Considerations on COM(2018)392 - Rules on support for strategic plans to be drawn up by Member States under the Common agricultural policy (CAP Strategic Plans) and financed by the EAGF and by the EAFRD - EU monitor

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(1) The Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions entitled ‘The Future of Food and Farming’ of 29 November 2017 sets out the challenges, objectives and orientations for the future Common Agricultural Policy (CAP) after 2020. These objectives include, inter alia, the need for the CAP to be more result-driven, to boost modernisation and sustainability, including the economic, social, environmental and climate sustainability of the agricultural, forestry and rural areas, and to help reducing the Union legislation-related administrative burden for beneficiaries.

(2) Since the CAP needs to sharpen its responses to the challenges and opportunities as they manifest themselves at Union, international, national, regional, local and farm levels, it is necessary to streamline the governance of the CAP and improve its delivery on the Union objectives and to significantly decrease the administrative burden. In the CAP based on delivery of performance (‘delivery model’), the Union should set the basic policy parameters, such as objectives of the CAP and basic requirements, while Member States should bear greater responsibility as to how they meet the objectives and achieve targets. Enhanced subsidiarity makes it possible to better take into account local conditions and needs, tailoring the support to maximise the contribution to Union objectives.

(3) The use of common definitions entirely set at Union level has caused certain difficulties for Member States to cater their own specificities at national, regional, and local level. Member States should therefore be given the flexibility to specify certain definitions in their CAP Strategic Plan. In order to ensure a common level playing field, a certain framework has, however, to be set at Union level constituting the necessary essential elements to be included in those definitions (‘framework definitions’).

(4) In order to ensure that the Union can respect its international obligations on domestic support as set out in the WTO  Agreement on Agriculture, and in particular that the basic income support for sustainability and related types of interventions continue to be notified as ‘Green Box’ support which has no, or at most minimal, trade-distorting effects or effects on production, the framework definition for ‘agricultural activity’ should provide for both the production of agricultural products or the maintenance of the agricultural area. In light of adjusting to local conditions, Member States should lay down the actual definition of agricultural activity in their CAP Strategic Plans.

(5) In order to retain the essential Union-wide elements to ensure comparability between Member State decisions, without however limiting Member States in reaching Union objectives, a framework definition for ‘agricultural area’ should be set out. The related framework definitions for ‘arable land’, ‘permanent crops’ and ‘permanent grassland’ should be set out in a broad way to allow Member States to further specify definitions according to their local conditions. The framework definition for ‘arable land’ should be laid down in a way that allows Member States to cover different production forms, including system such as agroforestry and arable areas with shrubs and trees and that requires the inclusion of fallow land areas in order to ensure the decoupled nature of the interventions. The framework definition of ‘permanent crops’ should include both areas actually used for production and not, as well as nurseries and short rotation coppice to be defined by Member States. The framework definition of ‘permanent grassland’ should be set in a way that allows Member States to specify further criteria and allows them to include species other than grasses or other herbaceous forage that can be grazed or that may produce animal feed, whether used for actual production or not.

(6) Synergies between the EAFRD and Horizon Europe should encourage that the EAFRD makes the best use of research and innovation results, in particular those stemming from projects funded by Horizon Europe and the European Innovation Partnership (EIP) for ‘agricultural productivity and sustainability’, leading to innovations in the farming sector and rural areas.

(7) In order to ensure legal certainty that support is paid for an agricultural area which is at the farmer's disposal and where an agricultural activity is exercised, a framework definition for ‘eligible hectare’ with the essential elements should be set out. In particular, in order to avoid double claims, Member States should set the conditions to determine whether the land is at the farmer’s disposal. Considering the likelihood of occasional and temporary use of agricultural land for an activity which is not strictly agricultural, and given the potential of certain non-agricultural activities to contribute to the income diversification of agricultural holdings, Member States should set appropriate conditions to include areas also used for non-agricultural activities as eligible hectares.

(8) As regards the areas used for the production of hemp, in order to preserve public health and to ensure the coherence with other bodies of legislation, the use of hemp seeds varieties with tetrahydrocannabinol content below 0.2% should be part of the definition of eligible hectare.

(9) In view of further improving the performance of the CAP, income support should be targeted to genuine farmers. In order to ensure a common approach at Union level for such a targeting of support, a framework definition for ‘genuine farmer’ displaying the essential elements should be set out. On the basis of this framework, Member States should define in their CAP Strategic Plans which farmers are not considered genuine farmers based on conditions such as income tests, labour inputs on the farm, company object and inclusion in registers. It should also not result in precluding support to pluri-active farmers, who are actively farming but who are also engaged in non-agricultural activities outside their farm, as their multiple activities often strengthen the socio-economic fabric of rural areas.

(10) In order to ensure consistency between the direct payments types of interventions and rural development types of interventions when addressing the objective of generational renewal, a framework definition for ‘young farmer’ with the essential elements should be set out at Union level.

(11) In order to give substance to the objectives of the CAP as established by Article 39 of the Treaty on the Functioning of the European Union (TFEU), as well as to ensure that the Union adequately addresses its most recent challenges, it is appropriate to provide for a set of general objectives reflecting the orientations given in the Communication on ‘The Future of Food and Farming’. A set of specific objectives should be further defined at Union level and applied by the Member States in their CAP Strategic Plans. While striking a balance across the dimensions of sustainable development, in line with the impact assessment, these specific objectives should translate the general objectives of the CAP into more concrete priorities and take into account relevant Union legislation, particularly with regard to climate, energy and environment.

(12) A smarter, modernised and more sustainable CAP needs to embrace research and innovation, in order to serve the multi-functionality of Union agriculture, forestry and food systems, investing in technological development and digitalisation, as well as improving the access to impartial, sound, relevant and new knowledge.

