Order Code RL32624
CRS Report for Congress
Received through the CRS Web
Green Payments in U.S. and European Union
Agricultural Policy
October 6, 2004
Barbara A. Johnson
Analyst in Agricultural and Natural Resources Policy
Resources, Science, and Industry Division
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Science and Industry Division
Congressional Research Service ˜ The Library of Congress

Green Payments in U.S. and European Union
Agricultural Policy
Summary
Green payments are defined as payments made to agricultural producers as
compensation for environmental benefits that accrue at levels beyond what producers
might otherwise achieve under existing market and regulatory conditions. They may
support both environmental and farm income objectives.
Modern U.S. agri-environmental programs began in 1985 by paying farmers to
retire land, thereby reducing negative environmental effects associated with
production agriculture. For example, the largest U.S. agri-environmental program,
the Conservation Reserve Program (CRP) established by the 1985 farm bill (P.L.99-
198), pays farmers to remove highly erodible, environmentally sensitive land from
production for 10-15 years to help control soil erosion. Since then, U.S. agri-
environmental programs have evolved to pay farmers for conservation on working
farms, benefitting soils, water quality, wildlife habitat, and other environmental
aspects while maintaining agricultural production. For example, the Environmental
Quality Incentives Program (EQIP) established in the 1996 farm bill (P.L. 104-127)
promotes agricultural production and environmental quality on working lands as
compatible goals. The program assists producers in complying with a number of
environmental regulatory requirements (and to avoid the need for further regulation).
The Conservation Security Program (CSP), enacted in the 2002 farm bill (P.L. 107-
171), represents a further evolution of U.S. agri-environmental policy. CSP pays
producers to capture environmental benefits across their entire agricultural operation,
while still maintaining agricultural production. It has been characterized by some as
the most comprehensive U.S. “green payments” program.
General environmental policy in the European Union (EU) deals with negative
externalities from water pollution, nitrates, and pesticides, among other issues, and
also impacts agricultural production. EU farm policy since 1985, however, has
included payments to farmers to compensate for costs incurred or income forgone
from undertaking agri-environmental measures that meet farm policy and rural
development objectives. Such measures include, inter alia, reducing use of fertilizer
and chemical inputs, adopting organic production methods, maintaining countryside
and landscape, or managing land for leisure activities or public access. Successive
reforms of the EU’s Common Agricultural Policy (CAP) have placed greater
emphasis on such green payments — and increased funding for them — as agri-
environmental measures have been integrated into a broad rural development policy.
U.S. agri-environmental programs received substantial increases in funding
authority in the 2002 farm bill. However, subsequent annual congressional
appropriations have not provided full funding for some of these 2002 authorizations,
and the forecasts of current and future budget deficits could pressure appropriators
to continue this pattern. The outlook for financing EU agri-environmental programs
seems more positive. Contributing to this positive financial outlook are recent
decisions by EU policymakers to incorporate agri-environmental (green) payments
into the EU’s rural development program and to shift funds away from commodity
support to rural development. This report will be updated.

Contents
What Are Green Payments? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Agri-Environmental Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Cross-Compliance Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Conservation Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Sodbuster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Swampbuster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Voluntary Agri-Environmental Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Land Retirement Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Working Lands Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Green Payments: The Conservation Security Program
(CSP) (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Outlook for U.S. Financing of Agri-Environmental Measures . . . . . . . . . . . 8
EU Agri-Environmental Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General EU Environmental Policy and Agriculture . . . . . . . . . . . . . . . . . . . . 9
Water Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Nitrates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Pesticides . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Habitats and Wild Birds (The Natura Network) . . . . . . . . . . . . . . . . . 10
Agri-Environmental Programs in the CAP . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Less Favored Area Program (LFA) . . . . . . . . . . . . . . . . . . . . . . . 11
The “Efficiency” Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Organic Farming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Agri-Environmental Measures in the 1992 CAP Reform . . . . . . . . . . . . . . 11
Agri-Environmental Programs in Agenda 2000 . . . . . . . . . . . . . . . . . . . . . 13
2003 CAP Reforms and Agri-Environmental Programs . . . . . . . . . . . . . . . 14
Cross-Compliance with Agri-Environmental Measures . . . . . . . . . . . 14
Assistance to Farmers in Meeting Standards . . . . . . . . . . . . . . . . . . . . 15
Support for Implementing Natura (2000) . . . . . . . . . . . . . . . . . . . . . . 15
Increased EU Co-Financing for Agri-Environment
(and Animal Welfare) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Increased Support for LFAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Additional Financing for Rural Development Policy (Modulation) . . . . . . 16
EU Spending on Agri-Environmental Measures . . . . . . . . . . . . . . . . . . . . . 17
Some Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Good Agricultural and Environmental Practices . . . . . . . . . . . . . . . . . 15
Table 2. Proposed Budget Commitments for the CAP, Rural Development,
and Total EU Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 3. Comparison of U.S. and EU Agri-Environmental Policy . . . . . . . . . . . 19

Green Payments in U.S. and
European Union Agricultural Policy
What Are Green Payments?
Green payments generally are defined as payments to agricultural producers for
providing environmental services on working farms. They are designed to encourage
producers to provide more environmental services than they might otherwise provide
in the absence of the payments,1 and they are not connected to a producer’s level of
production.
In the United States,”green payments” refers to agricultural programs with
primarily environmental goals. Although all U.S. “green payments” programs focus
on the environment, the types of payments range from cost-sharing for specific
conservation practices to incentives for whole-farm management of environmental
resources and rewards for “good actors” for past environmental stewardship. This
discussion will review U.S. green payments within the context of modern U.S. agri-
environmental policy, which has evolved from programs focusing primarily on land
retirement to programs encouraging sound environmental management on working
farms.
The European Union (EU) views green payments more broadly than does the
United States, using them to achieve socioeconomic and rural development goals as
well as environmental goals. The EU makes agri-environmental (green) payments to
farmers within the framework of its rural development policy, which encompasses
not only environmental activities but also investments to modernize farms, programs
to help young farmers get established or promote early retirement, assistance with
processing and marketing farm products, and programs to promote the non-farm rural
economy such as agri-tourism or preservation of cultural heritage. This discussion
of EU green payments will focus primarily on agri-environmental measures that
compensate farmers who take measures to enhance the environmental benefits from
farming, but not other aspects of the EU’s rural development policy.
The following review of green payments and agri-environmental policy in the
United States and the European Union shows that they have become an important
aspect of agricultural policy (although green payments are only one tool of agri-
environmental programs).2 Forces at work in the global economy could tend to
1Sandra S. Batie and Richard E. Horan, “Green Payments Policy,” at [http://www.aec.msu.
edu/agecon/smith_endowment/documents/outlaw4.pdf], visited May 27, 2004.
2Other methods used in agri-environmental programs to encourage producers to adopt sound
environmental practices include regulating pesticide use, targeting program funds to areas
of particular environmental need, and setting standards for environmental performance as
(continued...)

