Final Report Summary - CAP-IRE (Assessing the multiple impacts of the Common Agricultural Policies (CAP) on rural economies) The European Union (EU) dedicates about EUR 44 billion per year to the Common Agricultural Policy (CAP), the main expenditure in the EU budget. Even if this policy remains a very important driver of change in rural areas, these areas are also undergoing major changes for other reasons. The challenge of the CAP on rural economies (CAP-IRE) project was to improve the understanding of long-term socio-economic mechanisms of change in rural areas. It provided an overview of inter-linkages between the different components of the CAP and the mechanisms which have an impact on rural economies. The final objective of CAP-IRE was to contribute to the ongoing reflexion regarding the future design of the CAP. A set of concepts and tools were developed to identify farm households' reactions to CAP reforms. Six thematic, and one cross-thematic, viewpoints were used: 1) farm structural adjustment, investment and innovation; 2) chain interactions between agriculture and related economic sectors; 3) environmental sustainability; 4)social sustainability; 5) interactions between rural communities and the rest of the world; 6) farm and rural governance issues; and 7) the interplay between the previous aspects. CAP-IRE relied on a consistent combination of secondary data on rural areas, original surveys, econometric and programming modelling of policy scenarios and stakeholder / expert involvement. The geographical coverage included 11 case study areas (CSA) in 9 EU countries. Overall, approximately 2400 farm-households were interviewed over the course of the project. The CAP-IRE results show that European rural regions are very heterogeneous in terms of their social features and sustainability. A growing heterogeneity of farms (in terms of size, organisation, and technology) and farm households (in terms of the number of members, employment, and dependency on farming income) can also be observed across and within each of the regions studied. Furthermore, social and business networks are changing in rural areas and farms and households are progressively disconnecting from each other. Moreover, exits from agriculture appear to be continuing unabated, whilst land abandonment is significant only in disadvantaged areas. The CAP still provides income support and affects the production choices of individual farm households, and, in doing so, also helps maintain crop diversity. However, the current CAP may also be an obstacle to the diffusion of new options, such as energy crops, which hints at the challenge of finding a fair balance between different policy objectives. If the current CAP is maintained, the general tendency of structural change toward a higher concentration of productive factors in fewer farms is expected to continue, given that about 20 % of farms are expected to exit production within the next 10 years. Yet removing the CAP altogether would sharply increase the exit rate, with about 30 % more farm households ceasing farming activity. That said, the effect would be very heterogeneous and would also depend on external factors (such as unemployment rates). CAP abandonment would also lead to a reduction in the use of land and capital factors, respectively, by 24 % and 30 % of the active farmers. In addition, the abolishment of the CAP would negatively affect the number of farms adopting innovations in the next 10 years, with the exception of farmers supported by agri-environmental schemes or pursuing organic production, (which have shown a different reaction pattern and a greater intention to decrease the use of inputs). CAP-IRE also found that standard economic indicators (such as the contribution to gross domestic product (GDP) and employment) do not account fully for the significant role of agriculture in the rural economy. Upstream (e.g. agriculture input producers) and downstream (e.g. food processors) firms are acutely aware of their vulnerability to changes in the CAP. Exits would also result in a reduction in the amount of labour used in agriculture. Project context and objectives: European rural areas are undergoing major changes. The CAP is the main expenditure chapter of the EU with about EUR 44 billion per year. The CAP, first established in 1957, undergoes regular reforms, of which the most recent were in 2000 and 2003, followed by the health check in 2008. Related documents Final Report - CAP-IRE (Assessing the multiple impacts of the Common Agricultural Policies (CAP) on rural economies)
