Upscaling environmental incentives in the Common Agricultural Policy: an assessment of the potential of transfers from the first to second pillar

Abstract

Agri-environment-climate measures and organic farming support have been the main contractual instruments promoting environment-friendly agricultural practices in the European Union since the 90s. They are insufficient in reaching significant environmental improvements, partly because underfunded. Using French panel data from the farm accountancy data network, we evaluate the impact of a budget transfer from income support to environmental incentives on contract uptake. We apply a generalised Tobit model to estimate the adoption probability and the acceptable farm-level payment triggering this adoption and simulate a transfer from direct payments to organic farming support and agri-environment-climate measures budget. Results suggest this mechanism increases adoption. Decreasing direct payments affects participation probabilities and acceptable farm-level payments, differently depending on the type of environmental contract, the type of direct payment and the farm technical orientation. We evaluate several transfer scenarios and provide ex-ante elements on how it could help reaching the Green Deal organic target.