HEADING 2 SUSTAINABLE GROWTH NATURAL RESOURCES

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1 HEADING 2 SUSTAINABLE GROWTH NATURAL RESOURCES 1/59

2 HEADING 2: Sustainable growth: natural resources Common Agricultural Policy (CAP) including European Agricultural Guarantee Fund (EAGF) and European Agricultural Fund for Rural Development (EAFRD) Lead DG: AGRI 1. EU added value and general objectives 1.1. EU added value Common Agricultural Policy The Common Agricultural Policy (CAP) is a policy of strategic importance to food security, the environment and territorial balance. The aim is to promote smart, sustainable and inclusive growth for EU agriculture and rural areas in line with the Europe 2020 strategy, notably in terms of resource efficiency, by maintaining sustainable agriculture throughout the EU, addressing important cross border issues such as climate change and biodiversity and reinforcing solidarity among Member States. The analysis carried out in the framework of the impact assessment for the legislative proposals on the reform of the Common Agricultural Policy clearly shows the cost of no action in terms of negative economic, environmental and social consequences. The CAP is a genuinely European policy as instead of operating 28 agricultural policies, Member States pool resources to operate a single European policy with a single European budget. Such a common policy allows for a more effective response to transnational goals and cross border challenges, such as food security, mitigating climate change, enhancing biodiversity and contributing to economic and social cohesion, as well as for a level playing field in the single market and a better position in trade negotiations. This naturally means that the CAP accounts for a significant proportion of the EU budget. However, this approach ensures both the most effective response to the policy challenges as well as the most efficient use of budgetary resources, as the running of 28 different and competing national policies would be more costly and less effective. At the same time, this approach also allows sufficient flexibility in implementation to cater for local needs General objectives General Objective 1: To promote a viable food production Indicator 1: Agricultural factor income Current situation In real prices: EUR/AWU Definition: Real net value added at factor cost per annual work unit (AWU) 2 (2013 EU28) Indicator 2: Agricultural productivity Current situation 104,4 (index 2005 = 100) Indicator 3: EU commodity price variability Current situation World Jan Dec 2014 EU Jan Dec 2014 Coefficient of variation Commodity Beef 13,6% 2,8% Poultry 7,0% 2,5% Pig 13,8% 7,9% Soft wheat 13,2% 14,2% Maize 21,9% 15,9% Long term target To increase Long term target To increase Long term target 1 For a more detailed description of the EU value added of the CAP including examples, see Commission staff working paper "The EU value added of the EU budget" accompanying the Commission Communication "A budget for Europe 2020" (SEC(2011) 867 final, , p. 25). 2 Change in baseline necessary in order to align the definition with the agreed method for the underlying CAP impact indicator. 2/59

3 Barley 13,7% 15,0% Butter 15,3% 13,1% Cheese (Cheddar) 10,6% 7,4% Skimmed milk powder (SMP) 21,9% 16,7% Whole milk powder (WMP) 24,3% 15,8% General Objective 2: To promote a sustainable management of natural resources and climate action Indicator 1: Emissions from agriculture Current situation Long term target Greenhouse gas To decrease (2012) (in t of CO 2 equivalent) Indicator 2: Water abstraction in agriculture: volume of water applied to soils for irrigation purposes Current situation Long term target To decrease (2010) 3 General Objective 3: To promote a balanced territorial development Indicator 1: Rural employment rate Current situation 62,4% (2013 EU 28) Long term target To increase CAP: European Agricultural Guarantee Fund (EAGF) 1. Financial programming Legal Basis Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008. Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009. Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007. Council Regulation (EU) No 1370/2013 of 16 December 2013 determining measures on fixing certain aids and refunds related to the common organisation of the markets in agricultural products Period of application Reference Amount (EUR million) Financial Programming (EUR million) DB Total Total , , , , , , , ,9 3 Data available for EU28 excluding BE and LU in 1000 m 3 (Source: Eurostat SAPM 2010). 3/59

