The abbreviation "CAP" stands for the "Common Agricultural Policy of the European Union”. The CAP is one of the most communitised EU policies; central requirements and the related financing of measures are decided at EU level. The reason for this has been the interest of EU Member States to shape a common policy for a sector that secures the food supply and plays a significant role in using and conserving natural resources and for the economic development of rural areas. Services to society provided by agriculture, such as environmental protection, climate change mitigation, and the promotion of biodiversity and animal welfare, are now playing an increasingly important role.

As early as 1957, in the Treaties of Rome, the founding states of the then European Economic Community (EEC) set down the objectives and tasks of a European agricultural policy: in order to supply the people living in the ruins of post-war Europe with sufficient food, they decided to promote productivity in agriculture, to stabilise the markets and thereby to secure an appropriate standard of living for the rural community.

They conferred the right to initiate common regulations to the Community in the shape of the European Commission. The states also entrusted the Community with the financing of the related measures.

In 1958, the six EEC states developed the guiding principles underpinning the future Common Agricultural Policy. To achieve the objectives of the EEC treaty, it was planned to increase trade within the Community and remove barriers to trade. The aim was also to ensure fair competition between regions and avoid surpluses. Family-owned agricultural businesses were the focus of attention. Since its introduction, the Common Agricultural Policy has repeatedly been adjusted to meet topical challenges.

"The introduction of the Common Agricultural Policy has not stopped the profound structural change that has taken place in agriculture over the past decades: the number of agricultural holdings has greatly declined while the remaining enterprises have become bigger and more productive.

When EU surpluses accumulated and agricultural expenditure rose significantly – in the 1980s, up to 70 percent of the EU budget was spent on agriculture –, the CAP made a paradigm shift: with the agricultural reform in 1992, it turned away from market and price support and prioritised direct aid for agricultural holdings. Support prices for cereals, for instance, were reduced and arable land set aside. Farmers received direct payments as compensation. In addition, support measures such as extensification or afforestation in the area of agricultural structural policy were introduced. This was the first time that environmental concerns found their way into the CAP on a larger scale.

The agricultural policy reforms were continued with the Agenda 2000: support prices were reduced again, whereas direct payments were increased. A further new environmental aspect was added: in future, Member States could make direct payments conditional on compliance with environmental rules. Information on the importance of environmental and climate aspects in the current programming period from 2023 can be found here. There was also an increasing focus on rural areas: Questions concerning agricultural structural policy were included far more extensively with the advent of the so-called 2nd pillar for “rural development support”.

Eventually, in 2003, the EU started to decouple direct payments from production. The concepts of environmental protection and animal welfare were further strengthened: those who wanted to receive the direct payments in full had henceforth to comply with certain conditions (so-called cross-compliance).

Finally, from 2014, the market-orientated course was continued and the CAP was geared even more strongly towards rewarding services to society. With the so-called "greening", farmers were obliged to provide additional environmental services. At the same time, greening continues to provide farmers with a safety net in the event of market risks – currently to cushion certain economic consequences of the Russian war in Ukraine.

All citizens in Germany and elsewhere in the European Union benefit from the CAP. On the one hand, it enables the agricultural sector to provide a reliable supply of high-quality and nutritious food at affordable prices. On the other hand, it remunerates farmers for the services they provide to the general public, such as the conservation and maintenance of cultivated landscapes. Farmers shape the social fabric of villages and create income and job opportunities in rural areas.

The second pillar of the CAP supports people living in rural areas in keeping their region attractive and strengthening the economic power of rural regions. Examples include, for instance, support for tourist activities on farms, farm shops, local village renewal projects or the elaboration of regional development strategies and civic commitment. The main support instrument for the development of rural areas is the European Agricultural Rural Development Fund (EAFRD).

In addition to that, the CAP remunerates services in all parts of Germany that farmers provide as so-called voluntary agri-environment-climate measures or eco-schemes in order to conserve and protect the environment. These include, for example, measures to preserve and promote biodiversity, measures to protect water resources, the promotion of organic farming or the promotion of areas facing natural constraints. For farmers, the state aid is in turn a compensation for the fact that European farmers have to meet far higher standards in the fields of environmental, animal and consumer protection than many of their colleagues in other parts of the world. These higher standards raise the cost of production in many cases and may be a competitive disadvantage in a globalised market. Support seeks to offset this disadvantage and ensures high product safety and high quality. Direct payments under the CAP help to safeguard and stabilise farmers’ incomes by cushioning the impact of price fluctuations for agricultural products, which in some cases can be extreme.

