Financing of the CAP: facts and figures

This fact sheet explains how the common agricultural policy (CAP) has been funded since it was established in 1962. Since 2007, CAP funding has been allocated under two pillars, the European Agricultural Guarantee Fund (Pillar I) and the European Agricultural Fund for Rural Development (Pillar II). Some support measures are also co-financed by the Member States, and regulations adopted in 2021 established a new model for all CAP expenditure, linked to CAP strategic plans developed by the Member States. The fact sheet presents a breakdown of recent and planned CAP expenditure by year, country and type of support measure.

Legal basis

• Article 40(3) of the Treaty on the Functioning of the European Union makes provision for one or more agricultural guidance and guarantee funds to be set up.
• Regulation (EU, Euratom) 2020/2093, known as the Multiannual Financial Framework Regulation, sets out the EU’s long-term spending plan for the 2021 to 2027 period.
• Regulation (EU) 2021/2115, known as the CAP Strategic Plans Regulation, establishes rules on support for CAP strategic plans to be drawn up by Member States and financed by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD).
• Regulation (EU) 2021/2116 sets rules on how the CAP is financed, managed and monitored.
• Regulation (EU) 2021/2117 updates several other regulations relating to the single market in agricultural products, quality schemes for agricultural products and foodstuffs, the protection of geographical indications of aromatised wine products, and specific measures for agriculture in the outermost regions of the EU.

Development of the financial framework for agriculture

The CAP was established in January 1962 and, at that time, it was implemented through a single fund, the European Agricultural Guidance and Guarantee Fund (EAGGF). In 1964, this fund was split into two sections, the Guarantee Section and the Guidance Section.

• The Guarantee Section financed measures on agricultural markets to support producer prices. These included public purchases and export subsidies to ensure the sale of agricultural products.
• The Guidance Section financed measures to improve and modernise farm structures.

Over the years, the tasks covered by these two sections expanded gradually. Initially, the Guidance Section was extended to help agricultural businesses adapt to new challenges and improve their practices and to promote the development of rural areas. The Guarantee Section then evolved with subsequent reforms of the CAP, focusing more on direct payments to farmers and less on market price support. The link between payments and production volumes was gradually removed. This ‘decoupling’ of direct payments was in line with new agriculture policy objectives (3.2.3) and international commitments (3.2.10).

In 2007, the EAGGF was replaced by two new funds, commonly referred to as the two pillars of the CAP.

• The European Agricultural Guarantee Fund (EAGF) (Pillar I), finances all expenditure related to direct payments to farmers (3.2.7) and all market-related expenditure (3.2.6);
• The European Agricultural Fund for Rural Development (EAFRD) (Pillar II), finances rural development in partnership with national authorities, through investments, agro-environmental measures and measures to improve the quality of life in rural areas, encourage the diversification of the rural economy and build local capacity.

Under the Treaty on the Functioning of the European Union (3.2.1), the European Parliament and the Council of the EU, making up the EU’s budgetary authority, take joint decisions on all agricultural expenditure.

CAP expenditure

A. Annual expenditure

About 25% of the EU budget is allocated to the CAP. Its share of the budget has consistently decreased over the years, from over 70% in 1980, following policy reforms and changing political priorities. CAP expenditure is set in the Multiannual Financial Framework Regulation, under the ceiling fixed for Heading 3 – Natural Resources and Environment. The table below shows the amounts made available annually under this heading from 2021 to 2027. These figures take into account permitted transfers between the two pillars and the budget reduction following the mid-term revision of the multiannual financial framework.

In total, for the 2021-2027 period, more than EUR 378 billion are available for CAP-related expenditure under Natural Resources and Environment. This is made up of approximately:

• EUR 283 billion for direct payments and market-related measures under Pillar I (EAGF);
• EUR 94 billion for measures for rural development under Pillar II (EAFRD).

In addition, more than EUR 8 billion were allocated to rural development measures from the NextGenerationEU programme to fund economic and social recovery following the COVID-19 crisis. This brings total CAP funding available for the 2021-2027 period to more than EUR 386 billion.

CAP AMOUNTS UNDER HEADING 3 OF THE MULTIANNUAL FINANCIAL FRAMEWORK (2021-2027, EUR million)

Source: European Commission, Financial report on the EAGF and the EAFRD for 2023.

B. Expenditure by country

The table below shows the distribution of those funds by Member State in 2023. France is the largest recipient of EAGF (Pillar I) funding (18% of the total), followed by Spain, Germany and Italy. France and Italy receive the largest shares of the EAFRD (Pillar II), followed by Germany and Poland.

CAP EXPENDITURE BY MEMBER STATE (EU-27, 2023)

Source: European Commission, Financial reports on the EAGF and the EAFRD for 2023.

^* Expenditure made directly by the European Commission.

