EU subsidies benefit big farms while underfunding greener and poorer plots – new research

Jaromir Chalabala/Shutterstock

Murray Scown, Utrecht University; Kimberly Nicholas, Lund University, and Mark Brady, Swedish University of Agricultural Sciences

The Common Agricultural Policy, or CAP, is the European Union’s largest budget item. For the €60 billion (£53.9 billion) a year it pays in subsidies, the CAP is expected to support farmer incomes, ensure a supply of quality food, protect biodiversity, tackle climate change and encourage young people into farming.

It’s hard to tell if the EU is succeeding in these aims because of a lack of transparency, complex reporting, and insufficient monitoring. But the success of the European Green Deal and a green recovery from COVID-19 depend on these subsidies being well spent.

In our new study, we found that the CAP isn’t living up to its promises.


Read more: Explainer: what is the EU Common Agricultural Policy?


Where subsidies really go

We carefully analysed how agricultural subsidies flow down from EU bureaucracy to the local level. We connected these payments to their intended CAP goal – such as improving biodiversity or creating new opportunities for young farmers – and compared where they ultimately go.

Our analysis showed that at least €24 billion a year goes to support incomes in the richest farming regions of the EU with the fewest farm jobs. Meanwhile, the poorest regions with the most farm jobs are left behind. These essentially unnecessary welfare payments would more than cover the €20 billion a year needed to meet the EU’s biodiversity strategy, or could be better spent on other goals in regions of greatest need.

Our results show that current spending is exacerbating, rather than reducing income inequality among farmers, because income payments are simply based on the area of land farmers manage, not their needs. The larger the farm, the higher their income support.

The way these payments are allocated requires no proof of environmental benefits – everyone gets the same payment for each hectare of land. As a result, the very premise on which the majority of CAP support is paid is gravely flawed.

In what was perhaps most surprising, we also found that substantial payments intended to support rural development are actually made to urban areas.

EU farm income compared to greenhouse gas emissions

Two maps comparing farm income across the EU with greenhouse gas emissions.
Murray Scown, Author provided

Not only does the CAP fail to support the incomes of farmers most in need, our study showed it actually subsidises farming regions with the most pollution and least biodiversity-friendly farming habits. Farming regions with the highest greenhouse gas emissions from intensive livestock production are getting paid billions of euros each year without any obligation to reduce pollution.

In its current state, the CAP is unlikely to contribute to a green recovery from the pandemic, nor broader goals for sustainable development as the European Commission desires.

Rethinking the CAP

The details of the post-2020 CAP are now being wrangled among member states. But the proposals don’t address these major flaws, particularly because the main way in which payments are distributed remains unaltered in the new proposed CAP. These flaws could be addressed by, for example, removing area-based payments. But implementing these changes will take political will.

CAP income support should become needs-based, like other social welfare payments that are means-tested. That means recipients need to prove they need income support according to a particular criteria, considering all sources of income. Otherwise farmers should only be rewarded or compensated based on evidence of them providing public goods.

This would give farmers in regions with lots of pollution the support they need to reduce it. It would also give farmers in less fertile regions income for providing environmental services, such as protecting grasslands high in biodiversity. These changes would drastically improve the current model of payments being based on how much farmland a person owns.

How CAP subsidies actually benefit the environment must also be scrutinised. One easy way is to monitor, using satellites or crowd-sourced photographs, the extent of grassland habitats on farms, with subsidies reduced if these areas shrink or increased if the areas expand. These unplowed, sparsely grazed areas are very valuable to biodiversity, but they wouldn’t usually be protected without environmental payments.

A brown butterfly rests on a white flower in a meadow.
A redesigned CAP could reward farmers based on the area of biodiverse grassland they sustain. Thomas Marx/Shutterstock

Another option is for the CAP to finance pollution reduction – such as nitrogen in waterways or greenhouse gas emissions – and continuously measure it against a baseline.

Farmers are stewards of a large portion of the EU’s land area, and its cultural landscapes, wildlife and habitats too. The future security of Europe’s food supplies will depend on maintaining healthy soils and biodiversity.

But misspent agricultural subsidies are destroying the very environment upon which farming depends worldwide. The current CAP negotiations need to change how unevenly and unwisely this huge chunk of the EU budget is being spent to safeguard food security and the environment for future generations.

