European Union Agricultural Support ‘Coupling’ in Simulation Modelling: Measuring the Sustainability Impacts

Abstract

Over the last twenty years, the Common Agricultural Policy of the European Union has evolved into a multifunctional policy instrument. As part of this transformation, most farmer receipts are paid independently of production, granting this class of payment production-neutral or ‘fully decoupled’ status. In prospective agricultural market studies, simulation models routinely represent these payments as decoupled, despite academic evidence to the contrary that posits a number of ‘coupling-channels’. To explore the ramifications of differing degrees of coupling on the three pillars of sustainability, a natural-resources focused simulation model is employed. Comparing with a ‘standard’ decoupled baseline to 2030, higher coupling increases global agricultural employment and reduces production intensity on European Union agricultural land and agricultural emissions. Higher coupling also diminishes the Common Agricultural Policy’s capacity as a safety-net for European Union food-security and agricultural employment, whilst there is tentative evidence of increasing emissions ‘leakage’. At the very least, if the non-distorting status of decoupled payments is mis-specified, this has direct implications for the design of greener policy initiatives under the auspices of the Green Deal that promote sustainable fairer trade. As a result, further empirical research on the production distorting effects of the European Union’s decoupled payments is needed.