FACULTY OF LAWLund University

Hanna Persson

Beyond Wine Lakes and Butter Mountains –

A Study on the Effects of the Common Agricultural Policy on Sustainable Agriculture in Sweden

LAGM01 Graduate Thesis

Graduate Thesis, Master of Laws program30 higher education credits

Supervisor: Sanja Bogojević

Semester of graduation: period 1 fall semester 2015

ContentsBeyond Wine Lakes 1and Butter Mountains – 1A Study on the Effects of the Common Agricultural Policy on Sustainable Agriculture in Sweden 1Summary 1Sammanfattning 2Acknowledgements 3Abbreviations 41 Introduction 5

1.1 Background 51.2 Purpose and research questions 71.3 Delimitations 81.4 Methodology 91.5 Definitions and metrics 111.6 Material 121.7 Disposition 13

2 EU Agricultural Policy 152.1 Introduction 152.2 Early history 15

2.2.1 Setting the stage 152.2.2 Common markets organizations 16

2.3 Recent history 172.3.1 The MacSharry reforms 172.3.2 Continued price cuts 18

2.4 CAP in the Lisbon Treaty 192.5 Current secondary legislation 20

2.5.1 Pillar I 202.5.2 Pillar II 222.5.3 Quota system 22

2.6 Summarising remarks 233 The Swedish implementation of CAP 24

3.1 Introduction 243.2 Swedish agriculture 24

3.2.1 Socially and economically 243.2.2 Environmental consequences 25

3.3 Before CAP 263.3.1 Interventionst policies 263.3.2 Liberalization 27

3.4 Current implementation of CAP 28

3.4.1 Pillar I implementation 283.4.2 Pillar II implementation 29

3.5 Summarising remarks 304 Policy consequences 31

4.1 Introduction 314.2 Farm size 31

4.2.1 Introduction 314.2.2 Analysis 32

4.3 Price of milk 354.3.1 Introduction 354.3.2 Analysis 37

4.4 Use of pesticides 404.4.1 Introduction 404.4.2 Analysis 41

4.5 Conclusion 445 Suggested policy changes 46

5.1 Analysis of current policies 465.2 Alternatives to the current CAP 475.3 Conclusion 49

Bibliography 51Table of Cases 60

SummaryIt is well known that industrial agriculture has extensive negative social, economic and environmental effects. Sustainable agriculture has been designed as a way of out this negative cycle, and is meant to create an agricultural system with temporal stability. With this starting point, this thesis investigates how the Common Agricultural Policy (CAP) has affected sustainable agriculture in Sweden. Since sustainable agriculture is a very broad term, this essay will focus on three metrics instead: how CAP has affected farm size, price of milk and pesticide use in Sweden.

The secondary EU legislation that makes up the most of CAP is divided into two pillars. Pillar I is concerned with two aspects of the policy: the common organization of the market, which regulates market intervention, and direct payments given to farmers based on their acreage. The direct payments were previously based on production levels. Pillar II makes up the rural development policy, with aid that is supposed to benefit rural communities.

This thesis shows that CAP has had, and continues to have, great consequences for these three metrics. The direct payments get capitalized into land values, which means that land becomes more expensive. This means, in turn, that farm sizes increase, which has great negative effects on the surrounding environment. However, these rate of farm size increase has been mitigated somewhat after the direct payments were decoupled (that is, when they were based on acreage rather than production levels).

For the past decades, the EU has enforced a milk quota, putting a cap on how much milk each member state can produce. This has created artificially high prices on milk, which has created a higher income for dairy farmers, thereby letting them avoid bankruptcy. This quota was removed in 2015, and prices are expected to drop as a result.

CAP has also affected, or failed to affect, the use of pesticides in Sweden. The previous coupled direct payments incentivized farmers to keep high production levels. This requires using a lot of pesticides. Pesticide levels have increased steadily over the past decades, despite some efforts to reduce them, such as promoting organic farming and introducing decoupled payments.

In total, this means that CAP has had negative effects on sustainable agriculture in Sweden, with consequences such as an increased rate of agricultural concentration, soil depletion and social isolation for the remaining farmers. With this said, CAP has also contributed positively to the development of agriculture. Its milk quotas have, for example, ensured that more farmers can stay in business. The conclusion is therefore that a reform of CAP is necessary to ensure a sustainable agriculture for the future.

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SammanfattningDet är välkänt att det industriella jordbruket har omfattande negativa sociala, ekonomiska och miljömässiga effekter. Hållbart jordbruk ses som ett alternativ till detta nedbrytande system. Dess syfte är istället att skapa ett jordbruk som är hållbart på lång sikt. Med detta som utgångspunkt undersöker denna uppsats hur den gemensamma jordbrukspolitiken (CAP) har påverkat hållbart jordbruk i Sverige. Eftersom ”hållbart jordbruk” är svårt att definiera så kommer uppsatsen att fokusera på tre aspekter och undersöka hur CAP har påverkat gårdsstorlekar, mjölkpriser och användning av växtskyddsmedel i Sverige.

CAP utgörs främst av sekundärrätt som är uppdelad i två pelare. Pelare I behandlar två aspekter: den gemensamma organisationen av jordbruksmarknaders, som främst reglerar marknadsåtgärder, och arealbaserade direktstöd. Direktstöden baserades tidigare på produktionsnivåer. Pelare II reglerar landsbygdsprogrammet, som ger bidrag till utveckling av landsbygden.

Denna uppsats drar slutsatsen att CAP har haft stora konsekvenser för dessa tre aspekter. Direktstöden kapitaliseras in i markvärdena, vilket innebär att markpriserna stiger. Detta leder i sin tur till att gårdsstorlekarna ökar, vilket har negativa konsekvenser för den närmsta omgivningen. Dessa effekter har däremot minskat något efter att direktstöden kopplades isär från produktionen.

Under de senaste årtiondena har EU:s mjölkkvoter satt en gräns för hur mycket mjölk varje medlemsstat får producera, vilket har drivit upp mjölkpriserna. Detta har ökat böndernas inkomster, och drivit dem längre bort från konkurs. Mjölkkvoterna togs bort under våren 2015, och mjölkpriserna förväntas nu falla som ett resultat av detta.

CAP har också påverkat, eller misslyckats med att påverka, användningen av växtskyddsmedel i Sverige. De kopplade direktstöden gav bönder ett incitament att ha höga produktionsnivåer, vilket kräver mycket växtskyddsmedel. Nivåerna av växtskyddsmedel har ökat stadigt de senaste åren, trots försök att sänka dem. Dessa försök har bland annat innefattat ett ökat stöd för ekologisk odling, och ett frikopplat direktstöd.

Sammanfattningsvis innebär detta att CAP har haft negativa effekter på svenskt hållbart jordbruk. Dessa effekter innefattar bland annat en högre grad av koncentration inom branschen, utarmning av jordar och social isolering för kvarvarande jordbrukare. Med detta sagt har CAP dock även bidragit positivt till utvecklingen. Ett exempel på detta är mjölkkvoterna som låtit fler bönder fortsätta med sin verksamhet. Det är därför nödvändigt att reformera CAP, för att säkerställa ett hållbart jordbruk för framtiden.

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AcknowledgementsEftersom jag väl aldrig lär publicera en bok får jag ta tillfället i akt och passa på att tacka alla ordentligt här.

Tack:

Mamma, pappa och Johan.

Mormor, morfar och farmor.

Till mina favoriter slash bieber loverz: Alicia, Ebba och Agnes. Det finns inget bättre än vänner som aldrig tvivlar på att du är coolast i hela världen.

Reese. Thanks for remembering my birthday, and for drawing me a sign commemorating the occasion. And for everything else.

Tack till alla vänner på juristprogrammet, för att ni har gjort de här åren så härliga. Särskilt tack till min ständige vapendragare Rasmus, som följt med från Delphi till Malmö via Berkeley.

Tack till alla nätkurslärare, för allt häng på kontoret, alla panikskratt när ingenting funkar och alla fredagsluncher. Tack till Ullis, Visnja och Simon för ganska relevanta uppsatsdiskussioner in i oändligheten.

Also, thanks so much to everyone in LURK, especially Annika and Cornelia, for taking me in and showing me why rowing is so great. The times out on the water have helped keep me sane during this semester.

Tack till min handledare Sanja för värdefulla råd och snabb hjälp under hela terminen.

Tack så hemskt mycket till alla, men nu orkar jag inte skriva mer ord i det här dokumentet.

Lund, 7 januari 2016

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AbbreviationsCAP Common Agricultural PolicyCMO Common market organizationsEAFRD European Agricultural Fund for Rural

DevelopmentEFA Ecological Focus AreaECJ European Court of JusticeEU European UnionGAEC Good agricultural and environmental conditionPSE Producer Support EquivalentSPS Single Payment SchemeTEU Treaty on the European UnionTFEU Treaty of the functioning of the European UnionWHO World Health OrganizationWTO World Trade Organization

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1 Introduction

1.1 BackgroundSomething has turned sour in the milk market. These are the words of Jean Claude Juncker, President of the European Commission, in his State of the Union speech September 2015.1 He was referring to the agricultural crisis that had left European farmers protesting in Brussels earlier that week because of falling meat and dairy prices.2 The Commission responded by giving a € 500 million aid package to the farmers, but it is far more likely that the problems with the current agricultural system run deeper than what a monetary infusion can remedy. In fact, despite significant technical progress over the past century, industrial agriculture has caused unplanned social and environmental side effects.3

Sustainable agriculture has been designed as a way out of the current industrial agricultural system. The latter is mostly known for focusing on high yields and profit over other immeasurable values like biodiversity and rural quality of life. As a result of this, the concept of sustainable agriculture has risen. In short, sustainable agriculture focuses on the temporal stability of agriculture.4

The issues voiced by the protesting farmers are by no means new in the European Union. Farmers have been struggling economically for a long time. The agricultural treadmill, which forces farmers to keep investing in expensive equipment and to continue expanding, makes farming hard to depend on as a livelihood. Smaller farms that cannot afford to continuously expand tend to go bankrupt, while larger farms (so called mega farms) and absentee landowners thrive.5

Farmers all over Europe are clearly facing economic struggles. For example, the French minister for agriculture recently estimated that more than 22 000 French farms are on the verge of bankruptcy.6 Sweden is by no means

1 Juncker, Jean Claude: State of the Union 2015: Time for Honesty, Unity and Solidarity, speech in the European Parliament, 2015-09-09, http://europa.eu/rapid/press-release_SPEECH-15-5614_en.htm, accessed 2015-09-14.2 Ruddick, Graham: Farmers clash with police in Brussels during meat and milk prices protest, published 2015-09-07, http://www.theguardian.com/environment/2015/sep/07/farmers-clash-police-brussels-milk-meat-prices-protest, accessed 2015-09-14.3 International Assessment of Agricultural Knowledge, Science and Technology for Development: Executive Summary of the Synthesis Report, 2008, p. 3.4 Harwood, Richard R.: ”A History of Sustainable Agriculture” in Sustainable Agricultural Systems by Edwards, Clive A. et al (eds), Ankeny, Iowa, 1990, p. 3.5 Levins, Richard A and Cochrane, Willard,W: The Treadmill Revisited, 1996, p. 552 f.6 Stéphane Le Foll: «Plus de 22000 éleveurs sont au bord du dépôt de bilan», published 2015-07-17,http://www.leparisien.fr/economie/stephane-le-foll-plus-22-000-eleveurs-sont-au-bord-du-depot-de-bilan-17-07-2015-4951741.php, accessed 2015-09-28.

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exempt from these problems. The Federation of Swedish Farmers (Lantbrukarnas riksförbund) shows that the profit per liter of milk is at a historically low point, and the situation has gotten worse over the summer. This means that it is getting harder to sustain a livelihood as a farmer: the number of Swedish diary farmers has decreased by 5% over the past year only. The economic situation is also made worse by the Russian trade embargo on European goods, which is supposed to last at least until August 2016.7

However, the current crisis is not limited to farmer’s livelihoods. Industrial agriculture is one of the larger causes of climate change and other environmental issues. The agricultural sector is one of the largest sources of greenhouse gas emissions: it accounts for around 12% of the total global emissions.8 The European agriculture specifically has also been shown to have great negative impacts on ecosystems, by contributing to the loss of biodiversity and increased eutrophication, among others.9 The latter is especially important in a Swedish context, since eutrophication is one of the most pressing environmental issues in the Baltic sea, having resulted in algae growth and dead zones in coastal marine waters.10

Industrial agriculture is also having negative social impacts on the European residents. Some of the largest concerns are the health effects of the modern way of farming. Communities close to industrial agriculture establishments often report large adverse health effects. For example, people living near swine operations are more than twice as likely to get infected with the antibiotics resistant bacteria MRSA. This is likely because of the large amount of antibiotics fed to the animals in high-density livestock production.11 The general public also displays signs of having been affected by industrial agriculture. A current example is glyphosate, the most commonly used herbicide in the world, which was recently determined to be a “possible carcinogen” by the International Agency for Research on Cancer at the World Health Organization (WHO).12

The social impacts also go hand in hand with the both the economic impacts. As the number of farms has decreased over the past century, although growing in size, rural areas all over Europe have faced an exodus of people leaving to become employed rather than run their own farms.