4 2. Implementation rates CA Impl. Rate PA Authorised appropriation , ,18 % , ,17 % ,587 82,92 % ,546 82,88 % Authorised appropriation excluding external earmarked revenue Impl. Rate CA Impl. Rate PA Impl. Rate , ,18 % , ,14 % ,587 82,92 % ,373 82,88 % This table includes all authorised appropriations (in EUR million), including assigned revenue; the execution rate is calculated on 15 April 2015 by comparing the execution of these credits to the voted appropriations (after transfers). 3. EU added value and contribution to Europe 2020 Strategy 3.1. EU added value Direct payments support and stabilise farmers' income and contribute to the provision of environmental public goods, while market measures allow for a safety net in times of market disturbances or crises and for maintaining market stability and meeting consumer expectations. In addition, cross-compliance ensures applied minimum standards in the field of the environment, food safety, animal and plant health and animal welfare throughout the EU. Hence, the EAGF supports sustainable agriculture throughout the EU and provides the basis for the development of the agricultural sector and rural areas towards smart, sustainable and inclusive growth, thus contributing to the CAP objectives of viable food production, sustainable management of natural resources and balanced territorial development. Evaluations of the different elements of the CAP are conducted on a regular basis 4 and their results are incorporated in impact assessments preparing new initiatives. The indicators defined in the context of the common monitoring and evaluation framework 5 will serve as a basis for future evaluations. Based on these, in 2018 results on the performance of the CAP will be presented in a report to the European Parliament and Council Contribution to Europe 2020 Strategy Contribution to Europe 2020 headline targets The '20/20/20' climate/energy targets should be met (including an increase to 30% of emissions reduction if the conditions are right) Contribution to Flagship initiatives Flagship Budget 2015 (EUR million) DB 2016 (EUR million) Resource efficient Europe , , Contribution to mainstreaming of climate action Relevant objective/output Budget2015 (EUR Million) DB 2016 (EUR Million) To contribute to the development of sustainable agriculture through the , ,0 "green direct payment" and cross compliance 4 In 2014 the following evaluations were finalised: Evaluation of the market implications of veal and young cattle meat standards; evaluation of CAP measures for the cotton sector. 5 Commission Implementing Regulation (EU) No 834/2014 of 22 July 2014 laying down rules for the application of the common monitoring and evaluation framework of the common agricultural policy. 6 Article 110 of Regulation (EU) No 1306/ For financial years 2015 and 2016, the amount is established using the same methodology i.e. the Rio marker of 40% is applied to a 20% share of the appropriations for direct payments. 8 As of Draft Budget 2016, with the new direct payments' schemes fully implemented, the climate action contribution is calculated accordingly: the payment for agricultural practices beneficial for the climate and the environment (item ) is split into three equal tiers, in analogy to the three compulsory farming practices applicable. The tiers receive the following Rio marker: The Rio markers take into account the climate 4/59

5 3.2.4 Contribution to financing biodiversity Relevant objective/output Contribute to the development of sustainable agriculture and to making the Common Agricultural Policy more compatible with the expectations of the society through cross-compliance. Contribute preventing soil erosion, maintaining soil organic matter and soil structure, ensuring a minimum level of maintenance and avoiding the deterioration of habitats, and protecting and managing water. Contribute avoiding a massive conversion into arable land 9 Budget2015 (EUR Million) DB 2016 (EUR Million) 3 272, ,7 4. Specific objectives Specific Objective 1: To improve the competitiveness of the agricultural sector and enhance its value share in the food chain Indicator 1: Share of EU agricultural exports in world market Target 18,5% (2012) Share in world market maintained Indicator 2: Share of value added for primary producers in the food chain (2011 EU-27) Value added (in EUR billion) Primary sector * 167 Processing sector * 227 Retail sector (including service activities) ** 385 * Eurostat - National accounts ** Eurostat - Structural Business Statistics Target Improved situation of primary producers in the food chain Specific Objective 2: To foster market stability Indicator 1: Export refunds Ratio of the volume of the products exported with export refunds and the total EU production per given period Target Beef: 0% (December 2014) Pigmeat: 0% (December 2014) Poultry: 0% (December 2014) Cereals, rice and sugar: 0% (December 2014) Used only in case of market crisis (seen against market developments) Indicator 2: Public intervention, ratio of volume of the products bought in the intervention storage and the total EU production of those respective products contribution of the three compulsory green direct payment obligations: 1st tier 0% (crop diversification), 2nd tier 40% (ecological focus area), 3rd tier 100% (permanent grassland); plus a Rio marker of 40% applied to 20% of the remaining direct payments taking into account cross-compliance (i.e. 8% of budget chapter 0503 direct payments without payment for agricultural practices beneficial for the climate and the environment). For Budget 2015, the amount was established using the following methodology: 40% of 20% = 8 % of budget chapter Direct payments. 9 As of Draft Budget 2016, with the new direct payments' schemes fully implemented, the contribution to biodiversity is calculated as follows: for the payment for agricultural practices beneficial for the climate and the environment (item ) a Rio marker of 40% is applied; plus a Rio marker of 40% is applied to 10% of the remaining direct payments taking into account cross-compliance (i.e. 4% of budget chapter 0503 Direct payments without payment for agricultural practices beneficial for the climate and the environment). For Budget 2015, the amount was established using the following methodology: 40% of 20% = 8 % of budget chapter Direct payments. 5/59

6 Target 0% (2014) Used only in case of market crisis (seen against market developments) Indicator 3: Private storage, Ratio of volume of the products placed into the publicly aided private storage and the total EU production of those respective products Butter: 0,99% (2014) SMP: 1,33% (2014) Target Used only in case of market crisis (seen against market developments) Specific Objective 3: To better reflect consumer expectations Indicator 1: EU commodity prices compared to world prices Data for December Price indices (Jan 2000 = 100) World (USD/ton) Wheat US Wheat US Beef Chicken Pork Maize Barley Butter Cheddar SMP WMP SRW HRW 276,3 195,4 223,4 267,6 260,6 192,5 247,7 257,8 210,3 156,0 152,2 Target Prices brought closer to world prices European Union (EUR/ton) Beef Chicken Pork Soft wheat Maize Barley Butter Cheddar SMP WMP 127,6 136,2 119,4 125,3 104,4 123,1 94,6 100,4 81,8 87,1 2. Absolute prices World Beef Chicken Pork ($/100kg ($/100kg) ($/100kg ) carcass) Wheat US SRW Wheat US HRW Maize Barley Butter Cheddar SMP WMP ($/mt) ($/mt) ($/mt) ($/mt) ($/mt) ($/mt) ($/mt) ($/mt) 537,2 250,8 186,0 261,0 288,6 178,3 218, , , , ,0 European Union Beef Chicken Pork Soft wheat Maize Barley Butter Cheddar SMP WMP EUR/100 kg EUR/mt EUR/mt 371,1 183,2 134,6 176,6 146,2 160, , , , ,0 6/59