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increase the role of green payments as a component of agricultural support. For
example, in multilateral agricultural trade negotiations, pressures are mounting to
curtail trade- and production-distorting support for domestic agriculture.3 Green
payments are thought by many to be less trade- and production-distorting than other
forms of domestic support for agriculture.4 In the future, U.S. producers and
policymakers may focus more attention on the role of green payment programs in
agricultural policy as a vehicle for supporting agriculture and rural areas that would
be less susceptible to cuts resulting from multilateral trade negotiations.
U.S. Agri-Environmental Policy
The United States has implemented agri-environmental policies since the 1930s,
when the Dust Bowl spurred Congress to enact laws providing financial, technical,
and educational assistance to farmers for soil conservation practices. Today, the
United States employs two main types of agri-environmental policy tools: mandatory
cross-compliance mechanisms and voluntary incentives. The few regulatory federal
laws affecting agriculture include the use of restrictions and bans on certain
pesticides, but these have been fairly limited in number and are not a topic of this
report.5
Cross-Compliance Mechanisms
In general, U.S. agri-environmental programs include few compulsory
environmental requirements when compared to EU programs. U.S. cross-compliance
programs aim to discourage farmers from converting wetlands into farmland and
2(...continued)
a requirement for certain agricultural payments. Economic Research Service, Agri-
Environmental Policy at the Crossroads,
ERS Rept. No. 794, 2001, p. 7.
3CRS Report RS21905, The Agriculture Framework Agreement in the WTO Doha Round,
discusses the status of efforts in multilateral trade negotiations to reduce trade-distorting
domestic support to agriculture.
4The World Trade Organization’s Uruguay Round Agreement on Agriculture (1994)
exempts from reduction commitments payments under environmental programs that meet
the following conditions: (a) eligibility for such payments shall be determined as part of a
clearly defined government environmental or conservation program and be dependent on the
fulfillment of specific conditions under the government program, including conditions
related to production methods or inputs; and (b) the amount of payment shall be limited to
the extra costs or loss of income involved in complying with the government program.
5Roger Claassen et al., Agri-Environmental Policy at the Crossroads: Guideposts on a
Changing Landscape
, Agricultural Economic Report Number 794, Economic Research
Service, January 2001, Appendix 1. Major federal programs include mandates for states to
deal with agricultural nonpoint pollution, under the Coastal Zone Act Reauthorization
Amendments of 1990; prohibitions against taking a member of a threatened or endangered
species, under the Endangered Species Act of 1973; regulation of pesticides under the
Federal Insecticide, Fungicide, and Rodenticide Act of 1947; and regulation of concentrated
animal feeding operations under the Federal Water Pollution Control Act Amendments (also
known as the Clean Water Act) .

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from farming highly erodible land (unless the land is protected from excessive soil
erosion). A producer must comply with these programs to receive federal commodity
price and income support, to participate in federal voluntary conservation programs,
and to be eligible for federal agriculture loans or loan-related guarantees and other
agriculture-related federal benefits.6 Farmers who do not comply may still farm, but
are ineligible for these substantial government benefits.
U.S. cross-compliance mechanisms, first enacted in the Food Security Act of
1985, include Highly Erodible Land Conservation (also known as “Conservation
Compliance” and “Sodbuster”) and Wetland Conservation (called “Swampbuster”).7
Land is defined as “highly erodible” when it may erode at (or at more than) eight
times the “soil loss tolerance level” (this is the rate at which soil can erode without
losing its productivity). Much of this highly erodible land is located in the Great
Plains states.
Conservation Compliance. Under this program, farmers producing
agricultural commodities on highly erodible land that was cropped from 1981 to 1985
must implement an approved conservation plan. The plan must provide for a 75%
reduction in erosion as compared to the land’s previous erosion rates.
Sodbuster. Under this program, producers who plow erosion-prone grasslands
(that were not cropped from 1981 to 1985) must implement a conservation plan that
holds erosion to no more than the soil loss tolerance level.
Swampbuster. Under this program, producers converting a wetland area to
cropland may lose eligibility for several federal farm program benefits, although there
are many exceptions in statute (such as wetland conversions that have little effect on
wetland functions).8
Voluntary Agri-Environmental Programs
The majority of U.S. agri-environmental programs are voluntary in nature and
are funded by mandatory spending under the Commodity Credit Corporation (CCC).
They are known as “farm bill” programs because they are authorized by the farm bill,
a multi-year act authorizing federal commodity, farm support, and agricultural
conservation programs, as well as other farm sector-related provisions.9 U.S.
6Economic Research Service, Agricultural Resources and Environmental Indicators,
Chapter 6.3, p. 1, at [http://www.ers.usda.gov/publications/arei/ah722/arei6_3/AREI6_
3compliance.pdf], visited September 8, 2004.
7Food Security Act of 1985, PL 99-198, 99 Stat. 1504, as amended, Subtitles B and C.
8Program descriptions from CRS Report 97-905, Agriculture: A Glossary of Terms,
Programs, and Laws, 4th Edition
.
9The most recent farm bills were enacted in 1985 (P.L. 99-198), 1990 (P.L. 101-624), 1996
(P.L. 104-127), and 2002 (P.L. 107-171). The 1985 law serves as the basis for modern
agricultural policy; the other three laws amend the 1985 law. The next farm bill is
anticipated in 2007, since many of the programs authorized in the 2002 bill will expire after
(continued...)