7 Lantbrukarnas Riksförbund, Mjölkrapporten, 2015, p. 2 ff.8 IPCC: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report, Cambridge, United Kingdom and New York, 2014, p. 869.9 Öhlund, Erika, Zuzek, Karolina and Hammer, Monica: Towards Sustainable Agriculture? The EU Framework and Local Adaptation in Sweden and Poland, 2015, p. 270.10 Larsson, Markus and Granstedt, Artur: Sustainable Governance of the Agriculture and the Baltic Sea – Agricultural Reforms, Food Production and Curbed Eutrophication, 2010, p. 1943.11 Casey, JA et al: High-density livestock operations, crop field application of manure, and risk of community-associated methicillin-resistant Staphylococcus aureus infection in Pennsylvania, 2013, p. 1985 ff.12 International Agency for Research on Cancer: Evaluation of five organophosphate insecticides and herbicides, 2015, p. 1.

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Rural life also becomes harder for other reasons; for example, industrial agriculture consumes disproportionate amounts of water and pollutes the water, soil, and air around the farms.13

Within the European system, the Common Agricultural Policy (CAP) has, from its conception, been a driver towards industrialized agriculture. The policy was first designed in the years post WWII, when a stable access to food was the main priority. With the explosion of environmental concerns over the past decade, CAP has undergone change to become more environmentally, socially and economically sustainable. It is, however, unclear to what extent the policy is effective in creating a truly sustainable agricultural system within the European Union.

1.2 Purpose and research questionsIn light of this, this essay aims to analyze how the Common Agricultural Policy of the European Union has affected the move towards sustainable agriculture in Sweden. The first purpose of the essay is therefore to give an account of the common agricultural policy and its background. The second purpose is to analyze the effects of the CAP in a Swedish context. I will then investigate how CAP has affected the Swedish move towards agricultural sustainability. Since “sustainable agriculture” is a very wide term, I have chosen three metrics to focus on: farm size, the price of a liter of milk, and pesticide use.

The main question I want to investigate in this thesis is therefore:

How has CAP affected sustainable agriculture in Sweden?

In order to answer this question, I have divided it into four sub questions. This means, more precisely, that I will focus on the following questions:

What are the basic legal features of CAP?

How has CAP been implemented on the Swedish national level?

How have both CAP and its implementation in Sweden affected the move to a sustainable agriculture in Sweden, judging from the metrics farm size, milk price and pesticide use?

Is CAP satisfactory from the point of view of sustainable agriculture, and if not, how ought it be reformed?

13 Horrigan et al: How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture, 2012, p. 445.

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1.3 DelimitationsThis is an ambitious thesis that engages with a complex legal field. By its very nature, this thesis will therefore not be able to cover all aspects that could be of relevance in a research project with a wider scope. One example of this is international agreements: the General Agreement on Tariffs and Trade (GATT), part of the World Trade Organization could have been useful to discuss.

EU agricultural policy is also a very broad field. This means that I will not be able to investigate the whole policy, but will instead focus on parts of it. I will give a broad overview of the CAP as a whole, and write in greater detail about the parts of the policy that matter for the research question. It would therefore be possible to cover many more aspects of CAP than what I have covered in this thesis.

Since sustainable agriculture is a very broad concept I will only be able to focus on some aspects of it in this thesis. I have chosen three metrics that together cover some of the most important aspects of agricultural sustainability (see subchapter 1.5 Definitions and metrics), but there is much more to be discussed to give a complete picture of the field. For example, I have chosen not to cover the consumer aspects of agriculture, such as food security and consumer rights. I will also not discuss the working conditions for farm workers, or animal protection.14

Agricultural policy is a field mostly researched by economists. Most of the available material in the subject is therefore within the economic field. In this essay, I will investigate agricultural policy from a legal point of view. I will use their economic conclusions and arguments when discussing how CAP has affected sustainable agriculture in Sweden. But a more in depth view of economic arguments will not be used.

One final problem is the possibility that other factors have impacted a sustainable agriculture in Sweden. The European Union must operate in a complex world, and there are forces that move the world forward that are outside of its control, and that cannot be affected by policy changes. This means that there are other aspects of society that have affected the move towards a sustainable agriculture. One example of this is the recent economic hardships after the crisis in 2008, which affected farmers as much as any other occupation.

14 For further reading on the subject, I recommend Sustainable Agricultural Systems by Clive A. Edwards et al (eds), Ankeny, Iowa, 1990, and Sustainable Agriculture by Eric Lichtfouse et al, New York, 2009.

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1.4 MethodologyThe common agricultural policy is a very dynamic area of law. It is built on a few basic legal sources: seven articles in the Lisbon treaty and three regulations from 2007 and 2013.15 This is complemented by numerous policy documents, such as news releases, comments and statements from the Commission. Policy is hard to analyze from a legal perspective since it does not come from the traditional legal sources, and does not follow the usual forms. This means that it changes quickly: new regulations come, effectively making the older ones obsolete.

Another aspect complicating the analysis of the European agricultural policy is the number of levels that legal and policy material comes from. The policy originates at the EU level, where it can come from a multitude of different legal bodies. The main EU regulations are then implemented on a national level, where the national governing bodies and executive departments draft their own legislation. It is finally carried out on a regional level. To that, it is also possible to add a fourth layer: the international layer of legal sources, such as World Trade Organization (WTO) agreements, which influence national and supranational regulations.

In this case, agricultural policy is a clear example of EU multi-level governance, a theoretical framework defined as “the participation of not only the state but different levels including both sub-national and supranational, as well as private and citizen interests in the decision-making”.16 This complicates the interpretation of the policy, since each level of the policy chain will influence it. The final version of the policy, at the local level, might therefore be different from what the policy makers at the international level envisaged.17

In the article Maturity and Methodology: Starting a Debate About Environmental Law Scholarship, Elizabeth Fisher et al discuss the same difficulties of environmental law scholarship that I have noted here. In the article, they pinpoint the same problems with environmental law scholarship in general, not just specifically agricultural law. They note four main problems with conducting research in the field: the speed of regulatory change, the subject’s interdisciplinary nature, the reliance on a wide range of governance arrangements, and environmental law’s multi-jurisdiction nature.18

These aspects, the fact that it is a very dynamic area of law, and the number of levels from which legal material can spring, makes it very challenging to

15 Articles 38-44 TFEU, Regulations 1305/2013, 1307/2013 and 1234/2007.16 Keskitalo, E. Carina H., and Pettersson Maria: Implementing Multi-Level Governance? The Legal Basis and Implementation of the EU Framework Directive for Forestry in Sweden, 2012, p. 91.17 Keskitalo and Pettersson, p. 91.18 Fisher et al: Maturity and Methodology: Starting a Debate About Environmental Law Scholarship, 2009, p. 228.

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work with from a strictly legal perspective. The regulatory speed also adds another layer to the already complicated topic, since the legal texts written quickly become dated. A text, for example, written before the changes in 2013, has already lost most of its relevance to the legal community. This means that it is hard to find up-to-date legal doctrine on the topic.

The next two difficulties identified by Fisher et al are the reliance on a variety of governance arrangements and the topic’s multi-jurisdictional nature. These two aspects create complications regarding the legal method used. Without clear legal sources, the traditional legal methodology, with its reliance on clearly defined sources of law, is harder to use. However, with these complications in mind, I have chosen to use the legal analytical method for a large part of my essay. Sandgren argues that the traditional legal dogmatic method should rather be called legal analytical method, since the purpose is to frequently analyze the established law from critical perspectives, or draw normative conclusions from descriptive statements, rather than just find an objective legal ‘truth’.19

Because of this, I will use primary and secondary legal sources to analyze CAP from the perspective of sustainable agriculture. The way this is done differs based on whether I am analyzing national Swedish sources, or legal sources connected to the EU. These two legal systems use different methods of interpretation, and recognize legal material from different sources.20 The Swedish legal sources are usually defined as statutes, preparatory works, case law and doctrine.21 The European Union bases its legal material firstly on binding statutes, while material from other sources, such as non-binding secondary law and doctrine is simply meant to be of guidance.22 European legal material must be interpreted both in light of its larger purpose, and from its context. The European Court of Justice (ECJ) has been known to add its own meaning to the words, paying little attention to the intentions of the legislator.23 This stands in stark contrast to the Swedish method of interpretation, where the preparatory works is of great importance.24

The final difficulty faced by environmental law scholars, the interdisciplinary nature of the subject, is based on a number of factors, such as the technicalities of scientific environmental research, and the fact that a lot of regulatory concepts come from other sources. Fisher et al exemplify this with different types of governance: for example, when doing research on emissions trading schemes, it is necessary to understand the non-legal methods through which the schemes are regulated.25 This means that environmental law scholar must understand, and use, research from other disciplines, in order to be able to fully analyze their own subject. In this

19 Sandgren, Clas: Är rättsdogmatiken dogmatisk?, 2005, p. 648 ff.20 Hettne, Jörgen and Otken Eriksson, Ida (red): EU-rättslig metod: teori och genomslag i svensk rättstillämpning, Stockholm, 2011, p. 34.21 Sandgren, p. 651.22 Hettne and Otken Eriksson, p. 40.23 Hettne and Otken Eriksson, p. 158.24 Sandgren, p. 651.25 Fisher et al, p. 233.

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essay, I will use articles and research from a number of different fields. The most important for this topic, agricultural law, are economics and the environmental and agricultural sciences. I will not use the methodology of these fields, but their findings will be used to create legal analysis and conclusions.

1.5 Definitions and metricsSustainable agriculture is one of the many movements around the world that seek to secure an agricultural future for the planet. Traditionally, it has been seen as an umbrella definition for producing food in a way that takes all the actors of the food chain into account. This means establishing a system that ensures animal protection, inflicts minimal harm on the environment, creates a living wage for workers and farm owners, supports local communities and creates healthy and safe food for consumers.26

Sustainable agriculture is often said to be the opposite of the modern, industrial agriculture that is characterized by high rates of technological innovations, increasing size of farms, monocultures, widespread use of pesticides and stable yields. This way of farming has brought on many concerns, including ecological, economic and social ones. Sustainable agriculture has risen as a concept to combat all these issues.27 Researchers have stressed that a sustainable agricultural system would work in harmony with its natural surroundings to ensure temporal stability.28

CAP does not have its own official definition of sustainable agriculture – instead the European Commission and the individual member states have to define it on their own. The European Commission has stated the following aims for their sustainable agriculture:

- Produce safe and healthy food, - Conserve natural resources, - Ensure economic viability, - Deliver services for the ecosystem, - Manage the countryside, - Improve quality of life in farming areas and - Ensure animal welfare.29

The Swedish Board of Agriculture lists the following aspects as essential parts of a sustainable agriculture:

- Non-depletion of resources, - Maintained conditions for food production, biodiversity and

recreation, - Sustained ecosystems and small biotopes

26 Björklund et al: Ecosystem-Based Agriculture Combining Production and Conservation – A Viable Way to Feed the World in the Long Term?, 2012, p. 826.27 Harwood, p. 3. 28 Altieri et al: Developing Sustainable Agroecosystems, 1983, p. 47 ff.29 European Commission, Sustainable agriculture for the future we want, 2012, p. 2 f.

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- Using agricultural processes that minimize the negative effect on the surrounding environments and maximize the use of resources

- A landscape that inspires outdoor activities, tourism and outdoor learning.30

Both of these definitions are wide and do not offer any practical solutions. Since an essay of this scope cannot deal with these definitions as a whole, I have chosen three metrics that together cover most of the aims set by the European Commission and the Swedish Board of Agriculture.

- Farm size. - Milk price.- Pesticide use31.

All three of these metrics cover some aspects of sustainable agriculture, and I will elaborate more on these reasons in chapter four. Farm size is mostly important for social reasons: large farms have for example been shown to have negative effects on the surrounding local community32, but the way industrial farming is done also affects environmental aspects such as biodiversity negatively.33 As for milk price, it is a mostly economic aspect that also has environmental and social consequences. With a higher milk price, more farmers can afford to stay in business, which has beneficial social effects for the surrounding community.34 Lastly, pesticide use is an aspect that mostly matters from an environmental perspective. Since pesticides are toxins, they harm the whole environment, and lead to soil degradation and decreased biodiversity, to only name a few consequences. These toxins also harm human health, and are especially dangerous to the farmworkers that handle them.35

1.6 MaterialAs mentioned in the discussion on methodology, this topic is not a traditional legal one. Instead, it is an area of law that contains more policy documents than law, and that changes rapidly. This has consequences for the material used: there are not a lot of primary sources, and the ones that do exist are written in a general way. This is problematic since it almost impossible to discern how the policy is implemented only by looking at the primary sources. Instead, the policy documents that exist, such as memos,

30 Jordbruksverket: Hållbart nyttjande inom jordbruket, 2007, p. 15.31 In this essay, the term ”pesticide” will be used to cover all plant protection products used for agricultural purposes. 32 Ikerd, John E: Sustainable agriculture as a rural economic development strategy, published 1999: http://web.missouri.edu/ikerdj/papers/sa-cdst.htm, accessed 2015-11-2833 D’Souza, Gerard and Ikerd, John: Small Farms and Sustainable Development: Is Small More Sustainable?, 1996, p. 82.34 Lobley, Matt et al: The Wider Social Impacts of Changes in the Structure of Agricultural Business, 2005, p. 27 and 41.35 Robson, Mark G. and Hamilton, George C: ”Pest Control and Pesticides” in Environmental Health: From Global to Local by Howard Frumkin (ed) San Francisco, 2010, p. 559 f.

