The Common Agricultural Policy: Legal Foundations, Funding, and Agricultural Regulation

The Common Agricultural Policy: Legal Foundations, Funding, and Agricultural Regulation

Introduction

The Common Agricultural Policy (CAP) is one of the oldest and most extensive common policies of the European Union. Established at the beginning of European integration, it was designed to address a fundamental economic and political problem: how could the Member States create a common agricultural market while ensuring a stable food supply, reasonable prices for consumers and a fair standard of living for the agricultural community?

Agriculture occupies a distinctive position in the European economy. Unlike many industrial sectors, it depends heavily on natural conditions, seasonal production cycles and biological processes. Farmers face risks arising from weather, disease, fluctuating commodity prices, changing input costs and international competition. Agricultural production also has consequences extending beyond the farm itself, including food security, rural employment, landscape management, biodiversity, water use and climate change. These characteristics have historically justified a degree of public intervention that would be unusual in other sectors of the economy.

The CAP provides the legal and financial framework through which the European Union addresses these challenges. It combines income support for farmers, market measures, rural development instruments and environmental and climate-related obligations. It is financed through the EU budget, principally by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), and implemented through a system involving the European Commission, Member States, national paying agencies and agricultural authorities.

The contemporary CAP is not simply a system of agricultural subsidies. It is a complex regulatory structure that connects the common market, public expenditure, environmental law, food production and territorial development. Its legal foundations are found principally in Articles 38–44 of the Treaty on the Functioning of the European Union (TFEU), while its practical operation is governed by extensive EU legislation, national strategic plans and administrative controls.

The current programming framework, covering 2023–2027, introduced a more performance-oriented model based on national CAP Strategic Plans, enhanced environmental conditions, eco-schemes and a strengthened link between agricultural support and measurable objectives. Subsequent legislative adjustments have also sought to simplify certain requirements and respond to concerns about administrative burdens and the economic position of farmers.

This article examines the historical development and constitutional foundations of the CAP, its institutional and financial architecture, the principal forms of agricultural support, market regulation, environmental conditionality, enforcement mechanisms and the challenges facing European agricultural law.

1. Historical Development of the Common Agricultural Policy

1.1 The origins of the CAP

The Common Agricultural Policy was created under the Treaty establishing the European Economic Community, signed in 1957 and entering into force in 1958. Agriculture was included in the original integration project because the economic and political conditions of post-war Europe made food production and agricultural stability matters of common concern.

European states had experienced food shortages, disrupted agricultural markets and considerable economic instability during and after the Second World War. Agricultural production was often inefficient, fragmented and vulnerable to sudden changes in supply. National governments used price supports, import restrictions and other protective measures to secure domestic production, but these policies could conflict with the objective of creating a common market.

The founders of the European Economic Community therefore recognised that agriculture required a common framework. Article 39 of the Treaty of Rome identified objectives that would become the enduring foundations of the CAP: increasing agricultural productivity, ensuring a fair standard of living for the agricultural community, stabilising markets, assuring the availability of supplies and ensuring reasonable prices for consumers.

The first major common agricultural market organisations were established in the 1960s. The CAP developed through common price mechanisms, intervention purchasing, import levies and export support. These arrangements helped establish a common market for agricultural products and reduced the significance of separate national agricultural policies.

1.2 The original model: price support and market intervention

The early CAP relied heavily on price support. The Community established common prices for agricultural products and intervened in markets when prices fell below specified levels. Import arrangements protected the internal market, while export refunds helped European products compete in international markets.

This model contributed to increased production and greater market stability. It also created significant structural problems. Guaranteed prices encouraged production, sometimes beyond market demand, while intervention purchasing and export support generated substantial public expenditure.

By the 1980s, the Community faced persistent surpluses in certain agricultural sectors. The best-known examples included the so-called butter mountains and milk lakes. These surpluses illustrated the difficulty of maintaining high guaranteed prices without creating incentives for overproduction.

The resulting financial and economic pressures encouraged successive reforms. Milk quotas were introduced in 1984 to limit production, while budgetary and market-management mechanisms were progressively adjusted.

1.3 The MacSharry reform of 1992

The 1992 reform marked a major change in the philosophy of the CAP. Instead of relying primarily on guaranteed prices, the Community began reducing institutional prices and compensating farmers through direct payments.

The reform sought to reduce production incentives, limit surplus accumulation and make European agriculture more competitive internationally. It also introduced accompanying measures relating to agri-environmental protection, early retirement and afforestation.

The significance of the reform was structural: agricultural income support became increasingly detached from the volume of production. This transition laid the foundation for the modern system of direct payments.

1.4 The Agenda 2000 and the 2003 reform

The Agenda 2000 reforms continued the movement towards lower administered prices and greater reliance on direct income support. They also strengthened rural development as a distinct component of the CAP.

The 2003 reform, associated with the Fischler reform, introduced a more substantial separation between payments and the production of particular commodities. The system of the Single Payment Scheme was based increasingly on entitlements and compliance with certain standards, rather than on the farmer’s current production decisions.

Cross-compliance linked the receipt of support to compliance with specified statutory management requirements and standards for maintaining land in good agricultural and environmental condition. This established an important precedent for the contemporary relationship between agricultural funding and environmental and regulatory obligations.

1.5 The 2013 reform and the development of environmental conditionality

The 2013 reform introduced a more structured system of direct payments, including the basic payment, greening payments, redistributive support, support for young farmers and voluntary coupled support.

Greening required farmers receiving certain direct payments to comply with specified agricultural practices considered beneficial for the climate and environment. These included crop diversification, the maintenance of permanent grassland and ecological focus areas, subject to applicable exemptions and thresholds.

The reform also strengthened the role of rural development policy and encouraged greater attention to environmental sustainability, innovation and rural economic diversification.