7 Expenditure related outputs (for specific objectives 1 to 3) Output Budget line Fruit & vegetables: Proportion of the value of production marketed through producer organisations (POs) in value of the total production 10 Wine: National support programmes Budget 2015 DB 2016 Number EUR million Number EUR million Known autumn 2015 (2012: 45.7%; provisional data) 541,5 Known autumn Restructuring: Number of hectares Wine: National support programmes Investments and promotion: Number of projects and beneficiaries 12 Public intervention: Volume of intervention stocks p.m. 0 p.m. Private storage: Volume of private 13 storage in tonnes (dairy) Apiculture: National programmes for 28 (2015 % 28 (92% in the apicultural sector: number of execution not ) programmes (% of expenditure on available yet) available funds previous year) Horizontal promotion programmes: Number of programmes accepted School fruit scheme: Number of beneficiaries School milk scheme: Number of beneficiaries and quantity of milk and milk products on which aid has been paid Around 8,6 million 144 children 16 20,4 million children and tonnes of milk and milk products on 77 which aid has been paid (school year ) Around 9,8 million children 20,4 million children and tonnes of milk and milk products on which aid has been paid (school year ) The budget figures relate to appropriations and do not include the estimated assigned revenue to be available to this budget item at EUR 362,4 million for 2015 and EUR 400 million for Outputs are based on the 2015 budget. Outputs for 2016 are pending the Member States' programmes to be notified by June See previous footnote 13 The figure relates to commitment appropriations and does not include the estimated assigned revenue to be available to this budget item at EUR 14.3 million for Figure for Figure for Based on the provisional analysis of monitoring reports 2012/2013: schools and around 8,6 million children; 24 Member States participating in 2012/2013; School year 2011/2012: schools, around 8,1 million children from 23 Member States. 17 Same as for Budget No more recent data available at present. 7/59

8 Justification of changes to the financial programming and/or to the performance information Markets (appropriations EUR 186 million) Needs in 2015 budget: Appropriations requested in 2015 budget: Estimated assigned revenue available in 2015 budget: Needs in 2016 budget: Appropriations requested in 2016 budget: Estimated assigned revenue available in 2016 budget: EUR million EUR million EUR 524 million EUR million EUR million EUR 400 million The budgetary needs for market expenditure in 2016 are significantly lower than in budget 2015, which was marked by increased market intervention in the wake of the Russian import embargo. At present it is estimated that the measures taken so far to counter the effects of the embargo should have only a limited impact on the 2016 budget. Overall, the outlook for most agricultural markets is rather favourable, albeit subject to considerable uncertainties related to the duration of the Russian embargo and sluggish economic performance that could depress demand-growth for agro-food products within and outside the EU. The Commission has based its estimates on the aforementioned market outlook and foresees to update its estimates in an Amending Letter to the Draft Budget 2016 in light of actual developments. When taking into account an amount of EUR 400 million foreseen to be covered by assigned revenue, the requested appropriations for this chapter become EUR million, which is a decrease of EUR 186 million compared to Olive oil (appropriations - EUR 1,3 million) Appropriations in the 2015 budget: Appropriations in the 2016 DB: EUR 46,6 million EUR 45,3 million The requested appropriations for the budget 2016 remain largely stable. A decrease of EUR 1,3 million as compared to the level in the 2015 budget concerns mainly the quality improvement measures. No aid for private storage is foreseen in the Draft Budget Textile plants (appropriations - EUR 0 million) Appropriations in the budget: Appropriations in the DB: EUR 6 million EUR 6 million The requested appropriations for the budget 2016 are unchanged compared to the level in the 2015 budget and relate primarily to the cotton restructuring programme for Spain, at the financial ceiling established by the Council and the European Parliament Fruit and vegetables (appropriations - EUR 203 million) Needs in 2015 budget: Appropriations requested in 2015 budget: Estimated assigned revenue available in 2015 budget: Needs in 2016 budget: Appropriations requested in 2016 budget: Estimated assigned revenue available in 2016 budget: EUR million EUR 836 million EUR 469 million EUR million EUR 634 million EUR 400 million The decrease in needs as compared to Budget 2015 is due to several factors. Firstly, the 2015 needs cover the measures taken in the wake of the Russian import embargo estimated at EUR 219,3 million, while no expenditure for such support measures is taken into account in the 2016 budget for this sector. Secondly, budgetary needs for the aid to producer groups for preliminary recognition are expected to significantly decrease compared to the 2015 budget, mainly due to a gradual phasing out of this measure in the EAGF and the revision of existing plans as indicated in the latest Member States' communications (January 2015). Thirdly, slightly lower needs for financial year 2016 are foreseen for the aid to 8/59