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news releases and comments, fill in the gaps and create the actual, detailed policy.

I will therefore rely on policy documents in answering the research questions that lay the foundations for this thesis. This might be problematic from a strictly legal perspective since these documents do not stem from any of the traditional legal sources. It is, however, necessary to be able to analyze the subject of agricultural policy from a legal perspective.

The competence of the agricultural policy is shared between the European Union and the member states36, and the member states can choose how to implement a lot of the mandatory agricultural regulations.37 This means that there are three different sources of relevant official material: the European Union, the national Swedish level, and policy documents from the Swedish Board of Agriculture. In order to fully understand this area of law, it is therefore necessary to be able to work with material from all three sources.

Another consequence of the fact that European Union agricultural policy changes very rapidly is that it is hard to find judicial commentary, or doctrine, on the subject. A book or article written on the subject can quickly become dated if the whole policy is changed. This means that there are only a few legal scholars who are writing about EU agricultural policy, and the works that do exist can only be partially used since the policy has changed after their publication date. In this thesis, I will use legal doctrine as much as possible, but with this obvious limitation.

Since the analysis of the consequences of the agricultural policy is interdisciplinary, I will also use a number of articles from various academic fields, primarily economics and agricultural science, as they are the research areas that are typically most relevant to agricultural policy.

1.7 DispositionThe second chapter will give an overview of the common agricultural policy by first going through its inception in the late 1950s, and then detailing the most significant policy reforms since then. It will then go through the most relevant aspects of how CAP operates today with a focus on its constitutional foundation and relevant secondary legislation.

The third chapter will first give an overview of the current state of Swedish agriculture. It will then go through the recent history of agricultural reforms in Sweden, and end with a discussion on the application of CAP to the Swedish legal and agricultural systems, examining how it has been implemented in the Swedish context.

36 Art 4(2)(d) TFEU.37 See for example Art 1(b) in Regulation 1307/2007.

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In the fourth chapter, CAP is analyzed through a critical lens in light of sustainable agriculture, with a specific focus on the three chosen metrics: farm size, milk price, and pesticide use.

In the fifth chapter, I will present an analysis on the previous chapters, examining whether CAP is satisfactory from the point of view of sustainable agriculture. I will also discuss different options for trying to change the policy.

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2 EU Agricultural Policy

2.1 IntroductionThe Common Agricultural Policy is a very extensive topic to cover, and not something that can be done within the scope of this essay. I have therefore chosen to describe the most important stages of its history. I will begin with its origin in 1957, and then choose the most important turn of events, including: the Stresa conference in 1958, the first common market organizations in 1962, the MacSharry reforms in 1992, and the 2003 Fischler reforms. These are the largest agricultural reforms, and they all matter greatly for the way CAP functions today. I will then go through the history of the milk quota, a legislative aspect that matters greatly for the producers’ price of milk.

I will also discuss its constitutional basis and the most relevant current secondary legislation, together with a brief overview of some international conventions with implications for agricultural policy.

2.2 Early history

2.2.1 Setting the stageEuropean Union agricultural policy can be traced back to the very origins of the Union. It was one of the main pillars of the 1957 Treaty of Rome, which set the foundations for today’s European Union. The treaty was signed by the original six Member States (West Germany, the Netherlands, Belgium, France, Luxembourg and Italy), during a time when Europe was still recovering from the impacts of the two World Wars and a period of agricultural depression during the inter-war years. Farms were still not modernized, and large European regions were trying to handle rural flight. A common agricultural policy was therefore one of the basic reasons for the economic cooperation, shown by the fact that agriculture was the only sector that got its own title within the treaty. This set the stage for the agricultural system’s exceptionalism in the EU, something that still continues today. 38

The general principles of CAP were set in the Treaty of Rome. According to article 39 of the treaty, CAP would:

- Increase agricultural productivity through technical progress- Ensure a fair standard of living for agricultural communities- Stabilize markets- Assure the availability of supplies- Ensure reasonable prices for consumers

38 Cardwell, Michael: The European Model of Agriculture, Oxford, 2004, p. 20f.

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These aims are intentionally vague: in fact, some researchers have argued that the Treaty of Rome was more an “agreement to agree” than anything else.39 It is also clear that the five goals of the Treaty protect different interests, and that simultaneously fulfilling all of them seems near impossible.

If the Treaty of Rome set the general principles for a common policy, the Stresa Conference in 1958 was the time when the first Member States carved out the aims for the Union’s agriculture. At the conference, it was noted that farm incomes were not keeping up with the incomes of non-farm workers, and agricultural output increased more than consumption of the produce. These two issues therefore largely set the agenda for the conference.

The most important outcome in Stresa was the establishment of the common market for agricultural goods. The convening nations disagreed on the extent to which the common market should favor internal goods over imported ones, but settled on a compromise where trade links with third countries were to be upheld. Other notable decisions were to balance production and market outlets, and to create a price policy that avoided overproduction while ensuring competitiveness on a large market. All six countries agreed that one of the main reasons behind the newly established agricultural policy was to secure a future for small family owned farms.40

2.2.2 Common markets organizationsThe first common market organizations (CMOs), or the first version of CAP, were implemented in 1962. They were based on the market principle (meaning that all prices should be determined by the free market), but in reality, the prices were often manipulated. The largest commodity crops, such as cereals and dairy products, were given price guarantees. If the market price went below a certain point, the Member States were responsible for purchasing all surplus goods, to ensure the farmers a stable income. In short, there was a now a floor, below which the farmers were ensured their selling prices would never fall. They also set threshold prices for the food being imported into the Union, making sure that imported goods would never be cheaper than internal ones. 41

A price intervention system like this was already used among the individual member states. It has traditionally benefited both consumers and producers since it ensures stable prices for both parties. The intervention system usually works best when there is a high level of self-sufficiency, but when the country is not overproducing. This allows for a system that can control supply from season to season or annually. But when the producers in the

39 Jack, Brian: Agriculture and EU Environmental Law, Farnham, United Kingdom, 2009, p. 10.40 Tracy, Michael: The spirit of Stresa, 1994, p. 360 f.41 Jack, p. 6 f.

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market are constantly overproducing, this becomes a problem. The governmental bodies paying the floor prices are faced with great expenditures, and large quantities of surplus produce. Since the elasticity of demand for most food is very inelastic (the need for food stays pretty much constant no matter how much is produced), the market gets flooded with surplus goods.42

This is exactly what happened in the European Union during the years after the implementation of the first CMOs. The price intervention policies developed into becoming more protectionist, and the problems and expenses grew for the member states. Price interventions were introduced to new, smaller food groups (such as specific vegetables and tobacco). This resulted in the so-called butter mountain and wine lakes, which were created by the European states’ gross overproduction. During the 1980s, production increased by 2% annually while domestic demand increased only 0.5%.43 This led to market distortions, with effects such as a compulsory distillation of wine into industrial alcohol.44

It also led to problems for the developing countries outside of the European Union. It has been accused of distorting the markets for a lot of these countries by selling the overproduced yield to less developed countries to dumping prices, and thereby destroying the livelihood for local farmers.45 This overproduction also had negative consequences for the environment, with, among others, water pollution and loss of soil quality.46

2.3 Recent history

2.3.1 The MacSharry reformsDuring the 1980s, the union faced pressure from various sides to change its agricultural policy. The price intervention policies of instituted in 1962 had been so successful at making farmers produce more that the Union’s budget was getting strained – agricultural expenditures was by far the largest post in the budget. The Union had also expanded significantly, and the farming policies of the new member states were less homogenous than those of the original six. The new Scandinavian states were using a more liberal trade policy, while the Mediterranean members already had price intervention systems put in place. CAP was also criticized heavily from outside partners

42 Fennell, Rosemary: The Common Agricultural Policy – Continuity and Change, Oxford, 1997, p. 133 ff.43 European Commission, The common agricultural policy – Promoting Europe’s agriculture and rural areas: Continuity and change, 1998, p. 4f.44 Fennell, p. 136.45 UN Human Rights Council, Report of the Special Rapporteur on the Right to Food, Olivier de Schutter: The Common Agricultural Policy Towards 2020: The Role of the European Union in Supporting the Realization of the Right to Food, 2011, p. 2ff.46 European Commission, The development and future of the CAP, 1991, p. 2.

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– the international community critiqued its protectionist policies, and European media frequently discussed the food waste.47

The Union therefore decided to bring about some change in the policy, and it did so with the 1992 MacSharry reforms. The European Commission argued that the current policy no longer fulfilled the goals set in the Treaty of Rome, and that the current level of price interventions needed to be decreased.48 This was carried out by a shift from product support through price intervention to producer support through income support. The levels of price support for cereals and beef were subject to large cuts, and the farmers were instead granted direct payments based on the number of hectares and animals in their possession. They were also paid to take some of their land out of production.49 This had the desired effect: annual cereal outputs fell by 20 million tons and the excess food supplied all but disappeared. However, farmers were getting worried about how long the direct aid would last. This was especially worrisome for smaller farms, where every piece of land could be important in ensuring a future for the enterprise.50

The MacSharry reforms also included so-called “accompanying measures”, which were the first instances of rural development policy in the history of the European Union. It included an early retirement scheme for farmers, and policies to ensure more environmentally friendly farming and afforestation of marginalized land. This was complemented by measures such as start-up assistance to young farmers, and financial aid for rural infrastructure projects.51 This was important since the European Commission had warned that the countryside was falling further behind the non-rural areas: for example, over half the Union’s farmers were over 55 years of age.52

2.3.2 Continued price cutsThe policies introduced in the MacSherry reforms continued during the 1990s and 2000s. As the Union was preparing for its expansion towards the ex-Soviet countries, it also updated the agricultural policy with the Agenda 2000 reforms. CAP expenditure was at this point around 45% of the Union’s total spending. The prices for beef and cereals were cut even more, and again compensated by direct payments. The rural development policy was also strengthened. This did not, however, help alleviate the problems faced by farmers.53

47 Burrell, Alison, ”The CAP: Looking Back, Looking Ahead”, in The Common Agricultural Policy: Policy Dynamics in a Changing Context, edited by Skogstad, Grace and Verdun, Amy, Abingdon, 2010, p. 7.48 European Commission, 1991, p. 3 ff.49 Burrell, p. 8.50 Sloman, John, Economics, Harlow, 2006, p. 86.51 European Commission, 1998, p. 6.52 European Commission, 1991, p. 3 ff.53 Burrell, p. 8.

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Greater changes to the policy came a couple of years later with the 2003 Fischler reform. Up until this point, the direct payments had been commodity-specific, meaning that they were based on what the farmer was producing. They were now combined into the Single Payment Scheme (SPS), and the farmers would get paid a certain amount per hectare of eligible land. This is called decoupling the subsidies. According to art 44(2) of Regulation 1782/2003, “eligible hectare” meant any land that was not covered in permanent crops, forests or used for non-agricultural purposes. This was groundbreaking since it did not require the production of anything at all, let alone the production of specific goods.

2.4 CAP in the Lisbon TreatyThe constitutional foundation for CAP can be found in Article 39 in the Treaty of the functioning of the European Union (TFEU). It is virtually the same as Article 33 in the Treaty of Rome. There are three economic objectives: increasing agricultural productivity, stabilizing markets and ensuring the availability of supplies. The remaining two objectives – ensuring a fair standard of living for farmers and ensuring reasonable prices for consumers are social. It has been noted that these objectives cannot be simultaneously attained, and in Beus v Hauptzollamt München, the ECJ commented that the interests had to be balanced against each other without a clear hierarchy.54 The Court later clarified this principle in Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof by stating that any of the aims can get temporary priority, if it is needed to secure the long-term harmonization of the goals.55 Since these rulings, however, the Court has often given preference to the interests of the producers over consumer protection.56 This is significant since it gives an indication of what values generally are considered important by the Union.

Agriculture and fisheries are regulated together in Articles 38 to 44 TFEU. Apart from Article 39, the article with the most relevance for this topic is Article 40. It lays down that in order for the goals in Article 39 to be met, a common organization of agricultural matters will be set up. This is the basis for all of the actual agricultural policies that have been implemented, starting with the ones crafted at the Stresa conference. Other important factors to consider are that agricultural products are part of the common market and that they are included in EU competition law57. Article 43 also details the process through which the European Union can legislate on agricultural matters.

According to Article 4(2)(d) TFEU, the competence of the agricultural sector is shared between the member states and the European Union. Shared competence means that both individual member states and the EU are

54 C-5/67 Beus v. Hauptzollamt München [1968] ECR 83.55 C-5/73 Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof [1973] ECR 109156 Jack, p. 3.57 Arts 38 and 41 TFEU

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allowed to legislate in the field, but the member states are only allowed to use their competence to the extent that the EU has not done so.58 It is also important to note that according to the principle of subsidiarity, the EU may legislate only if that would be more effective than for the individual member states to do so.59 For the agricultural sector, this means that the EU legislation is to be given preference.

2.5 Current secondary legislation

2.5.1 Pillar IThe current secondary EU legislation on agricultural matters is divided into two “pillars”. Pillar I focuses on the common organization of the markets (CMOs) in agricultural products and direct payments to farmers, while pillar II focuses on rural development policy.