(13) While under the CAP delivery model the Union should set the Union objectives and define the types of interventions as well as the basic Union requirements applicable to Member States, the latter should be in charge of translating that Union framework into support arrangements applicable to beneficiaries. In that context, Member States should act in line with the Charter of Fundamental Rights, general principles of Union law and ensure that the legal framework for the granting of Union support to beneficiaries be based on their CAP Strategic plans and be in line with the principles and requirements set out under this Regulation and the [Horizontal Regulation].

(14) In order to foster a smart and resilient agricultural sector, direct payments keep on constituting an essential part to guarantee a fair income support to farmers. Likewise, investments into farm restructuring, modernisation, innovation, diversification and uptake of new technologies are necessary to improve farmers’ market reward.

(15) In the context of greater market-orientation of the CAP, as outlined by the Communication on ‘The Future of Food and Farming’, market exposure, climate change and associated frequency and severity of extreme weather events, as well as sanitary and phytosanitary crises, may lead to risks of price volatility and increasing pressures on incomes. Thus, although farmers are ultimately responsible for designing their on-farm strategies, a robust framework should be set up to ensure appropriate risk management. To this aim, Member States and farmers may be able to draw on a Union-level platform on risk management for capacity-building in order to provide farmers with adequate financial instruments for investments and access to working capital, training, knowledge transfer and advice.

(16) Bolstering environmental care and climate action and contributing to the achievement of Union environmental- and climate-related objectives is a very high priority in the future of Union agriculture and forestry. The architecture of the CAP should therefore reflect greater ambition with respect to these objectives. By virtue of the delivery model, action taken to tackle environmental degradation and climate change should be result-driven and Article 11 TFEU should, for this purpose, be considered as an obligation of result.

As many rural areas in the Union suffer from structural problems such as lack of attractive employment opportunities, skill shortages, underinvestment in connectivity, infrastructures and essential services, as well as youth drain, it is fundamental to strengthen the socio-economic fabric in those areas, in line with the Cork 2.0. Declaration, particularly through job creation and generational renewal, by bringing the Commission's jobs and growth to rural areas, promoting social inclusion, generational renewal and the development of ‘Smart Villages’ across the European countryside. As indicated in the Communication on ‘The Future of Food and Farming’, new rural value chains such as renewable energy, the emerging bio-economy, the circular economy, and ecotourism can offer good growth and job potential for rural areas. In this context, financial instruments and the use of the InvestEU guarantee can play a crucial role for ensuring access to financing and for bolstering the growth capacity of farms and enterprises. There is a potential for employment opportunities in rural areas for legally staying third country nationals, promoting their social and economic integration especially in the framework of Community-led Local Development strategies.

(17) The CAP should keep ensuring food security, which should be understood as meaning access to sufficient, safe and nutritious food at all times. Moreover, it should help improving the response of Union agriculture to new societal demands on food and health, including sustainable agricultural production, healthier nutrition, food waste and animal welfare. The CAP should continue to promote production with specific and valuable characteristics, while at the same time helping farmers to proactively adjust their production according to market signals and consumers’ demands.

(18) In view of the scope of the reform that is necessary to achieve the objectives and respond to concerns, it is appropriate to provide for a new legal framework in one single Regulation that covers the Union support financed by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD) and that replaces the arrangements currently laid in Regulation (EU) No 1305/2013 of the European Parliament and of the Council 9 and Regulation (EU) No 1307/2013 of the European Parliament and of the Council 10 .

(19) This Regulation should lay down the rules that apply to Union support financed by the EAGF and the EAFRD and granted in the form of types of interventions specified in a CAP Strategic Plan drawn up by the Member States and approved by the Commission.

(20) In order to ensure that the Union can respect its international obligations on domestic support as set out in the WTO Agreement on Agriculture, certain types of interventions provided for in this Regulation should continue to be notified as ‘Green Box’ support which has no, or at most minimal, trade-distorting effects or effects on production, or to be notified as ‘Blue Box’ support under production-limiting programs and is so exempted from reduction commitments. While the provisions set out in this Regulation for such types of interventions are already in compliance with the ‘Green Box’ requirements as set out in Annex 2 to the WTO Agreement on Agriculture or the ‘Blue Box’ requirements set out in its Article 6.5, it should be ensured that the interventions planned by Member States in their CAP Strategic Plans for these types of interventions continue to respect those requirements.

(21) Building on the previous system of cross-compliance implemented until 2020, the system of new conditionality links full receipt of CAP support to the compliance by beneficiaries of basic standards concerning the environment, climate change, public health, animal health, plant health and animal welfare. The basic standards encompass in a streamlined form a list of statutory management requirements (SMRs) and standards of good agricultural and environmental conditions of land (GAECs). These basic standards should better take into account the environmental and climate challenges and the new environmental architecture of the CAP, thus delivering a higher level of environmental and climate ambition as the Commission announced in its Communications on the ‘Future of Food and Farming’ and the Multiannual Financial Framework (MFF). Conditionality aims to contribute to the development of sustainable agriculture through better awareness on the part of beneficiaries of the need to respect those basic standards. It also aims to make the CAP more compatible with the expectations of society through improving consistency of the policy with the environment, public health, animal health, plant health and animal welfare objectives. Conditionality should form an integral part of the environmental architecture of the CAP, as part of the baseline for more ambitious environmental and climate commitments, and should be comprehensively applied across the Union. For those farmers who do not comply with those requirements, Member States should ensure that proportionate, effective and dissuasive penalties are applied in accordance with [the HZR Regulation].