1.6 The 2023–2027 CAP framework

The CAP for 2023–2027 represents a further transformation. It is governed principally by three regulations adopted in December 2021:

• Regulation (EU) 2021/2115, establishing rules on support for CAP Strategic Plans;
• Regulation (EU) 2021/2116, governing the financing, management and monitoring of the CAP;
• Regulation (EU) 2021/2117, amending the common market organisation and related agricultural legislation.

The framework introduced national CAP Strategic Plans, through which Member States organise and implement the principal forms of support. It also established a more performance-oriented approach, with common EU objectives, national interventions, indicators and reporting obligations.

The 2023–2027 framework retains the two-pillar structure of the CAP but changes the way in which its objectives are translated into national agricultural measures. Member States have greater flexibility in designing interventions, while the Commission retains responsibility for approving plans and monitoring their implementation.

2. The Treaty Foundations and Objectives of the CAP

2.1 Articles 38–44 TFEU

The constitutional basis of the Common Agricultural Policy is found in Articles 38–44 TFEU. These provisions establish agriculture as an area of common EU action and define the relationship between agricultural policy, the internal market and the Union’s legislative institutions.

Article 38 provides that the Union shall define and implement a common agriculture and fisheries policy. It also establishes the relationship between agricultural products and the internal market. Agricultural products are defined as products of the soil, stock farming and fisheries, together with products of first-stage processing directly related to those products.

The Treaty recognises that agricultural markets have particular characteristics. Agricultural production is closely connected to land, climate, biological cycles and rural economic structures. These features justify a common policy that may include market organisation, income support and specific regulatory interventions.

Article 39 sets out five principal objectives:

1. To increase agricultural productivity by promoting technical progress and ensuring the rational development of agricultural production and the optimum utilisation of factors of production, particularly labour;
2. To ensure a fair standard of living for the agricultural community, particularly by increasing the individual earnings of persons engaged in agriculture;
3. To stabilise markets;
4. To assure the availability of supplies; and
5. To ensure that supplies reach consumers at reasonable prices.

These objectives remain the constitutional reference point for the CAP. They are not always mutually reinforcing. For example, increasing productivity may contribute to food availability and competitiveness, but intensive production can place pressure on soil, water and biodiversity. Higher prices may support farm incomes but impose additional costs on consumers. Direct payments may stabilise income but raise questions about the distribution of public resources between farms of different sizes.

Article 39 therefore requires a balancing exercise rather than the pursuit of a single economic objective.

2.2 The specific characteristics of agricultural markets

Article 39(2) TFEU recognises several factors that must be taken into account when developing the CAP. These include the particular nature of agricultural activity, the social structure of agriculture and structural and natural disparities between the various agricultural regions.

This provision has enduring importance. European agriculture is not economically or geographically uniform. A large commercial farm operating on fertile plains faces different conditions from a small family holding in a mountainous region, an island community or an area affected by drought and soil degradation.

The Treaty also recognises the need to make appropriate adjustments gradually. Agricultural reform can affect land ownership, employment, investment decisions and rural communities. Abrupt changes to market support or eligibility rules may have consequences extending beyond individual businesses.

The CAP consequently combines common legal standards with mechanisms allowing adaptation to national and regional circumstances.

2.3 Articles 40 and 41: market organisation and agricultural support

Article 40 TFEU provides for the establishment of a common organisation of agricultural markets (CMO). Depending on the product, this may take the form of common competition rules, compulsory coordination of national market organisations or a European market organisation.

The purpose is to create a common framework for agricultural products while preventing national arrangements from fragmenting the internal market. The common organisation may include intervention measures, marketing standards, production rules, trade arrangements and sector-specific support.

Article 41 permits the Union to establish measures concerning agricultural research, training, the dissemination of agricultural knowledge and the promotion of consumption of certain products. These activities complement direct financial support by addressing the structural and technological conditions of agricultural development.

2.4 Article 42: the relationship between agriculture and competition law

Agriculture is not entirely outside EU competition law, but the Treaties recognise that its application must take account of the particular structure of agricultural markets.

Article 42 TFEU provides that the competition rules apply to the production of and trade in agricultural products only to the extent determined by the European Parliament and the Council, within the framework of Article 43(2), and having regard to the objectives of the CAP.

This allows the EU legislature to establish specific agricultural derogations and exemptions. Such arrangements are important for recognised producer organisations, interbranch organisations and certain forms of cooperation intended to strengthen farmers’ bargaining position.

They do not create a general exemption from competition law. Agricultural businesses and organisations remain subject to applicable rules unless a specific legal provision provides otherwise.

2.5 Article 43: legislative authority

Article 43 TFEU establishes the principal legislative basis for implementing the CAP. The European Parliament and the Council act under the ordinary legislative procedure when adopting the common organisation of agricultural markets and other provisions necessary to pursue the objectives of the CAP.

The Treaty also provides for particular powers of the Council in relation to certain measures concerning fixing prices, levies, aid and quantitative limitations. These provisions reflect the historical importance of market-management decisions in agricultural policy.

Article 43 is therefore central to the legal architecture of the CAP. It connects the constitutional objectives in Article 39 with the detailed regulations governing financial support, market intervention and agricultural administration.

2.6 The relationship with other EU policies

The CAP must be interpreted within the wider constitutional framework of the Union. It interacts with environmental law, climate policy, public health, food safety, competition law, regional development, trade policy and the internal market.

Article 11 TFEU requires environmental protection requirements to be integrated into the definition and implementation of Union policies and activities, particularly with a view to promoting sustainable development. Article 13 requires the Union and Member States to pay full regard to the welfare requirements of animals when formulating and implementing certain policies.

These provisions help explain why agricultural support is increasingly linked to environmental management, animal welfare and climate objectives. Agricultural policy cannot be treated as an isolated economic sector when its effects are directly connected to land use, water quality, emissions and biodiversity.

