European agricultural policy is complex comprising of different schemes of payments, quotas, and ecological regulations (as described in section 3.1.2). In the simulation of
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EU agricultural policy two structural elements are to be considered: first, the existence of farm level regulations and second, the existence of regulations of a national level. Prominent farm level regulations are limits of per hectare livestock stocking density. Prominent national regulations are derogations of payments proportionate to the rate of overshoots of national ceilings. Simulating such national regulations is not possible in models based on a bottom-up approach like EU-EFEM. Alternatively, an approach will be introduced that is applicable in bottom-up models while considering the historic fulfilment of national ceilings, a case in which actually the simulation in a top-down model would be indicated. In doing so, real payment flows (i.e. with respective derogations) can be approximated in addition to the simulation of farm level regulations one-to-one.
In EU-EFEM, the mentioned approach is only applied to the animal sector. In the plant production branch it is omitted since national ceilings (Council Regulation (EC) No 1782/2003 and Council Regulation (EC) No 118/2005) and implementation choices are not as numerous as in the animal production branch and the significance to the results is thus smaller. This means that national quotas for plant premiums like the energy crop payment limited to 1,500,000 ha are disregarded.
Structurally, in EU-EFEM agricultural policy is simulated on farm level. It was assumed that the number of contemporary stables places represents an upper limit which will not be expanded. The value of the animal premiums is not copied from the agricultural policy regulation, but it is taken instead from the recent accountancy data. In the accountancy data real payment flows are indicated, i.e. national derogations to the premiums indicated in the agricultural policy regulation, which practically are maximum premiums, are in case of overcalling of premiums already implied. In the accountancy data the payment flows are given as total farm payment, but specified to payment category, so that the division by the number of qualified animal heads yields the premium value per animal head30.
Now, drawing back on the assumption that the number of stable places from the accountancy data represents the upper limit for stable places, only not-using stable places can change the value of a single animal premium. The “virtual farmers” of the model thus decide whether to use all stable places or to have unused capacities. It is assumed that large unused capacities will not be found for the analysed scenarios.
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This approach will only deliver more accurate simulations in case the overshoot of national ceilings is more likely than the not-using of stable places. For EU-EFEM, no cross-check between unused capacities and national ceilings is executed.
In the simulation of agricultural policy, both, in the animal and the plant production branch, the complexity of policy regulations is reduced. In the plant production branch, the national caps to the premiums are disregarded. In the animal production branch, farm receipts are reduced by fixed values in case of unused capacities regardless of the level of utilization of national ceilings. It must be noted that apart from this structural simulation problem, the deduction of unused capacities in animal production carries further inaccuracies since the definition of premium categories in the policy regulations could not fully be matched with the definition of animal categories in EU-EFEM.
3.3.1.1 Integration of the AGENDA 2000 Regulations
The AGENDA 2000 regulations are integrated to EU-EFEM as valid during the years 2000 to 2001, i.e. the period covered by the model’s reference period31. In line with the above described approach, coupled payments are integrated to EU-EFEM as the average of the values given in the accountancy data for 2000 and 2001. Premiums that are not claimed by the model due to a simulated reduction of production are deducted with the named value and not with the average value. This is only an approximation to reality but, again, in a farm level model like EU-EFEM, the overall use of the national ceilings cannot be simulated. The set-aside regulation is also simulated, reflecting the state of the AGENDA 2000: the minimum and maximum level of set-aside are defined by policy annually for the minimum (compulsory) and fixed permanently for the maximum (voluntary).
The coupled payments in the COP-sector draw on the principle of historic yield. The data on historic yields were provided by the CAPRI (2006) network on a regional level and for all EU-15 member states. The latest values of historic yields and historic payments were applied to EU-EFEM. The historic yields have been fixed by policy and will remain unchanged with the replacement of the AGENDA 2000 with the 2003 reforms.
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3.3.1.2 Integration of the Reformed AGENDA 2000 Regulations
Under the 2003 reforms of the AGENDA 2000 (section 3.1.2), the single farm payment (SFP) was introduced, i.e. a farm specific payment whose value is deducted from premiums obtained during a previous reference period. For the purpose of determining the value of premiums received during the reference period (2000 - 2002), in EU-EFEM, as a first step, a reference run is initiated. Its result is stored to an external file. In the second step, EU-EFEM is started, drawing on these previously stored data, in terms of the reformed AGENDA 2000, the so-called “historic receipts”. For the reformed AGENDA 2000, EU-EFEM performs the (national or sometimes regional) derogations to the historic payment stipulated with the reforms (compare Table 10), thus obtaining the farm specific SFP.
The regulations of the sugar market were implemented to the model as valid by the year 2013, with the fixed institutional price of 26.29 €/t of beet and 60% compensation for price reduction with respect to the (national) price before the 2005 sugar market reforms being merged into the SFP (COUNCIL REGULATION, 2006)).