Two important features of pillar I need to be mentioned in order to get a solid overview of how CAP works in this regard. The first is the regulation of CMO, and the second is direct payments. The direct payments are divided into two components: the target objectives based on which farmers can get aid, and a cross-compliance requirement that farmers must fulfill in order to qualify for the payments.

There used to be 21 CMOs within the European Union. They all regulated the market for different agricultural products. Each CMO had three main objectives:

- To create a single market for that good, in order to eliminate trade barriers within the union

- To ensure that European produce would be preferred over imported goods

- To operate all CMOs on the principle of financial solidarity between the member states.60

This system was very complicated and hard to oversee; so all 21 CMOs were combined into a single one, regulated in Council Regulation EC 1234/2007. The current CMO is very detailed, and contains over 200 provisions. It is divided into two parts: one that details the internal aspects (such as market intervention), and one that regulates the external aspects (trade with third countries). The market intervention tools have been transformed into a safety net for farmers with the establishment of a reserve fund for farmers. In the event of a production crisis, the EU can intervene in the market and purchase surplus goods at an intervention price. The current budget for this is currently around € 400 million annually. If, at the end of

58 Art 2(2) TFEU59 Art 5(3) TEU60 Jack, p. 5.

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the year, not all that money has been spent, it is to be handed out to the farmers.61

Direct payments are regulated in Regulation (EU) No. 1307/2013. The direct payment system is still based on the size of the farm – the farmer gets paid per owned hectare. The system has undergone some changes, and the payments are now targeted. This means that each direct payment is based on a certain objective. There are seven main components of the farm payment system, out of which the first three are mandatory for the member states:

The first is a basic payment scheme, which sets up a harmonized payment per hectare (art 32). The second is a ‘young farmers payment’, which grants extra aid to farmers under 40 years of age, in order to promote farming as an occupation for younger people (art 50). The third is regulated in Articles 43-36 and is an environmental component, which incentivizes farmers to farm ‘green’. In order to qualify for this payment, the farmers must use the following practices:

- Crop diversification (the farmer must grow a certain number of different crops, based on the size of available land)

- Maintaining existing permanent grassland, and- Having an 'ecological focus area’ on their farm (at least 5% of the

arable land must be used for other purposes, such as afforestation or nitrogen-fixing crops).

The member states can choose whether they want to offer aid based on the remaining four objectives. These objectives include a redistributive payment for the first hectares (arts 41-42), extra income support for farmers in Less Favored Areas, LFAs (arts 48-49), coupled support for production for economic or social reasons (section IV), and a simplified system for small farms with a maximum payment of € 1250.

In exchange for getting these subsidies, the farmer or landowner must also comply with certain basic standards, so-called cross-compliance. The first one is that the land must be kept in “good agricultural and environmental condition”, which is a range of standards like soil maintenance and water management. The farmer must also comply with 18 statutory management requirements, regarding different fields like food safety, the use of plant protection products, and animal welfare. All costs for complying with the requirements must be paid for by the farmer, the so called polluter-pays-principle. This is regulated in Council regulation 73/2009 and Commission Regulation 1122/2009.

Pillar I is of great importance for the research question, especially regarding the direct payments. These payments change farmers’ incentives to farm (what to grow, and how much), and therefore have a great effect on the sustainability of agriculture. They also impact farming on a more basic level: with the direct aid, more people can survive as farmers.

61 Arts 70-77 Council Regulation EC 1234/2007

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2.5.2 Pillar IIPillar II is concerned with rural development policy, and it was instituted with the Agenda 2000 reforms. It is currently funded by the European Agricultural Fund for Rural Development (EAFRD), whose purpose is to promote a sustainable rural development as part of the Europe 2020 plan. There are currently six priorities for the rural development policy. They all deal with either economic improvements (such as increasing the competitiveness of all types of agriculture), social targets (promote rural social inclusion and poverty reduction), or environmental concerns (preserve ecosystems and promote the efficient use of resources).62

It is up to each member state to create their own rural development program. It needs to be designed to meet the needs of the specific member state (or its different regions), and is to be co-funded by EAFRD. The programs have to get approved by the Commission before they can be put in place. To create their programs, the individual member states can choose from a ‘menu’ of measures. These measures include, but are not limited to: setting up producer groups, physical investment, Natura 2000 payments and payments for environmental services and forest conservation. They also include some risk management tools, such as crop insurance.63

The rural development policy is also important regarding how CAP affects sustainable agriculture in Sweden, although not to the same extent as the direct payments. The funds are targeted at the three main parts of sustainable agriculture: economic, social and environmental aspects. The fact that the payments under pillar II are meant to be used to forward these goals therefore means that they are important when answering the research question.

2.5.3 Quota systemDuring the wine lake and butter mountain era of the 1980s, the prices of a lot of European agricultural products were above the world price, which led to a large surplus of produce. Because of the price intervention policy, the European Commission was forced to buy a lot of dairy products. This was very ineffective, and a new policy of milk quotas was set up as part of the CMO for milk products in 1983, to regulate that commodity specifically. They entered into force one year later. Individual member states were then given a set number of production quotas to distribute to its farmers. If the total national milk production exceeded the quota, the member state had to pay a fee to the Union.64

62 Art 5 Regulation (EU) no 1305/201363 The full list can be found under Title III in Regulation 1305/2013.64 Cardwell, Michael: Milk quotas: European Community and United Kingdom Law, Oxford, 1996, p. 5 ff.

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The MacSharry reforms in 1992, which changed the policy from price intervention to direct payments, and the following reforms in 1999 and 2003, which decoupled the direct payments from production levels, reduced the producer prices of milk, which in turn reduced the levels of production. During the mid-term review in 2003, it was therefore decided that the milk quota was to be abolished by 2015. In addition to this, the quota would be increased by 1% every year, to create a “soft landing” for the farmers.65 The milk quotas were finally abolished in March 2015.

2.6 Summarising remarksThis purpose of this chapter is to give an overview of CAP, both historically and how it currently operates, in order to be able to understand how it has affected Swedish sustainable agriculture. It is clear that the original version of CAP did not take sustainability into account. The first focus of the policy was on family farms and their income stability, together with food security. This meant that technological advancement and a more efficient and industrial way of farming was encouraged. This was also effectively ensured by the market intervention policies, with overproduction as a result.

This has changed over time: the gross overproduction of the wine lakes and butter mountain era has led to a policy that is focused more on long-term consequences than acutely feeding its population. Removing market interventions and decoupling the direct payments are two signs of this, since both policies let the market define the production.

It is notable, and quite surprising, that the general objectives in Article 39 of the TEUF do not contain anything on the protection of the environment. Instead, the constitutional foundation of CAP is largely focused on improving agricultural competition. This is naturally very meaningful when analyzing the policy: it shows that at least the theoretic foundations of CAP are not concerned with sustainability.

In conclusion, it seems that CAP is a policy that is still largely focused on industrial agriculture. Even though some ‘greening’ has been carried out, such as the cross-compliance requirements for direct payments and a larger focus on environmental issues in the rural development policy, the basic foundations of CAP are still concerned with issues that belong to the ideas of industrial agriculture.

65 European Commisison: Economic impact of the Abolition of the Milk Quota Regime – Regional Analysis of the Milk Production in the EU, 2009, p. I.

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3 The Swedish implementation of CAP

3.1 Introduction This chapter begins with an overview of Swedish agriculture from the three different perspectives that together make up sustainable agriculture: social, environmental and economic. This is important to know, since it lays the foundation for understanding the implementation of CAP in Sweden. I will then go through the most relevant history of Swedish agricultural policy before 1995, when Sweden joined the EU and thereby also CAP. This is important for the research question, since Sweden agricultural policy has differed from CAP. Some of the effects that CAP has had on Swedish sustainable agriculture can not be understood properly without a clear understanding of previous national policies. Finally, I will go through the aspects of the Swedish implementation of CAP that are most important when analyzing the policy from a perspective of sustainable agriculture.

3.2 Swedish agriculture

3.2.1 Socially and economicallyHistorically, Sweden has been very dependent on agriculture. However, its size and geography mean that the conditions for farming vary considerably. The south has a climate like Denmark or northern Germany, with a growing season of 220 days, while the barren north is more like Norway and Finland, with a growing season of only 170 days.66 Sweden is also heavily forested, with the consequence that forestry and farming often go hand in hand. This means that some farms, especially in northern Sweden, only have small areas of arable land. Livestock production is the most common form of agriculture, and it is only in the southern parts of the country that cropping farming is more common.67

Only about 8% of the Swedish land area is used for agricultural purposes, and only about 2% of the population is working on farms. The Swedish agricultural sector has been subject to widespread reform during the 1900s, in an effort to rationalize the production. This means that the number of Swedish farms has decreased by 85% since 1919. But while this number has gone down, the average size of the farm has gone up to an average of 37 hectares in 2010. This is large in comparison to the EU average of 12 hectares. Swedish agriculture is also highly specialized, with 93% of farms

66 Rabinowicz, Eva, ”Swedish Agriculture” in Sweden and the European Union Evaluated by Lee Milles (ed), London, 2000, p. 180.67Statistiska centralbyrån: Jordbruksstatistik sammanställning 2015, 2015, p. 28.

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being specialized in either animal or crop farming. The number of Swedish farms keeps decreasing, while the average farm size and number of animals held on a farm keep increasing. This means that agriculture is Sweden is a small employer, and does not take up a lot of land. The Swedish economy as a whole is also not very dependent on agriculture.68

3.2.2 Environmental consequencesIt is well known that intensive farming can have disastrous negative consequences for the surrounding environment. These effects differ between areas because of varying regional natural conditions, national regulations and farming traditions. This is obviously also true for Sweden, which means that the Swedish agricultural policy (both implemented because of CAP and drafted independently) is partly designed to meet the specific needs that arise because of these negative environmental problems.

Eutrophication is probably the environmental issue that gets the most attention in Swedish media. Caused mainly by an overuse of fertilizers, it has great negative consequences on both land and marine natural systems. Excessive amounts of phosphorus and nitrogen from agricultural runoff lead to extensive algae blooms in bodies of water. The algae blooms then cause oxygen depletion in the water, which might kill off marine animals. Other effects include toxicity and loss of biodiversity. Eutrophication also happens through natural processes, but the great increase over the past years has mainly been caused by intensive agricultural practices. The Baltic Sea on the Swedish east coast has been particularly affected by this.69 Ending all eutrophication is also one of the sixteen Swedish national environmental goals for 2020.70

Agriculture is also responsible for around 11 % of the Swedish total greenhouse gas emissions. The main contributor to this is nitrous oxide, followed by methane from animal husbandry. These compounds are 20-200 times more powerful than carbon dioxide.71 Together, these three gases contribute greatly to the greenhouse effect, which is likely to increase the average global temperatures by 2-4° C by 2050. This is a major cause for concern, since a temperature increase of that size would alter the climate beyond recognition. A lot of time and effort is therefore being placed on trying to mitigate these effects, and reducing the agricultural impact is of vital importance72

68 Öhlund et al, p. 277 f.69 Finansdepartementet: Bonde söker bidrag: en ESO-rapport om effektivitet i det svenska landsbygdsprogrammet, 2013, p. 48 f.70 Miljödepartementet: Svenska miljömål: preciseringar av miljökvalitetsmålen och en första uppsättning etappmål, 2012, s. 49.71 Finansdepartementet, p. 50.72 Duxbury, John M: The significance of agricultural sources of greenhouse gases, 1994, p. 152.

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Another negative environmental consequence of industrial agriculture is the loss of biodiversity. Historically, the opposite has been true: the Swedish traditional landscape has had had an array of diverse species thriving in the wake of grazing animals. This positive side effect of agriculture has decreased with the introduction of industrial agriculture: the areas with most biodiversity, such as pastures and ditches, have, to a large extent, been removed to make room for extensive farming. Around half of all endangered Swedish species exist in the traditional agricultural landscape.73

One final, possibly disastrous, consequence of industrial agriculture is the loss of soil quality. This is caused by a number of factors: heavy machinery packing the dirt, use of pesticides to combat weeds, the extensive use of monocultures and the ratio of organic material in the soil. A decreased soil quality means that the crops grown there will have less nutrition in them. It might also be harder to get anything to grow at all.74

3.3 Before CAP

3.3.1 Interventionst policiesThe Swedish agricultural policy before CAP can be traced back to the crisis years of the 1930s. During that time, the number of people employed in agriculture was falling and farming itself was ineffective with low rates of mechanization. The Swedish state dealt with this by intervening in the market with the intention of stabilizing prices. The measures introduced were both protectionist (such as: alcohol was only allowed to be produced using domestic potatoes) and interventionist (such as: production of cereals was given a support price in exchange for the mills treating at least 60% domestic cereals). These measures worked, and the market in general stabilized.75

After the hard years during WWII, the previous policy was reintroduced. The Swedish state had three main goals for the agricultural policy to help realize: the goal of production, the goal of income and the goal of efficiency/consumers.76 These policies had the desired effect, and Sweden started producing more and more agricultural products. At this point, the development in Sweden and the European Union were almost identical: during the 1960s, they both focused on trying to decrease the general price levels.77 This backfired in the 1970s when prices rose noticeably. To combat this, Sweden introduced subsidies for food. In the late 1970s, the direct support system was expanded. This created a food surplus similar to the one in the European Union.78

73 Finansdepartementet, p. 50 f.74 Finansdepartementet, p. 51 f.75 Ds 1989:63, p. 62 f.76 SOU 1987:44, p. 44.77 Bolin, Olof, and Swedenbord, Birgitta (reds), Mat till EG-pris?, Stockholm, 1992, p. 67. 78 Ds 1989:63, p. 64.