(22) The framework of standards of GAECs aims to contribute to the mitigation and adaptation to climate change, the tackling of water challenges, the protection and quality of soil and the protection and quality of biodiversity. The framework needs to be enhanced to take into account in particular the practices set until 2020 under the greening of direct payments, the mitigation of climate change and the need to improve farms sustainability, and in particular the nutrients management. It is acknowledged that each GAEC contributes to multiple objectives. In order to implement the framework, Member States should define a national standard for each of the standards set at Union level taking into account the specific characteristics of the area concerned, including soil and climatic conditions, existing farming conditions, land use, crop rotation, farming practices and farm structures. Member States may also define in addition other national standards related to the main objectives laid down in Annex III in order to improve the environmental and climate delivery of the GAEC framework. As part of GAEC framework, in order to support both the agronomic and the environmental performance of farms, nutrient management plans will be established with the help of a dedicated electronic Farm Sustainability Tool made available by the Member States to individual farmers. The tool should provide on-farm decision support starting from minimum nutrient management functionalities. A wide interoperability and modularity should also ensure the possibility to add other electronic on-farm and e-governance applications. In order to ensure a level playing field between farmers and across the Union, the Commission may provide support to the Member States in the design of the Tool as well as with the data storage and processing services required.

(23) SMRs need to be fully implemented by Member States in order to become operational at farm level and ensure equal treatment of farmers. To ensure the consistency of the rules on conditionality in enhancing the sustainability of the policy, SMRs should encompass main Union legislation on environment, public health, animal health, plant health and animal welfare which implementation at national level imply precise obligations on individual farmers, including obligations under Council Directive 92/43/EEC 11 and Directive 2009/147/EC of the European Parliament and of the Council 12 or Council Directive 91/676/EEC. 13 In order to follow up on the joint statement made by the European Parliament and the Council as annexed to Regulation (EU) No 1306/2013 of the European Parliament and of the Council, 14 the relevant provisions of Directive 2000/60/EC of the European Parliament and of the Council 15 and Directive 2009/128/EC of the European Parliament and of the Council 16 are included as SMRs into the scope of conditionality and the list of GAEC standards is adapted accordingly.

(24) Member States should set farm advisory services for the purpose of improving the sustainable management and overall performance of agricultural holdings and rural businesses, covering economic, environmental and social dimensions, and to identify the necessary improvements as regards all measures at farm level provided for in the CAP Strategic Plans. These farm advisory services should help farmers and other beneficiaries of CAP support to become more aware of the relationship between farm management and land management on the one hand, and certain standards, requirements and information, including environmental and climate ones, on the other hand. The list of the latter includes standards applying to or necessary for farmers and other CAP beneficiaries and set in the CAP Strategic Plan, as well as those stemming from the legislation on water, on the sustainable use of pesticides, as well as the initiatives to combat antimicrobial resistance and the management of risks. In order to enhance the quality and effectiveness of the advice, Member States should integrate advisors within the Agricultural Knowledge and Innovation Systems (AKIS), in order to be able to deliver up-to-date technological and scientific information developed by research and innovation.

(25) In order to ensure a fairer distribution of income support, the amounts of direct payments above a certain ceiling should be reduced and the product should either be used for decoupled direct payments and in priority for the complementary redistributive income support for sustainability, or be transferred to the EAFRD. In order to avoid negative effects on employment, labour should be taken into account when applying the mechanism.

(26) Union legislation should provide that Member States should set requirements in terms of minimum area for receiving decoupled payments in their CAP Strategic Plan. Such requirements should relate to the need to avoid the excessive administrative burden caused by managing numerous payments of small amounts and to that of ensuring an effective contribution of the support to the objectives of the CAP to which the decoupled direct payments contribute. In order to guarantee a minimum level of agricultural income support for all genuine farmers, as well as to comply with the Treaty objective in ensuring a fair standard of living for the agricultural community, an annual area-based decoupled payment should be established as the type of intervention ‘basic income support for sustainability’. In order to enhance better targeting of this support, the payment amounts can be differentiated, by groups of territories, based on socio-economic and/or agronomic conditions. In view of avoiding disruptive effects for farmers' income, Member States may choose to implement the basic income support for sustainability based on payment entitlements. In this case, the value of payment entitlements before any further convergence should be proportional to their value as established under the basic payment schemes pursuant to Regulation (EU) No 1307/2013, taking also into account the payments for agricultural practices beneficial for the climate and the environment. Member States should also achieve further convergence in order to continue to move progressively away from historical values.

(27) When providing decoupled direct support based on the system of payment entitlements, Member States should continue to manage a national reserve or reserves per group of territories. Such reserves should be used, as a matter of priority, for young farmers and farmers commencing their agricultural activity. Rules on the use and transfers of payment entitlements are also necessary in order to guarantee a smooth functioning of the system.

(28) Small farms remain a cornerstone of Union agriculture as they play a vital role in supporting rural employment and contribute to territorial development. In order to promote a more balanced distribution of support and to reduce administrative burden for beneficiaries of small amounts, Member States should have the option of offering to small farmers the possibility of replacing the other direct payments by providing a round some payment for small farmers.

(29) In view of the acknowledged need to promote a more balanced distribution of support towards small and/or medium-sized farmers in a visible and measurable way, a specific decoupled payment per hectare, the complementary redistributive income support for sustainability, should be established at Union level. To allow for a better targeting of this complementary support and in view of acknowledging the differences in farm structures across the Union, Member States should have the possibility to provide different amounts of complementary support to different ranges of hectares.

(30) The creation and development of new economic activity in the agricultural sector by young farmers is financially challenging and constitutes an element that should be considered in the allocation and targeting of direct payments. This development is essential for the competitiveness of the agricultural sector in the Union and, for this reason, Member States may establish a complementary income support for young farmers. This type of interventions should be established to provide young farmers with an additional income support after the initial setting up.