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voluntary agri-environmental programs have evolved from emphasizing land
retirement to encouraging the adoption of best management practices on working
farmland. The following paragraphs describe U.S. voluntary agri-environmental
programs in the order they were enacted.
Land Retirement Programs. These programs involve retiring land from
crop production for the duration of the program contract in exchange for annual
payments. They are precursors to “green payments” programs in that they are the
first modern voluntary agricultural programs to target environmental goals.
The Conservation Reserve Program (CRP) (1985). This program has
its roots in the 1950s-era Soil Bank program, which had twin goals of controlling
agricultural production and reducing soil erosion by idling up to 30 million acres of
land producing surplus commodities. First enacted in the 1985 farm bill,10 CRP is
the largest private land retirement program in the United States, and by far the largest
“farm bill” agri-environmental program in terms of annual spending (CBO estimates
the program to cost $1.8 billion in FY2004).11 Farmers may submit bids to “enroll”
land in CRP for 10-15 years. The CRP’s original aim was to retire 40 to 45 million
acres of cropland, primarily to reduce soil erosion but also to protect soil
productivity, control surplus production, and provide income support to farmers.
Administered by the Farm Service Agency (FSA), CRP now has a more
environmental focus. Since 1990, FSA has evaluated bids to enroll land in CRP
based on an Environmental Benefits Index (EBI) score, which reflects the impact
enrollment would have on various environmental measures (ground water and
surface water quality, wind erosion, wildlife habitat, etc).12 FSA has also developed
a number of subprograms within CRP, the most visible of which is the Conservation
Reserve Enhancement Program or CREP. CREP targets land adjacent to streams in
environmentally sensitive watersheds for retirement. As reauthorized in the 2002
farm bill, CRP may accept up to 39.2 million acres (about 8% of US cropland) at any
one time. As of August 2004, 34.9 million acres are enrolled.13
The Wetlands Reserve Program (WRP) (1990). WRP was first enacted
in the 1990 farm bill. Administered by the Natural Resources Conservation Service
(NRCS), WRP provides long-term protection to wetlands by requiring participants
to implement approved wetland restoration and protection plans. Most lands enrolled
in WRP are flood-prone agricultural lands. Because the goal is long-term wetland
9(...continued)
that year.
10Economic Research Service, Agri-Environmental Policy at the Crossroads, Agricultural
Economic Report No. 794, January 2001, p. 7.
11This and subsequent program cost estimates are from the Congressional Budget Office
March 2004 baseline. By way of comparison, CRP is twice as expensive as the next most
costly FY2004 program, EQIP ($975 million).
12Farm Service Agency, Conservation Reserve Program: Final Environmental Impact
Statement
, Chapter 3 (2003).
13Farm Service Agency, Monthly CRP Statistics, August 2004, accessed at [http://www.
fsa.usda.gov/dafp/cepd/stats/aug2004.pdf] on October 4, 2004.

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restoration, most land is enrolled under a permanent easement or a 30-year easement.
(Land may also be enrolled for ten years without any easement.) The 2002 farm bill
set an enrollment limit of 2.275 million acres, with a goal of enrolling 250,000 acres
in any given year.14 As of 2003, a total of approximately 1.5 million acres have been
enrolled.15 WRP is estimated to cost $280 million in FY2004.16
Working Lands Programs. While land retirement programs were popular,
they could not address environmental problems stemming from ongoing agricultural
production. Thus programs for working farms were created, providing payments to
farmers for increased environmental services on working lands (“green payments”).
Below is a description of four major working lands programs. One targets
environmental problems on farms, while the others aim to create habitat or preserve
especially valuable farmland. These programs have been very popular and received
substantial funding increases in the 2002 farm bill.
The Environmental Quality Incentives Program (EQIP) (1996). The
best-known U.S. program is the Environmental Quality Incentives Program (EQIP).
It has been described as the first major U.S. “green payments” program specifically
designed to pay farmers for environmental benefits while allowing continued
agricultural production.17 It is also the second-largest agri-environmental program
in terms of funding ($975 million in FY2004).18 First enacted in the 1996 farm bill19
and subsequently reauthorized in the 2002 farm bill,20 EQIP promotes agricultural
production and environmental quality as compatible goals, so producers can keep
lands in farming rather than retiring them. EQIP provides cost-sharing and technical
assistance for implementing specific conservation measures (such as installing buffer
strips near streams to improve water quality) to remedy particular environmental
problems on farms, and may provide incentive payments to encourage producers to
adopt certain practices. NRCS distributes funds at the national level based on
national environmental priorities, including reduction of nonpoint source pollution,
reduction of air pollution and control of soil erosion. Once each state receives
funding, it determines its own environmental priorities and funds the appropriate
14P.L. 107-171, §2202.
15Natural Resources Conservation Service, “Program Status — Wetlands Reserve Program,”
accessed at [http://www.nrcs.usda.gov/programs/wrp/State_Maps_Stats/progstat.html] on
September 10, 2004.
16See footnote 11.
17 Karen Klonsky and Florence Jacquet, “How Well do Green Payments Fit into the Green
Box?” Paper presented at the International Conference Agricultural Policy Reform and the
WTO: Where Are We Heading?
, Capri, Italy, June 23-26, 2003, accessed at [http://www.
ecostat.unical.it/2003agtradeconf/], June 16, 2004.
18See footnote 11.
19P.L. 104-127, §334.
20P.L. 107-171, §2301.

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EQIP projects. As authorized in the 2002 farm bill, 60% of EQIP funds must be
targeted at practices related to livestock production.21
The Wildlife Habitat Incentives Program (WHIP) (1996). WHIP was
enacted in the 1996 farm bill22 and reauthorized in the 2002 farm bill.23 It provides
cost-sharing to landowners to develop or restore wildlife habitat on their agricultural
operations. In exchange, landowners voluntarily limit their activities on the land for
a specified time but retain private ownership of the land. WHIP targets at-risk
species, declining habitats, and conservation practices that are ineligible for other
agricultural conservation program funds (e.g., fish passages). Agreements range from
5 years to 15 years or more in duration. Funding is distributed to states, which rank
applications from landowners within their state and set local wildlife habitat
priorities. State ranking criteria include items such as proximity to protected wildlife
habitat, projected longevity of habitat created, and cost per acre. Since 1998, WHIP
has enrolled over 2 million acres.24 WHIP is estimated to cost $42 million in
FY2004.25
Farm and Ranch Lands Protection Program (FRPP) (1996). FRPP
was first established by §388 of the 1996 farm bill. It is a voluntary program that
helps producers keep their land in agriculture by providing matching funds to state,
tribal, local, or non-governmental organizations that have existing farmland
protection programs to purchase permanent conservation easements. The easements
usually restrict non-farm development and subdivisions on the land, although the
landowner retains the right to farm the land. The landowner must also implement a
conservation plan to reduce soil erosion on any highly erodible land. NRCS state
officials decide which applications to fund, and each state has an FRPP plan detailing
the degree of development pressure, acreage of land to be protected, acreage of land
lost, and other program indicators. Through 2002, FRPP has protected over 170,000
acres in 35 states.26 FRPP is estimated to cost $112 million in FY2004.27
The Grasslands Reserve Program (GRP) (2002). Authorized as a new
program in the 2002 farm bill, the Grasslands Reserve Program (GRP) supports
grazing, ranching and pasture operations.28 The program targets grasslands
21Ibid.
22P.L. 104-127, §387.
23P.L. 107-171, §2502.
24Personal communication with NRCS.
25See footnote 11.
26NRCS, Fact Sheet, Farm and Ranchland Protection Program, April 2003. Other
information derived from NRCS “Program Description,” Farm and Ranchlands Protection
Program, April 2003, and NRCS, “Key Points,”Farm and Ranchland Protection Program,
April 2003.
27See footnote 11.
28P.L. 107-171, §2401.