9 producer organisations based on the most recent information from Member States and the observed trend in expenditure of the recent years. On the other hand the appropriations for the school fruit scheme increase on account of the higher ceiling as of the 2014/2015 school year together with a better planned implementation of the scheme in the current and upcoming school years. In total the needs for this sector are expected to decline by EUR 272 million. The appropriations requested in the 2016 budget decline by EUR 203 million as a lower amount of assigned revenue is estimated to be available for this article (EUR 469 million in Budget 2015 compared to EUR 400 million in Draft Budget 2016) Wine (appropriations - EUR 11 million) Appropriations in the 2015 budget: Appropriations in the 2016 DB: EUR million EUR million The marginal decline in appropriations for budget article is based on the estimated execution of Member States' programmes, reflecting a slight under-execution of the overall envelope that has been observed in the previous years Promotion (appropriations + EUR 22 million) Appropriations in the 2015 budget: Appropriations in the 2016 DB: EUR 65 million EUR 87 million Budget year 2016 will be the first year of implementation of the reformed agricultural information and promotion policy 18. Appropriations requested for item reflect the need for the financing of the Member States' programmes. This is based on the expenditure estimated in the financial statement accompanying the Commission proposal for the policy reform, adjusted with the implementation pattern of the recent years. Moreover, the requested appropriations take into account the 2015 Commission decision to provide additional funding to finance promotion programmes in the wake of the Russian import embargo. Under item , appropriations are requested to finance the information and promotion measures, managed directly by the Union. As from 2016 these measures will include promotion activities delegated to the executive agency CHAFEA. For commitment appropriations, the requested appropriations are in line with the estimate in the financial statement accompanying the Commission proposal. The requested payment appropriations take into account the payment of pre-financing for grant agreements expected to be signed already in POSEI (appropriations + EUR 5 million) Appropriations in the 2015 budget: Appropriations in the 2016 DB: EUR 231 million EUR 236 million The appropriations requested for this item take into account the programme modifications made by Member States and a continued higher level of execution of the overall ceilings. This evolution is also reflected in the budget lines and Milk and milk products (appropriations + EUR 12 million) Needs in the 2015 budget: Appropriations in the 2015 budget: Estimated assigned revenue available in 2015 budget: Needs in the 2016 budget: Appropriations in the 2016 budget: Estimated assigned revenue available in 2016 budget: EUR 131 million EUR 77 million EUR 54 million EUR 89 million EUR 89 million EUR 0 million The budgetary needs for the dairy sector in 2016 decline compared to the 2015 budget, as the targeted aid measures granted to milk producers in the Baltic Member States and Finland to address difficulties following the Russian import embargo and private storage aid for cheese are not expected to have any impact for financial year On the other hand, needs are expected to increase for private storage aid of skimmed milk powder and butter following the 18 Regulation (EU) No 1144/2014 9/59

10 prolongation of the two schemes until September For the school milk scheme, the budgetary needs are expected to slightly decrease as compared to the 2015 budget, reflecting the past level of execution. Appropriations for the 2016 budget are higher, which is only due to the fact that the lower needs in 2016 do not counterbalance the reduction of assigned revenue that was budgeted in 2015 to finance the crisis measures Pigmeat, eggs, poultry meat and beekeeping (appropriations - EUR 10 million) Appropriations in the 2015 budget: Appropriations in the 2016 DB: EUR 41 million EUR 31 million The requested appropriations for this article relate solely to the aid for beekeeping, remaining stable at EUR 31 million and in line with the past level of execution. The decrease in needs for this article relates primarily to the amount of EUR 8,8 million that was foreseen in budget 2015 to compensate poultry farmers in one Member State for the losses linked to the outbreak of avian influenza in August This measure does not have financial implications in No private storage aid for pigmeat is foreseen during Export refund rates for all products concerned by this article are fixed at zero with no residual payments foreseen for Specific Objective 4: To sustain farmers' income stability by providing direct income support Indicator 1: Share of direct support in agricultural entrepreneurial income (family farm income) 2014: 49% : 47% : 47% 2011: 47% 2010: 51% 2009: 61% 21 To maintain the ratio Target Specific Objective 5: To promote a more market oriented agriculture, by ensuring a significant level of decoupled income support Indicator 1: % of total direct payments which is decoupled Calendar year 2013/budget year 2014: 93,54% 22 Calendar year 2012/budget year 2013: 93,24% Calendar year 2011/budget year 2012: 92,13% Calendar year 2010/budget year 2011: 91,67% Target Calendar year 2015/budget year 2016: 88,57% 23 Calendar year 2014/budget year 2015: 92,62% 24 Specific Objective 6: Contribute to the development of sustainable agriculture and to making the Common Agricultural Policy more compatible with the expectations of the society. Contribute preventing soil erosion, maintaining soil organic matter and soil structure, ensuring a minimum level of maintenance and avoiding the deterioration of habitats, and protecting and managing water. Contribute avoiding a massive conversion into arable land 19 The calculation is based on 2013 budget execution data and 2013 farm income data 20 The figures before 2013 refer to EU-27; figures for subsequent years relate to EU The share of direct payments in agricultural entrepreneurial income in 2009 was due to the economic crisis which decreased farmers' revenues of the farmers. 22 Execution of the Budget 2014 provisional figures 23 Draft Budget 2016, based on estimated needs and excluding crisis reserve. 24 Budget 2015, based on estimated needs and excluding crisis reserve. 10/59