(31) The CAP should ensure that Member States increase the environmental delivery by respecting local needs and farmers' actual circumstances. Member States should under direct payments in the CAP Strategic Plan set up Eco-schemes voluntary for farmers, which should be fully coordinated with the other relevant interventions. They should be defined by the Member States as a payment granted either for incentivising and remunerating the provision of public goods by agricultural practices beneficial to the environment and climate or as a compensation for the introduction of these practices. In both cases they should aim at enhancing the environmental and climate performance of the CAP and should consequently be conceived to go beyond the mandatory requirements already prescribed by the system of conditionality. Member States may decide to set up eco-schemes for agricultural practices such as the enhanced management of permanent pastures and landscape features, and organic farming. These schemes may also include ‘entry-level schemes’ which may be a condition for taking up more ambitious rural development commitments.

(32) Member States should be allowed to use part of their financial ceiling available for direct payments for coupled income support in order to improve competitiveness, sustainability, and/or quality in certain sectors and productions that are particularly important for social, economic or environmental reasons and undergo certain difficulties. Furthermore, Member States should also be allowed to use an additional part of their financial ceiling available for direct payments to grant coupled income support specifically for the support of protein crop production in order to reduce the Union's deficit in this regard.

(33) Compliance of coupled income support with the Union's international commitments should be ensured. This includes in particular the requirements of the Memorandum of Understanding between the European Economic Community and the United States of America on oilseeds within the framework of the GATT, 17 as applicable subsequent to changes to the EU separate base area for oilseeds following changes to the composition of the EU. The Commission should have the power to adopt implementing acts for this purpose of laying down detailed rules in this respect.

(34) In accordance with the objectives set out in Protocol No 4 on cotton attached to the 1979 Act of Accession, it is necessary to continue a ‘crop-specific payment’ per eligible hectare linked with the cultivation of cotton, as well as the support for inter-branch organisations in the cotton producing regions. However, since the budgetary allocation for cotton is fixed and cannot be used for other purposes and because the implementation of this program has a Treaty law basis, the payment for cotton should not be part of the interventions approved in the CAP Strategic Plan. In order to ensure the efficient application and management of the crop-specific payment for cotton, the power to adopt certain acts should be delegated to the Commission.

(35) Sectoral types of interventions are needed to contribute to the CAP objectives and reinforce synergies with other CAP instruments. In line with the delivery model, minimum requirements concerning the contents and objectives for such sectoral types of interventions should be elaborated at Union level in order to ensure a level playing field in the internal market and avoid conditions of unequal and unfair competition. Member States should justify their inclusion in their CAP Strategic Plans and ensure consistency with other interventions at sectoral level. The broad types of interventions to be established at Union level should cover the sectors of fruit and vegetables, wine, apiculture products, olive oil and table olives, hops and other products to be defined, for which the establishment of sectoral programs is deemed to have beneficial effects on the achievement of some or all of the general and specific objectives of the CAP pursued by this Regulation.

(36) National financial envelopes or other limitations in form of caps are needed in order to maintain specificity of intervention and facilitate programming sectoral interventions for wine, olive oil and table olives, hops and other agricultural products to be defined in this Regulation. However, in the fruit and vegetables and apiculture sectors Union financial assistance should continue to be granted in accordance with the rules laid down in Regulation (EU) No 1308/2013 of the European Parliament and of the Council 18 in order not to undermine the achievement of the additional objectives that are specific to these types of interventions. Where Member States would introduce support for ‘other sectoral interventions’ in their CAP Strategic Plans, the corresponding financial allocation should be deducted from the allocation for the type of interventions in the form of direct payments of the Member State concerned in order to remain financially neutral. Where a Member State would choose not to implement sectoral interventions for hops and olive oil, the related allocations for that Member State should be made available as additional allocations for types of interventions in the form of direct payments.

(37) For interventions for rural development, principles are defined at Union level, particularly with regard to the basic requirements for the Member States to apply selection criteria. However, Member States should have ample discretion to define specific conditions according to their needs. Types of interventions for rural development include payments for environmental, climate and other management commitments that Member States should support throughout their territories, in accordance with their national, regional or local specific needs. Member States should grant payments to farmers and other land managers who undertake, on a voluntary basis, management commitments that contribute to climate change mitigation and adaptation and to the protection and improvement of the environment including water quality and quantity, air quality, soil, biodiversity and ecosystem services including voluntary commitments in Natura 2000 and support for genetic diversity. Support under payments for management commitments may also be granted in the form of locally-led, integrated or cooperative approaches and result-based interventions.

(38) Support for management commitments may include organic farming premia for the maintenance of and the conversion to organic land; payments for other types of interventions supporting environmentally friendly production systems such as agro-ecology, conservation agriculture and integrated production; forest environmental and climate services and forest conservation; premia for forests and establishment of agroforestry systems; animal welfare; conservation, sustainable use and development of genetic resources. Member States may develop other schemes under this type of interventions on the basis of their needs. This type of payments should cover additional costs and income foregone only resulting from commitments going beyond the baseline of mandatory standards and requirements established in Union and national law, as well as conditionality, as laid down in the CAP Strategic Plan. Commitments related to this type of interventions may be undertaken for a pre-established annual or pluri-annual period and might go beyond seven years where duly justified.

(39) Forestry measures should contribute to the implementation of the Union Forest Strategy, and be based on Member States' national or sub-national forest programs or equivalent instruments, which should build on the commitments stemming from the Regulation on the inclusion of greenhouse gas emission and removals from land use, land use energy and forestry [LULUCF Regulation] and those made in the Ministerial Conferences on the Protection of Forests in Europe. Interventions should be based on forest management plans or equivalent instruments and may comprise forest area development and sustainable management of forests, including the afforestation of land and the creation and regeneration of agroforestry systems; the protection, restoration and improvement of forest resources, taking into account adaptation needs; investments to guarantee and enhance forest conservation and resilience, and the provision of forest ecosystem and climate services; and measures and investments in support of the renewable energy and bio-economy.