3. The Objectives and Structure of the CAP 2023–2027

3.1 The ten specific objectives

The 2023–2027 CAP is organised around ten specific objectives, grouped within economic, environmental and social dimensions.

The economic objectives concern viable farm income, competitiveness and the position of farmers in the food chain. The environmental objectives address climate action, natural-resource management, landscapes and biodiversity. The social objectives include generational renewal, rural development, food quality and the promotion of knowledge and innovation.

The ten objectives are:

1. Ensuring a fair income for farmers;
2. Increasing competitiveness;
3. Improving the position of farmers in the food chain;
4. Contributing to climate-change mitigation and adaptation;
5. Promoting sustainable development and efficient management of natural resources;
6. Contributing to the protection of biodiversity, ecosystem services and landscapes;
7. Attracting young farmers and facilitating business development in rural areas;
8. Promoting employment, growth, social inclusion and local development in rural areas;
9. Improving the response of EU agriculture to societal demands concerning food and health, including safe, nutritious and sustainable food and animal welfare; and
10. Modernising agriculture and rural areas through knowledge, innovation and digitalisation.

A further cross-cutting objective concerns the modernisation of the sector through knowledge-sharing, innovation and digital technologies.

The objectives are intended to guide the preparation of national CAP Strategic Plans. Member States must translate them into interventions, targets and performance indicators rather than merely reproduce them as general policy statements. The European Commission provides an overview of the ten key CAP objectives.

3.2 The two-pillar structure

The CAP continues to operate through two principal financial and policy pillars.

Pillar I is primarily concerned with direct payments to farmers and measures supporting agricultural markets. It is financed through the European Agricultural Guarantee Fund.

Pillar II supports rural development, environmental and climate commitments, investment and structural improvements in rural areas. It is financed through the European Agricultural Fund for Rural Development, with national co-financing under the applicable rules.

The two pillars serve complementary purposes. Direct payments provide a relatively predictable income-support mechanism, while rural development measures address longer-term economic, social and environmental challenges.

The distinction is not absolute in terms of policy objectives. Both pillars can contribute to environmental protection, resilience and competitiveness. Their financial rules and methods of implementation, however, differ.

3.3 The new delivery model

One of the defining features of the 2023–2027 CAP is the new delivery model. Under the previous framework, EU legislation prescribed a relatively detailed set of measures and implementation rules. The current model places greater emphasis on common objectives and national strategic planning.

Each Member State prepares a CAP Strategic Plan covering the principal interventions financed by the EAGF and EAFRD. The plan identifies national and regional needs, selects appropriate interventions, establishes targets and explains how the measures contribute to EU-wide objectives.

The Commission assesses and approves each plan. Member States then implement the approved measures, monitor their results and report performance information. Plans may be amended under the conditions established by Regulation 2021/2115.

The model seeks to combine common EU standards with greater flexibility in national implementation. It reflects subsidiarity in the sense that agricultural conditions vary considerably between Member States, but national discretion remains bounded by common objectives, eligibility requirements, financial rules and environmental standards.

The European Commission describes this arrangement as the CAP’s new delivery model.

4. The Institutional Administration of the CAP

4.1 The European Commission

The European Commission is responsible for the overall administration and supervision of the CAP within the institutional framework established by the Treaties and secondary legislation.

The Directorate-General for Agriculture and Rural Development (DG AGRI) develops policy proposals, prepares implementing measures, evaluates national plans and monitors the expenditure and performance of the CAP.

The Commission also exercises important powers concerning:

• Approval and amendment of CAP Strategic Plans;
• Adoption of delegated and implementing acts;
• Monitoring of Member State implementation;
• Supervision of agricultural expenditure;
• Financial corrections and payment suspensions where legally justified;
• Assessment of performance reports;
• Coordination of agricultural market measures; and
• Management of certain emergency and crisis instruments.

Its role is not limited to policy development. Because the CAP involves substantial public expenditure, the Commission must ensure that EU funds are used in accordance with the applicable rules and that Member States maintain reliable administrative and control systems.

4.2 The Council of the European Union

The Council represents the governments of the Member States and participates in the adoption of CAP legislation, generally together with the European Parliament under the ordinary legislative procedure.

The Council also adopts certain measures under specific Treaty provisions and participates in the political coordination of agricultural policy. The Special Committee on Agriculture (SCA), composed of representatives of national governments, prepares much of the Council’s work in this field.

Agriculture ministers meet in the Agriculture and Fisheries Council configuration to discuss legislative proposals, agricultural market conditions, rural development and wider policy priorities.

4.3 The European Parliament

The European Parliament is a co-legislator in the CAP. It participates in the adoption of the principal legislative framework, including regulations governing strategic plans, agricultural financing and the common organisation of markets.

Parliamentary scrutiny is also relevant to the allocation and supervision of agricultural expenditure. The Parliament examines Commission proposals, adopts resolutions, scrutinises implementation and exercises budgetary and discharge functions.

Its role is significant because agricultural policy distributes public funds and establishes regulatory obligations affecting millions of economic actors. Democratic accountability is therefore an essential component of the CAP’s institutional structure.

4.4 Member States and national authorities

Although the CAP is a common EU policy, its daily administration is largely carried out by Member States. National authorities receive applications, determine eligibility, calculate payments, conduct inspections and manage rural development programmes.

Each Member State must designate the necessary administrative and control structures under the CAP legislation. These include paying agencies, coordinating bodies where applicable, and certification bodies.

National administrations must apply the approved CAP Strategic Plan and comply with the common EU rules. They may not introduce national eligibility criteria or payment practices that contradict the governing regulations.

This division of responsibilities is an example of shared management: the EU establishes the legal and financial framework, while national authorities implement the policy under Commission supervision.