Murray Scown, Postdoctoral Researcher in Environment and Sustainability, Utrecht University; Kimberly Nicholas, Associate Professor of Sustainability Science, Lund University, and Mark Brady, Associate Professor in Agricultural and Environmental Economics, Swedish University of Agricultural Sciences

This article is republished from The Conversation under a Creative Commons license. Read the original article.

28 thoughts on “EU subsidies benefit big farms while underfunding greener and poorer plots – new research

  1. From 55 years experience on the ‘inside’ – subsidy money does NOT benefit farmers or the environment.

    It goes directly (OK, via the farmer’s bank accounts to the cronies and assorted parasites.
    That is, the machinery, feed, seeds and fertiliser dealers.

    2 examples.
    1) 45 years ago my father bought a ‘top of the then market’ tractor. it cost £2,500 then
    Annual inflation at 5% means prices double every 15 years, so that tractor should now cost £20,000
    Wrong
    The nearest equivalent now costs £40,000 – the difference being zero/no subsidies then to the current system we hear about here

    2) In 1981 my father got a quote for an above-ground liquid-manure store.
    £995 plus £95 to build/erect the thing.No subsidy
    By 1991 because of tightening regulation it was up to me to actually buy one of these things.
    regulations generously gave an automatic 50% grant towards the cost.
    So far so good.
    BUT, the identical store quoted for in 1981 had gone up in price to £10,995 plus £995 erection charge
    The 50% grant had raised the price by a factor of eleven over 10 years

    So you see, in the same way that rising energy prices proportionately affect The Poor, (artificially) rising farm input prices disproportionately affect the farming poor = the Little People
    Over time, they go bust

    So the very subsidy system these folks are railing about, making large farmers rich, is actually creating the large farmers.

    Its not just in Climate, Medicine and Food Science that has gone crazy.
    If sh1t like this continues we really are doomed – Good Intentions etc etc

    • It goes directly … to the cronies and assorted parasites. That is, the machinery, feed, seeds and fertiliser dealers.

      The cooperative movement in Saskatchewan (with which I’m most familiar) began with the idea of cutting out the assorted ‘parasites’. A successful example would be farmers going together and renting a boxcar to ship their own wheat rather than relying on the grain companies. link

      On the other hand … a lot of coops failed because they discovered that whatever the ‘parasites’ were doing wasn’t that profitable.

      If you think you have a big problem with ‘parasites’, start a coop.

    • Peta of Newark
      BUT, the identical store quoted for in 1981 had gone up in price to £10,995 plus £995 erection charge

      Erection charge? They just wanted you to understand that you were being screwed.

    • A friend married a British Banker. After a few yrs, the couple bought their weekend cottage, a 300+ yr old 10 bedroom home which came with a farm. They were not eligible for the farm subsidies so leased the land to a farmer. End result, the farmer gets the subsidies so he can pay more rent for the land.

      • I forgot to add, the subsidy per acre was greater than the gross revenue an Alberta dry land farmer receives for an acre of durum wheat. (AB does not have the same rich soil as say Nebraska)

        • Farms on the Canadian prairies tend to be big. One square mile (640 acres) doesn’t nearly cut it any more. I think the average is somewhere north of 1600 acres. I think farms with gross revenues of more than a million bucks are pretty common. 2012 article It’s pretty much the same for North Dakota.

          When I was a pup, people used to take 160 acre (quarter section) farms seriously. Those days are gone for sure. To quote Patton (or Stalin or someone else) quantity has a quality all its own. link Farmers out west do get less per acre but they make up for it by having way more acres.

    • 1) Do you have any evidence that inflation over the last 45 years has been only 5%? For the US, that sounds a bit low, I have no idea what it has been in the UK. Is the new tractor equivalent to the one from 45 years ago? Just saying that they are both “top of the line” is meaningless.

      2) The entire cost increase was due to the subsidy, the regulations had nothing to do with it?

      “the machinery, feed, seeds and fertiliser dealers” are nothing but cronies and parasites? Really?

      • Real asset prices such as property tend to double every decade. So nearer 7%.

        Government figures are untrustworthy.

      • 45 years ago a top of the range tractor would of been say a Ford 7710 , or such like much more than 2.5grand then.