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In the late 1980s, the Swedish national agricultural policy was much like CAP, although more homogenous in the sense that different commodities were regulated in the same way. Variable import levies were put in place for the border control, with two exceptions: produce from countries with a free trade agreement with Sweden, and produce where the world market price was higher than the domestic price. There was also a domestic market price regulation, combined with some direct support systems.79 The main purpose of the agricultural policy at this time was to ensure a stable supply of goods, both in war and peace.80

The level of agricultural support in Sweden (measured by the Producer Support Equivalent, or PSE, which is the most common way to calculate the support the level of support to agriculture) in 1990 was 57%, compared to 46% within the EU. The support levels were therefore high within the Swedish system.81

3.3.2 LiberalizationThe Swedish agricultural policy was radically liberalized during the early 1990s. The changes came into effect on June 30 1991, one day before the Swedish application to become a member of the EU. The policy therefore only lasted about 4 years, until Sweden entered the union in 1995. It was a radical change of policy – much more so than the MacSharry reforms, which took place around the same time.82

The goal of the deregulation was mostly to ensure that the production of agricultural goods be subject to the same conditions as all other industries. The policy was therefore designed with a liberal, market oriented economy in mind: the market for agricultural products needed to be free, with the exceptions of certain interventions to limit negative externalities such as environmental degradation.83

The new system was based on a system of border control and import levies, but without internal market regulations. This meant that the only support farmers were getting would come from the fact that foreign partners had to pay more to sell their goods in Sweden than domestic farmers. However, these tariffs were expected to be lowered as a consequence of the GATT negotiations. Other changes included abolishing the milk quota system and export subsidies, and terminating price reviews. During a transition period of four years, Swedish farmers would be offered temporary compensation for their loss of income based on the area they had previously been using as farmland.84 79 Ds 1989:63, p. 65 f.80 SOU 1987:44, p. 44.81 Rabinowicz, p. 181.82 Rabinowicz, p. 181.83 Ds 1989:63, p. 165 f.84 Prop. 1989/90:146 p. 2 ff.

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The reform had some desired effects: for example, about 380 000 hectares of arable land was removed from production. However, Swedish farmers were not that quick to adapt since it was unclear how the policy would change with the Swedish entrance into the EU. It was clear that the Swedish government would not make any changes that could not be reversed, because of the membership debates. It was therefore a quite unsettling and insecure time for Swedish farmers.85

3.4 Current implementation of CAP

3.4.1 Pillar I implementationWhen implementing the decoupled subsidies in 2003, the member states could choose between three models: the historic model, which granted farm-specific subsidies based on how much the farm had received under the coupled subsidies; the regional model, which granted all farms in the region the same amount of subsidies per hectare; and the hybrid model, which was a combination of both. The main difference between the models is that in the historical and hybrid models, farms get different entitlements while in the regional model, all farms in that region have the same value of their entitlements.86

Sweden chose the hybrid model, and divided the country into five different regions. The payments were then differentiated based on that and the historic production levels. With the 2013 reforms of the SPS, these models were eliminated from EU policy, and replaced with a harmonized system with a national or regional flat-rate payment. Sweden has chosen to delay this policy change until 2020, and will therefore continue the hybrid model of the decoupled direct payments.87

Regarding the target objectives for the direct payments, Sweden has implemented the three mandatory objectives, but has chosen not to implement any of the voluntary ones, except for some coupled support for economic or social reasons. This is a coupled support for animal and milk production, which will remain at least until 2017. There are a lot of reasons for this: milk production especially is an important sector within Swedish agriculture, and the Swedish farmers would risk harsh competition from other European countries with cheaper milk production. Other factors include the importance of grazing cows for biodiversity, and their contribution to economic growth in the northern parts of Sweden.88

85 Rabinowicz, p. 184.86 Ciaian et al: The Impact of the 2013 Reform of the Common Agricultural Policy on Land Capitalization in the European Union, 2014, p. 645.87 European Parliament: Implementation of the first pillar of the CAP 2014-2020 in the EU member states, 2015, p. 69.88 Ds 2014:6, p. 86 f.

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The choices Sweden has made when implementing pillar I on national level matter for how sustainable the agriculture becomes, although obviously not as much as the EU policies do. As will be seen in chapter 4, the direct payments policy has great implications for the three chosen metrics. The three different models of direct payments have different implications on the farming structure. The supplementary payments to dairy farmers are also important from a sustainability perspective, since they might allow some farmers to stay in business by granting extra aid. The other part of pillar I, the CMOs, matters mostly on EU-level, and is therefore not something that the member states can choose how to implement.

3.4.2 Pillar II implementationThe second pillar of the CAP has been implemented in Sweden through the rural development program (landsbygdsprogrammet). It is regulated in Regulation 2015:406 about support for rural measures (Förordning om stöd för landsbygdsåtgärder). For a long time, it was divided into the following four axes: agriculture’s competitiveness, environmental measures, rural diversification and quality of life, and Leader (organization of the program).89 Earlier in 2015, however, the Commission accepted a new Swedish rural development program, which has been completely revised.

The main goal of the Swedish rural development program is to become a smart, sustainable and inclusive economy (taken from the Europe 2020 plan). There are six general objectives for the program, and it is possible to apply for aid based for each of these. The first objective is to promote transfer of knowledge and innovation in rural areas. This objective is supposed to be taken into account during all stages of the program. The other objects are as follows: increase agricultural profitability and competitiveness, improve animal welfare and agricultural risk management, maintain and improve ecosystems, promote the effective use of resources, and to promote rural economic well being. These are all very broad objectives, covering economic, social and environmental aspects of agriculture. In order to make them work in practice, they are connected to 15 measures chosen from the European Union ‘menu’. The Swedish Board of Agriculture is then in charge of making specific plans for each measure, such as the number employment opportunities or the budge for each measure. 90

The Swedish rural development program puts more emphasis on environmental protection than its European Union counterpart: 69% of the total Swedish rural development budget is targeted at measures to protect the environment, while the European one only accounts for 44%. Instead, 89 Finansdepartementet, p. 35.90 Jordbruksverket: Ny struktur för landsbygdsprogrammet 2014-2020, last updated 2015-09-18. http://www.jordbruksverket.se/amnesomraden/landsbygdsutveckling/programochvisioner/landsbygdsprogrammet20142020/struktur.4.7c4ce2e813deda4d30780004705.html. Accessed 2016-01-04.

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the EU’s budget focuses more on agriculture’s overall competitiveness.91 This is the most common difference between the two agricultural legislations: the Swedish tends to have higher standards for environmental protection, while the EU usually focuses on competitiveness and market efficiency. Sweden has therefore chosen to implement pillar II in a way that is more focused on sustainability than the European Union version.

3.5 Summarising remarksIt is clear that the Swedish agricultural policy has changed dramatically over the past decades. It has gone from a market intervention policy to a dramatically liberalized and deregulated policy, and then back to a policy with more interventions and regulations. This must be seen as negative from the perspective of sustainability: these fluctuations make it hard for farmers to invest in their business, since they cannot be sure of the future levels of support.

There is a stark difference between the Swedish liberalization policy of the early 1990s, and the following strongly regulated CAP that followed. I will elaborate more in chapter 5 on which of these policies could have the greatest effect on sustainable agriculture. From a farmer point of view, CAP might be better since the farmer is ensured some kind of basic income. From a market point of view, however, a liberalized policy is to be preferred.

In general, it can be said that the Swedish implementation of CAP is slightly more geared towards sustainability than what CAP itself stipulates. This can especially be seen when looking at the difference in budget spending for pillar II between Sweden and the European Union. While CAP on a European level is focused more on agricultural competitiveness (which can also be seen in Article 39 TFEU), the Swedish rural development program is focused on environmental sustainability. This is a clear move away from industrial agriculture.

91 Finansdepartementet, p. 36.

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4 Policy consequences

4.1 IntroductionIn this chapter, I am going to analyze how CAP has affected sustainable agriculture in Sweden, using three different metrics: farm size, price of milk and use of pesticides. Since it is not within the scope of this essay to carry out economic and policy evaluations, I will mainly see what other sources – both official sources and researchers - say on the subject. For each metric, I begin by going through some of the main reasons why that metric is important to sustainable agriculture. After that, I will analyze how the CAP has affected the metric.

The effects I am going to analyze are the actual effects of the policy: how has it changed farm size, milk price and pesticide use in Sweden? Even though this focus on actual consequences rather than only legal effects might go outside of what is typically done in legal scholarship, it is still of great importance when trying to understand the law. Different legal agricultural regulations will have different effects. The focus of this thesis is therefore to analyze the law and policy of the agricultural sector by mostly looking at its consequences.

4.2 Farm size

4.2.1 IntroductionThere are a lot of reasons why farmland size is an important metric when studying the sustainability of agriculture. The largest social reason is the negative effect larger farms tend to have on the rural community. One famous study showed that rural communities with more small-scale family farms, as compared to larger industrial farms, had more community participation, higher employment rates, better schools and higher family incomes.92 Other studies have shown beneficial economic effects for the surrounding community: sustainable farms tend to employ more people and have higher profits, even though they might not be as efficient.93

There are also widespread ecological side effects of larger farms. The first reason for this has to do with the size itself: smaller farms are less likely to disrupt the local surroundings, while larger farms naturally have a greater geographic impact on the fragile ecosystems.94 Farm size has also been

92 Goldschmidt, Walter: As You Sow: Three Studies in the Social Consequences of Agribusiness, Montclair, NJ, 1978.93 Ikerd, John E: Sustainable agriculture as a rural economic development strategy, published 1999: http://web.missouri.edu/ikerdj/papers/sa-cdst.htm, accessed 2015-11-2894 D’Souza, and Ikerd, p. 82.

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shown to affect biodiversity to almost the same extent as organic farming (compared to using conventional farming practices): one study conducted in Sweden found more than twice the number of birds, butterflies and certain plants on smaller farms than larger ones. One particularly important effect, bearing the acute bee colony collapse in mind, was that the number of bumblebees on small farms was up to five times as many as on larger farms. This is believed to be caused by the change in animals’ habitat: when an area that used to be farmed by several people is instead manned by only one farmer, several landscape characteristics, such as islands in between fields and ditches, disappear.95

It is important to note, however, that smaller farm size does not automatically equate a more sustainable agriculture. It has been argued, for example, that larger farms are more able to efficiently produce agricultural goods and therefore create a more stable food supply.96 But the overall risks of negative effects for larger farms clearly outweigh the potential positives.

4.2.2 AnalysisThe main contributor to changing land values, and thereby farm sizes, is direct farm payments. This policy has, as has been shown throughout this essay, changed a lot since the 1980s. From some direct payment under the interventionist regime, to radical deregulation in 1991 to coupled subsidies in 1995 as members of the European Union. The policy then changed again in 2003, decoupling the subsidies from production. The next change will come in 2020, when the hybrid system of a mix between regional and historic payments will change to a flat-rate payment per hectare.97 This frequent change of policy undoubtedly affects the farmers’ behavior, and therefor also the farm size. In this analysis, I will therefore mostly focus on the difference between the coupled payments pre-2003 and their decoupled predecessors.

The effect of subsidizes and land values on farm size has been studied extensively, since land is the single most important production factor in agriculture. The price of land, and who controls the access and use of it, therefore has immense importance for the agricultural system as a whole. Economic research has mostly focused on the effects of agricultural policy on three different aspects: changes in land prices, preferences regarding land tenure, and the demand for land on the land markets.98

From an economic point of view, it is therefore important to understand if the subsidies get capitalized into land values or not. If they do, then the 95 Belfrage et al: The Effects of Farm Size and Organic Farming on Diversity of Birds, Pollinators, and Plants in a Swedish Landscape, 2005.96 See for example Manevska –Tasevska, Gordana and Rabinowicz, Eva: Strukturomvandling och effektivitet i det svenska jordbruket, 2015, p. 9.97 European Parliament, p. 69.98 Bartolini, Fabio, and Viaggi, Davide: The common agricultural policy and the determinants of change in EU farm size, 2013, p. 126.

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prices of land rise. There are three major determinants of this: land supply, possible input substitutions (i.e.: can land be substituted for labor or capital?), and whether the subsidies are linked to the land. This means that if there is a limited supply of land (it is fixed), land values get capitalized into the land, and prices rise. But if there is a high elasticity of land supply, meaning that land is readily available as the demand for it increases, subsidies only partially get capitalized into land values, and prices don’t rise.99 Salhofer, professor of agricultural economics, has analyzed extensive research and drawn the conclusion that in Europe, the elasticity is low: between 0.1 and 0.4 (where 0 is no elasticity, and 1 is perfect elasticity). This is probably due to natural constraints.100 This would then mean that subsidies within Europe usually get capitalized into land values, and that the price of land generally has risen since CAP started the area-based subsidies in 1992.