5. Funding the Common Agricultural Policy

5.1 The CAP within the EU budget

The CAP is one of the most significant expenditure areas in the European Union budget. Its financial structure reflects the fact that agricultural policy is not merely a regulatory system: it involves large-scale transfers of public funds to farmers, rural businesses and other eligible beneficiaries.

For the 2021–2027 multiannual financial framework, the overall CAP allocation amounts to approximately €386.6 billion in current prices. This amount includes the resources allocated to the two principal funds and the additional contribution from the NextGenerationEU recovery instrument.

The allocation is divided between:

• The European Agricultural Guarantee Fund (EAGF), with approximately €291.1 billion;
• The European Agricultural Fund for Rural Development (EAFRD), with approximately €95.5 billion, including €8.1 billion from NextGenerationEU.

These figures concern the 2021–2027 financial framework and should not be confused with the amounts actually paid in a particular year or with the proposed financial arrangements for the post-2027 period. The European Commission’s overview of the CAP funds and their budget allocations provides the official breakdown.

5.2 The European Agricultural Guarantee Fund

The EAGF finances the first pillar of the CAP. Its principal functions are to finance direct payments to farmers and to support agricultural markets through the common market organisation.

Direct payments provide income support to eligible farmers, generally on an annual basis and according to the relevant area-based or other payment criteria. Market interventions are designed to address exceptional market disturbances and maintain the functioning of agricultural markets.

The EAGF is financed entirely from the EU budget. This distinguishes it from many rural development measures under the second pillar, which involve national co-financing.

5.3 The European Agricultural Fund for Rural Development

The EAFRD finances the second pillar of the CAP. It supports rural development through measures addressing agricultural competitiveness, environmental management, climate adaptation, investment, innovation and the vitality of rural communities.

Unlike the EAGF, EAFRD expenditure generally involves contributions from national or regional public budgets, subject to the co-financing rates and conditions established by EU legislation.

This co-financing structure is intended to encourage national ownership of rural development programmes while ensuring that EU resources contribute to common objectives.

The EAFRD may support farm modernisation, infrastructure, environmental commitments, organic farming, knowledge transfer, cooperation, local development and business diversification. It can therefore finance activities extending beyond agricultural production in the narrow sense.

5.4 Shared management and financial responsibility

CAP expenditure is implemented through shared management. The Commission and Member States have distinct but interconnected responsibilities.

The Commission provides EU financing, establishes the legal framework and supervises the national systems. Member States designate paying agencies, process applications, carry out checks and make payments to beneficiaries.

The paying agencies must satisfy accreditation requirements and maintain systems capable of ensuring that expenditure is lawful, regular and correctly recorded. Certification bodies examine the relevant accounts and internal control arrangements.

This system is intended to combine administrative proximity with EU-level financial accountability. National authorities are generally better placed to assess local agricultural conditions, but the use of EU funds must remain consistent with common financial rules.

5.5 Financial discipline and budgetary controls

The CAP is subject to rules on financial discipline, expenditure ceilings, eligibility and the correction of irregular expenditure. Payments cannot be made simply because an applicant carries out agricultural activity. The beneficiary must satisfy the applicable conditions and submit the required information.

Where expenditure is incorrectly declared or paid, the EU framework provides mechanisms for recovery, financial correction and, in appropriate cases, suspension or reduction of EU financing.

The Commission’s financial supervision includes annual financial clearance and performance clearance. Financial clearance examines the completeness, accuracy and veracity of the accounts of paying agencies. Performance clearance assesses whether reported outputs and expenditure correspond to the approved strategic plan.

These procedures are distinct. Correct accounting does not necessarily demonstrate that a programme has achieved its intended results, while a programme’s reported outputs do not remove the need for accurate financial records. The Commission explains these mechanisms in its overview of CAP clearance procedures.

6. Direct Payments and Agricultural Income Support

Direct payments are among the most visible instruments of the CAP. They provide financial support to eligible farmers and seek to stabilise agricultural income in markets characterised by price volatility, seasonal production and exposure to external shocks.

The 2023–2027 framework distinguishes between decoupled and coupled payments. Decoupled payments are generally not linked to the production of a particular commodity, while coupled payments are linked to specified agricultural sectors or activities.

6.1 Basic Income Support for Sustainability

Basic Income Support for Sustainability (BISS) replaced the previous Basic Payment Scheme and Single Area Payment Scheme under the 2023–2027 CAP.

It is an annual area-based payment, generally granted for eligible hectares declared by farmers who satisfy the applicable conditions. It is decoupled from the production of particular crops or livestock.

BISS is intended to provide a baseline income safety net and contribute to the Treaty objective of ensuring a fair standard of living for the agricultural community.

Eligibility depends on the applicable rules concerning the active farmer, agricultural land, agricultural activity, minimum requirements and the national implementation arrangements. The fact that land is owned by an applicant does not, by itself, establish entitlement to payment. The applicant must satisfy the relevant conditions and exercise the required agricultural activity or maintain the land in an eligible state.

The Commission’s explanation of Basic Income Support for Sustainability sets out the main eligibility principles and its relationship with other direct-payment schemes.

6.2 Redistributive income support

The Complementary Redistributive Income Support for Sustainability (CRISS) is designed to improve the distribution of direct payments by directing additional support towards smaller and medium-sized farms.

Under this mechanism, a Member State may provide an additional payment for eligible hectares up to a specified limit. The national strategic plan determines the relevant payment design and thresholds within the EU framework.

The policy rationale is that area-based payments can produce a highly unequal distribution of public support where larger farms receive proportionately larger amounts simply because they operate more land. Redistributive support seeks to moderate this effect without abandoning the area-based structure.

Its practical consequences depend on national choices, including the size of the eligible area, payment rates and the way the measure interacts with other forms of income support.

6.3 Support for young farmers

Generational renewal is a specific objective of the CAP. Many European agricultural sectors face an ageing farming population, difficulties in accessing land and capital, and barriers to establishing new agricultural businesses.