        But the point stands a new equivalent would be around a hundred grand, the market stands what they deem, a farmer can afford , nitrogen eg 20,10,10 will cost near a grand a bag and does not go far ,

        Were I live its common to see 200bhp tractors there not needed to farm persay, but the reason they drive them is the machines the tractors drive need the HP. The cost of employing people to use smaller machines does not add up, the modern tractors can do the job of two or three tractors, if the farmer cant handle the load he pays a contractor to do the work, on another monster tractor which is quick and affordable for the farmer,the contractor can do 3 or 4 farms in an area a day, depending what hes doing. Eg to supply and spread 20 tonnes of furnace slag cost 660 notes 40 acres, done in two hrs , the contractor did 4 farms that day. Much cheaper than a bag of 20,10,10.

  2. The way these payments are allocated requires no proof of environmental benefits – everyone gets the same payment for each hectare of land. As a result, the very premise on which the majority of CAP support is paid is gravely flawed.”

    The above is not correct ,land in the UK is broken up into types ie marginal land will receive a different grant under CAP than prime land, if forestry is in the holding no grant under cap, forestry is excluded, buildings within the curtilage of the farm holding eg the land they sit on are excluded from CAP.the country side police , DEFRA = England, NRW Wales, if a condition of a grant eg double fencing of hedge rows it will be checked before the grant is allowed, some of CAP rules are advisory some are subject to none compliance rules some rules that govern farming are outside cap not subject to Grant’s are are legally binding. Plus there are other Grant’s not subject to CAP.

    the CAP in its present form invites farmer to do nothing with the land leave fallow and get paid for doing so,so the more land the more grant you will be paid, this encourages speculators who see a investment with little to no work after buying land with a guaranty of a yearly payment, this drives up the price of land making it near impossible for young wannabes to start a farm , smaller holdings are bought up to compliment larger holdings,
    The associated farm house and buildings left to rot, or sold of with a couple of acres eg to the horsey people

    In the UK CAP will stop after the transition from Brexit is over , the latest grant replacement scheme in the pipe line will encourage farmers to not farm but leave fallow,and or increase wildlife populations or just rewilding, of course this will be a choice as far as Grant’s grow but the legally binding part of agricultural rules will be increased.

    The changes will directly compete with the market which the UK gove ultimately control, it will do nothing to help young farmers trying to buy into the industry, will do nothing to dissuade speculators, it’s a green slime initiative.

  3. A bunch of corrupt politicians unequally distributing tax monies to big business and not more to the little guy (who is not generating a large carbon footprint)? Let’s get some of that justice going here, let’s put a stop…wait a minute, the Common Agriculture Policy is enhancing production of foodstuffs that results in lower food prices and more wide distribution AND produces a larger carbon footprint that MIGHT cause global warming that COULD actually make living in England tolerable? Never mind.

  4. Oh come on Peta the price rise in tractors/machinary would be a fraction of present prices if manufacturers were not constantly having to jump thro pointless green hoops. A normally aspirated engine no adblue no over stressed components would last ten times as long and be ten times cheaper to service and we could go back to farmer repairs.

    And the payment is to support farming not farm jobs

  5. Oh come on Peta the price rise in tractors/machinery would be a fraction of present prices if manufacturers were not constantly having to jump thro pointless green hoops. A normally aspirated engine no adblue no over stressed components would last ten times as long and be ten times cheaper to service and we could go back to farmer repairs.

    And the payment is to support farming not farm jobs

  6. Australia and NZ don’t have subsidies, except for a diesel subsidy in Australia, due to the vast distances in the country. We are minnows compared to Europe, with the CAP, and the US, with their Farm Bill.
    Yet we are among the richest countries in the world, despite our small size.
    Get rid of the subsidies, and hiding behind the subsidies. Learn to live with the cold winds of competition, and in the end you will be better off.

    • Huh? NZ has such large subsidies for dairy that Canadian wholesalers buy NZ butter and mix it with Canadian butter to maximize their profit to meet the level of Cdn. content mandated by regulation. Wisconsin is a lot closer, so the subsidy must be at least equal to half way around the world transportation.