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containing forbs29 or shrubs, especially areas that historically have been grasslands
and have potential to provide habitat for animal or plant populations of significant
ecological value. GRP also targets grasslands threatened with conversion to other
uses. GRP offers landowners a choice of easements (lasting 30 years or permanently)
or rental agreements (lasting 10 to 30 years). In exchange, landowners protect and,
if necessary, restore grasslands in accordance with an NRCS restoration agreement.
GRP aims to protect 2 million acres of grasslands.30 In FY2003, GRP enrolled about
241,000 acres of land.31 GRP is estimated to cost $111 million in FY2004.32
U.S. Green Payments: The Conservation Security Program (CSP)
(2002). Some argue that the largest working lands program, EQIP, targets farms’
environmental problems rather rewarding producers who run environmentally
friendly operations. This was part of the basis for the Conservation Security Program
(CSP), enacted in section 2001 of the 2002 farm bill (P.L. 107-171). It is
acknowledged by some U.S. analysts as the most comprehensive U.S. “green
payments” program because it encourages integrated whole-farm planning and
rewards producers who proactively conserve environmental resources across their
entire agricultural operation. The eligibility criteria for CSP reward a producer’s
historic record of conservation as well as his willingness to do more conservation in
the future.
CSP creates a three-tiered system that rewards increased levels of conservation
on enrolled lands with increased payments. Producers may earn up to $20,000
annually (for “Tier I”-level protection — protecting one natural resource on part of
their operation) to $45,000 annually (for “Tier III”-level protection — protecting all
natural resources on all of their operation). In exchange, the 2002 farm bill requires
a producer to comply with cross-compliance programs, share in the farm operation
and risk of production, submit a conservation security plan, and sign a conservation
security contract.
Although CSP was designed to be widely available for many types of
agricultural operations, the Bush Administration is implementing the program with
additional eligibility criteria designed to reward only the highest levels of
conservation. These criteria will also winnow the number of eligible applicants,
which the administration says is necessary due to a congressional limit of $41.4
million on CSP funding in FY2004.33 The Administration adopted this approach in
a June 2004 interim final CSP rule (69 FR 34502) and held the first CSP signup from
July 6 to July 30, 2004. On August 28, 2004, the Bush Administration announced
29Forbs are also known as weeds or wildflowers. They provide important forage and seeds
for wildlife, as well as cover and protection from predators.
30NRCS, Questions and Answers, Grassland Reserve Program, August 2003.
31See [http://www.nrcs.usda.gov/programs/GRP/FY2003_ProgStats/GRP%202003%20acres
.pdf, NRCS], accessed on September 16, 2004.
32See footnote 11.
33See CRS Report RS21740, Implementing the Conservation Security Program, by Barbara
Johnson.

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it had funded 2,188 CSP contracts at average payments ranging from about $7,000
(for Tier I) to about $23,000 (for Tier III).34
Outlook for U.S. Financing of Agri-Environmental Measures
The U.S. voluntary agri-environmental programs noted above — the so-called
“farm bill” programs — received dramatic increases in funding authority in the 2002
farm bill. At the time of enactment, the Congressional Budget Office (CBO)
estimated the 2002 farm bill would increase overall spending for conservation and
environmental programs by 80 percent.35 This funding level may be difficult to
sustain given the current budget pressures and projected deficits. The increases
authorized in the 2002 farm bill already have been cut in annual appropriations,36 and
this trend may be continuing for FY2005. The FY2005 agriculture appropriations
bill (as passed by the House and reported by the Senate Appropriations Committee)
would limit funding for EQIP, WHIP, and FRPP, as well as the number of acres that
may be enrolled in WRP. The House bill would also limit CSP to $194 million,37
although the Senate committee bill would reinstate unlimited funding. This year and
in future years, CSP may be especially vulnerable to cuts because (unlike other farm
bill programs) its statutory funding is unlimited, and therefore appropriators may
achieve more “savings” by limiting CSP. Congress has already limited CSP twice,
once by capping it at $3.7 billion over 10 years in the FY2003 Consolidated
Appropriations Act38 and a second time by limiting FY2004 spending as noted above.
EU Agri-Environmental Policy
In the EU, the relationship between agriculture, the environment, and
development of rural areas has found expression in the concept of multifunctionality.
Farmers are viewed as producing not only food and agricultural products, but also
positive environmental and other benefits (externalities). Agri-environmental policy
focuses mainly, but not exclusively, on promoting positive externalities associated
with agricultural production. These include, among others, landscape, rural
34Figures derived from “CSP FY2004 Payment and Contract Information,” accessed at
[http://www.nrcs.usda.gov/programs/csp/], September 13, 2004.
35Based on CBO’s April 2002 baseline. Source: Economic Research Service, [http://www.
ers.usda.gov/features/farmbill/analysis/conservationoverview.htm], accessed September 16,
2004.
36Although changes in mandatory programs usually require changes in authorizing
legislation, appropriators (who deal with discretionary funds) frequently limit mandatory
funding in annual appropriations bills. This provides savings that appropriators can use to
increase funding for discretionary programs. “Savings” are relative to a mandatory
program’s budget score, as calculated by the Congressional Budget Office (CBO).
37H.R. 4766, §741.
38 At the time of the 2003 consolidated appropriations, CBO scored CSP at $6.8 billion over
10 years. By limiting CSP to $3.7 billion instead, appropriators were able to direct the
remaining $3.1 billion to other needs (in this case, agricultural disaster assistance). CSP was
limited by P.L. 108-199, Division H, §101.