The difference between coupled and decoupled subsidies, that is, whether the subsidies are linked to the land or not, can also have great effects on the farming landscape. Generally, decoupled subsidies have lower effects on the land market than coupled subsidies – in other words, they don’t get capitalized into land values to the same extent.101 However, in the European Union, the cross-compliance requirement for the decoupled subsidies adds extra costs to the farmer, causing a reduction of the capitalization of the subsidies into land values.102

Struggling farmers often face the choice of increasing their production in order to survive, or to exit farming completely. With more expensive land, expansion costs increase for existing farmers, creating an obstacle for farmers with less profit margins. The increase in land prices also creates a high entry barrier for new, usually younger farmers. Because of both of these factors, transactions of land are reduced, pushing up the average cost even more.103 This singles out farmers who are not willing, or financially able, to grow, and they instead choose to exit farming completely. This increases both farm size and agricultural concentration, which might be more efficient when it comes to levels of production, but less so regarding agricultural sustainability. This is especially true in areas with a decreasing number of farms, where capitalization of subsidies help farmers buy out other farmers, who are more willing to exit farming.104

Decoupling the subsidies is one way to try to deal with this problem. With decoupled payments, the rate of farm exits would slow down, since payments can be received for previously unused land. This conclusion was

99 Ciaian et al: EU land markets and the Common Agricultural Policy, 2010, p. 3 f.100 Salhofer, Klaus: Elasticities of Substitution and Factor Supply Elasticities in European Agriculture; A Review of Past Studies, 2000, p. 101.101 Andersson, Fredrik CA: Decoupling: The concept and past experiences, 2004, p. 14 ff.102 European Commission: Study to assess the administrative burden on farms arising from the CAP, 2006. 103 Ciaian et al, 2010, p. 283.104 Goetz, Steven and Debertin, David L: Why Farmers Quit: A County-Level Analysis, 2001.

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verified by Bradley et al, who compared the rate of farm exits with coupled and decoupled subsidies. They found that the change to decoupled support decreased the rate of farm exits and farm growth in all measured European areas, including Sweden. This was especially prominent in grassland areas, such as Jönköping in Sweden, where farmers now could get paid for keeping their previously unused land in good environmental and agricultural condition. Their incentives to keep the land had therefore increased. The environment also benefitted since the grassland had to be kept according to environmental standards.105

The theory that increasing land prices lead to fewer farms seems to be true within the European Union. Within the EU, agricultural concentration increased dramatically between 2003 and 2013. According to official data from Eurostat, more than 4 million agricultural holdings disappeared (from around 14 million in 2003 to 10 million in 2013) while the utilized agricultural area remained almost the same. This means that the average area per farm grew by 38%, from 11.2 hectares to 16.1 hectares. The countries with the largest drop in agricultural holdings were mostly former Soviet states, like Slovakia (with a drop of 67%), Bulgaria, Estonia and the Czech Republic, with Italy being the only exception to that trend.106 This suggests that agricultural policies like CAP have a large effect on farm size and agricultural concentration.

The same trends can be seen in a Swedish context, even if the change is not as dramatic. In comparison to the year 2000, the number of farms in Sweden in 2015 that are larger than 100 hectares has increased by 23% (from 6440 to 7930), while the number of small and middle-sized farms has decreased by 38%.107 The latest data regarding average farm size in Sweden comes from 2010. That data shows that since the year 2000, the number of agricultural holdings in Sweden has decreased from 814 000 to 711 000 while the utilized agricultural area has remained constant. This means that in 10 years time, the average number of hectares per holding has increased from 37.7 to 43.1.108 However, the increase rate has slowed down: from 2000 to 2007, the average farm size increased by 13.7 %, while it only increased 0.5 % between 2007 and 2010. The number of holdings decreased by around the same rate.109 This indicates that the decoupled payments, introduced in 2005 in Sweden, had the desired effect: less people are exiting farming, and farms are not growing as explosively as before.

Another aspect of this policy regards who is in control of the land. So called absentee land-owners, that is, people or companies that own land to rent it

105 Brady et al: Impacts of Decoupled Agricultural Support on Farm Structure, Biodiversity and Landscape Mosaic: Some EU Results, 2009, p. 574.106 Eurostat: Farm structure survey 2013: While area used for agriculture remained stable, over 1 out of 4 farms disappeared between 2003 and 2013 in the EU, 2015, p. 1 ff.107 Manevska-Tasevska and Rabionwicz, p. 3 f.108 Official data from Eurostat: http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Agricultural_holdings,_2000%E2%80%9310_YB14.png, published June 2014, accessed 2015-12-08.109 My own calculations based on the Eurostat data.

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out to farmers, are getting more common. Some researchers have criticized CAP for benefitting these landowners over farmers, by granting subsidies to the landowners instead of the farmers. In countries with the hybrid model, such as Sweden, allocation of subsidies is based on the land use during the first year of SPS. This means that “non-farming landowners” can receive the payments as well. When these payments are capitalized into land values, yet more barriers are created by the increasing land prices. More farmers are therefore forced to rent land in order to be able to farm, which raises rent prices.110 The European Union has tried to remedy this by limiting the definition of “active farmer”. The land must, as previously stated, be kept in good agricultural condition, and the farmer’s main income must be from farming.111 Critics have argued that it is to easy for landowners to circumvent this requirement, for example by switching to short-term farming contracts.112

Land rents have indeed risen in Sweden over the last 20 years. From a Swedish perspective, rent land prices have doubled since the entry into the EU in 1995. The highest increase rates happened in 2010, when rent prices increased by 16% in one year. Since then, however, the rates have stabilized and have not increased in a way that is statistically significant.113

To conclude; it is clear that CAP has had negative effects on farm size. The average farm size has increased notably during the time with direct payments. Coupled payments get capitalized into land values. This makes land more expensive, and farms get larger. Because of this, agricultural concentration has also gone up, together with the rate of farm exits. These rates have, however, slowed down with the introduction of the decoupled payments in 2005. As a consequence of higher land prices, a lot of farmers instead choose to rent land from non-faming landowners. This has resulted in the rent price being doubled during the last 20 years. CAP has therefore affected farm size in multiple ways. The latest reform that introduced decoupled payments has, however, stopped the negative trend somewhat and instead moved CAP in a more sustainable direction.

4.3 Price of milk

4.3.1 IntroductionSwedish national media has reported extensively on the economic hardships that dairy farmers are facing. The largest cooperative of milk producers in the country, Arla, is being blamed for the problem together with the low world market price of milk.114 Either way, the economic consequences of the

110 Ciaian et al, 2015, p. 644.111 Art 9, Regulation 1307/2013.112 Ciaian et al, 2015, p. 644 ff.113 Arrendepriser på jordbruksmark 2014, 2015, p. 1 ff.114 See for example El-Mochantaf, Christer: Flera mjölkbönder nära gå i konkurs, published 2015-03-05

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low producer price of milk are large. The exit rate for milk farmers in Sweden is very high: during the last five years, the number of milk farms has decreased by an average of 5.8% each month. The number of dairy cows in Sweden decreased by 5% from August 2014 to September 2015.115

The social consequences of a higher price of milk are closely linked to the ones regarding average farm size. Both the farmers who have been forced to exit farming, and the remaining ones, often suffer from stress and isolation. Other than this, both the farmers’ closest families and surrounding communities have to face great implications, with effects such as a decreasing level of community involvement and growing polarization between the still active farmers and the remaining population.116

The environmental effects of milk production vary from negative to positive. One of the sixteen Swedish environmental objectives for the future is to ensure varied agricultural landscape. This includes a lot of different aspects, such as maintaining the ecosystems in agricultural landscapes, reintroducing endangered species, and ensuring a future biodiversity.117 The Swedish Board of Agriculture, the governmental body responsible for implementing this environmental objective, is arguing that active farming practices with grazing animals are imperative in ensuring that the objective is reached. As a result of grazing, pasturelands are among the most species-rich environments in the agricultural landscapes.118 Low-density grazing has also been used to restore damaged vegetation next to rivers, and to improve biodiversity.119 Grazing is also used as a way to increase carbon capture in the soils.120

On the other hand, a lot of environmental organizations are calling for an end to cattle farming, because of the practice’s widespread negative consequences. The FAO, the Food and Agriculture Organization at the United Nations, has estimated that the dairy sector annually releases around 2000 tons of greenhouse gases. This equals 4 % of the total anthropogenic greenhouse gas emissions. Some of these negative consequences can, however, be decreased through better animal husbandry.121

http://www.expressen.se/gt/flera-mjolkbonder-nara-ga-i-konkurs/, accessed 2015-12-16.115 Lantbrukarnas riksförbund, p. 7.116 Lobley, Matt et al, p. 27 and 41.117 Ds 2012:23, p. 93.118 Jordbruksverket: Lantbruk i hela landet behövs för att nå miljömålet Ett rikt odlingslandskap, published 2015-05-04 https://www.jordbruksverket.se/pressochmedia/nyheter/nyheter2015/lantbrukihelalandetbehovsforattnamiljomaletettriktodlingslandskap.5.49eac12b14d1a32e35355928.html, accessed 2015-12-17119 Schrautzer, Joachim et al: Long-term effects of large-scale grazing on the vegetation of a rewetted river valley, 2016, p. 207 ff.120 Jones, M.B., and Donnelly, Alison: Carbon sequestration in temperate grassland ecosystems and the influence of management, climate and elevated CO2, 2004, p. 424.121 Food and Agriculture Organization of the United Nations: Greenhouse Gas Emissions from the Dairy Sector – A Life Cycle Assessment, 2010, p. 10 f.

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4.3.2 AnalysisThe two aspects of the common agricultural policy that matter the most for the price of milk are the milk quota under the common market organization for milk and dairy products (or, after 2007, as part of the single common market organization for all agricultural goods), and the direct payments to farmers. As with farm size, a lot of the discussion will be focused on the difference between the coupled and decoupled payments.

To be able to analyze the effects of the changing policies properly, it is important to understand some basic facts about the Swedish milk sector. It is the economically largest sector of Swedish agriculture, and brings in around a fifth of the total annual profits. Since 2002, the number of diary cows in Sweden has decreased with 17 %, while the number of dairy farmers has decreased by around 50 %. During this time, total production has decreased about 11 %, from 3 274 000 tons, to 2 932 000 tons.122 This means that the average milk output per cow has increased. The total production has decreased every year, except in 2014 when the mild weather led to record yields all over Europe.123 While the internal market for milk and dairy products has decreased, Swedish farmers have gained market shares in other countries, both within and outside the European Union. This is especially true for milk powder and certain cheeses.124

The milk quota that was in place between 1984 and April 2015 has received a lot of criticism from scholars and policy makers, but has also served its purpose well. For example, the Swedish production of milk has remained stable a couple of percentage points under the production limit set by the milk quota, with the exception for 2001 when production levels almost hit the quota ceiling, and produced 99.7 %.125

As stated previously, the point of the milk quota was to limit overall production, to avoid overproducing milk, and the drop in prices that would follow. It follows from the rules of supply and demand that if the supply of a specific good increases, then the price will decrease. This has worked: prices have remained at around the same level since the introduction of the milk quota. The milk market has since then stabilized at a relatively high price, and the situation has changed.126

Apart from raising prices, critics argue that the milk quota distorts the market even further by preventing it from developing without government

122 Jordbruksverket: Marknadsöversikt – mjölk och mejeriprodukter, 2012, p. 2 ff.123 European Commission: Short Term Outlook for EU arable crops, dairy and meat markets in 2015 and 2016, 2015, p. 3.124 Jordbruksverket: Handel med mjölk och mjölkprodukter, published 2015-07-01https://www.jordbruksverket.se/amnesomraden/handel/kottmjolkochagg/handelmedkottmjolkochagg/handelmedmjolkochmjolkprodukter.4.3a3862f81373bf24eab80001786.html, accessed 2015-12-20125 Jordbruksverket, 2012, p. 5.126 Binfield, Julian: EU Milk Production Quotas, 2009, p. 72 ff.

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intervention. Farmers have to pay for increased quota shares when trying to expand, which limits their possibilities to grow. The value of the milk quota has also been shown to get capitalized into the dairy farm assets, which creates a barrier to new farmers who want to start dairy farming. But milk quotas can also have a positive effect on the rate of new farmers in the business, since they can lend a sense of security.127

The elimination of the milk quota is believed to lead to higher production levels, and as a result of that, lower prices for both producers and consumers. Lower prices would in turn mean that smaller, less efficient farmers are out-competed by their larger neighbors, and that agricultural intensification increases. It is also reasonable to expect that certain regions with beneficial natural settings will become “dairy regions” at the expense of the less favored areas. In Sweden, this would likely mean that the dairy farmers in the north would fare worse than the farmers in the south. However, the entry barrier to farming is expected to get smaller as the elimination of the milk quota will lead to a lower level of expenses for new farmers.128 Since the elimination of the milk quota, some European countries have already started increasing their production, which has affected the price levels negatively.129

The direct farm payments are an important part of ensuring that the milk quota has the desired effect. Decoupling the payments was a vital part of this. While most of the subsidies were decoupled in 2003, the dairy program in Sweden was not decoupled until 2007. Without a decoupling of the payments, eliminating the milk quota would simply have brought back the problem of the 1980s. Coupled payments incentivize the farmers to overproduce, which is the exact opposite of the purpose of the milk quota. Decoupling the payments is therefore a necessity when removing the quota.130

Decoupling the subsidies also has other effects on the price of milk. A change in economic support systems affects producers’ incentives, which in turn creates a change in price. However, the fact that the European decoupled subsidies are area-based means that these effects are expected to be low. This is due to the fact that there is a low elasticity of supply of land.131 In short, decoupled subsidies are a sort of life-support to keep farmers in business, and when they are decoupled and area-based; their effect on pricing is small.