(40) In order to ensure a fair income and a resilient agricultural sector across the Union territory, Member States may grant support to farmers in areas facing natural and other area-specific constraints. As regards payments for ANC, the designation of the 2014-2020 Rural Development policy should continue to apply. For the CAP to deliver enhanced Union added on the environment and reinforce its synergies with the financing of investments in nature and biodiversity, it is necessary to keep a separate measure aiming at compensating beneficiaries for disadvantages related to the implementation of Natura 2000 and Water Framework Directives. Support should therefore continue to be granted to farmers and forest holders to help address specific disadvantages resulting from the implementation of Directive 2009/147/EC and Directive 92/43/EEC and in order to contribute to the effective management of Natura 2000 sites. Support should also be made available to farmers to help address disadvantages in river basin areas resulting from the implementation of the Water Framework Directive. Support should be linked to specific requirements described in the CAP Strategic Plans that go beyond relevant mandatory standards and requirements. Member States should also ensure that payments to farmers do not lead to double funding with eco schemes. Furthermore, the specific needs of Natura 2000 areas should be taken into account by Member States in the overall design of their CAP Strategic Plans.

(41) The objectives of the CAP should also be pursued through support for investments, productive as well as non-productive, on farm as well as off-farm. Such investments may concern, inter alia, infrastructures related to the development, modernisation or adaptation to climate change of agriculture and forestry, including access to farm and forest land, land consolidation and improvement, agro-forestry practices and the supply and saving of energy and water. In order to better ensure the consistency of the CAP Strategic Plans with Union objectives, as well as a level playing field between Member States, a negative list of investment topics is included in this Regulation.

(42) In the light of the need to fill the investment gap in the Union agricultural sector and improve access to financial instruments for priority groups, notably young farmers and new entrants with higher risk profiles, use of the InvestEU guarantee and combination of grants and financial instruments should be encouraged. Since the use of financial instruments across Member States varies considerably as a result of differences in terms of access to finance, banking sector development, presence of risk capital, familiarity of public administrations and potential range of beneficiaries, Member States should establish in the CAP Strategic Plan appropriate targets, beneficiaries and preferential conditions, and other possible eligibility rules.

(43) Young farmers and new entrants still face significant barriers regarding access to land, high prices and access to credit. Their businesses are more threatened by price volatility (for both inputs and produce) and their needs in terms of training in entrepreneurial and risk management skills are high. It is therefore essential to continue the support for the setting up of new businesses and new farms. Member States should provide for a strategic approach and identify a clear and coherent set of interventions for generational renewal under the specific objective dedicated to this issue. To this aim, Member States may set in their CAP Strategic Plans preferential conditions for financial instruments for young farmers and new entrants, and should include in their CAP Strategic Plan the ring-fencing of at least an amount corresponding to 2% of the annual direct payments' envelope. An increase of the maximum amount of aid for the installation of young farmers and rural business start-ups, up to EUR 100.000, which can be accessed also through or in combination with financial instrument form of support, should be established.

(44) In the light of the need to ensure appropriate risk management tools, insurance premia and mutual funds should be maintained, financed by the EAFRD. The category of mutual funds encompasses both those linked to production losses, and the general and sector-specific income stabilisation tools, linked to income losses.

(45) Support should enable the establishment and implementation of cooperation between at least two entities in view of achieving CAP objectives. Support can entail all aspects of such cooperation, such as the setting up of quality schemes; collective environmental and climate action; the promotion of short supply chain and local markets; pilot projects; Operational Group projects within the EIP for agricultural productivity and sustainability local development projects, Smart Villages, buyers' clubs and machinery rings; farm partnerships; forest management plans; networks and clusters; social farming; community supported agriculture; actions within the scope of LEADER; and the setting up of producer groups and producer organisations, as well as other forms of cooperation deemed necessary to achieve the specific objectives of the CAP.

(46) The Communication on ‘The Future of Food and Farming’ mentions the exchange of knowledge and focus on innovation as a cross cutting objective for the new CAP. The CAP should continue to support the interactive innovation model, which enhances the collaboration between actors to make best use of complementary types of knowledge with a view to spreading practical solutions. Farm advisory services should be strengthened within the AKIS. The CAP Strategic Plan should provide information on how advisory services, research and rural networks will work together. Each Member State or region, as appropriate, can fund a number of actions aimed at knowledge exchange and innovation, using the types of interventions developed in this Regulation.

(47) The EAGF should continue financing types of interventions in the form of direct payments and sectoral types of interventions, whereas the EAFRD should continue financing types of interventions for rural development as described in this Regulation. The rules for the financial management of the CAP should be laid down separately for the two funds and for the activities supported by each of them, taking into account that the new delivery model gives more flexibility and subsidiarity for Member States to reach their objectives. Types of interventions under this Regulation should cover the period from 1 January 2021 to 31 December 2027.

(48) Support for direct payments under the CAP Strategic Plans should be granted within national allocations to be fixed by this Regulation. These national allocations should reflect a continuation of the changes whereby the allocations to Member States with the lowest support level per hectare are gradually increased to close 50% of the gap towards 90% of the Union average. In order to take into account the reduction of payments' mechanism and the use of its product in the Member State, the total indicative financial allocations per year in the CAP Strategic Plan of a Member State should be allowed to exceed the national allocation.

(49) In order to facilitate the management of EAFRD funds, a single contribution rate for support from the EAFRD should be set in relation to public expenditure in the Member States. In order to take account of their particular importance or nature, specific contribution rates should be set in relation to certain types of operations. In order to mitigate the specific constraints resulting from the level of development, the remoteness and insularity, an appropriate EAFRD contribution rate should be set for less developed regions, the outermost regions referred to in Article 349 TFEU and the smaller Aegean islands.