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amenities, and cultural heritage. The premise underlying agri-environmental policy
is that these externalities are public goods that are undervalued by the market and
therefore require social or public funding to induce farmers to produce them. More
broadly, the EU maintains that support of commodity production and farm incomes
that also engenders these positive externalities is also justified. Critics of the
concept argue that multifunctionality is intended to justify substantial income support
for farmers and that support for the public goods produced by agriculture should be
specifically targeted. In addition to meeting desirable social goals, EU agricultural
policymakers view shifting funds from commodity support to rural development,
including agri-environmental programs, as being more compatible with multilateral
efforts in the World Trade Organization (WTO) to curb domestic support, while
maintaining support that is not, or is at most minimally, trade-distorting.39
Since 1985, agri-environmental (green) payments as defined above have been
available to EU farmers. Successive reforms of the EU’s Common Agricultural
Policy (CAP) in 1992, 2000, and 2003 have placed increasing emphasis on green
payments to meet farm policy and social objectives. In the process, agri-
environmental measures have become more integrally a part of the CAP.
General EU Environmental Policy and Agriculture
Beginning in the 1970s, the EU issued a number of directives outlining
measures to deal with water pollution, nitrates, pesticides, and habitats and wild
birds. Although these initiatives were important to agriculture, they were taken as
part of the EU’s general environmental policy, outside the framework of the CAP.
These environmental regulations will, as of January 1, 2005, become the basis
of so-called “statutory environmental management requirements” with which EU
farmers must comply in order to be eligible for direct income support under the
recently reformed CAP (discussed below). These general environmental regulations
cover the following.
Water Protection. A series of directives enumerate undesirable or dangerous
substances and establish standards for protecting water sources and/or safeguard
water quality.40
Nitrates. The nitrate directive aims to reduce water pollution caused by nitrates
from agricultural sources by requiring member states to implement action programs
in areas identified as being vulnerable to pollution. Among other requirements, the
directive limits the application of manure to 170 kg of nitrogen per hectare.41
39See Batie and Horan, cited above.
40The principal water protection directive is Council Directive 80/68/EEC , December 17,
1980, on the protection of groundwater against pollution caused by certain dangerous
substances (OJ L 20, 26.1.1980, p. 43). In this and subsequent footnotes referring to EU
regulations, OJ refers to the Official Journal of the EU.
41Council Directive 91/676/EEC of December 12, 1991, concerning the protection of waters
(continued...)

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Pesticides. A number of directives, issued from 1976 to the early 1990s, aim
to reduce the public health risks associated with the use of plant protection products.
These directives establish and regulate maximum residue limits (MRLs) of pesticides
for various products, including fruits and vegetables, cereals, and livestock
products.42 Other directives deal with harmonization of various national regulations
concerning conditions, arrangements, and procedures related to the classification,
packaging and labeling of pesticides, and with registration and control of sales of
pesticides.
Habitats and Wild Birds (The Natura Network). These directives aim to
protect natural habitats of wild fauna and flora and to protect wild birds in their
habitats.43 Member states have to take the necessary measures to achieve these aims
and to notify protected areas to the European Commission. Most of the designated
areas are in agricultural or wooded areas created and maintained by farming or other
human activity.
Agri-Environmental Programs in the CAP
Environmental objectives initially were omitted from the CAP, which was
conceived primarily as a policy to support the operation of agricultural commodity
markets for the benefit of farmers and consumers. However, the CAP did include an
objective with respect to “structural” aspects of agriculture (e.g., farm size, farm
population characteristics, farm organizations, investment in production or marketing
facilities, or regional disparities), which served subsequently as a legal (and financial)
framework for agri-environmental measures.
Until 1992 (see below), agri-environmental measures were financed from a
separate structural fund, the Guidance Section of the European Agricultural
Guarantee and Guidance Fund (EAGGF), while commodity support was financed
from the Guarantee Section. Guidance funds averaged about 10% of the total
funding of the CAP (around EUR 4 billion); agri-environmental programs were only
a small portion of total Guidance spending. As structural measures, pre-1992 agri-
environmental programs that meet the general definition of green payments used in
this memo were co-financed on a 50-50 basis by the EU and member states, although
the percentage of EU financing could be larger for projects in poorer regions. These
programs, which are now incorporated into the EU’s rural development policy,
provide compensation to farmers for undertaking specific agri-environmental
measures. Among the programs are the following.
41(...continued)
against pollution caused by nitrates from agricultural sources (OJ L 375, 31.12.1991, p. 1).
42Pesticide use on fruits and vegetables is covered by Council Directive 76/895/EE (L 340,
9.12.1976, p. 179); cereals by Council Directive 86/362/EEC (OJ L 221, 7.8.1986, p. 36);
and animal products by Council Directive 86/363/EEC ( OJ L 221, 7.8.86, p. 43)
43 Council Directive 92/43/EEC (OJ L 206, 22.7.92, p. 7) and Council Directive 79/409/EEC
(OJ LO 103, 2.5.1979, p. 1)

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The Less Favored Area Program (LFA).44 The LFA targets farmers in
mountainous areas, areas threatened with abandonment, and other areas where
agriculture is deemed necessary for the conservation or improvement of the
environment, management of landscape, promotion of tourism, or protection of
coastlines. Farmers in these areas can receive payments aimed at compensating the
costs and income losses resulting from implementation of environmental or
conservation measures. Member states identify the zones and implement the
programs in their national territories. LFA payments were fixed at EUR 200 per
hectare.
The “Efficiency” Regulations.45 As indicated by their designation, these
regulations were aimed at improving the efficient development of the agricultural
sector. The regulations encouraged, for example, the creation of agricultural
associations and the formation of groups of farmers to promote common use of
equipment in farming operations. It also introduced the possibility for member states
to make payments to farmers for environmentally friendly farming practices. Such
payments were subject to rules intended to prevent them from becoming national
subsidies of a competition-distorting nature. However, financing was by member
states only. Without EU funds, the regulations were not attractive to many member
states. As a result, only four countries (Denmark, Germany, the Netherlands, and the
United Kingdom) implemented agri-environmental programs under the efficiency
regulations.
Organic Farming.46 These regulations encourage farmers to engage in this
type of production, which is deemed beneficial and environmentally friendly because
of its emphasis on less intensive land use, exclusion of chemical inputs, and use of
conserving practices. The EU legislation establishes principles and rules to be
followed on production, processing, labeling, and imports of organically produced
products. They provide for inspection and control of the process at all stages in order
to verify that organic methods have been used. Incentive payments are available to
farmers who participate voluntarily in organic farming, and participants may receive
annual payments for up to five years and up to a maximum of EUR 3000 per holding
per year.
Agri-Environmental Measures in the 1992 CAP Reform
The EU undertook a major reform of the CAP in 1992. The major aims of the
reform were to reduce market surpluses, make agricultural products more competitive
in world markets, secure farmers’ incomes, and conform the CAP to anticipated
WTO rules and disciplines with respect to domestic support. The essential element
of the reform was to reduce price supports to farmers, while making direct payments
44Council Directive 75/268/EEC of 28.4.1975, OJ L 1289, 19.5.1975, p. 1
45Council Regulation 797/85 of 12.3.1985 (OJ L 93, 30.3.1985, p. 1) and Council Regulation
2328/91 of 15.7.1991 (OJ L 218, 6.8.1991, p. 1)
46Council Regulation 2092/91 (OJ L 198, 22.7.91, p. 1) and Commission Regulation (EC)
1935/95, 22.6.1995 (OJ L 186, 5. 8.95, p. 1).

