Members' Research Service By / July 20, 2016

How the EU budget is spent: Common Agricultural Policy

Written by Gianluca Sgueo, Francesco Tropea and Marie-Laure Augere-Granier, With 52% of the European Union (EU) territory classified as predominantly rural,…

© Andreas P / Fotolia

Written by Gianluca Sgueo, Francesco Tropea and Marie-Laure Augere-Granier,

Rural area view
© Andreas P / Fotolia

With 52% of the European Union (EU) territory classified as predominantly rural, more than 170 million hectares of agricultural land, and 113 million people (nearly one quarter of the EU population) living in rural areas, the Common Agricultural Policy (CAP) represents one of the largest shares of expenditure from the EU budget. The CAP pools European Union resources spent on agriculture to protect the viable production of food, the sustainable management of natural resources, and to support rural vitality.

The CAP consists of two ‘pillars’, the first includes direct payments (i.e. annual payments to farmers to help stabilise farm revenues in the face of volatile market prices and weather conditions) and market measures (to tackle specific market situations and to support trade promotion). The second pillar concerns rural development policy and it is aimed at achieving balanced territorial development and sustaining a farming sector that is environmentally sound, as well as promoting competitiveness and innovation.

Read the complete briefing on ‘How the EU budget is spent – Common Agricultural Policy’:
Pillar I and Pillar II

The CAP 2014-2020 accounts for 38% of the EU budget. Under the 2014-2020 Multiannual Financial Framework, a total of €408.31 billion is earmarked for the CAP, of which the largest part (€308.72 billion) is allocated to the first pillar, whereas the remaining €99.6 billion is allocated to the second pillar.

These two briefings offer a comprehensive overview of the legal basis, the state of the art and the scopes of the two pillars of CAP. The briefings follow the same structure: after illustrating the legal basis of the concerned CAP pillar, they focus on the objectives of the pillar. A thorough explanation of the measures funded as well as their assessment follows. In the conclusive remarks, the two briefings focus on other EU programmes operating in the same field.

Which challenges will CAP face in future years? The challenges identified for the CAP 2014-2020 included a broad variety of actions, ranging from the guarantee for viable food production, to the promotion of sustainable management of natural resources, and to the adoption of actions aimed at mitigating climate change. Five of these are the main objectives of CAP 2014-2020, as defined by the Treaties, namely:

  • To increase agricultural productivity by promoting technical progress and to ensure the optimum use of the factors of production, in particular labour;
  • To ensure a fair standard of living for farmers;
  • To stabilise markets – a crucial challenge, given the frequent alternation between sharp increases in global food prices and severe price depression;
  • To ensure the availability of supplies;
  • To ensure reasonable prices for consumers.

Looking to the future, CAP simplification is a key priority for the European Parliament. The Parliament adopted a resolution on CAP simplification in May 2010. The resolution underlines that further simplification of the CAP is necessary to reduce its implementation costs for EU institutions, Member States and the whole array of beneficiaries. The Parliament emphasises that administrative burdens and the CAP implementation costs should be reduced to enable farmers to spend more time working on their land.

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