Payment calculations and controls
For those of you who could not join the RBAPS conference in Brussels last month and for those who did and have more to say, we would like to encourage your contributions to the discussion on these 3 topics:
- – setting biodiversity objectives and determining results indicators
- – calculating payment rates, verification and controls
- – identifying what works from a farmers’ perspective
Here is your chance to add to discussions about calculating payment rates, verification and controls, an area which has been the subject of much discussion and confusion over the years.
What is the legal and policy framework?
Before getting into the discussion that took place at the conference let’s look at some of the basics about payment calculations.
When calculating payment levels for any agri-environment scheme authorities need to follow Article 28.6 of the EAFRD regulation (1305/2013) which requires that payments compensate beneficiaries for all or part of the additional costs and income foregone resulting from the commitments made, with up to an additional 20 per cent of the calculated premium (30 per cent for group applications) available for transaction costs. If necessary, an amount should be deducted from agri-environment-climate payments to exclude double funding of practices required under the ‘greening’ conditions applied to direct payments.
When calculating results-based payments, the European Commission advises that payments ‘should be based on the additional costs incurred and income foregone as a result of the farming practices which are in general necessary to achieve the results expected from these commitments.’ There are broadly three types of cost to be considered:
- – the opportunity cost of maintaining current management where this already provides the biodiversity results;
- – the income foregone by modifying management to improve biodiversity results that also reduces agricultural production from the land; and
- – the additional costs of specific biodiversity management.
In terms of verifying results-based payments, the European Commission states that the measuring and control of results-based payment schemes should relate to the ‘delivery of the expected results and not the practices undertaken by the beneficiary to achieve these results’.
For schemes run under EAFRD rules for 2014-20 the basic principle for results-based schemes is that the payment controls verify that the result indicators have been achieved, using the methodology specified in the contract. The ability to verify results is therefore a major factor in selecting results indicators, setting result thresholds and designing measurement protocols – as discussed here.
The use of auctions or tendering processes is an alternative approach for determining payments. Although potentially useful for setting payments in the first instance, particularly in homogenous landscapes, participants at the conference noted that experience suggests that auctions can result in a ‘race to the bottom’ as farmers quickly learn how to bid. To mitigate such a risk, participants proposed that an auction approach would need to focus on maximising the quality of the output rather than cost minimisation. Questions were also raised about the applicability of auctions for heterogeneous situations across different landscapes and farming systems.
There was a lively discussion at the conference on how to make results-based payments attractive to farmers and what are the important elements in the design of verification and control systems. Highlights from the discussion are captured here:
How to make results-based payments attractive to farmers?
Key to the discussion around payments at the conference was how to make payments for results attractive to farmers and what issues should be considered. Suggestions included:
- – Encouraging Member States to include farmers’ transaction costs within the payment calculation.
- – Including the farmers’ costs of planning and control in the payment – either as a transaction cost or in the main calculation.
- – Ensuring that the payment is attractive compared to alternative CAP schemes.
- – Emphasising the quality of the outcome and not just the cost.
- – Offering options within the scheme to include payments for non-productive investments where biodiversity investments are needed, such as habitat restoration.
What are the important elements in the design of verification and control systems according to participants?
It is important to remember that the measuring and control of results-based payment schemes should relate to the ‘delivery of the expected results and not the practices undertaken by the beneficiary to achieve these results’. Important elements identified include:
- – Time control inspections to individual farms to ensure results indicators are measurable.
- – Ensure that the controls are uncoupled from the payment calculation.
- – Encourage self-assessment, for example by providing farmers with good documentation with photos of results indicators such as flowers.
- – Remember that self-assessment is additional to formal controls and can be important to facilitate farmers’ understanding of the control methodology. Self-assessment is not a replacement for formal controls.
- – Remote sensing can be beneficial but is not a solution everywhere – for example, field visits are required for semi-natural vegetation and extensively managed land.
What other factors might be important to farmers? What other elements might be important for checking and controlling payments? please post your ideas below.