CRS-12
to farmers to compensate them for loss of income due to price reductions. At the
same time, the reform gave additional emphasis to agri-environmental measures.
Agri-environmental measures were dealt with in two ways in the 1992 CAP
reform. First, some agri-environmental measures were included in commodity
support programs; second, specific agri-environmental measures were introduced as
measures “accompanying” the market reforms. Examples of the former include
compulsory set-asides for large farmers, primarily to manage supplies but also to
foster the rotational release and recovery of arable land; limits on stocking density
(per holding or per hectare) in order to qualify for payments; extensification
premiums for further reducing stocking density per hectare; and payments to fruit and
vegetable producers made contingent on the adoption of environmentally sound
production practices.
The three accompanying measures in the 1992 CAP reform were:
! agricultural production methods compatible with the requirements of the
protection of the environment and the maintenance of the countryside;47
! early retirement from farming;48 and
! afforestation of agricultural land.49
For the agri-environmental accompanying measures, assistance, in the form of
payments, would be made to farmers or herders who voluntarily participated in
measures to:
! reduce the use of fertilizers and chemical inputs;
! introduce or continue with organic farming methods
! change production methods toward or maintain extensification of production;
! reduce the number of animals per forage unit;
! maintain the countryside and landscape and generally promote bio-diversity;
! ensure the upkeep of abandoned farmland or woodlands;
! set aside farmland for at least 20 years for nature reserves or parks or to
protect hydrological systems; and
! manage land for leisure activities and public access.
Payments were made to farmers to cover the costs and/or loss of income from
adopting the agri-environmental measures. In addition, assistance included measures
to improve the training of farmers with regard to farming or forestry practices
compatible with environmental protection.
The two other accompanying measures, though not principally agri-
environmental, also had environmental aspects. The principal aim of the early
47Council Regulation (EEC)2078/92 of 30.6.1992 (OJ L 215 30.7.92, p. 85), as amended by
Commission Regulation (EC)2772/95 (OJ L 288, 1.12.1995, p. 35).
48Council Regulation (EEC) 2079/92 ) of 30.6.1992 (OJ L 215, 30.7.1992, p. 91).
49Council Regulation (EEC) 2080/92 of 30.6.1992 (OJ L 215, 30.7.1992, p. 96).
Afforestation refers generally to establishing forest cover on agricultural land.

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retirement scheme was to encourage replacement of elderly farmers by younger ones
or to reallocate the land to non-agricultural uses. In both cases, member states were
to operate the programs “in harmony with the requirements of environmental
protection or assure that the land is used in a manner compatible with protection or
improvement of the quality of the environment and of the countryside” (Reg. EEC
2079/92). Similarly, the EU afforestation program aimed to encourage farmers to
withdraw their land from crop or livestock production for up to 20 years (a
permanent set-aside) and dedicate it to afforestation. Implementation of the program
was supposed to contribute to forms of countryside management more compatible
with environmental balance and to combat the effects of greenhouse gasses by
absorbing carbon dioxide through an eventual improvement in forest resources (EEC
2080/92).
Each member state could decide on its participation in the accompanying
environmental measures. Programs were funded from the Guarantee Section of the
EAGGF, not the Guidance Section, on a matching basis — 50% of the costs of the
programs were funded by the EU, 50% by member states. (EU co-financing for such
projects in poorer regions was 75%.) Farmers who voluntarily agreed to implement
agri-environmental measures for a minimum period of five years received annual
payments calculated on the basis of additional costs and income forgone and the
financial incentive needed to spur adoption. Payments were limited to EUR 450-900
per hectare.50 Payments were also made to livestock producers on a per animal unit
basis (EUR 210 for each sheep or cattle unit by which a herd is reduced; EUR 100
for each livestock unit of an endangered breed reared).
That these agri-environmental programs were funded from the Guarantee
Section of the EAGGF rather than the Guidance Section was an important change.
This is the first time that Guarantee funds were allocated to anything other than
commodity support. But whereas commodity support was totally financed by the
Guarantee Section, the Guidance Section approach of co-financing structural
programs on a matching basis was used to allocate the Guarantee funds to the agri-
environmental (and other rural development) programs.
Agri-Environmental Programs in Agenda 200051
The process of agricultural policy reform and of integrating agri-environmental
measures into agricultural policy was continued with the Agenda 2000 reforms. The
primary rationale for further reforming the CAP was to adapt it to the enlargement
of the EU by another 10 member states within existing budgetary and other limits.
A second rationale was to prepare the EU for new WTO agricultural trade
negotiations that were to have been launched in Seattle in 1999, but were launched
subsequently at Doha, Qatar, in 2001.
Agenda 2000 established adoption of agri-environmental measures as the only
compulsory element of EU rural development policy. Member states have to include
50One hectare is equivalent to 2.47 acres. 1 EUR is about $1.21 as of the date of this report.
Consequently, 450-900 EUR per hectare is about $220-$440 per acre.
51Council Regulation (EC) 1257/99 of May 17, 1999 (OJ L 160 26.6.1999, p. 80).