      • Reply to DMackenzie,
        Sorry but you have got that wrong .
        I have been farming in New Zealand for over 60 years and the only time we had subsidies was in the late 1970s into the early 80s with Minimum Supplementary Prices .
        In 1984 with a change of government these subsidies were rescinded and we have not had farming subsidies since then .
        There are no subsidies paid to farming in New Zealand.
        We produce food for the world and take world prices as it is sold.
        Fonterra runs a Global Dairy Auction every fortnight to set prices but also sell massive amounts every day .
        Canada has very high import Tariffs on imported dairy products to protect your farmers .
        Farms have become larger and basic food items have dropped in price in real terms.
        New Zealand is in the process of eliminating a cattle disease called Mycoplasma Bovis and every producer is levied at the dairy company and meat processors to pay the costs of eradication. Bureaucratic bungling has gone on which happens when bureaucrats have large sums to waste but it is the producers money.
        Just a note .
        New Zealand can export food to the other side of the world and the GHG emissions on that food is still lower than locally produced food in the importing country .
        Subsidies are insidious as they tend to increase the price of farm land as buyers count on the payments as income .
        They also tend to push up farm costs as suppliers do not have to “sharpen their pencil ‘give the best price so to speak .
        Graham
        Proud to be farming to feed the world with out subsidies .

        • Then someone is paying your price and dumping it on the Canadian market. There is more than one way to subsidize production.

        • Also Gwan, I am sure you experienced the 1973 slump of NZ produce imports the UK made when it joined the Common Market (EU).

          • Yes Patrick I had just brought my second farm ,a sheep, beef and grain growing farm to complement my dairy farm .
            The biggest squeeze was when interest rates topped 20% in the mid 80s.
            Reply to DMacKenzie .
            Under the NAFTA trade agreement Canada agreed to import New Zealand dairy products under a quota .
            Some how the Canadian Dairy Companies were able to buy most of the quota at world prices and that is probably why they are blending the butter and making a margin on it .
            New Zealand dairy farmers are the most efficient in the world as our climate allows us to grow grass all year round and our Dairy companies are also very efficient .
            We get a massive flush of milk in the spring and it has to be processed the day that it comes in from the farms .
            New Zealand dairy producst are not dumped on the world market .
            The definition of dumping is when governments pay their farmers well above the world market to produce and the countries end up with surpluses ,and it is then dumped at low prices on the world market .
            Graham
            Proud to be feeding the world without subsidies .

          • Yes Patrick I had just brought my second farm ,a sheep, beef and grain growing farm to complement my dairy farm .
            The biggest squeeze was when interest rates topped 20% in the mid 80s.
            Reply to DMacKenzie .
            Under the NAFTA trade agreement Canada agreed to import New Zealand dairy products under a quota .
            Some how the Canadian Dairy Companies were able to buy most of the quota at world prices and that is probably why they are blending the butter and making a margin on it .
            New Zealand dairy farmers are the most efficient in the world as our climate allows us to grow grass all year round and our Dairy companies are also very efficient .
            We get a massive flush of milk in the spring and it has to be processed the day that it comes in from the farms .
            New Zealand dairy products are not dumped on the world market .
            The definition of dumping is when governments pay their farmers well above the world market to produce and the countries end up with surpluses ,and it is then dumped at low prices on the world market .
            Graham
            Proud to be feeding the world without subsidies .

  7. In what was perhaps most surprising, we also found that substantial payments intended to support rural development are actually made to urban areas. – article

    Why is that a surprise? Around here, small acreages that didn’t get swallowed up in the real estate boom-bust cycle have become truck farms (market gardens) with subscriptions for people who want fresh produce but not the commercially grown megafarm stuff. Right now, I think they’re scraping by, and they don’t get subsidized for it, but they’re able to find a market without subsidies and keep going. This was once an ag-oriented county, but because there are many towns around here as a market source, if they were subsidized, they’d be counted in urban areas.

  8. The vast majority of subsidies are designed to benefit the politically well connected.
    Ditto for most regulations.

    • Buy a box of corn flakes. Then ask a farmer how much he was paid for the pound of corn inside the box. Its pretty clear that any subsidies he receives are only to stabilize the supply of raw materials for the benefit of downstream industries.

  9. No I am not steward of anybodys land. I did without holidays and big cars to own this farm.
    Are they “stewards” of their back lawn

  10. North American growers have achieved a massive level of scale that allows for big investments in process automation, the best gmo seed and precision planting density and nutrient control. The result is maximum yields and even greater scale. The Europeans with their smaller farms and bans on gmo and continued low food prices as a result of North American surpluses are so far behind that they will never catch up. They will only fall further behind as information tech and automation, affordable only by those with sufficient scale is going to blow up this business even more.

  11. The EU CAP was one of the reasons that caused BREXIT to happen. French farmers got significantly more subsidies that UK farmers. The UK could not change the CAP since countries that did well out of the scheme always refused to reform it.

Comments are closed.