Below you will find questions and answers on the new Common Agricultural Policy (CAP) from 2023.

The level of requirements (so-called conditionality), which is mandatory for all payees, will be raised. For example, from 2023 onwards, farming must better protect wetlands, moors and biodiversity and increase diversity in the fields. And the eco-schemes provide an additional financial incentive to provide further environmental services. At least 25 percent of the direct payment funds for agricultural holdings must be reserved for this purpose. For Germany, this amounts to almost EUR 1 billion per year. Thus, incentives are created to do more for biodiversity and climate in agricultural food production.

Further details on the current programming period from 2023-2027 can be found in the current brochure (german).

The regulations and acts can be found here:

• Gesetz über die Durchführung des im Rahmen der Gemeinsamen Agrarpolitik einzuführenden Integrierten Verwaltungs- und Kontrollsystems (GAP-Integriertes Verwaltungs- und Kontrollsystem-Gesetz – GAPInVeKoSG) (Act on the implementation of the Integrated Administration and Control System to be introduced under the Common Agricultural Policy)
• Gesetz über die im Rahmen der Gemeinsamen Agrarpolitik geltende Konditionalität (GAP-Konditionalitäten-Gesetz – GAPKondG) (Act on conditionality applying in the context of the Common Agricultural Policy)
• Gesetz über die Durchführung der im Rahmen der Gemeinsamen Agrarpolitik finanzierten Direktzahlungen (GAP-Direktzahlungen-Gesetz – GAPDZG) (Act on the implementation of direct payments financed under the Common Agricultural Policy)

The Direct Payments Act lays down the following key elements:

• Ten percent of EU funds for direct payments will be redirected to the 2nd pillar (EAFRD). This share will increase to 15 percent in 2026, or EUR 737 million. The funds are available for rural development, for greater animal welfare and for environmental and climate stewardship measures
• 25 percent of the funds are reserved for eco-schemes; this will be used to finance one-year environmental and climate stewardship measures.
• Twelve percent of the financial resources will be deployed to strengthen small and medium-sized farms. These farms will receive higher payments per hectare.
• Young farmers receive three percent of the funding.
• Two percent of the funds are earmarked for sheep, goat and suckler cow husbandry. These animals are often kept on ecologically valuable permanent grassland and their husbandry promotes value creation in grassland and low mountain regions.

The Conditionality Act regulates fundamental requirements, for instance in the fields of environmental conservation, climate change mitigation and biodiversity, which, in the event of non-compliance, can result in payments being reduced or cancelled altogether. One of these additional requirements is, for example, the obligation to set aside at least four percent of arable land for non-productive purposes or as landscape features in order to foster biodiversity. In addition, permanent grassland in moorland and wetlands may not be converted into arable land for reasons of climate stewardship.

The Integrated Administration and Control System Act regulates the practical implementation of funding, from the filing of applications to control and disbursement.

Green architecture is the term used to designate the design of and interplay between regulations, requirements and support measures that contribute to a better performance of agriculture in environmental protection and climate change mitigation. These comprise the new eco-schemes and conditionality under the first pillar as well as the promotion of multi-annual environmental and climate stewardship measures, including organic farming, under the second pillar.

Eco-schemes are intended to integrate particularly eco-friendly measures into the management of farmland, e.g. the establishment of fallow land or flower strips. Farmers thereby make a substantial contribution to biodiversity. And this holds true irrespective of whether someone is a conventional or an organic farmer. Organic farming, on the other hand, is a sustainable production method that is applied to all areas on an organic-production holding.

Society expects more from agriculture in terms of animal welfare, environmental protection and climate stewardship. The new CAP provides for the following eco-schemes, for instance:

• The additional creation of fallow land and flower pastures to protect insects and water bodies;
• cultivation that provides for particularly diverse arable crops (from cereals to protein crops);
• extensification of grassland use (preservation of species-rich meadows);
• dispensing with the application of synthetically produced chemical pesticides; and
• maintenance of agroforestry systems for climate change mitigation.

