Accounting for Public Goods: The Social and Natural Capital Imperatives

President Mc Enery, distinguished guests, ladies and gentlemen,

I'm happy to be here with you today, because I believe very strongly that a smart, sustainable agriculture policy can deliver a multitude of public goods for the people of Europe. And we need a strong CAP to ensure this delivery.

Agriculture is at its most basic level the provision of food for consumption by our people – as such it cannot technically be defined as a public good. But I think we can all agree that maintaining food security, in a continent that for most of its modern history was ravaged by war, is very much serving the common good.

The way we conceptualise agriculture policy, and the way we construct policy supports to underpin it, has evolved enormously in recent decades.

Today, we expect our farmers to maintain the environment and contribute to the fight against climate change. In this regard, agriculture is delivering not only measurable public goods, but measurable global public goods. But of course, this sector can do more.

Farmers are now central to the debate in relation to how we can ensure the adequate provision of public goods for our whole society. The Paris Agreement on climate change of December 2015 and the 2030 Sustainable Development Goals adopted last October are the most prominent examples.

As always, the devil is in the detail: It is always very nice to talk about public goods, but it is worth asking what exactly this means. And how can we all contribute to their provision?

I can enjoy a beer and easily pay for it. But a beautiful landscape is something that everybody can enjoy. So who pays for its provision and maintenance?

 

You have addressed these essential questions well in your paper on natural capital and accountancy, and today's event follows up on this debate. Accountancy can attach a value to natural capital. In my current role, I focus more on how policy can support the provision of public goods.

Farming has contributed for thousands of years to the maintenance of a healthy and varied countryside. Responsible and sustainable agricultural land management has been a positive force for the development of rich landscape and habitat varieties, including a mosaic of woodlands and wetlands as well as extensive tracts of open countryside.

But the links between the richness of the natural environment and farming practices are complex.

In the past, many public goods were provided as side effects of profitable agricultural production. However, as agriculture underwent major changes, involving the intensification of land-use and the abandonment of marginal farmlands, the provision of public goods could no longer be taken for granted.

Europe's Common Agricultural Policy has evolved to address the challenges of the day and has been reformed with a view to ensuring the best use of public funds. This means that in addition to ensuring the provision of affordable, safe and good quality food products, the CAP now has an increased focus on meeting other societal needs.

After all, our farmers are the only "boots on the ground" that can deliver and implement the policy.

Accordingly, in today's globalised world, agricultural policy is not exclusively about farming. We need to promote the multidimensional nature of agricultural policy – emphasising its role in encouraging the provision of public goods, its contribution to food security, economic growth, social cohesion, sustainability and geo-political stability.

The sustainable management of natural resources could by itself be considered a public good from a long term perspective.

Preserving good quality of the rural environment and the countryside are clearly of vital interest for human well-being – and agriculture plays a key role in these.

However, this will not happen unless farmers are incentivised and rewarded for playing this crucial role on our behalf, and from which all of us benefit -  current and future generations.

Policy action is needed to strengthen the ability of farmers to generate these public goods. We need stronger results when it comes to the decline of many species and habitats; when it comes to counteracting water scarcity and forest fires; when it comes to tackling soil erosion; as well as the exodus of people from rural to urban centres, which does not maintain a holistic balance between city and country.

To provide one good example, the Commission has recognised that policy initiatives cannot work in isolation to deliver public goods in an area as wide and fundamental as water policy.

For this reason, I am working closely with my colleagues Commissioner Katainen, Commissioner Moedas and Commissioner Vella through a Task Force on Water to develop a long-term alliance between different Commission services.

Joint work will be initiated to boost necessary investment and spread best practice with a view to foster transition to water sustainability in EU agriculture.

Agriculture and rural development policies have an important potential to contribute to the provision of public goods, indeed they are already contributing significantly. Since 1990, the CAP has achieved a 23% reduction in carbon emissions and a 17.7% reduction in nitrates in rivers. Approximately €57 billion will be spent on research and development in the 2014-2020 period to improve the sustainability of European agriculture.

And I'm heartened by the fact that this contribution is more and more recognised by the public at large, as evidenced by successive Eurobarometer polls.

In order to work towards this goal, policy can intervene in three ways: regulation, compensation, and facilitation. And we use all these tools in the CAP to support the provision of public goods.

Regulation refers to the imposition of requirements: for example farmers in Nitrate Vulnerable Zones must respect certain conditions such as seasonal restrictions on spreading manure on fields to avoid polluting water courses.

Compensation is used to financially support farmers subscribing on a voluntary basis to specific management practices for increasing environmental benefits. An example would be late mowing and improved habitats for nesting birds.

Facilitation: this means helping to develop schemes which capture a market return for environmental efforts. For example support for marketing or certification initiatives, which enable consumers to identify and choose specific production systems, or local tourism.

All these instruments are accompanied by related training measures and other support from the Farm Advisory System, which helps farmers to implement appropriate solutions for their specific situations.

And some keynote figures underline that what the CAP delivers is real, and measurable:

About 43.8 billion EUR of the total European Agricultural Fund for Rural Development budget has been allocated to Priority 4 (restoring, preserving and enhancing ecosystems related to agriculture and forestry).

Together with the 7.6 billion EUR for priority 5 (resource efficiency and climate action) the total allocation to the two Priorities accounts for 51.8% of the total EU budget for rural development.

These funds will trigger 2.7 billion EUR of public and private investments for projects aimed at reducing GHG and ammonia emissions.

In addition, about 18 % of agricultural land and 3.8 % of forest land is under management contracts supporting biodiversity and/or landscapes.

As you can see, the CAP is investing a lot in order to support the provision of public goods.

But we can always do better, and I am currently in the middle of a process to identify specific ways to do better.

As you all know, the CAP has undergone several waves of reforms, with the latest reform decided in 2013 and implemented in 2015. Since then, the context in which that reform was forged has shifted significantly. In particular:

Agricultural prices have fallen substantially and market uncertainty has increased – we need to find appropriate tools that help farmers to cope with these difficulties.

The emphasis of trade negotiations has moved more visibly from multilateral to bilateral deals, requiring a careful balancing of offensive and defensive interests.

And the EU has signed up to new international commitments, especially those concerning climate change, through the Conference of Parties COP 21, and broad aspects of sustainable development through the UN's Sustainable Development Goals.

These developments together with first insights from the implementation of the 2013 reform prompted a vigorous public debate about whether the 2013 reform went far enough to meet broader challenges, including the widest possible delivery of public goods.

Against this background, the Commission is now conducting a comprehensive public consultation on the simplification and modernisation of the CAP. 

The results of this consultation process will be published and communicated in a public conference in July 2017.

In this context, I can only encourage and invite you to take part in the public consultation. I am looking forward to your input.

Let me finish today with the following: we all agree that agriculture plays a key role in the provision of public goods and the safeguarding of natural capital.

This means that the 22 million farmers in the EU are the greatest resource that we have in terms of ensuring the protection and improvement of the rural environment. They are our people on the ground. And when we ask them to raise their level of environmental ambition, it is only right that our society rewards them appropriately.

In conclusion, ladies and gentlemen, you can see from my contribution today that the agri-food sector is an essential and integral part of any solution to ultimately deliver the "social and natural capital imperatives" for rural areas and society as a whole.

Thank you.