen shocks and environmental sustainability even more urgent.
Productivity growth has been mild and not always associated with improved sustainability performance. Over the last 60 years, EU agriculture has expanded its production while transitioning from a growth model based on intensification to one driven by productivity growth, thanks to technology and efficiency gains. Nevertheless, long-term agricultural productivity growth in the European Union has been weaker than in other OECD countries. In many EU countries, biodiversity has declined, emissions continue to increase, and pressure on water has not eased. Despite increased efforts with new and more targeted measures, as well as increased funding, environmental performance has not met expectations.
The European Green Deal with the associated Farm-to-Fork and Biodiversity Strategies provide a new context for the Common Agricultural Policy (CAP). At about one-third of the EU budget, the CAP increasingly expected to contribute to objectives beyond the boundaries of the agricultural sector. While ensuring the food security of the European Union and contributing to global food security, the EU agro-food sector should also contribute to making Europe climate-neutral, protecting its diverse natural habitats and transforming the European economy in line with sustainability objectives.
The main challenge for the CAP is to overcome its path dependency and move towards a bolder and more forward-looking food systems policy. Recent CAP reforms have changed the way support is delivered, but have only resulted in incremental progress. Although the CAP 2023-27 is taking a performance-based approach with more flexible implementation at the Member State level much remains to be done to put the agricultural sector on a fully sustainable footing. An EU-wide, high-level discussion on the purpose of the CAP, the rights and responsibilities of farmers, and the financial weight given to income compared to environmental or other objectives is needed.
Going forward, the targeting of direct payments should be improved in light of the ambitious policy goals. Direct payments are the main tool to support EU agriculture, and efforts have been made to improve fairness and to better distribute payments. However, direct payments may have consequences in terms of keeping some farmers in uncompetitive activities, stifling innovation, slowing structural and generational change, and could weaken long-term resilience. In the short term, income support objectives should be met with targeted payments not only to be more effective, but also to allow more funding to be made available for voluntary payments for environmental services, and for investment in innovation and resilience. In the long term, the appropriate roles for agricultural and broader social policies should be reviewed.
There is currently a gap between policy ambitions on environmental sustainability and observable results. The stalled progress to date is due to policy design and implementation rather than insufficient ambition or lack of resources. A protracted policy reform process has often resulted in excessive flexibilities for Member States, and reduced incentives to implement policies with clear implications for environmental sustainability. Instead, such flexibilities allowed them to choose lower cost options with limited sustainability benefits. If the CAP is to be further reoriented towards environmental sustainability, this will require the re-instrumentalisation of support in the next programming period to improve the regulatory and economic incentives for farmers and policy makers in Member States to shift away from the status quo.
Research and innovation are key drivers in the transition towards more sustainable food systems but remained marginal in the 2014-20 CAP design. The resources devoted to agricultural knowledge and innovation systems (AKIS) ‒ through Horizon Europe and the CAP ‒ are limited compared to the total support provided to the sector. Although the European Innovation Partnership for Agricultural Productivity and Sustainability is an important initiative and investment in AKIS and digital technologies has high potential to make enhanced productivity and environmental sustainability mutually compatible, investment in and adoption of innovation remains a challenge. Moreover, as noted above, the incentives created by the broader policy and regulatory environment for agriculture may slow the innovation needed to ensure long-term sustainability.
