The national and regional impacts of direct payments modulation in the Czech Republic

This paper addresses (ex ante) the issue of the potential impact of the modulation of direct payments on a sector and regional scale in the Czech Republic. The ultimate version of the compulsory modulation measure adopted under the Health Check of the Common Agricultural Policy (CAP) assumes the reduction of direct payments if the total individual claim exceeds 5 thousand € or 300 thousand € level. The Czech agricultural sector will be impacted by this measure substantially, given the large scale farming enterprises. In 2013, the total farmers' direct payments will be cut by more than 10% (€ 91 million). Moreover, there are regional differences in farm structures (the average farm size and the extent of collectivization) which will bring about various effects of policies in the heterogeneous regions. The analysis further shows that the regions that are least affected are at the same time more environmental sensitive and are mostly situated in the mountainous or sub-mountainous parts of the country or more urban areas than the average. Hence the effect of the modulation, from a purely environmental perspective, may not contradict the objectives of other environmental policies. That is to say the regions that need support the most will be reduced the least. However, the picture is less obvious in the regional economies where more rural regions (potentially more vulnerable with socio-economic problems) tend to be more affected.