Second pillar of the CAP: rural development policy

The most recent reform of the common agricultural policy (CAP) retained the two-pillar structure of the policy, in which rural development continues to be regarded as the ‘second pillar of the CAP’. The general principles of this pillar remain unaltered (cofinancing, multiannual national or regional programming from a European ‘menu of measures’, etc.). The new system allows Member States more flexibility.

Legal basis

  • Articles 38-44 of the Treaty on the Functioning of the European Union (TFEU);
  • Regulation (EU) No 1303/2013 (OJ L 347, 20.12.2013) (common provisions concerning the European structural and investment funds);
  • Regulation (EU) No 1305/2013 (OJ L 347, 20.12.2013) (support for rural development);
  • Regulation (EU) No 1306/2013 (OJ L 347, 20.12.2013) (financing, management and monitoring of the common agricultural policy).

Purpose and priorities

The European Union’s rural development policy was introduced as the second pillar of the CAP as part of the reform known as ‘Agenda 2000’. It is financed by the European Agricultural Fund for Rural Development (EAFRD). The purpose of the fund is to contribute to the implementation of the Europe 2020 Strategy (the European Union’s strategy to promote growth and employment) by promoting sustainable rural development. The EAFRD is intended to help develop an agriculture which is balanced from the regional and environmental points of view, avoids damaging the climate, and is resilient in a context of climate change, as well as being competitive and innovative.

The six priorities of the new rural development policy for 2014-2020 are as follows:

  • to promote knowledge transfer and innovation in agriculture and forestry (developing the knowledge base in rural areas; fostering links between agriculture, forestry and research);
  • to increase the viability and competitiveness of all types of agriculture, promote innovative agricultural technologies and support sustainable forest management;
  • to promote the organisation of the food production chain, animal welfare and risk management in farming;
  • to restore, preserve and reinforce agricultural and forest ecosystems (biodiversity, water and soil);
  • to promote the efficient use of resources (water and energy) and support the transition to a low-carbon economy (using renewable energy, reducing greenhouse gas emissions, carbon sequestration and storage);
  • to promote social inclusion, poverty reduction and economic development (facilitating job creation, promoting local development and improving access to information and communication technologies).

As in the past, the implementation of rural development policy is based on the drafting by Member States (or their regions) of rural development programmes. These multiannual programmes should apply a personalised strategy which simultaneously meets the specific needs of Member States (or regions) and accords with the priorities of European rural development policy. These programmes are based on a range of measures (which they combine), selected from a ‘menu’ of European measures detailed in Regulation (EU) No 1305/2013 and co-financed by the EAFRD. The co-financing rates vary according to the region and measure concerned. The programmes have to be approved by the European Commission and also comprise a financing plan and a set of performance indicators. A common system to monitor and assess rural development policy is established in cooperation between the European Commission and Member States.

During the current programming period, the emphasis has been placed on coordinating action funded by the EAFRD with that funded from other European structural and investment funds: the cohesion policy funds (Cohesion Fund, European Regional Development Fund (ERDF) and European Social Fund (ESF)) and the European Maritime and Fisheries Fund (EMFF). Rules common to these funds have been drawn up (Regulation (EU) No 1303/2013), which include a common strategic framework to facilitate programming and sectoral and regional coordination of measures paid for by European structural and investment funds in the Union. On this basis, each Member State draws up a partnership agreement for the period 2014-2020, which must indicate how it will use European structural and investment funds in an integrated manner.

Measures on the ‘European menu’

These measures cover the following areas:

  • transfer of knowledge and information measures (training, information campaigns, etc.);
  • advisory services, farm management and farm relief services;
  • quality systems applicable to farm products and foods (new participation by farmers in quality systems);
  • physical investment (processing of farm products, infrastructure, improving the performance and sustainability of holdings, etc.);
  • restoring agricultural production potential damaged by natural disasters and catastrophic events and introduction of appropriate prevention actions;
  • development of farm holdings and undertakings (business start-up aid for young farmers, non-farm business operations in rural areas, etc.);
  • basic services and renovation of villages in rural areas (broadband, cultural activities, tourist infrastructure, etc.);
  • investment in the development of forests and improving their viability (afforestation and creation of woodland; establishment of agro-forestry systems, prevention and restoration of damage to forests from forest fires, natural disasters and catastrophic events, including parasite infestations and diseases, as well as threats from climate change; investment to improve the resilience and environmental value of forest ecosystems and their potential for mitigating climate change; investment in forestry technologies and in processing, mobilisation and marketing of forest products);
  • setting-up of producer groups and organisations;
  • preservation of farming practices which benefit the environment and climate and encourage the changes needed in this respect (agri-environment-climate measures). Inclusion of these measures in rural development programmes is compulsory. Commitments must go beyond mandatory standards;
  • subsidies for organic farming;
  • Natura 2000 and Water Framework Directive payments;
  • payments to areas facing natural or other specific constraints;
  • animal welfare payments;
  • payments for forest, environmental and climate services and forest conservation;
  • encouragement of cooperation between agricultural and forestry operators and those involved in the food production chain (creation of centres and networks, operational groups of the European Innovation Partnership for Agricultural Productivity and Sustainability — the ‘EIP).