CRS-14
agri-environmental measures (such as those identified in the 1992 regulations) in
their rural development programs to tap funding available from the Guarantee
Section of the EAGGF.
Agenda 2000 also established rural development (including the agri-
environmental accompanying measures and the other environmental programs) as the
second pillar of the CAP, the first pillar being the commodity support programs and
direct income support payments to farmers. All of the rural development measures
are co-financed by the EAGGF Guarantee Section in all member states. This fund
has an annual average ceiling of EUR 4.3 billion for rural development (which
includes agri-environmental measures) for the budget period 2000 to 2006, about
10% of annual Guarantee funds under Agenda 2000. The EAGGF Guarantee
Section, as a rule, co-finances 50% of the cost of the rural development/agri-
environmental measures undertaken by member states. Poorer regions could qualify
for a higher percentage of EU co-financing.
2003 CAP Reforms and Agri-Environmental Programs52
A midterm review of Agenda 2000 undertaken by the EU resulted in further
significant reforms of the CAP in 2003. The major reform was the establishment of
a single farm payment decoupled from production (with some exceptions for certain
crops) to replace the myriad commodity payments made to EU farmers. Receiving
the single payment is contingent on farmers’ compliance with environmental and
other requirements (food safety, occupational safety, animal welfare) set at the EU
and national levels (cross-compliance). Cross-compliance is now compulsory and
all farmers receiving direct payments will be subject to it. Farmers will be sanctioned
for non-observance of these standards through cuts in direct payments. These policy
changes take effect on January 1, 2005. Member states still benefit from co-
financing of agri-environmental and other rural development measurers out of
Guarantee funds. The 2003 reform makes additional funds available for rural
development by reducing (modulating) the Guarantee funds available for commodity
price and income support and transferring them to rural development.
Cross-Compliance with Agri-Environmental Measures. In order to
qualify for the single farm payment, EU farmers must observe “statutory mandatory
requirements” related to the environment as well as “good agricultural and
environmental farming practices.” (Cross-compliance also entails meeting standards
for food safety and animal welfare). No additional compensation is available to
farmers for meeting these minimum standards. The statutory mandatory requirements
include the regulation established in the water protection, nitrate, pesticide, and
habitats and wild birds directives discussed above. Good farming practices are
spelled out in the regulation implementing the 2003 reforms (see Table 1).
52Council Regulation (EC) 1782/2003 L 270/1 21.10.2003, p. 1 ff.

CRS-15
Table 1. Good Agricultural and Environmental Practices
Issue
Standards
Soil erosion:
— Minimum soil cover
Protect soil through appropriate measures
— Minimum land management
reflecting site-specific conditions
— Retain terraces
Soil organic matter:
— Standards for crop rotations where
Maintain soil organic matter levels
applicable
through appropriate practices
— Arable stubble management
Soil structure:
— Appropriate machinery use
Maintain soil structure through
appropriate measures
Minimum level of maintenance:
— Minimum livestock stocking rates
Ensure a minimum level of maintenance
or/and appropriate regimes
and avoid the deterioration of habitats
— Protection of permanent pasture
— Retention of landscape features
— Avoiding the encroachment of
unwanted vegetation on agricultural
land
Source: Annex IV of Council Directive (EC) No 1782/2003.
Farmers who do not comply with the statutory management requirements or
good agricultural and environmental practices “as a result of action or omission
directly attributable to the individual farmer” will be subject to reduction or
cancellation of their single farm payment. If non-compliance results from negligence,
the farmer’s payment is reduced by a minimum of 5% or, in the case of repeated non-
compliance, 15%. If non-compliance is intentional, the percentage reduction will be
not less than 20% and may go as high as the total payment for one or more calendar
years. Member states get to keep 25% of any amounts derived from non-compliance.
Member states are responsible for carrying out spot checks to verify that farmers
are complying with the requirements. The European Commission is responsible for
ensuring that the member states are enforcing cross-compliance and providing them
with technical assistance if needed.
Assistance to Farmers in Meeting Standards. The 2003 reforms added
two measures that assist farmers in meeting the new, more demanding standards.
Temporary and degressive support will be payable to farmers to help them adapt to
the introduction of the new standards. Assistance will be on a flat-rate basis and
degressive for a maximum period of five years and subject to a ceiling of EUR
10,000 per holding in any year. Support will also be available to help farmers with
the costs of using farm advisory services to assess the performance of their farm
business against the new cross-compliance standards being introduced. Farmers may
receive up to a maximum of 80% of the cost of such services, subject to a ceiling of
EUR 1,500 per service.
Support for Implementing Natura (2000). The 2003 CAP reforms also
made some changes in the Natura 2000 program (see page 7). Per hectare funding

CRS-16
for areas covered by the habitats and wild birds directives will be increased.
Assistance can start at EUR 500 per hectare, declining to EUR 200 per hectare over
five years. Higher payments initially are intended to reflect higher initial costs
associated with adjustment of farming practices when land is designated under the
Natura 2000 program. The total area eligible for Natura 2000 funding is no longer
restricted to a maximum of 10% of the area of a member state.
Increased EU Co-Financing for Agri-Environment (and Animal
Welfare). EU co-financing for these measures increases to a maximum of 85% in
poorer regions and 60% in other areas. (Previous co-financing of rural development
measures was 75% for poorer regions and 50% for all others.)
Increased Support for LFAs. Compensatory allowances for LFAs are
increased to a maximum of EUR 250/hectare (on average at member state levels).
Previously, per hectare payments in LFAs were set at EUR 200.
Additional Financing for Rural Development Policy
(Modulation)

The 2003 CAP reforms also introduced a new system for financing rural
development (including agri-environmental) policy called compulsory modulation.
Under compulsory modulation funds from commodity support will be transferred to
rural development support. Member states may then use the additional funds to
finance new rural development measures or to increase financing of existing
measures. Under the system, farms receiving over EUR 5000 a year in direct
payments will have those payments reduced (i.e., modulated) by 3% in 2005, 4% in
2006, and 5% from 2007 onward. The additional funds become available in 2006.
When the modulation rate reaches 5%, estimates are that it will result in additional
EU rural development funds (inflation-adjusted) of EUR 1.2 billion per year (over
the 4.3 billion previously allocated).
Currently EU agri-environmental programs account for 52% of rural
development spending (from both EU and member states’ financing). Within the
rural development spending category, agri-environmental programs compete with
rural restructuring (e.g., investment aids) and non-farm rural economy programs (e.g.,
agri-tourism or village renewal). Despite these competing programs within the rural
development program, spending on agri-environmental measures appears likely to
continue as a substantial component of total rural development spending over the
2007-2013 EU budget period.53
53“Proposed budget commitments for the CAP,” in AgraFacts, June 30, 2004, published for
Agra-Europe (AgE) Bonn, German Federal Republic, by AGRA, 84 Boulevard de
Sebastopol, 75003 Paris, France.