11 Indicator 1: % of CAP payments covered by cross compliance 2014: 83,5% 25 Maintain the % 2013: 82,4% : 79,4% 2011: 80,2% 2010: 81,4% Indicator 2: Opinion expressed by the public on cross compliance 83% support the reduction of direct payments to farmers not Maintain the positive opinion complying with environmental rules 84% support the reduction for non-compliance of animal welfare rules 86% support the reduction of direct payment to farmers not respecting food safety rules 27 Indicator 3: Control rate for GAEC Target Target Target 100 % - In 2013, all paying agencies fulfilled the mandatory 100% implementation of the minimum regulatory control rate except Ireland regarding holdings receiving RD control rate payments. 28 Indicator 4: The ratio of permanent pasture within a Member State in relation to the total agricultural area Ratio has not decreased beyond the limit of 10% 29 Indicator 5: Share of area under greening practices Not applicable (2015 being the first year of implementation) Target Maintain the ratio within the limit of 10% in relation to a reference ratio 30 Target Maintain the share (the share is to be established in 2015) Expenditure related outputs (for specific objectives 4 to 6) Output Budget line 31 Budget 2015 DB 2016 Number EUR million Number 32 EUR million Single Payment Scheme (number of hectares The scheme no 79 (Residual paid): 33 longer exists in amounts) calendar year 2015/financial year 2016 Single area payment scheme (number of Execution of the Budget 2014 provisional figures 26 The calculation of the 2013 baseline indicator in the management plan was adapted. 27 Results of the latest Special Eurobarometer "Europeans, Agriculture and the Common Agricultural Policy" published in In the absence of new Eurobarometer with specific questions on cross compliance, there is no new information available. 28 GAEC stands for Standards of Good Agricultural and Environmental Condition. GAECs form part of the requirements under Cross Compliance and apply to anyone receiving direct payments (except under the small farmers scheme) and/or support under certain rural development schemes. 29 Two MS (EL and IE) did not communicate yet the ratio for year The maintenance of the ratio of permanent pasture means that there should not be, at national or regional level, a decrease by more than 10% of the current ratio of permanent pasture in relation to the total agricultural area by comparison with a reference ratio reflecting this ratio at a reference period. 31 The item , and are as from calendar year 2015/financial year Best estimate based on available information. To be confirmed in The figures relate to appropriations (after financial discipline) and do not include the estimated assigned revenue to be available to this budget item at EUR million for the Single Payment Scheme in 2015 and EUR million for the Basic Payment Scheme in /59

12 hectares paid): Basic payment scheme (number of hectares paid) Payment for agricultural practices beneficial for the climate and the environment (number of hectares paid) Voluntary coupled support (number of hectares paid) Voluntary coupled support (number of heads paid) Other TOTAL Justification of changes to the financial programming and/or to the performance information The financial year 2016 (corresponding to calendar year 2015 for direct payments) is the first year for the new direct payments' schemes introduced by Regulation (EU) No 1307/2013. Three direct payments schemes applicable in calendar year 2014 continue to exist (the single area payment scheme (SAPS), redistributive payment and the crop-specific payment for cotton) and six new schemes will be implemented for the first time (basic payment scheme (BPS), payment for agricultural practices beneficial for the climate and the environment, payment for areas with natural constraints, payment for young farmers, voluntary coupled support and the small farmers scheme). Some schemes are obligatory whereas others are voluntary for the Member States. The allocation of the national envelopes to different schemes depends to a large extent on Member States' decisions. Regulation (EC) No 73/2009 is repealed and the schemes no longer in force are only included in Draft Budget 2016 to cover the needs for residual amounts. For financial year 2016, financial discipline has to be applied to establish the crisis reserve of EUR 441,6 million, as proposed by the Commission 35 in line with the provisions of Regulation (EU) 1306/2013. Financial discipline reduction to direct payments is only necessary to establish the crisis reserve as there is a margin of EUR million within the EAGF sub-ceiling of Heading 2 of the MFF Direct payments (appropriations - EUR 373 million) Needs in 2015 budget before financial discipline (incl. crisis reserve): Needs in 2015 budget after financial discipline: Appropriations in 2015 budget after financial discipline: EUR million EUR million EUR million Estimated assigned revenue available in 2015 budget: EUR million Amount of financial discipline in 2015 budget (incl. crisis reserve): EUR 433 million Needs in 2016 budget before financial discipline (incl. crisis reserve): Needs in 2016 budget after financial discipline: Appropriations requested in the 2016 budget after financial discipline: EUR million EUR million EUR million Estimated assigned revenue available in 2016 budget: EUR million Amount of financial discipline in 2016 budget (incl. crisis reserve): EUR 441,6 million For direct payments (chapter 05 03), the budgetary needs decrease by EUR 316 million to an amount of EUR million in 2016 after taking into account of the financing of the reserve for agricultural crises through application of the financial discipline mechanism. Requested appropriations for this chapter decrease by EUR 373 million, taking into account the reduction of revenue assigned to the BPS (until 2015 to the single payment scheme (SPS)) from EUR million in 2015 to EUR million in As a consequence, the requested appropriations amount to EUR million in 2016, including the appropriations for the reserve for agricultural crises of EUR 441,6 million which are entered into article Appropriations remaining from the 2015 budget, up to the limit set out in Article 169(3) of Regulation (EU) No 966/2012, will be carried over to the 2016 financial year and transferred to article to be reimbursed to the final beneficiaries, who will be subject to financial discipline in financial year Not including measures covered under specific objective 7 for which output indicators are given and not including the amount for the reserve for agricultural crises under Article COM(2015)141 of 26 March /59