Another aspect that affects the profitability of Swedish milk production is the animal welfare regulations. On a European level, rules concerning dairy cows can be found in Council Directive 98/58/EC concerning the protection of animals kept for farming purposes. This regulation only sets up minimum requirements for the member states, meaning that they are allowed to have 127 Colman, David: Phasing out milk quotas in the EU, 2002, p. 4.128 Colman, p. 5 ff.129 Jordbruksverket: Läget i den svenska mjölknäringen, 2015, p. 2.130 Colman, p. 4.131 Anderssson, p. 15.

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stricter regulations if they wish.132 As the only European country, the Swedish state decided to demand from farmers that they let their cows out to graze.133 This means that every animal needs to be allowed to graze at least 6 hours of the day during 60 days of the spring and summer months.134

This requirement affects the profitability for Swedish diary farmers. A study conducted by the Swedish Board of Agriculture estimated that the grazing requirements increased the cost of one cow between 200 and 1 200 Swedish krona, based on which kind of grazing the cow was doing. The grazing requirement also made it harder for Swedish dairy farmers to expand their production, since it can be difficult to get access to good pastureland at a reasonable distance from the farm. This does not affect the sale of milk and dairy products to Swedish consumers, who have shown well-grounded support for strong animal welfare regulations. It does, however, impact the export of dairy products, since farmers in other countries do not have the same expenses.135 One positive aspect of the strong animal welfare regulations, from a strictly economic perspective, is that the animals are healthier, which decreases the amount of antibiotics used in dairy farming. The effect of the stronger animal welfare regulations is therefore somewhat mitigated.136

From a historical perspective, Swedish prices have changed drastically the past decades. The prices remained stable from the 1940s until the 1970s, when they slowly started declining. The prices dropped drastically in the 1990s as a result of the Swedish liberalization of agricultural support.137 When Sweden entered into the European Union in 1995, the price level was around 30 Euro per 100 kilos of milk. Since then, the price has fluctuated between around 27 and 40 Euro, and is currently at 33, with a large drop in prices since mid-2014.138 This means that when taking inflation into account, the price levels of milk have dropped after Sweden joined the European Union. Compared to the price levels in 1941, the real value of milk (as opposed to the nominal value) has dropped by about 10 Euro per 100 kilos.139

These low and fluctuating prices obviously have a great impact on farmers’ possibilities to keep farming or not. Low prices of milk mean that the profit margin is smaller, which increases the pressure on farmers. The constantly

132 Article 1, Directive 98/58/EC133 SOU 2015:15, p. 76 ff.134 Statens jordbruksverks föreskrifter och allmänna råd om djurhållning inom lantbruket m.m. 2010:15, 25, 26 §§. 135 Jordbruksverket: Beteslagstiftningens effekter på lönsamheten i mjölkföretagen, 2014, p. 66 ff.136 Jordbruksverket, 2015b, p. 1.137 Jordbruksverket: Mjölkpris till bonden 1941 – 2011. Published 2012-07-29. https://jordbruketisiffror.wordpress.com/2012/07/29/mjolkpris-till-bonden-1941-2011/. Accessed 2016-01-05.138 Historical EU Price Serie of Cow’s Raw Milk, 2015, p. 1 ff.139 Jordbruksverket: Mjölkpris till bonden 1941 – 2011. Published 2012-07-29. https://jordbruketisiffror.wordpress.com/2012/07/29/mjolkpris-till-bonden-1941-2011/. Accessed 2016-01-05.

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fluctuating prices also prevent some farmers from investing in their business, since they cannot be sure of the economic return of their work.140

To conclude; structural changes in the Swedish dairy sector have led to a climate where the rate of farm exits has stabilized at a high rate, and milk prices have not increased nominally since the early 1980s. CAP, and especially the milk quota, has limited overproduction, thereby ensuring that the prices have remained on the same level. With the elimination of the milk quota, and a decoupled support system, production is expected to rise and prices drop as a result of this. This means that more small, less efficient farms will be forced to exit farming. The Swedish farmers are especially vulnerable to this, since they have higher production costs than farmers from other countries (owing to, among others, higher standards for animal welfare) and are therefore less able to compete on an international market.

4.4 Use of pesticides

4.4.1 IntroductionPesticides are plant protection products that are used in agriculture to keep the plants safe from pests. They are mostly chemical or biological products used to attract and kill a wide array of natural elements that may destroy parts of the product, which allows farmers to get larger yields, and thereby more profit. Pesticide is a generic term for agents such as herbicides, fungicides and insecticides, which all target different potentially detrimental groups of pests. This means that they are toxic by default: they are designed to kill or harm living beings.141

This is obviously going to have serious consequences for both the environment and human society. The environmental effects are wide-ranging: from decreasing soil quality to eutrophication. Mostly, however, they affect living beings. In his research, professor Tyrone Hayes at the University of California, Berkeley, has shown that the herbicide Atrazine, one of the most common pesticides in the world, greatly disrupts the endocrine system in frogs.142 Pesticides are also thought to be a great contributor to the recent bee colony collapse.143

The main social consequence of pesticides is their effect on human health. Pesticides exposure happens to humans in three different ways: occupational exposure, residential exposure and ingestion through food. It is therefore an important public health issue. The occupational exposure mostly affects

140 Jordbruksverket, 2012, p. 1.141 Robson and Hamilton: p. 559 f.142 Hayes, Tyrone et al: Review: Demasculinization and feminization of male gonads by atrazine: Consistent effects across vertebrate classes, 2011.143 Lu, Chensheng, Warchol, Kenneth and Callahan, Richard: Sub-lethal exposure to neonicotinoids impaired honey bees winterization before proceeding to colony collapse disorder, 2014.

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farmworkers, while the residential exposure occurs to people living in the surrounding rural community. These types of exposures can cause acute poisoning symptoms, such as headaches, respiratory problems and muscular weakness. Pesticides are also often neurotoxins, meaning that a low but steady exposure (which includes all three types) can have effects on the central nervous system.144

4.4.2 AnalysisSweden has traditionally advocated for a conservative use of pesticides. Already in 1988, for example, the Swedish government decided to try to decrease the risks of agricultural pesticide use, and succeeded with the plan.145 On average, Swedish farmers also use fewer pesticides than their European counterparts. This is partly due to the favorably cold climate which makes it harder for pests to live, and partly due to the fact that Swedish agriculture mostly produces crops that are not very pesticide-intensive.146 Taken together, this means that the Swedish approach is much less pesticide friendly than what can be found in other places.

Most of the Swedish pesticides are used in the fertile areas in southern Sweden, where a lot of pesticide-intensive crops are being grown. Since so much of the rest of the country is covered in forest, the use of pesticides is low in the other parts. The most common crop that is sprayed with pesticides is potato, which uses a lot of fungicides. Other than that, herbicides are the most common pesticides, followed by fungicides and insecticides.147

CAP has affected the use of pesticides in two different ways: directly through farm support regulations and indirectly through economic support, which might incentivize growing certain crops over others. When Sweden joined the EU in 1995, the production subsidies were coupled, which had a direct effect on the use of agricultural pesticides. This policy incentivizes farmers to produce as much as possible. This kind of intensive farming requires a lot of pesticides, and other procedures harmful to the surrounding environment.148 The subsidies before 2003 also promoted the production of cereals and oil plants, which are plants that typically need a lot of pesticides. This increased the use of pesticides even further.149

This changed with the CAP reforms of 2003. This reform, which decoupled the subsidies from production levels, also did a lot to decrease the use of

144 Robson and Hamilton, p. 562 ff.145 Jordbruksverket: Hälso- och miljörisker vid användning av bekämpningsmedel – resultat av handlingsprogrammet, 1992, p. 1.146 Jordbruksverket: Växtskyddsmedel och miljöeffekter – rapport från projektet CAP:s miljöeffekter, 2008, p. 45.147 Jordbruksverket, 2008, p. 45 ff.148 Angelo. Mary Jane: The Law and Ecology of Pesticides and Pest Management, Farnham, 2013, p. 298 ff.149 Jordbruksverket, 2008, p. 91.

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pesticides in agriculture. The first beneficial effect of this reform was the decoupling itself: when farmers no longer had to produce in order to get the government support, they also lost on of the incentives to use an intensive form of agriculture.150 This effect has been proven: it has been shown that a decoupled support system leads to a decreased use of agricultural pesticides.151 The Swedish Board of Agriculture estimated that the expected decline in cereals would lead to a decrease of 149 tons, or 8 %, of total agricultural pesticide sales.152

As part of the CAP revision of 2013, and the plan CAP towards 2020, the EU tried to ‘green’ its agricultural policy. As described in chapter 2, farmers are now able to apply for an additional direct payment by following certain environmentally friendly regulations. One of these is the so-called EFA, or ecological focus area, which requires farmers to set aside at least 5 % of their arable land for environmental purposes.153 These EFAs are partly thought to slightly decrease the amount of pesticides used, since land is taken out of production, but their main beneficial effect is to decrease the negative side effects of pesticides. EFAs are primarily meant to increase biodiversity by setting aside a part of land where animals can live without being hurt by pesticides.154

A range of environmental organizations has criticized the EFA for not being strict enough. Their main point of criticism is that the EU has made it up to each member state to decide what can be grown in the EFAs, and if pesticides can be used. According to them, this damages the biodiversity, which was the original goal of the EFA. The fact that individual member states can allow farmers to use pesticides also means that the decrease of pesticides in the EU is not as great as it could have been.155

One other aspect of the decoupled payments that affects the use of agricultural pesticides is the cross compliance requirement. As mentioned previously, it requires two things of the farmer that wants to qualify for direct payments:

- The land needs to be kept in good agricultural and environmental condition, and

- The farmer must comply with 13 legislative standards, called Statutory Management Requirements. Out of these, Council Directive 91/414/EEC of 15 July 1991 concerning the placing of plant protection products on the market matters for the purpose of pesticide use.156

150 Angelo, p. 298 ff.151 Kassoum, Ayouba, and Lefer, Henri-Bertrand: Impact of the 2003 CAP reform on the agricultural pesticide use in Eure-et-Loir, 2013.152 Jordbruksverket: Miljöeffekter av 2003 års jordbruksreform – rapport från projektet CAP:s miljöeffekter, 2007b, p. 7.153 Art 46, EU Regulation 1307/2013.154 Preamble para. 44 and 45, EU Regulation 1307/2013.155 See for example German Federal Environment Agency: Ecological focus areas – Crucial for biodiversity in the agricultural landscape!,2014, p.1. 156 Article 4 and Annex II, Council Regulation 73/2009.

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The main idea behind this is to increase awareness of environmental issues among farmers. By forcing them to comply with some basic rules, the EU is hoping to improve the overall environmental condition in Europe, while still ensuring stable food supply. By making farmers show concern for the environment, the EU is hoping for a reduced use of agricultural pesticides.157 It is unclear, however, whether this will actually have any effect. The cross-compliance requirements are easy to comply with, and don’t set any specific demands on the farmer. This is especially likely in countries like Sweden where environmental conditions are already stricter than the cross-compliance level.

The last and final policy that might affect the use of pesticides is the rural development program under Pillar II. This program, and its effects, is harder to define since each member state can design the program according to their wishes. On top of this, Sweden has let each county decide specific matters. There are a couple of policies in the Swedish rural development policy that will probably affect the use of pesticides. The one that matters the most is the support to organic farmers. Farmers who want to start farming organically, or who already are certified organic, (which means that synthetic pesticides are not allowed) can apply for extra aid.158 Organic farming has increased dramatically over the past ten years: from covering 6,2 % of the total Swedish active acreage in 2005, to covering 15,3 % in 2014.159

In 1992, the total Swedish sales of pesticides for agricultural use were 1512 tons.160 By 1998, that number had risen to 1629 tons,161 and in 2014, it was 1875 tons.162 This means that the total number of pesticides for agricultural use has gone up by about 19%.163 The same pattern can be seen when looking at the number of sold hectare doses over time. Since 2005, the hectare dose has fluctuated from 4.4 to 5.2 million sold doses, with the lowest amount of 3.8 million doses sold in 2010.164 This means that the measures taken by the EU to revise the CAP in order to decrease the amount of agricultural pesticides used have not been sufficient. It remains to be seen, however, if the changes implemented in 2015 will have any effect on the pesticide use. It is also important to note that the pesticides used over the past two decades have changed dramatically regarding their health risks.165

157 European Commission: Cross-compliance, published 2015-12-14. http://ec.europa.eu/agriculture/direct-support/cross-compliance/index_en.htm. Accessed 2015-12-28.158 Landsbygdsdepartementet: Nationell handlingsplan för hållbar användning av växtskyddsmedel för perioden 2013-2017, 2013, p. 36.159 Statistiska centralbyrån, p. 14.160 Kemikalieinspektionen: Försålda kvantiteter av bekämpningsmedel 1992, 1992, p. 11.161 Kemikalieinspektionen: Försålda kvantiteter av bekämpningsmedel 1998, 1998, p. 8.162 Kemikalieinspektionen: Försålda kvantiteter av bekämpningsmedel 2014, 2014, p. 9.163 My own calculations based on the official statistics.164 Kemikalieinspektionen and Statistiska centralbyrån: Växtskyddsmedel i jordbruket 2014, beräknat antal hektardoser, 2014, p. 3.165 Landsbygdsdepartementet, p. 42.

