Modelling New EU Agricultural Policies: Global Guidelines, Local Strategies

The Common Agricultural Policy (CAP) has evolved throughout time reflecting the continuously changing concerns of European societies and its rural areas. The Mid-Term Review of the CAP, agreed on June 2003, represents a complete change in the way the EU support the farm sector. On the one hand, “decoupling” will make EU farmers more competitive and market oriented and, on the other hand, “cross-compliance” will ensure the respect of environmental, food safety and animal welfare standards. There is less emphasis on market and income support measures within Pillar 1 and an increasing importance of rural development programs. One of the particularities of the new CAP is that Member States have several options to implement the single payment scheme. That means that the CAP sets up the general guidelines but it will be for Member States and regions to decide the specific measures to adopt. The versatile nature of the new CAP will lead to a multiplicity of support schemes, rising the interest of developing economic tools flexible enough to take into account the different features and concerns of the rural areas. This motivates the aim of this paper to develop a methodology aimed to guide the design of regional or local strategies in the Spanish farming systems. The need to collect comprehensive field data is a serious limitation of traditional farm modelling methodologies to perform evaluation on a global scale. Most of existing analyses are restricted to the evaluation of impacts in limited areas making it difficult to establish general conclusions. In this context, the development of methodologies adapted to work with the limited databases available and that can be applied to diverse situations are highly valuable. In this paper we propose a methodological framework to assess the environmental and socio- economic impacts of different policy option in a large number of farming systems representing the heterogeneous characteristics that can be found throughout the Spanish territory. In this sense, we develop a positive mathematical programming model that allows us to simulate farmers’ behaviour under alternative policy scenarios. One of the main limitations of positive mathematical programming is that available options to the farmers are limited to the observed activities in the actual situation. We propose a cost transfer approach which allow us to overcome this difficulty. The model interface allows friendly use and easy replication to a large number of rural areas. This modelling approach allows us to evaluate environmental and socio-economic impacts of different agricultural policy scenarios. Chosen scenarios focus on some recently envisaged policy alternatives, such as the cross-compliance option in the Agenda 2000 and the decoupling scheme in the Mid Term Review of the CAP. Model results allow us to suggest that this modelling approach may be used as a management tool to assist the design of regional programs of measures within the CAP.