The CAP provides several forms of support for young farmers, including complementary income payments, installation assistance, investment support and rural development measures.

Member States must allocate an amount corresponding to at least 3% of their direct-payment budget to support young farmers, through the eligible forms of support specified in the legislation. The complementary income support for young farmers may take the form of an annual payment per eligible hectare or a lump-sum payment, depending on the national plan.

The legal definition of a young farmer and the applicable conditions are established under the EU framework and elaborated in national strategic plans. Relevant considerations include age, establishment as head of the holding and the required level of agricultural training or skills, where applicable.

The Commission’s young farmers support framework explains the available interventions and the relationship between EU funding and national measures.

6.4 Coupled income support

Coupled income support is linked to the production of particular agricultural products or sectors. It may be used where certain sectors experience specific difficulties and are important for economic, social or environmental reasons.

The instrument may support sectors such as protein crops, certain livestock activities and other eligible products identified under the relevant national plan. However, coupled payments are subject to limits because excessive production-linked support may distort markets and undermine the objective of orienting production towards market demand.

The scheme is therefore not a general entitlement to subsidies for producing a particular commodity. It operates within the limits and conditions established by Regulation 2021/2115 and the approved national strategic plan.

6.5 Small-farmer support

The CAP allows Member States to establish simplified support arrangements for small farmers. These schemes may replace certain other direct payments with a simplified annual payment, subject to the applicable conditions and national choices.

The policy objective is to reduce administrative complexity for smaller holdings. A simplified scheme can be particularly important where the cost of complying with detailed application and reporting requirements would otherwise be disproportionate to the amount of support available.

6.6 Capping and degressivity

The CAP framework also permits Member States to reduce or cap certain payments to larger beneficiaries. The purpose is to moderate the concentration of direct support and improve the distribution of public funds.

Capping and degressivity must be applied according to the rules in Regulation 2021/2115 and the choices made in national strategic plans. Labour costs and other permitted adjustments may be relevant to the calculation, depending on the applicable rules.

These mechanisms are particularly important in debates about the distribution of CAP expenditure. Since area-based payments tend to favour holdings with larger eligible areas, redistributive instruments and payment limits are intended to make support more targeted.

7. Eco-Schemes and Environmental Conditionality

7.1 The environmental dimension of the CAP

Agriculture has a direct relationship with the environment. Farming practices affect soil fertility, water quality, biodiversity, greenhouse-gas emissions, landscape conservation and the resilience of ecosystems.

The CAP 2023–2027 framework therefore places environmental and climate objectives within the central structure of agricultural support. It combines mandatory baseline conditions with voluntary measures that reward farmers for adopting practices which provide additional environmental benefits.

This approach is sometimes described as a system of conditional support: public funding is linked to compliance with minimum legal and environmental standards, while additional payments may be available for commitments that go beyond those standards.

7.2 Conditionality

Conditionality is the system of requirements that farmers must respect in order to receive certain CAP payments. It combines statutory management requirements (SMRs) with standards for good agricultural and environmental condition (GAEC).

The statutory management requirements refer to obligations arising from specified EU legislation in areas such as the environment, public health, animal health, plant health and animal welfare. The GAEC standards establish requirements concerning the maintenance of agricultural land and the protection of natural resources.

The framework covers matters such as:

• Protection of wetlands and peatlands;
• Soil protection and minimum soil cover;
• Crop rotation or diversification under the applicable rules;
• Retention of landscape features;
• Protection of permanent grassland;
• Prevention of soil erosion;
• Maintenance of organic matter and soil structure;
• Protection of watercourses and other environmental features.

Conditionality does not mean that every agricultural activity must be identical across the Union. Member States specify certain technical details within the framework, taking account of soil conditions, climate, land use and other regional characteristics.

The Commission’s conditionality framework explains the relationship between statutory management requirements and GAEC standards.

7.3 Eco-schemes

Eco-schemes are voluntary interventions under the first pillar of the CAP. They provide financial incentives to farmers who undertake agricultural practices beneficial to the climate, environment and animal welfare.

Member States must include eco-schemes in their CAP Strategic Plans, but farmers generally choose whether to participate. The measures may support organic farming, agroecological practices, soil improvement, biodiversity protection, carbon farming, landscape management, reduced pesticide use or improvements in animal welfare, depending on the national plan.

For the 2023–2027 period, at least 25% of the direct-payment allocation is intended to be devoted to eco-schemes under the applicable financial rules and flexibility arrangements.

The legal distinction between conditionality and eco-schemes is important. Conditionality establishes the baseline requirements for receiving support. Eco-schemes provide additional payments for voluntary practices that go beyond the relevant baseline.

The Commission’s eco-schemes framework describes their legal basis, national design and environmental objectives.

7.4 Agri-environment-climate commitments

Environmental and climate commitments are also supported through rural development interventions under Article 70 of Regulation 2021/2115.

These commitments are generally voluntary and may extend over several years. They can compensate farmers for additional costs and income foregone when they adopt practices that go beyond the relevant statutory requirements and GAEC standards.

Examples include maintaining biodiversity-rich grassland, restoring habitats, reducing nutrient losses, protecting water resources, preserving traditional landscapes and adopting farming practices that contribute to climate adaptation.

The multiannual character of these commitments is important. Environmental improvements often require sustained management rather than isolated annual actions. Longer commitments can therefore support continuity and provide greater predictability for both farmers and environmental authorities.

7.5 Organic farming

Organic farming is an important component of the EU’s environmental and agricultural policy. It is governed by a specific legal framework, principally Regulation (EU) 2018/848 on organic production and labelling of organic products.

The Regulation establishes rules concerning production, processing, distribution, certification and control. It also regulates the use of the terms and logos associated with organic products.

Organic production is not merely a voluntary marketing description. Operators must comply with defined production standards and undergo the relevant control and certification procedures before products may be marketed as organic under EU law.