The member states are obliged to earmark a minimum of 25 percent of direct payment funds to this end in the future, whereby the member states can offset expenditure against this percentage if they have disbursed a significant proportion of funds for agri-environment-climate measures under the second pillar. For Germany, around EUR one billion per year will be available for eco-schemes in the future.

The learning phase, i.e. the first two years of the new CAP 2023 and 2024, does not mean that the eco-schemes can be postponed for these two years. The requirement for member states to offer eco-schemes for a minimum percentage of direct payment funds has applied from the launch of the reform in 2023. However, the learning phase allows for the flexible use of unused funds for other direct payments or agri-environmental measures as a last option after all other options for using them for eco-schemes have been exhausted. This learning phase is necessary because uncertainties will arise with respect to the uptake and planning of this new instrument, notably in the first few years.

The so-called redistributive income support enables member states to use part of the direct payments funds as targeted support for strengthening small and medium-sized farms. The small and medium-sized farms thus receive higher payments per hectare.

The development of rural areas remains an important goal in the future CAP. The CAP will continue to help ensure that the development potential of rural areas is tapped and that these regions are maintained and further developed as attractive places to live in and do business. To this end, the range of support measures under the second pillar, which has proven successful in the past, will be maintained. Investments and the capacity for the innovation of agriculture and rural areas can thus be promoted, also with respect to digitalisation. This also includes diverse measures to promote the economic and social infrastructure in rural areas and economic diversification, including beyond the farming sector. In addition, direct payments also help secure the future economic viability of farms and thus enhance the economic prospects of rural areas.

Supporting young farmers is one of the future CAP's specific targets. Under the new rules, a sum at least equivalent to 3 percent of the national direct payment budget must be used to promote young farmers. This is a minimum budget. Support can be given by providing complementary income support for young farmers per hectare under the first pillar or as a lump-sum payment and/or by supporting young farmers under the second pillar (for example through setting-up aid). Investment aid for young farmers can also be counted towards the minimum budget.

Animal welfare is included in the specific goals pursued by the CAP. The EU provisions on the protection of livestock form part of the basic requirements to receive direct payments - violations result in deduction or cancellation of payments. What is new is that higher animal welfare requirements can also be promoted from direct payments under the new eco-schemes. In addition, animal welfare can be specifically promoted by special support measures in the field of rural development, e.g. by fostering particularly animal-friendly husbandry systems and investments that promote animal welfare.

It is one of the objectives of the CAP to make farms fit to master crises. The member states can provide for and promote risk management tools in their CAP Strategic Plans. For instance, financial contributions to insurance premiums or mutual funds can be promoted in this context. Due to our constitutional allocation of tasks, the federal states (Länder) are responsible for this. Risk prevention measures are also eligible for funding in specific programmes for certain sectors. In the fruit and vegetables sector, harvest insurances to cover market losses of recognised producer organisations and/or their members can be funded. This is also possible for wine.

Total annual funding of around EUR 6.2 billion in Community resources, on average, is available for agricultural support in Germany from 2023 to 2027. EU funding is divided across two pillars.

• The direct payments to farmers, which are granted per hectare of farmland if the respective requirements are met, are financed under the first pillar. In order to be eligible, environmental requirements and other standards of good farming practice must be complied with. Prior to redirecting funds to the second pillar of the CAP, direct payments amount to around EUR 4.9 billion per year.
• The first pillar also finances market measures. These encompass market stabilisation measures in the event of a sharp fall in prices and targeted support measures for wine growing, hops growing, bee-keeping and fruit and vegetable producer organisations along with sales promotion measures and the provision of fruit, vegetables, milk and milk products to children in schools and preschools. Only some of the funds for market measures are fixed beforehand. It is estimated that an average of around EUR 150 million per year will be available for this purpose in the years 2023-2027.
• The second pillar comprises specific funding programmes for sustainable and environmentally sound farming and rural development. These include, inter alia, agri-environmental programmes and the promotion of organic farming. Under the second pillar, Germany has around EUR 1.1 billion in annual EU funding at its disposal in the 2023-2027 period, which must be co-financed with further national funding. In addition, there are funds that are shifted from the first pillar to the second pillar of the CAP. In 2023, this amounts to just under EUR 400 million, which will continue to increase in the coming years.

EU agricultural support in Germany in the 2023-2027 period in EUR million (prior to reallocation between the pillars)