(50) EAFRD should not provide support to investments that would harm the environment. Hence it is necessary to provide in this Regulation a number of exclusion rules, as well as the possibility to further develop these guarantees in delegated acts. Notably, the EAFRD should not finance investments in irrigation which do not contribute towards the achievement, or the preservation, of good status of the associated water body or bodies and investments in afforestation which are not consistent with climate and environmental objectives in line with sustainable forest management principles.

(51) For the purpose of ensuring adequate financing for certain priorities, rules on minimum financial allocations for these priorities should be set for the support under EAFRD. For the sake of ensuring a level playing field between farmers, a maximum allocation should also be set for the coupled support under direct payments. Furthermore, Member States should also be allowed to use an additional part of their financial ceiling available for direct payments to grant coupled income support specifically for improving the competitiveness, sustainability, and/or quality of the protein crop production.

(52) Reflecting the importance of tackling climate change in line with the Union's commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, this Program will contribute to mainstream climate action in the Union's policies and to the achievement of an overall target of 25% of the EU budget expenditures supporting climate objectives. Actions under the CAP are expected to contribute 40 % of the overall financial envelope of the CAP to climate objectives. Relevant actions will be identified during the Program's preparation and implementation, and reassessed in the context of the relevant evaluations and review processes.

(53) The transfer of responsibility to Member States for assessing needs and achieving targets goes hand in hand with an increased flexibility to set up the combination of both types of interventions in the form of direct payments, sectoral types of interventions and types of interventions for rural development. This should be supported by some flexibility to adjust the relevant national allocations of funds. When Member States estimate that the pre-allocated envelope is too low to have room for all intended measures, a certain degree of flexibility is therefore justified, while at the same time avoiding considerable fluctuations in the level of annual direct income support versus the amounts available for multi-annual interventions under EAFRD.

(54) To enhance the Union added value and to preserve a functioning agricultural internal market, as well as to pursue the above-mentioned general and specific objectives, Member States should not take decisions according to this Regulation in isolation but in the framework of a structured process that should materialise in a CAP Strategic Plan. Union top-down rules should lay down the specific EU-wide objectives of the CAP, the main types of interventions, the performance framework and the governance structure. Such a distribution of tasks is aimed at ensuring full correspondence between financial resources invested and results achieved.

(55) In order to ensure a clear strategic nature of these CAP Strategic Plans, and to facilitate the links with other Union policies, and notably with established long-term national targets deriving from Union legislation or international agreements such as those related to climate change, forests, biodiversity, and water, it is appropriate that there should be one single CAP Strategic Plan per Member State.

(56) In the process of development of their CAP Strategic Plans, Member States should analyse their specific situation and needs, set targets linked to the achievement of the objectives of the CAP and design the interventions which will allow reaching these targets, while being adapted to the national and specific regional contexts, including the outermost regions pursuant to Article 349 TFEU. Such process should promote more subsidiarity within a common Union framework, while compliance with the general principles of Union law and the objectives of the CAP should be ensured. It is therefore appropriate to set rules on the structure and content of the CAP Strategic Plans.

(57) In order to ensure that the setting of targets by Member States and that the design of interventions is appropriate and maximises the contribution to the objectives of the CAP, it is necessary to base the strategy of the CAP Strategic Plans on a prior analysis of the local contexts and an assessment of needs in relation to the objectives of the CAP.

(58) The CAP Strategic Plans should aim to ensure enhanced coherence across the multiple tools of the CAP, since it should cover types of interventions in the form of direct payments, sectoral types of interventions and types of interventions for rural development. They should also ensure and demonstrate the alignment and appropriateness of the choices made by Member States to the Union priorities and objectives. It is therefore appropriate that they contain a result-oriented intervention strategy structured around the specific objectives of the CAP, including quantified targets in relation to these objectives. In order to allow their monitoring on an annual basis, it is appropriate that these targets are based on result indicators.

(59) The strategy should also highlight complementarity both between CAP tools and with the other Union policies. In particular, each CAP Strategic Plan should take account of environmental and climate legislation where appropriate, and national plans emanating from this legislation should be described as part of the analysis of the current situation ('SWOT analysis'). It is appropriate to list the legislative instruments which should specifically be referred to in the CAP Strategic Plan.

(60) Considering that flexibility should be accorded to Member States as regards the choice of delegating part of the implementation of the CAP Strategic Plan at regional level on the basis of a national framework, in order to facilitate co-ordination among the regions in addressing nation-wide challenges, it is appropriate that the CAP Strategic Plans provide a description of the interplay between national and regional interventions.

(61) Since the CAP Strategic Plans should allow the Commission to assume its responsibility for the management of the Union budget and provide Member States with legal certainty on certain elements of the Plan, it is appropriate that the plans contain a specific description of the individual interventions, including the eligibility conditions, the budgetary allocations, the planned outputs and the unit costs. A financial plan is necessary to provide an overview on all budgetary aspects and for each intervention, together with a target plan.

(62) In order to ensure the immediate start and efficient implementation of the CAP Strategic Plans, support from the EAGF and the EAFRD should be based on the existence of sound administrative framework conditions. Each CAP Strategic Plan should therefore include the identification of all governance and coordination structures of the CAP Strategic Plan, including the control systems and penalties, and the monitoring and reporting structure.

(63) Considering the importance of the general objective of modernising the agricultural sector, and in view of its crosscutting nature, it is appropriate that Member States include in their CAP Strategic Plan a dedicated description of the contribution that such a Plan will make to this objective.

(64) In view of the concerns related to administrative burden under shared management, simplification should also be subject to a specific attention in the CAP Strategic Plan.

(65) Considering that it is not appropriate for the Commission to approve information which can be considered as background, or historical, or which is under the responsibility of the Member States, some information should be provided as Annexes to the CAP Strategic Plan.