CAP support may assist farmers converting to organic production or maintaining organic practices. However, the receipt of an organic-farming payment and the legal status of a product as organic are distinct matters. A payment does not replace the certification requirements under Regulation 2018/848.

7.6 Animal welfare

Animal welfare is integrated into the CAP through statutory management requirements, voluntary support schemes and rural development interventions.

The CAP does not constitute the entire EU animal-welfare framework. Sector-specific legislation governs matters such as the protection of farm animals, transport and slaughter. Nevertheless, CAP conditionality can link agricultural support to compliance with relevant animal-welfare requirements.

Member States may also use eco-schemes and rural development measures to support welfare practices that exceed mandatory legal standards. These may concern improved housing, access to outdoor areas, reduced stocking densities or management practices designed to improve animal health and welfare.

The underlying principle is that public agricultural support may reward higher standards, but it does not remove the obligation to comply with the minimum standards established by EU law.

8. The Common Organisation of Agricultural Markets

8.1 The purpose of the CMO

The common organisation of agricultural markets is the part of the CAP concerned with the functioning and regulation of agricultural product markets. It seeks to establish common rules for the production, marketing and trade of agricultural products, while providing mechanisms for addressing serious market disturbances.

The principal legal framework is Regulation (EU) No 1308/2013, as amended, including by Regulation (EU) 2021/2117. It covers a wide range of agricultural sectors, including cereals, rice, sugar, fruit and vegetables, wine, olive oil, milk and dairy products, beef and veal, pigmeat, sheepmeat, poultry and eggs.

The CMO is not a single price-control system. It combines market rules, quality standards, sectoral support, intervention arrangements and mechanisms for cooperation between agricultural producers and other participants in the food chain.

8.2 Public intervention

Public intervention is a market-management mechanism under which designated public authorities may purchase eligible agricultural products when market conditions deteriorate sufficiently to justify intervention.

The purpose is to prevent severe price collapses and support market stability. The products, periods, reference thresholds and operational conditions are governed by the relevant EU legislation.

Public intervention is not an unlimited guarantee that farmers will receive a particular price for all their production. It operates only for specified products and under defined conditions. The system may also involve the storage and subsequent disposal of products in accordance with the applicable rules.

8.3 Private storage aid

Private storage aid is another market-support mechanism. Rather than purchasing the product itself, the EU may provide financial assistance to operators who agree to store eligible products for a specified period.

The measure can help reduce immediate market supply and relieve temporary price pressure. It may be particularly relevant in sectors where production cannot be rapidly adjusted to changing demand.

The legal framework determines the eligible products, the storage period, the minimum quantities and the conditions for payment. Private storage aid is therefore a targeted market instrument rather than a general subsidy for maintaining commercial inventories.

8.4 Exceptional measures and market crises

Agricultural markets may be affected by exceptional circumstances, including animal or plant disease, severe weather, geopolitical disruption, sudden changes in international demand and other events capable of producing serious economic consequences.

The CMO framework provides for exceptional measures where ordinary market mechanisms are insufficient. These may include temporary market support, measures to address specific disruptions and financial assistance under the relevant legal provisions.

The CAP also includes a crisis reserve intended to provide additional resources for responding to agricultural market disturbances. Its operation is subject to the applicable budgetary and legislative rules.

The existence of these instruments does not mean that every decline in market prices automatically triggers EU intervention. The institutions must assess the relevant circumstances, legal conditions and financial implications.

8.5 Producer organisations and collective bargaining

Agricultural producers often occupy a relatively weak bargaining position compared with processors, distributors and large retailers. Their products may be perishable, production costs may be difficult to adjust quickly, and individual farmers may have limited influence over purchasing conditions.

EU agricultural legislation therefore recognises producer organisations and certain forms of collective cooperation. Recognised organisations may coordinate production, concentrate supply, improve marketing, reduce transaction costs and strengthen farmers’ negotiating position.

The CMO Regulation provides a legal framework for the recognition and operation of producer organisations and their associations. It also contains specific competition-law provisions governing certain agricultural activities.

These arrangements must be interpreted carefully. They do not authorise every form of coordination between competitors. The scope of permissible cooperation depends on the relevant statutory conditions, the type of organisation, the sector and the applicable competition rules.

8.6 Unfair trading practices in the agricultural and food supply chain

The agricultural supply chain involves producers, processors, wholesalers, retailers and other commercial operators. Differences in bargaining power may result in contractual practices that place disproportionate risks on weaker suppliers.

Directive (EU) 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain establishes a minimum level of protection against specified practices.

The Directive prohibits certain practices, including late payments for perishable agricultural and food products, last-minute cancellations, unilateral contractual changes in specified circumstances and certain forms of commercial retaliation. Other practices are prohibited unless they have been agreed clearly and unambiguously in advance.

Member States must designate enforcement authorities and provide mechanisms through which suppliers can submit complaints. They may also adopt more protective national rules, subject to EU law.

The Directive is important because it recognises that the functioning of agricultural markets cannot be assessed solely through prices and production volumes. The distribution of commercial power and contractual risk within the food chain also affects the viability of agricultural businesses.

8.7 Marketing standards and product quality

The CMO framework also establishes marketing standards for agricultural products. These rules may concern classification, grading, presentation, labelling, packaging and other characteristics relevant to market transparency and consumer information.

Marketing standards are intended to support fair competition and facilitate trade by establishing common expectations about the characteristics of products placed on the market.

They must be distinguished from food-safety requirements. A product may satisfy food-safety legislation but fail to comply with a particular marketing standard, or vice versa. Both regulatory frameworks may apply simultaneously.

9. Rural Development and the Second Pillar

9.1 The role of rural development policy

Rural development is the second major dimension of the CAP. It recognises that agricultural policy cannot be limited to the economic performance of individual farms. Rural areas require infrastructure, employment opportunities, access to services, environmental protection and economic diversification.