13 The decrease in needs is the effect of decisions of Member States, notified by 31 December 2013 and 1 August 2014, concerning the transfers between the two CAP pillars 36 and the estimated product of the reduction of payments 37 which is made available for the support under the European Agricultural Fund for Rural Development. The effect is partly netted off by the increase due to the continued phasing-in of the direct payments for three Member States (Bulgaria, Croatia and Romania) and the integration of the amount from the Croatian de-mining reserve for The maximum amount of direct payments which a Member State may pay in a financial year (excluding the amounts covered by Specific Objective 7) is limited by the ceiling set in Annex III to Regulation (EU) No 1307/2013. For calendar year 2015 (financial year 2016), the total of Annex III amounts to EUR million as compared to EUR million for calendar year The estimate of the budgetary needs take into account information available to the Commission at the time of establishing the Draft Budget as regards decisions and actions of the Member States to implement the reformed direct payments schemes. Finally, the needs for direct payments are reduced by application of the financial discipline mechanism. The amount of financial discipline taken into account for the Draft Budget 2016 relates only to the establishment of the crisis reserve (EUR 441,6 million) similar to 2015 where the crisis reserve amounts to EUR 433 million. The need for financial discipline will be re-assessed, as appropriate, in the context of the autumn Amending Letter to the 2016 Draft Budget Decoupled direct payments (appropriations - EUR million) Needs in 2015 budget before financial discipline: Needs in 2015 budget after financial discipline: Appropriations in 2015 budget after financial discipline: Estimated assigned revenue available in 2015 budget: Needs in 2016 budget before financial discipline: Needs in 2016 budget after financial discipline: Appropriations requested in the 2016 budget after financial discipline: EUR million EUR million EUR million EUR million EUR million EUR million EUR million Estimated assigned revenue available in 2016 budget: EUR million As regards decoupled direct payments, the estimated needs (after financial discipline) amount to EUR million. Requested appropriations for this article become EUR million (- EUR million compared to 2015) after taking into account the reductions due to financial discipline and the expected assigned revenue to be available to this article (EUR million). The decrease in the estimated needs for decoupled direct payments compared to budget 2015 should in particular be seen in the context of the new structure of direct payments introduced by the 2013 CAP reform. The Member States' implementation decisions result in a net transfer to Article "Other direct payments". The needs after financial discipline for the BPS, which to some extent replaces the SPS, are estimated at EUR million (after a deduction of the estimated product of reduction according to Article 11 of Regulation (EU) No 1307/2013 and not taking into account the overbooking of BPS). This is lower than the needs for the now expired SPS in the budget 2015 (EUR million). The needs after financial discipline for the Single Area Payment Scheme (SAPS), after a deduction of the estimated product of reduction according to Article 11 of Regulation (EU) No 1307/2013 amount to EUR million and decrease by EUR million compared to the budget year 2015 The above evolution is mainly due to the introduction of the new payment for agricultural practices beneficial for the climate and the environment which is compulsory at the level of 30% of the national envelopes. On this basis the needs for this scheme are estimated at EUR million after financial discipline. The redistributive payment was introduced in calendar year 2014 where three Member States applied it. In calendar year 2015, corresponding to financial year 2016, with eight Member States applying the scheme, the needs are consequently increasing by EUR 811 million and amount to EUR million after financial discipline. The needs for two further new schemes, i.e. the payment for young farmers and the payment for areas with natural constraints, are estimated at respectively EUR 549 million and EUR 3 million after financial discipline reflecting the national ceilings for these schemes. 36 In accordance with Article 136a of Regulation (EU) No 73/2009 and Article 14 of Regulation (EU) No 1307/ In accordance with Article 11 of regulation (EU) No 1307/ Annex VIII to Regulation (EC) No 73/2009 after transfers to the EAFRD for Germany and Sweden under article 136 and including the amounts for the crop-specific payment for cotton. 13/59