(66) Pursuant to paragraph 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016, there is a need to evaluate the Funds on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burdens, in particular on Member States. These requirements, where appropriate, can include measurable indicators, as a basis for evaluating the effects of the Funds on the ground.

(67) The approval of the CAP Strategic Plan by the Commission is a crucial step in order to guarantee that the policy is implemented according to the common objectives. In accordance with the principle of subsidiarity, the Commission should provide the Member States with appropriate guidance in presenting coherent and ambitious intervention logics.

(68) It is necessary to provide for the possibility for programming and revising CAP Strategic Plans, in accordance with the conditions laid down in this Regulation.

(69) A Managing Authority should be responsible for the management and implementation of each CAP Strategic Plan. Its duties should be specified in this Regulation. The Managing Authority should be able to delegate part of its duties while retaining responsibility for the efficiency and correctness of management. Member States should ensure that in the Management and Implementation of CAP Strategic Plans, the financial interests of the Union are protected, in accordance with [Regulation (EU, Euratom) X] of the European Parliament and the Council [the new Financial Regulation] and Regulation (EU) X of the European Parliament and the Council [the new Horizontal Regulation].

(70) In accordance with the principle of shared management, the Commission is assisted by committees formed by Member States representatives in the implementation of the CAP. With a view to simplifying the system and streamlining the position of Member States, only one Monitoring Committee is established for the implementation of this Regulation, merging the ‘Rural Development’ Committee and the ‘Direct Payments’ Committee, which were established under the 2014-2020 programming period. The responsibility to assist Member States in the implementation of the CAP Strategic Plans is shared between the Managing Authority and this Monitoring Committee. The Commission should also be assisted by the ‘Common Agricultural Policy’ Committee, in accordance with the provisions laid down by this Regulation.

(71) The EAFRD should support through technical assistance, at the initiative of the Commission, actions relating to the fulfilment of the tasks referred to in [Article 7 HzR]. Technical assistance may also be provided, at the initiative of Member States, for the purpose of the fulfilment of the tasks necessary for the effective administration and implementation of support in relation to the CAP Strategic Plan. An increase of the technical assistance at the initiative of Member States is only available for Malta.

(72) In a context where Member States will have much more flexibility and subsidiarity on the design of interventions, networks are a key tool to drive and steer policy and to ensure sufficient attention and capacity in the Member States. A single network should ensure better coordination between networking activities at the Union and at the national and regional levels. The European and national CAP network replace the current European Network for Rural Development and EIP for ‘agricultural productivity and sustainability’ networks and the National Rural Networks, in the form of a platform providing for more exchange of knowledge in order to capture the results and added value of the policy at European level, particularly the Horizon Europe policy. In the same perspective of improvement of the exchange of knowledge and innovation, an EIP for ‘agricultural productivity and sustainability’ is set up, implementing the interactive innovation model in accordance with the methodology outlined in this Regulation.

(73) Each CAP Strategic Plan should be subject to regular monitoring of the implementation and of progress towards the established targets. Such a performance, monitoring and evaluation framework of the CAP should be set up with the purpose of demonstrating the progress and assessing the impact and efficiency of policy implementation.

(74) The result-orientation triggered by the delivery model requires a strong performance framework, particularly since CAP Strategic Plans would contribute to broad general objectives for other shared managed policies. A performance-based policy implies annual and multi-annual assessment on the basis of selected outputs, result and impact indicators, as defined in the performance monitoring and evaluation framework. To this end, a limited and targeted set of indicators should be selected in a way which reflects as closely as possible whether the supported intervention contributes to achieving the envisaged objectives. Result and output indicators relating to climate- and environment-related objectives may include interventions set out in national environmental and climate-planning instruments emanating from Union legislation.

(75) As part of the performance, monitor and evaluation framework, Member States should monitor and report annually to the Commission on the progress made. The information provided by the Member States are the basis on which the Commission should report on the progress towards the achievement of specific objectives over the whole programming period using for this purpose a core set of indicators.

(76) Mechanisms should be in place to take action to protect the Union’s financial interests in case the CAP Strategic Plan implementation deviates significantly from the targets set. Member States may thus be asked to submit action plans in case of significant and non-justified underperformance. This could lead to suspensions and, in the end, reductions of the Union funds if the planned results are not achieved. Moreover, an overall performance bonus is established as part of the incentive mechanism based on allocating the performance bonus, in view of encouraging good environmental and climate performances.

(77) In accordance with the principle of shared management, Member States should be responsible for the evaluation of their CAP Strategic Plans, whereas the Commission is responsible for the syntheses at Union level of the Member States’ ex-ante and for the Union level ex post evaluations.

(78) Notifications are needed from Member States for the purpose of applying this Regulation, and for the purpose of monitoring, analysing and managing financial entitlements. In order to ensure the correct application of the rules set out in this Regulation and to make such notifications fast, efficient, accurate, cost-effective and compatible with the protection of personal data, the power to adopt certain acts should be delegated to the Commission, including notification requirements under those agreements and in respect of further rules on the nature and type of the information to be notified, the categories of data to be processed and maximum period of retention, the access rights to the information or information systems and the conditions of publication of the information.

(79) Articles 107, 108 and 109 TFEU should apply to the support the types of interventions under this Regulation. Nevertheless, given the specific characteristics of the agricultural sector, those TFEU provisions should not apply to types of interventions in the form of direct payments and types of interventions for rural development concerning operations falling within the scope of Article 42 TFEU, that are carried out under and in conformity with this Regulation or to payments made by Member States, intended to provide additional national financing for types of interventions for rural development for which Union support is granted and which fall within the scope of Article 42 TFEU.

(80) Farmers are increasingly facing risks of income volatility, partly because of market exposure, partly because of extreme weather events and frequent sanitary and phytosanitary crises affecting the Union livestock and agronomic assets. To alleviate the effects of income volatility by encouraging farmers to make savings in good years to cope with bad years, national tax measures whereby the income tax base applied to farmers is calculated on the basis of a multiannual period should be exempted from the application of the State aid rules.