The EAFRD supports interventions designed to address these needs. Its measures may assist farmers, forestry operators, rural businesses, local communities and other eligible beneficiaries.

Rural development policy is therefore broader than agricultural income support. It can contribute to the resilience of rural economies and the preservation of social and environmental structures.

9.2 Investment in agricultural holdings

Investment support may be available for modernising agricultural holdings, improving productivity, introducing new technology, enhancing energy efficiency and improving environmental performance.

Eligible investments depend on the national CAP Strategic Plan and the applicable EU conditions. They may include buildings, machinery, irrigation systems, renewable-energy installations, digital technologies, processing facilities and improvements to animal housing.

Investment aid is generally subject to eligibility criteria, selection procedures and conditions concerning the purpose and use of the supported assets. Public funding must not be used to finance activities or expenditure that fall outside the approved intervention.

9.3 Diversification and rural enterprise

Rural development measures may support the diversification of economic activities beyond traditional agricultural production. Examples include food processing, rural tourism, craft activities, local services, renewable energy and small rural enterprises.

Diversification can reduce dependence on agricultural commodity prices and create alternative sources of employment. It may also help maintain population levels in rural communities where traditional economic activity is declining.

The legal framework permits Member States to select interventions suited to their rural development needs, provided that the measures comply with the CAP regulations and relevant financial rules.

9.4 LEADER and community-led local development

LEADER is a community-led approach to rural development based on local partnerships and local development strategies. It allows communities to identify priorities and support projects reflecting the specific economic, social and environmental conditions of their areas.

Local action groups generally bring together public authorities, businesses, civil society organisations and other local actors. They select and support projects in accordance with an approved local development strategy.

The approach reflects the principle that rural development cannot always be planned effectively through central administration alone. Local knowledge may identify opportunities and challenges that are not sufficiently visible at national level.

9.5 Knowledge, innovation and digitalisation

The CAP supports agricultural knowledge and innovation through training, advisory services, cooperation projects, demonstration activities and digitalisation.

The European Innovation Partnership for Agricultural Productivity and Sustainability (EIP-AGRI) has supported cooperation between farmers, researchers, advisers and other actors in developing practical solutions to agricultural challenges.

Digital tools may improve farm management, resource efficiency, traceability and compliance monitoring. Precision agriculture, remote sensing and data-based decision-making can help farmers manage inputs and respond to changing environmental conditions.

However, digitalisation also raises legal questions concerning data ownership, access to agricultural data, cybersecurity, interoperability and the position of smaller farms that may lack the resources to adopt new technologies.

10. Eligibility, Administration and Control

10.1 The active farmer requirement

Access to many CAP direct payments is linked to the concept of the active farmer. The purpose is to ensure that support is directed towards persons or entities genuinely engaged in agricultural activity, rather than being distributed solely on the basis of land ownership.

The precise criteria are developed through the EU framework and national strategic plans. Member States may use objective criteria relating to agricultural activity, income, business organisation or other relevant indicators, within the limits established by EU law.

The requirement must be applied consistently with the purpose of the scheme. It should not create arbitrary distinctions between legitimate forms of agricultural business organisation or exclude eligible farmers through disproportionate administrative requirements.

10.2 Applications and eligible hectares

Farmers seeking direct payments generally submit annual aid applications declaring the agricultural areas for which support is claimed.

The application process requires accurate information about the holding, land parcels, agricultural activity and relevant commitments. National administrations may use pre-filled applications, digital maps and satellite imagery to facilitate declarations and reduce errors.

Eligibility is determined under the relevant payment scheme. Land must satisfy the applicable definition of agricultural area and be used or maintained in a manner consistent with the requirements of the intervention.

An application does not itself create an unconditional right to payment. The competent authority must verify eligibility and calculate the amount due under the applicable rules.

10.3 The Integrated Administration and Control System

The Integrated Administration and Control System (IACS) is a central administrative and control framework for CAP payments. It includes systems for identifying beneficiaries, recording agricultural parcels, processing applications, conducting checks and preventing irregular payments.

The Land Parcel Identification System (LPIS) is a key component. It provides a geographical reference for agricultural parcels and supports the verification of declared areas.

The Area Monitoring System uses satellite data and other relevant information to monitor agricultural activity and compliance with certain conditions. This approach can reduce the need for traditional on-the-spot inspections in some circumstances, although physical checks remain relevant where remote monitoring cannot establish the facts sufficiently.

The system is designed to protect EU funds and improve administrative accuracy. It also creates obligations for farmers to provide correct declarations and cooperate with lawful verification procedures.

10.4 Inspections, reductions and administrative penalties

Where a farmer fails to comply with the relevant eligibility conditions or conditionality requirements, the competent authorities may reduce payments or impose administrative penalties in accordance with the legislation.

The consequences depend on the nature, seriousness, extent and duration of the infringement, together with the applicable rules and any relevant exceptions.

The administration must respect procedural safeguards, including the requirement to establish the facts, apply the correct legal criteria and provide reasons for adverse decisions. Farmers must have access to the remedies available under national law and the relevant EU legal framework.

10.5 Financial correction and protection of EU funds

The Commission supervises the national systems responsible for CAP expenditure. Where deficiencies are identified, it may require corrective action and, where the legal conditions are met, apply financial corrections or suspend payments.

The objective is to ensure that expenditure charged to the EU budget complies with the governing legislation. The system is not limited to detecting individual fraudulent claims; it also addresses weaknesses in administrative controls, accreditation, accounting and performance reporting.

The European Court of Auditors contributes to external financial scrutiny through audits of EU expenditure and assessments of the effectiveness, economy and regularity of CAP spending.

11. Simplification and Reform of the CAP

11.1 The 2024 targeted simplification

The 2023–2027 framework encountered criticism concerning administrative complexity, conditionality requirements and the practical burden placed on farmers and national administrations.