Risk management toolkit:

  • insurance for crops, livestock and plants (financial contributions to premiums for crop, animal and plant insurance against economic losses to farmers caused by adverse climatic events, animal or plant diseases, pest infestation, or an environmental incident);
  • a mutual fund to respond to adverse climatic events, animal and plant diseases, parasite infestations and environmental incidents (with a view to the payment of financial compensation to farmers for the resultant economic losses);
  • an income stabilisation tool, in the form of financial contributions to mutual funds, providing compensation to farmers for a severe drop in their income.

The annex to the Regulation contains an indicative list of measures which could contribute to the various priorities. In addition, the ‘Links between the rural economy and development actions’ (Leader) approach is continuing. This is a local development approach pursued by local operators. The EAFRD also finances technical assistance measures, a European rural development network (with the task of networking national networks and national organisations and administrations working in the field of rural development in the European Union) and the EIP network, which links agricultural operators and researchers to promote exchanges of knowledge. Member States also decide on the support that they provide to operational groups of the EIP which develop innovative projects.

In addition, the Regulation explicitly stipulates that Member States may implement thematic sub-programmes for young farmers, small agricultural holdings, mountain regions, short supply chains, women in rural areas, mitigating climate change and adapting to it, biodiversity and restructuring of certain agricultural sectors. In this context, some of these themes may be allocated more generous support from the EAFRD.

Financial aspects

In the Multiannual Financial Framework 2014-2020, the European Agricultural Fund for Rural Development (EAFRD) is allocated EUR 99.6 billion (after transfers between pillars arising from the Member States’ choices as to what CAP measures to implement). France (11.4 billion), Italy (10.4 billion), Germany (9.4 billion) and Poland (8.7 billion) are the four biggest beneficiaries of the EAFRD. If national contributions from co-financing are included, the funding available under the second pillar of the CAP will amount to EUR 161 billion over the period as a whole.

At least 30% of EAFRD funds must be allocated to investment in the environment and climate, the development of woodland and improving the viability of forests, ‘agri-environment-climate’ measures, organic farming and payments under Natura 2000. In addition, at least 5% of the EAFRD contribution must be spent on the Leader approach.

The amounts and rates of support are indicated in detail in Annex II to the Regulation. For example, business start-up aid for young farmers is limited to EUR 70 000, aid to quality systems to EUR 3 000 per annum, and, in the case of organic farming, aid to the growing of perennials to EUR 900 per annum.

Implementation

Over a one-year period (between 12 December 2014 and 11 December 2015), the Commission approved all 118 rural development programmes drawn up by the 28 Member States. Twenty 20 Member States chose to implement a single national programme, and eight opted to use more than one programme (so as to reflect their geography or administrative arrangements, for example). According to the information available, which is still provisional, the three measures most commonly chosen by Member States are physical investment (23.5% of total public expenditure), ‘agri-environment-climate’ measures (17%) and payments to areas subject to natural constraints or other specific constraints (16%). Moreover, for example, 23 Member States have decided to provide business start-up aid to young farmers, which will be payable to 154 000 holdings (EUR 5.3 billion in public expenditure altogether).

Role of the European Parliament

After the entry into force of the Lisbon Treaty, the most recent reform of the CAP was the first to be adopted under the ordinary legislative procedure (‘co-decision’) (see Fact Sheet 5.2.3). The European Parliament fully played its part as co-legislator, particularly by obtaining a minimum threshold of 30% EAFRD expenditure for investment in the environment and climate, development of woodland and improving the viability of forests, ‘agri-environment-climate’ measures, organic farming and payments under Natura 2000. Parliament also secured a ban on ‘double financing’ of the greening of direct aids from the first and second pillars, and thanks to its efforts, the determination of the annual allocation of EAFRD funds can be modified by means of a delegated act (not an implementing act). Parliament also secured an increase in the maximum payment per hectare in areas subject to natural constraints or other specific constraints (EUR 450/hectare rather than the EUR 300 initially proposed by the Commission and endorsed by the Council).

Guillaume Ragonnaud

06/2016