14 Other direct payments 39 (appropriations + EUR million) Appropriations in the 2015 budget before financial discipline: EUR million Appropriations in 2015 budget after financial discipline: Appropriations requested in 2016 budget before financial discipline: EUR million EUR million Appropriations requested in the 2016 budget after financial discipline: EUR million For the other direct payments, appropriations increase by EUR million compared to 2015 budget. This increase is mainly explained by the introduction of the new voluntary coupled support, which is applied by all but one Member State. The needs for this scheme are estimated at EUR million after financial discipline. The reform has introduced several mechanisms of cross-financing of schemes. This applies for instance to the small farmers scheme which is financed from the amounts available for other schemes. The appropriations needed for the small farmers scheme cannot be determined at this stage given that the uptake of the scheme is not known until in the course of financial year Reserve for crises in the agricultural sector (appropriations + EUR 8,6 million) Appropriations requested in the 2015 budget: EUR 433,0 million Appropriations requested in the 2016 budget: EUR 441,6 million In accordance with Article 25 of Regulation (EU) No 1306/2013, a crisis reserve has to be established by applying, at the beginning of each year, a reduction to direct payments with the financial discipline mechanism. For financial year 2016, the amount of the crisis reserve corresponds to EUR 441,6 million (in current prices). Specific Objective 7: To promote local agricultural production and to ensure a fair level of prices for commodities for direct consumption and for processing by local industries in the Outermost Regions of the EU and in the Aegean Islands Indicator 1: Support to the Local Production (SLP) to maintain/develop the agricultural production: Utilised agricultural area (variation with respect to the previous year)* Target POSEIDOM 40 : To maintain local agricultural production Guadeloupe: ha (-2,8%) Martinique: ha (-2,5%) Guyane: ha (+0,9%) Réunion: ha (-0,2%) POSEICAN: Canaries: ha (+0,7%) 41 POSEIMA 42 : Madeira: ha (+41%: 2009 data) Azores: ha (+7,5%: 2009 data) Smaller Aegean Islands: ha (-6,7%) *In their annual implementation reports for 2013, the Member States concerned (except Portugal for Madeira) have communicated data related to the common performance indicators as requested by the Commission services. However, the provided data may not be fully in line with the requirements of the Commission services and thus not mutually comparable. Therefore, these indicators shall be evaluated with due caution. 39 Not including measures covered under specific objective 7 (POSEI) 40 The data provided by the French authorities on the utilised agricultural area in 2012 was only provisional. It was corrected in the annual report for the year 2013 (budget year 2014). This explains the differences among the data for 2012 and The variation shown in the present document is calculated on the latest data provided by the French authorities for 2012 (budget year 2013). 41 Data for 2012, data for 2013 (budget year 2014) not available yet. 42 In the annual report from 2010, 2011 and 2012 the Portuguese authorities communicated 2009 data. Submission of data for the annual report 2013 is ongoing. 14/59

15 Indicator 2: Specific Supply Arrangements (SSA) to ensure the supply of essential products: SSA coverage rate (relation between quantities of products benefiting from SSA support and total quantities of the same products introduced in the respective outermost region) Target POSEIDOM 43 (all products): 49% (2012: 46%) 100% POSEICAN (cereals only): 99,6% (2012: 99,1%) POSEIMA Madeira (cereals only): 98,6% ( 2012: 95%) Azores (cereals only): 85.3% (2012: 88,1%) Smaller Aegean Islands (animal feed stuff only): 99,61% (+9%) Indicator 3: Indicator 3: Specific Supply Arrangements (SSA) to ensure an equitable level of prices for essential products: comparison of prices for the consumers in the outermost regions of certain products/groups of products covered under SSA with prices of similar products in their Member States. Target POSEIDOM 44 : Reduction of the gap with mainland Average of 4 DOM/métropole: n/a prices POSEICAN: Canaries: -Wheat (100kg): 1.58 (1.46 in 2012) -milking cow's animal feed (100kg): 1.16 (1.07 in 2012) -Beef cattle animal feed (100kg): 1.26 (1.14 in 2012) POSEIMA: Madeira (foodstuffs, indicator 2b): 1.00 (1.00 in 2012) Azores: -rice: 1.26 (1.25 in 2012) -oil: 1.13 (1.11 in 2012) -bread: 1.18 (1.14 in 2012) Smaller Aegean Islands: -Animal feeding stuffs: Flour: 1.1 Expenditure related outputs Output Regime for outermost regions of the EU: direct aids for banana reference area (hectares/quantities) Budget line B 2015 DB 2016 Number EUR million Number EUR million ES: ES: tonnes tonnes PT: PT: tonnes tonnes 279 FR: FR: tonnes tonnes Other TOTAL The French authorities used in their annual report for 2013 a different methodology and data source to calculate this indicator (calculation based on value and not quantities, data taken from customs sources and not from SSA operators). 44 Submission of data by the French authorities is ongoing. 15/59

16 Justification of changes to the financial programming and/or to the performance information For the support to the POSEI and Smaller Aegean Islands, the programmes are divided into two types of measures: special supply arrangements financed under chapter and support for the local products which are split into market aids (chapter 05 02) and direct payments (chapter 05 03). The variations for the market-related expenditure are explained above (see item ). For direct payments, the lower level of requested appropriations is due to the updated reallocation, as communicated by the Member States concerned, in their programmes shifting some financing to the market aids. The requested appropriations in the 2016 budget similarly to budget 2015 also take into account financial discipline. Specific Objective 8: To provide the Commission with reasonable assurance that Member States have put in place management and control systems in conformity with EU rules designed to ensure the legality and regularity of the underlying transactions financed by the EAGF, EAFRD, SAPARD and IPARD and, where this is not the case, to exclude the expenditure concerned from EU financing so as to protect the EU's financial interests Indicator 1: Percentage of expenditure (EAGF+EAFRD) with statistics or 100 % check Target 94% in % Expenditure related outputs Output Number of applications controlled by satellite 45 Budget 2015 DB 2016 Budget line Number EUR million Number EUR million km² 6, km² 9,1 Justification of changes to the financial programming and/or to the performance information In order to assist the Member States carrying out on the spot checks on aid applications, the satellite imagery acquired is made available to the national authorities allowing them to determine the area of agricultural parcels, to identify crops and verify their status. The requested appropriations for the Draft Budget 2016 increase by EUR 2,3 million compared to the budget 2015, due to the additional control requirements linked to the implementation of the CAP reform in the field of direct payments (in particular greening) and the intensified use of controls with remote sensing. Within chapter and under budget line , the amount of EUR 35 million is included in order to reimburse Member States in case of accounting clearance decisions taken in their favour. Accounting clearance decisions taken for the last four budget years involved corrections in favour of the Member States. Specific Objective 9: To inform and increase awareness of the CAP by maintaining an effective and regular dialogue with stakeholders, civil society, and specific target audiences Indicator 1: Public awareness of CAP Target The Latest Eurobarometer survey (field research November Maintain and if possible increase awareness of December 2013) shows that 92% of Europeans believe that agriculture the CAP and rural areas play an important role for their future and that 64% have heard about the support that the EU gives farmers through its CAP. There is a broad consensus on the key changes decided in the recent CAP reform. The next Eurobarometer survey will be conducted in the last quarter of The results will be published in first quarter of 2016 Indicator 2: Number of page visits on AGRI Europa website 45 Very High Resolution images 16/59