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The most popular agricultural pesticide is definitely herbicide, commonly used on cereals, the most common Swedish crop. It is also used on sugar beets. The amount of herbicide used has risen from 1280 tons in 2005, to 1430 tons in 2014, but has fluctuated between these numbers during the whole period. The expected decrease because of the decoupling of the subsidies therefore did happen, but other factors have brought the sales up again. It is also reasonable to assume that the previous CAP policies, which favored cereals over other kind of produce, still affect production today. High prices on cereals and oil plants also means that farmers are less likely to switch away from these plants.166

To conclude: the pesticide issue has clearly become important to both the EU and Sweden over the past couple of years. Some of the CAP revisions during the 2000s have aimed at trying to reduce the number of pesticides used in agriculture, and studies have shown that the desired effect has been reached in other places. However, these policies have not had a great effect in Sweden: in fact, the number of pesticides sold has risen over the past decade. This suggests that either the new policies implemented were not strong enough to create a lasting change, or they had no impact at all.

4.5 ConclusionIt is clear that the CAP has great effects on sustainable agriculture. With the introduction of CAP, and to some extent other similar previous policies, Sweden has seen higher land values, resulting in a growth in average farm size. This has in turn affected such different things as the average age of the farmers, and biodiversity among bumblebees. This means that from a sustainability perspective, CAP has influenced farm size negatively.

The milk market interventions that CAP has created with the milk quota and the direct support systems, both coupled and decoupled, have helped keep the milk price at an artificially high level. This is something that no doubt is seen as negative by economists, but from a sustainability perspective, this has been beneficial in a lot of ways. The fact that smaller farmers can survive on the profits from their dairy farming means that the rate of farm exits has slowed down. This in turn benefits the social aspects of the local community, and the environmental consequences are mitigated.

Finally, the CAP has affected, or failed to affect, the use of pesticides in Swedish agriculture. After Sweden’s entry into the European Union, the number of pesticides has increased. This despite the fact that a number of new agricultural policies, partly or wholly aimed at reducing the amount of pesticides in Europe, has been implemented over the past decade. This obviously has negative effects for both the surrounding environment, and people’s health. It is important to note, however, that the pesticides have evolved over time and now pose significantly smaller health and environmental risks than only 20 years ago.

166 Jordbruksverket, 2008, p. 92.

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It is also obvious that all three metrics, farm size, price of milk and pesticide use, are related to the same aspects of sustainable agriculture. For example, both a decreasing price of milk and increasing farm sizes affect the rate of agricultural concentration. Agricultural concentration can in turn affect pesticide use – since it is more profitable to specialize in one or a few crops, farmers doing this will need pesticides to artificially enhance the soil to allow for the monocropping to work. The same reasoning can be applied on the rate of farm exits.

It is also remarkable how the decoupling of the direct farm payments has affected the move towards sustainable agriculture. Alone, this policy has had great effects on all three metrics: it has contributed to a decrease in the rate of average farm size growth, provides an income for some of the dairy farmers that will get paid less for their milk with the abolition of the milk quota, thereby decreasing the rate of farm exits, and it finally has helped decrease the amounts of pesticides used in agriculture by removing the incentive for intensive agriculture. It is hard, however, to discern whether these effects are attributable to the decoupled support, or if the coupled support system was simply very negative in multiple ways.

One thing to note, however, is the possibility that other factors have impacted the move toward a more sustainable agriculture. There are multiple examples of this. The one that first comes to mind is perhaps climate change, which will have impacts such as water shortage and an increased need for pesticides.167 Other examples include human population pressure168 and technological advances.169 This is the reality that the European Union must operate in. Policy changes will therefore not be the only driving factor toward a more sustainable agriculture with environmental, social and economic benefits.

167 Olesen, Jörgen E. and Bindi, Marco: Consequences of climate change for European agricultural productivity, land use and policy, 2002, p. 239.168 See for example Tiffen, Mary and Mortimore, Michael: Environment, Population Growth and Productivity in Kenya: A Case Study of the Machakos District, 1994.169 For this and other examples, see Hazell, Peter and Wood, Stanley: Drivers of change in global agriculture, 2008.

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5 Suggested policy changes

5.1 Analysis of current policiesHow has CAP affected the move towards a Swedish sustainable agriculture? The question of what makes an agricultural system sustainable is, as seen in this essay, very complicated. Most aspects of this policy have both negative and positive social, economic and environmental effects. On very clear example of this is the number of active dairy cows: on the one hand, their grazing is a vital part of maintaining a varied agricultural landscape with great biodiversity, and on the other, cattle farming is a large contributing factor to greenhouse gas emissions and thereby climate change.

The solution cannot therefore be to look at each individual cow and estimate whether that cow is good or bad, but to see it systematically: how is farming done on a large scale, and what are the consequences of this? This question goes back to the purpose and research question of this paper. Industrial farming is done on a great scale with production levels and economic theories. That is perhaps the paradox of trying to make CAP more sustainable: it is in its very nature a product of industrial agriculture.

In light of this, the conclusions drawn in this paper are not surprising, and any changes to the policy must be seen through this lens. The policy changes made over the past years – cross-compliance, EFAs etc. – have polished the CAP to make it slightly more environmentally conscious, but have not done anything to change the inherent problems of the policy. When looking at the results of the policy, it is obvious that the official discussion about sustainability goes a lot further than actual practice.

This part of the conclusion cannot be very surprising to anyone. The common agricultural policy has experienced significant criticism since its inception in the early 1960s, and as can be seen in this thesis, it still has numerous problems. It is a main driving factor behind growing farm sizes, increased rates of agricultural concentration, pesticide use, and loss biodiversity, among others. However, the agricultural policy has not drawn much attention in legal scholarship. This is unfortunate, since agriculture is such a large part of both the European economy, and of the current environmental degradation.

This thesis has also showed, however, that there are policies enacted by the European Union that have brought a more lasting change to the agricultural system. The one that is most obvious in this thesis is the decoupling of the direct payments to farmers. As has been previously mentioned, coupled payments incentivize farmers to increase production, no matter the market for the crops. This increases average farm size, agricultural concentration, the rate of farm exits and the use of pesticides. It has also led to vast overproduction.

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Decoupling the subsidies is therefore a great step on the way to make CAP more sustainable. Even though the decoupled subsidies may be valuable not because of their inherent qualities but only because they are not coupled, they have brought with them some positive effects, leading to a more sustainable agriculture. They aid struggling farmers who are trying to survive as a business, without a production demand. This has had consequences such as slowed rate of farm exits and agricultural concentration, which is positive from a sustainable point of view.

This means that a relatively new conclusion also can be drawn from this essay: CAP has, in some ways, also contributed to a more sustainable agriculture in Sweden. The policies that are in place specifically for environmental reasons, such as cross-compliance and EFAs have not been shown to have any lasting effects on the metrics examined in this essay. Instead, the most effect has come from policies that mostly have had different intentions, such as decoupled subsidies.

It is clear that right now is a hard time to be a farmer. Farmers carry out some of the most important work in the world: making sure to feed everyone else, thereby creating the basic foundation of the modern world. Since the 1950s, farming as both a way of living and as an occupation has undergone dramatic structural change. This is in large part due to events and movements outside of the policy arena. But CAP has both contributed to, and halted, this development. A lot of the time, the same policy has both sped up the process, and slowed it down.

An example of this is the milk quota system. This artificial market intervention has kept up prices by limiting milk production over almost three decades. This constructed price floor has enabled small dairy farmers to stay in business, thereby creating both positive social and environmental side effects. But it has also made it harder for new farmers to start producing milk. This is a big problem, since a large part of Europe’s farmers are nearing retirement. The farmers who were protesting in Brussels are therefore having legitimate concerns – they are being forced into a new social order that does not pay much attention to their livelihoods.

5.2 Alternatives to the current CAPThe next question that needs to be answered is whether, and in that case how, CAP can be changed to a more sustainable alternative. There are a lot of ways to go forward from the current situation. The first option here would be to simply reform the current agricultural policy, and refine it in a way that benefits smaller farms, with more organic production and higher price levels.

This option might be relatively easy to realize. Reforming a policy is probably easier than coming up with a completely new one, especially on

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such a high level as the European Union. The main problem with this option is the uncertainty around how far reaching the effects will actually be. Simply reforming a faulty policy might lead a bit of the way, but it is unlikely to create deep change.

The second option is to liberalize the policy – to move away from a strong agricultural policy, and instead let the market forces decide to a greater extent. This is a clear trend in current agricultural policies: a move towards a more liberalized policy, with less market distorting incentives and more competition between farmers. This is expected to lead to a more environmentally friendly agriculture. The main idea behind this is that without government support, the farmers will lose the incentive to overproduce. This means that more farmers will retire from farming, and their land will instead be used by more efficient, large farms. As farms get more efficient, they will use less pesticides and less land, which is beneficial for the environment.

As can be seen in this essay, however, this path will not lead to a truly sustainable agriculture. A policy that only takes certain environmental effects into account, and forgets both social and economic consequences for the people that might have farmed the same land for generation, will not succeed in the long run.

It is also possible, if not probable, that a more market-oriented agricultural policy will lead to further agricultural intensification. A clear example of this is the elimination of the European milk quota, which has enabled smaller and less efficient farmers to stay in business, and thereby ensuring a vivid rural community. Removing the milk quota is thought to result in increased agricultural intensification, which might just as easily lead to a higher rate of industrial agriculture, with monocropping and an intensive use of land.

The third and final option has been promoted by some researchers. They have argued that a complete overhaul of agricultural policies is needed around the world in order to create a truly sustainable agricultural system. Agricultural policy has long been the culprit, leading the move towards an industrial agricultural system. The current European agricultural policy is based on ideas very much part of an industrial agriculture, where animals are being turned into goods and pesticides are a vital part of making crops grow at all. They argue that a sustainable agriculture can never be ensured using a policy based on these ideals. Instead, a new policy is needed that has environmental, economic and social sustainability as its main focus, rather than profitability.170

At this point in time, it is hard to say to what extents these ideas are likely to ever be applied as part of a policy. The policy itself might be a good idea, since it could have sustainability as its focus rather than other values.

170 See for example Holt Giménes, Eric and Shattuck, Annie: Food crises, food regimes and food movements: rumblings of reform or tides of transformation?, 2011.

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However, it seems very unlikely that the European Union would vote something like this through. CAP is a large part of the EU budget, and completely changing it would take a long time with a lot of political will. I would therefore argue that even though the third option is necessary to create a sustainable future agriculture in Europe, we should start out by reforming the current CAP. This would be good for two reasons. First, it would mitigate some of the negative side effects of the current industrial agricultural system and second, it would make it easier to one day completely change CAP to something that would be based on the ideas of sustainable agriculture.

The first necessary step to take would be to start decentralizing CAP. At the moment, any policy enacted by CAP has great consequences for farmers all over Europe. This completely disregards the great variety of landscape and culture that farmers are facing on the continent. Instead, member states ought to get an increased right of self-determination regarding how to reach the agricultural goals. One way of doing this could be to set common European standards for what should be accomplished, but let the member states carry out the policies in the way they deem fit for the particular situation in that country. This would ensure a policy that is more adapted to each country, and create less sweeping changes that farmers can’t predict.

5.3 ConclusionIn conclusion, CAP has affected, and continues to affect, the move towards a sustainable agriculture in Sweden. Historically, CAP has increased the rate of industrialized agriculture by promoting intense production, monocropping and large farm sizes. As time has gone by, the problems with these policies have gotten larger and larger. This has resulted in the current situation, where a lot of the policies still in place are mostly meant to result in an efficient way of farming, with smaller adjustments to remove the worst side effects.

This thesis has investigated how CAP has affected sustainable agriculture in Sweden, based on three different metrics. Average farm size has increased mainly due to the direct payments, but the rate has slowed down after the decoupling of the policies. This affects the surrounding community negatively. The milk quota has ensured artificially high milk prices, which has let more farmers stay in business, but prices are expected to drop after the elimination of the milk quota earlier this year. Finally, CAP has failed to decrease the amount of pesticides used annually in Swedish agriculture.

CAP has therefore mostly contributed negatively to the move towards a sustainable agriculture. The coupled direct payments are a large contributor in this, causing both increased farm sizes and overproduction. Over the past decade, however, CAP has slowly started moving towards a more sustainable system and has shown intentions, if not actual policy changes,

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that try to mitigate some of the worst effects of industrial agriculture. But the way to a truly sustainable system is still far away.

Finally, there are three main options for moving forward: keeping the current agricultural policy, but tweaking it in a way that creates a more sustainable path. The second is to deregulate agriculture, partly or completely, and instead let the market forces of supply and demand determine how to best get an efficient agriculture. The third and last option is to do a complete overhaul of the system; changing the agricultural policy from focusing on production and outcome, to focusing on the environmental and social consequences instead.

I would argue that while option one and two are not going to actually help the basic problems of the current situation, they are at least politically feasible. A completely renewed agricultural policy is necessary when trying to create a truly sustainable agriculture, but the current political climate makes it hard to realize. In order to create a possible change in the near future, I therefore mean that reforming CAP is the best alternative.

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