CRS-17
Table 2. Proposed Budget Commitments for the CAP,
Rural Development, and Total EU Spending
(EUR million — 2004 prices)
2007 2008
2009
2010
2011
2012
2013
Rural
11,759
12,235
12,700
12,825
12,952
13,077
13,205
Develop-
ment

Total
55,259
55,908
56,054
55,859
55,666
55,863
55,497
CAP
Total EU
133,560
138,700
143,140
146,670
150,200
154,315
158,450
Note: Rural development, which includes spending on agri-environmental measures, is a component of total
CAP spending.
Funds generated by modulation will be distributed among all member states for
use in their rural development programs financed by the EAGGF Guarantee Section.
As of 2007, 20% of the modulation money generated in a member state will be
allocated to that member state. The remaining amounts will be redistributed among
member states, according to their
! agricultural area;
! agricultural employment;
! GDP per capita purchasing power.
Every member state, however, will get back at least 80% of the modulation funds
generated from its farmers.
EU Spending on Agri-Environmental Measures
It is difficult to get an estimate of EU and member states’ total spending on agri-
environmental programs, particularly since funding of such activities is a shared
responsibility between the EU and the member states. Nevertheless, an idea of how
much is spent on this category of programs is included in the EU’s notification to the
WTO of domestic support for agriculture in 2000-2001 (marketing year), the most
recent year available.54 The EU reports spending by the EU and its member states of
EUR 5.7 billion for “protection of the environment and preservation of the
countryside, control of soil erosion, extensification, aid for environmentally sensitive
areas; support and protection of organic production by creating conditions for fair
competition; aid for forestry measures in agriculture; (and) conservation of genetic
resources in agriculture.” In contrast, the United States, in its WTO notification,
reports spending of $2.7 billion for various environmental programs in its 2000-2001
notification.55
54The EU notification of domestic support for agriculture for MY2000-MY2001 is available
at [http://docsonline.wto.org/DDFDocuments/t/G/AG/N/EEC/49.doc].
55The U.S. notification of domestic support for agriculture for MY2000-MY2001 is
available at [http://docsonline.wto.org/DDFDocuments/t/G/AG/N/USA/51.doc].

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Some Concluding Observations
This review of U.S. and EU agri-environmental policies reveals both similarities
and differences (see the following table). Many of the major environmental issues
dealt with by U.S. and EU policy and programs are much the same — soil and water
quality, wildlife habitat, farmland preservation and protection, and wetlands
protection and restoration. A major difference, however, is the extent to which
cross-compliance measures are used in relation to receipt of commodity support
payments. Although U.S. agri-environmental policy has emphasized voluntary
participation, farmers or ranchers with erodible lands and wetlands must comply
with cross-compliance measures as a condition for receiving commodity payments.
In the EU, on the other hand, all farms (as of January 1, 2005) are required to meet
certain statutory environmental management requirements and observe “good
agricultural and environmental practices” in order to receive support payments
(provided as a single farm payment).56
In the United States, the federal government is primarily responsible for
program administration and funding. In contrast, EU member states are primarily
responsible for administering agri-environmental programs which are co-financed
generously by the European Commission. In the United States, farmers receive
technical assistance and financial or cost-sharing assistance from the federal
government in developing and implementing conservation plans. In the EU, farmers
receive technical assistance to enable them to meet the soon-to-be compulsory agri-
environmental standards and financial aid as they implement activities to meet the
standards.
In the United States, agri-environmental programs are not explicitly integrated
with rural development policy and future funding levels are at issue. EU
policymakers seem to have made a decision to integrate agri-environmental programs
into a broad rural development policy. The EU, as part of its most recent reform of
the CAP, has also made a policy decision to shift increasing amounts of funds from
commodity to agri-environmental support. The United States has not moved in this
direction. Part of the difference with respect to funding derives from different
approaches to budgeting for agricultural programs in the EU and the United States.
While the EU operates on a six-year fixed budget for agriculture (with inflation
factors built in), the United States operates with budgets decided in annual
appropriations legislation, although programs are authorized for multi-year periods.
Further developments in agri-environmental policy in both the United States and
the EU will likely depend at least in part on outcomes from ongoing multilateral
agricultural trade negotiations. If these negotiations result in further restrictions on
trade-distorting domestic commodity support, farmers, ranchers, and policymakers
may view increased funding for green payments as an attractive alternative for
providing support to agriculture.
56A discussion and evaluation of the EU’s recent policy reforms is Analysis of the 2003 CAP
Reform
prepared by the Organization for Economic Cooperation and Development (OECD),
Paris, France, 2004.

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Table 3. Comparison of U.S. and EU Agri-Environmental Policy
Key Policy Aspects
U.S.
EU
Overall purpose of
Encourage voluntary
Integrate range of environmental
policy
adoption of agricultural
and socio-economic goals into
practices that benefit the
agricultural policy.
environment.
Program
Federal government
Member States primarily
administration and
primarily responsible for
responsible for program
funding
administration and
administration; co-financing with
funding.
EU on formula basis.
Relationship to
Cross-compliance
In principle, cross-compliance
Commodity
required for farms with
with all agri-environmental
Payments
certain types of land to
programs required for all farms to
receive commodity
receive commodity payments.
payments (see “cross-
compliance,” below).
Major issues
- Soil quality
- Soil quality
addressed by agri-
- Water quality
- Water quality
environmental
- Wildlife Habitat
- Wildlife habitat
policy
- Farmland Preservation
- Farmland Preservation
- Grassland and Wetland
- Wetland Protection and
Protection and
Restoration
Restoration
- Nitrates
- Water Conservation
- Pesticides
- Air Quality.
- Wild birds
- Stocking density
(The US addresses
- Permanent pastures
pesticides through
- Rural landscape
regulation.)
(Also food safety, animal welfare,
promotion of rural development).
Cross-Compliance
Compulsory cross-
Compulsory cross-compliance
Measures: Programs
compliance with resource
with:
or specific actions
conservation measures:
- Statutory (environmental)
required to receive
-Conservation
management requirements
direct commodity
compliance (erodible
- “Good Agricultural and
support payments
lands)
Environmental Practices;”
- Sodbuster (erodible
- Other standards (food safety,
grasslands)
animal welfare).
- Swampbuster
(wetlands).
Assistance to
Technical assistance for
Temporary and degressive
producers to meet
developing conservation
(reduced over time) compensatory
compulsory
plans; financial or cost-
financial aid to meet standards;
measures
sharing assistance to
technical assistance (farm
implement plans.
advisory services).

CRS-20
Key Policy Aspects
U.S.
EU
Voluntary Programs
CRP, WRP, EQIP,
Member State programs co-
WHIP, GRP, FPP, CSP
financed with EU, e.g., reduction
and other smaller
of fertilizer use, organic farming,
programs.
extensification, upkeep of
abandoned farmland, or
permanent set-aside.
Source: Congressional Research Service, based on literature review including U.S. and EU
publications.