C. Expenditure by type of support measure

In December 2021, the European Parliament and the Council of the EU adopted three new regulations on the CAP. The CAP Strategic Plans Regulation (Regulation (EU) 2021/2115) introduced a new model for CAP financing based on national strategic plans to be drafted by each Member State. This and the other two regulations (Regulations (EU) 2021/2116 and (EU) 2021/2117) set out the CAP’s financial rules and the distribution of funds between the various policy objectives and relevant support measures.

The table below shows the amounts of funding that have been allocated to specific measures under each of the CAP’s two pillars. Some of the measures are funded through EU funds only, while others are co-financed by the EU and national governments. The total expenditure, combining EU and national funding, is also included in the table.

Direct payments to farmers under Pillar I of the CAP account for 62% of CAP spending. The main types of measures funded as direct payments, as set out in the CAP Strategic Plans Regulation, are funded by the EU in their entirety, with no national co-financing.

• Basic income support for sustainability,at more than EUR 96 billion, makes up almost one third of the total planned expenditure.
• Coupled income support is support linked to the production of specific products, and, at around EUR 23 billion, makes up 7% of the total.
• Complementary income support for young farmers totals around EUR 3.5 billion, or 1%.
• Complementary redistributive income support for sustainability is when direct payments are redistributed from larger to small or medium-sized farms and accounts for 7% of the total.
• Schemes for the climate, the environment and animal welfare provide funding (15% of the total) to farmers who commit to agricultural practices that benefit the environment and animal welfare.
• Crop specific payments for cotton (0.4% of the total) fund farmers producing cotton in Bulgaria, Greece, Spain and Portugal.
• Support measures for specific sectors under Pillar I are not co-financed, except for apiculture (beekeeping), for which Member States may set specific objectives in their CAP strategic plans. This sectoral support combined makes up 3% of the total planned CAP expenditure and it covers:
• Measures for rural development, supported by Pillar II of the CAP, are co-financed by the Member States. The total planed expenditure for these measures is more than EUR 109 billion, with approximately 60% provided by the EU and 40% by national authorities. As set out in the CAP Strategic Plans Regulation, the measures relate to:

PLANNED PUBLIC EXPENDITURE (2023-2027) FOR EAGF AND EAFRD

Source: European Commission, Approved 28 CAP Strategic Plans (2023-2027), June 2023.

^* National contribution or co-financing does not include additional national financing referred to in Article 146 of the CAP Strategic Plan Regulation. Payments for support under Regulation (EU) 1308/2013 are not included in the CAP Strategic Plans. Transfers between funds are included.

^**Direct payments: as regards the adjusted Annex V to the CAP Strategic Plans Regulation (the total includes the estimated product of reduction), where Member States have made the choice to include it, the total includes the estimated amount resulting from the capping of amounts granted to farmers, thus the planned total of all support measures under direct payments is higher than the amount set in Annex V to the regulation, so the difference corresponds to the capping; cotton payments are not planned as support measures and their allocations are set in Annex VIII to the CAP Strategic Plans Regulation.

^***Rural development: technical assistance financed from national funds is not included; early retirement payments, which is a measure from the 2007-2013 period with maximum payments for 15 years (approximately EUR 5 million in total, including EUR 2 million funded through the EAFRD), are not included.

Role of the European Parliament

The European Parliament has gradually gained a greater say on EU expenditure, through interinstitutional agreements signed in 1988, 1993, 1999 and 2006. In 2009, the Treaty of Lisbon further increased the European Parliament’s power, giving it an equal right with the Council of the EU to adopt, amend or reject the entire annual EU budget.

The European Parliament was able to influence the regulation laying down the financial framework for 2014-2020, which was adopted in December 2013. It secured increased flexibility in the management of budget headings, strengthened budget unity, ensured the immediate use by Member States of outstanding appropriations from the 2013 budget and also secured an increase in appropriations allocated under Heading 1 (Smart and Inclusive Growth).

The first proposal for the long-term spending plan for 2021 to 2027 was presented in May 2018 but replaced in May 2020 by a second proposal that included provision for EU funding to help repair the economic and social damage of the COVID-19 pandemic. The European Parliament adopted its position on the proposal in its resolutions of 14 November 2018, 23 July 2020 and 17 December 2020. Following lengthy negotiations between the European Parliament and the Council of the EU, the Multiannual Financial Framework Regulation laying down the EU’s spending plan for 2021-2027 was adopted on 17 December 2020.

In June 2018, the European Commission published proposals for new regulations on the post-2020 CAP. The European Parliament played an important role during the negotiations on issues such as promoting better environmental performance for EU farms, providing more money to small farms and young farmers, protecting the rights of farm workers more robustly, helping farmers deal with risks and crises, and ensuring more transparency to protect EU funds and higher sanctions for repeated breaches of the rules. The new CAP regulations were adopted in December 2021 and took effect from 1 January 2023.

 

Rachele Rossi

10-2025