17 January 2013-December 2013: 4,9 million January 2014-December 2014: 5,2 million Target Maintain and if possible increase the number of page visits Expenditure related outputs Output Grants awarded to third party organisations to implement actions to improve the level of understanding of the CAP among EU citizens Budget line Budget 2015 DB 2016 Number EUR million Number EUR million ,0 15 3,0 Media networking ,4 Stakeholders: conferences ,6 Networking 30 5,0 General public events ,3 Horizontal activities ,7 Total 8,0 8,0 Justification of changes to the financial programming and/or to the performance information Budget line Enhancing Public Awareness of the CAP is foreseen to finance the communication efforts of the Commission in relation to the CAP. The overall needs for DB 2016 for the article are estimated to remain unchanged at EUR 8 million. This includes an amount of EUR 3 million destined for grants to third party organisations. The other external communication actions in 2016, financed under this budget item, will focus on the relevance of the CAP in particular in relation with the growth, jobs and investments priority theme. The scope, choice and intensity of these communication actions will very much depend on the final policy direction which, at the moment of the preparation of the DB 2016, is still to be decided. In addition to actions such as conferences, media activities, attendance in fairs, publications, web and social media activities, a new specific communication campaign is being considered in relation to the simplification of the CAP and its implementation. Specific Objective 10: To facilitate decision making on strategic choices for the CAP and to support other activities of the DG by means of economic and policy analyses and studies Indicator 1: Representativeness of information about the EU farm economic situation collected by the Farm Accountancy Data Network (FADN) Target Farm returns collected for accounting year 2012: Maximum number of farm returns to be collected for accounting year 2013: Observed coverage of EU agricultural production for the accounting year 2012: Coverage of EU agricultural production for the accounting year 1. 94% coverage of the Standard Output; 2013: 2. 93% coverage of the Utilised Agricultural 1. 90% coverage of the Standard Output; Area % coverage of the Utilized Agricultural Area. Indicator 2: Adequate knowledge of Farm's structure Target Data of Farm Structure Survey 2013 are expected to be First use of the 2013 Farm Structure Survey data in internal 17/59

18 delivered by Member States to Eurostat by December analyses, publications and indicators of the common 2014 and made available by Eurostat to users as from monitoring and evaluation framework for the CAP first quarter Expenditure related outputs Output Budget line B 2015 DB 2016 Number EUR million Number EUR million Data collection on EU Farm Accountancy Data Network (FADN) data: farm returns , ,1 Data collection on structure of agricultural holdings: farms surveyed , ,2 Technical assistance ,7 4,4 Other 46 4,8 5,7 Total 42,9 25,4 Justification of changes to the financial programming and/or to the performance information The Farm Accountancy Data Network data are essential tools for the monitoring of agriculture income and business which are used for the evaluation and the impact analysis of the agricultural measures. They provide support to the decision process related to the CAP. The appropriations requested for 2016 relate to the Farm Accountancy Data Network (EUR 14,34 million) and are intended to finance the standard fee for FADN farm returns transmitted by the Member States ( * EUR 165) and the development and maintenance of the information system used for the collection, processing, analysis, publication and dissemination of the farm accountancy data and analysis results (EUR 0,78 million). Information from Farm Structure Surveys is systematically used in extended impact assessments, evaluation and policy conception, particularly regarding the regional situation of specific sectors. The content of the surveys is regularly adapted to answer new needs for agricultural and rural development policy and other policies (in particular regional, social and environmental policy). As the pre-financing of commitments for the Farm Structure Survey of 2016 was paid in 2015, then in 2016 no funds are needed for the survey itself. Only an amount of EUR 0,25 million is requested and it will be destined for the maintenance of the Eurofarm IT tool used in the processing of these surveys. Under other, the DB 2016 request includes an amount of EUR 2,18 million for the MARS agro-meteorological system used for monitoring crops and forecasting yields of the main crops in Europe and its neighbourhood. In addition, EUR 2 million is destined for the maintenance, development and use of modelling tools used by the Commission in its agricultural economic and policy analysis. Finally, an amount of EUR 1,5 million is included for setting up and developing a coherent system for the production of harmonised supply balance sheets for 7 main crops, for the production of harmonised data for land prices and rents and for the preparation of the new strategy for the IT architecture and infrastructure for the farm survey system after This excludes appropriations for item for Budget /59