(81) Personal data collected for the purposes of the application of any provision enshrined in this Regulation should be processed in a way that is compatible with those purposes. It should also be made anonymous, be aggregated when processed for monitoring or evaluation purposes, and be protected in accordance with Union law concerning the protection of individuals with regard to the processing of personal data and on the free movement of such data, in particular Regulation (EC) No 45/2001 of the European Parliament and of the Council 19 and Regulation (EU) 2016/679 of the European Parliament and of the Council 20 . Data subjects should be informed of such processing and of their data protection rights.

(82) In order to supplement certain non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Inter-institutional Agreement of 13 April 2016 on Better Law-Making 21 . In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(83) In order to ensure legal certainty, protect the rights of farmers and guarantee a smooth, coherent and efficient functioning of types of interventions in the form of direct payments, the power to adopt certain acts should be delegated to the Commission in respect of rules making the granting of payments conditional upon the use of certified seeds of certain hemp varieties and the procedure for the determination of hemp varieties and the verification of their tetrahydrocannabinol content; rules for good agricultural and environmental condition and certain related elements in respect of the eligibility requirements; and on the content of the declaration and the requirements for the activation of payment entitlements; further rules on eco-schemes; measures to avoid that beneficiaries of coupled income support suffering from structural market imbalances in a sector, including the decision that such support may continue to be paid until 2027 on the basis of the production units for which it was granted in a past reference period; rules and conditions for the authorisation of land and varieties for the purposes of the crop-specific payment for cotton and rules on the conditions for the granting of that payment.

(84) In order to ensure that sectoral types of interventions contribute to the CAP objectives and reinforce synergies with other CAP instruments and in order to ensure a level playing field in the internal market and avoid unequal or unfair competition, the power to adopt certain acts should be delegated to the Commission in respect of criteria for the approval of inter-branch organisations and rules governing the situation where the approved inter-branch organisation does not satisfy such criteria and obligations for producers; rules for the proper functioning of sectoral types of interventions, the basis for the calculation of Union financial assistance, including the reference periods and the calculation of the value of marketed production, and the maximum level of Union financial assistance for market withdrawals; rules for the fixing of a ceiling for expenditure on the replanting of vineyards; and rules under which producers are to withdraw the by-products of winemaking, and on exceptions to that obligation in order to avoid additional administrative burden and rules for the voluntary certification of distillers. In particular, in order to ensure the effective and efficient use of Union funds for interventions in the apiculture sector, the power to adopt certain acts should be delegated to the Commission in respect of additional requirements concerning the notification obligation and the establishment of a minimum Union contribution to the expenditure to implement those types of interventions.

(85) In order to ensure legal certainty and to guarantee that interventions for rural development achieve their objectives, the power to adopt certain acts should be delegated to the Commission in respect of support for management commitments, for investments and for cooperation.

(86) In order to amend certain non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of the Member States’ allocations for types of interventions in the form of direct payments and rules on the content of the CAP Strategic Plan.

(87) In order to ensure uniform conditions for the implementation of this Regulation and to avoid unfair competition or discrimination between farmers, implementing powers should be conferred on the Commission as regards the fixing of reference areas for the support for oilseeds, rules for the authorisation of land and varieties for the purposes of the crop-specific payment for cotton and related notifications, the calculation of the reduction where the eligible area of cotton exceeds the base area, the Union financial assistance for distillation of by-products of wine-making, the annual breakdown by Member State of the total amount of Union support for types of interventions for rural development, rules on the presentation of the elements to be included in the CAP Strategic Plan, rules on the procedure and time limits for the approval of CAP Strategic Plans and the submission and approval of requests for amendment of CAP Strategic Plans, uniform conditions for the application of the information and publicity requirements relating to the possibilities offered by the CAP Strategic Plans, rules relating to the performance, monitoring and evaluation framework, rules for the presentation of the content of the annual performance report, rules on the information to be sent by the Member States for the performance assessment by the Commission and rules on the data needs and synergies between potential data sources, and arrangements to ensure a consistent approach for determining the attribution of the performance bonus to Member States. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council. 22

(88) The Commission should adopt immediately applicable implementing acts where, in duly justified cases relating to solving specific problems while ensuring the continuity of the direct payments system in the case of extraordinary circumstances, imperative grounds of urgency so require. Moreover, in order to solve urgent problems occurring in one or more Member States while ensuring the continuity of the direct payments system, the Commission should adopt immediately applicable implementing acts where, in duly justified cases, extraordinary circumstances affect the granting of support and jeopardise the effective implementation of the payments under the support schemes listed in this Regulation.

(89) Regulation (EU) No 228/2013 of the European Parliament and of the Council 23 and Regulation (EU) No 229/2013 of the European Parliament and of the Council 24 should remain outside the scope of this Regulation, unless where some of their provisions are explicitly referred to.

(90) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States but can rather, by reason of the disparities between the various rural areas and the limited financial resources of the Member States, be better achieved at Union level through the multiannual guarantee of Union financing and by concentrating on clearly identified priorities, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union (TEU). In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(91) Regulations (EU) No 1305/2013 and (EU) No 1307/2013 should therefore be repealed.

(92) In order to facilitate the transition from the arrangements provided for in Regulations (EU) No 1305/2013 and (EU) No 1307/2013 to those laid down in this Regulation, the power to adopt certain acts should be delegated to the Commission in respect of measures to protect any acquired rights and legitimate expectations of beneficiaries.

(93) In order to ensure legal certainty and continuity, the special provisions for Croatia concerning the gradual introduction of direct payments and complementary national direct payments in the framework of the phasing-in mechanism should continue to apply until 1 January 2021.