In response, Regulation (EU) 2024/1468 amended Regulations 2021/2115 and 2021/2116. The changes addressed good agricultural and environmental condition standards, eco-schemes, strategic-plan amendments, reviews and exemptions from controls and penalties.

Among the changes were adjustments to GAEC requirements, including the treatment of crop rotation and crop diversification and the removal of the general requirement that farmers devote at least 4% of arable land to non-productive areas or features under the relevant conditionality standard. The revised framework retained the obligation to protect certain landscape features and introduced greater flexibility for Member States in defined circumstances.

The Regulation also provided for exemptions from conditionality controls and penalties for small farms below the relevant area threshold, while preserving the application of underlying EU environmental, health and animal-welfare legislation.

These amendments illustrate the continuing tension between environmental ambition and administrative feasibility. Simplification may reduce unnecessary burdens, but it must be distinguished from the repeal of substantive environmental or food-safety obligations. The official text of Regulation (EU) 2024/1468 sets out the legal changes.

11.2 The CAP simplification package adopted in 2025

Further changes were introduced through the Commission’s 2025 CAP simplification initiative. The relevant legislative proposal was adopted as Regulation (EU) 2025/2649, which entered into force on 1 January 2026.

The package seeks to reduce administrative burdens for farmers and national administrations, simplify certain payment and control procedures, and improve the operation of the CAP’s financing and management framework. It forms part of a wider effort to make agricultural support easier to administer while preserving the principal objectives of the 2023–2027 policy.

The legal importance of this development is that the CAP framework must now be read together with the amendments adopted after the original 2021 legislative package. A reference to Regulation 2021/2115 or Regulation 2021/2116 should therefore be understood as a reference to the applicable consolidated text, rather than only the version originally adopted.

The Commission’s overview of the legislative package confirms its adoption and commencement on 1 January 2026: Omnibus III — Common Agricultural Policy simplification.

11.3 The CAP after 2027

The current CAP framework is scheduled to run until the end of 2027. The Commission presented proposals in July 2025 for the 2028–2034 period, as part of the next multiannual financial framework.

The proposed structure would integrate CAP funding more closely into a broader National and Regional Partnership framework. It would move away from the existing two-pillar financial structure while retaining many of the policy instruments and interventions familiar to farmers.

The Commission’s proposal includes a ring-fenced allocation of at least €300 billion for income and crisis support, together with broader resources available through national and regional plans. These figures are part of the proposed financial architecture and should not be treated as a final adopted budget.

An important institutional development occurred on 26 October 2026, when the Council agreed a partial negotiating position on the future CAP framework. This establishes the Council’s position for negotiations with the European Parliament; it does not mean that the entire post-2027 CAP legislation has been finally adopted.

The proposed framework seeks to simplify the structure, improve the targeting of support, strengthen generational renewal and enhance risk-management and crisis-response mechanisms. The final financial allocations and detailed legal rules remain subject to the wider negotiations on the 2028–2034 budget.

The Commission’s CAP post-2027 proposal and the Council’s 26 October 2026 negotiating position provide the current institutional context.

12. The CAP and Other Areas of EU Law

12.1 The relationship with EU competition law

Agricultural markets are subject to a special competition-law framework. Article 42 TFEU permits the EU legislature to determine how competition rules apply to agricultural production and trade, taking account of the CAP’s objectives.

The CMO Regulation contains specific provisions concerning producer organisations, interbranch organisations and certain forms of collective action. These rules recognise that cooperation may be necessary to improve the position of farmers within the food supply chain.

However, agricultural cooperation cannot be treated as a blanket exemption from competition law. Agreements concerning prices, production quantities or market allocation may still raise competition concerns unless they fall within a specific statutory exception or satisfy the applicable legal conditions.

The relationship between the CAP and competition policy also extends to national agricultural subsidies. Article 107 TFEU generally prohibits state aid that distorts or threatens to distort competition by favouring certain undertakings, subject to the exceptions established by the Treaties and secondary legislation. Article 42 provides the specific constitutional framework for applying these rules to agricultural products.

12.2 The relationship with EU food law

Agricultural support and food regulation are closely connected but perform different legal functions.

The CAP supports agricultural production and rural economic activity. EU food law establishes rules intended to protect public health, ensure food safety and provide consumers with reliable information.

Regulation (EC) No 178/2002, known as the General Food Law Regulation, establishes the general principles and requirements of food law, creates the European Food Safety Authority and establishes procedures relating to food safety.

Other legislation regulates hygiene, contaminants, pesticide residues, official controls, animal health and plant health. Farmers and food businesses must comply with these requirements regardless of whether they receive CAP support.

This distinction is important: financial eligibility under the CAP does not replace the obligation to comply with food-safety legislation, and compliance with food-safety requirements does not automatically create an entitlement to agricultural payments.

12.3 The relationship with EU environmental law

The CAP must operate consistently with the wider body of EU environmental legislation. Relevant instruments include the Water Framework Directive, the Habitats Directive, the Birds Directive, the Nitrates Directive and legislation addressing pesticide use and nature restoration.

These instruments may impose obligations that apply independently of CAP funding. A farmer cannot assume that receiving a CAP payment authorises an activity that would otherwise violate environmental legislation.

At the same time, the CAP can provide financial incentives for agricultural practices that support environmental objectives. It therefore operates both as an income-support system and as a mechanism for encouraging land management that contributes to wider EU environmental policy.

12.4 The relationship with international trade law

The CAP must also comply with the EU’s international trade obligations, particularly those arising under the WTO agreements.

Agricultural subsidies are regulated by the WTO Agreement on Agriculture. That Agreement distinguishes between different categories of domestic support and establishes rules concerning market access, export competition and domestic support commitments.

The legal classification of agricultural support is important. Not every payment to a farmer has the same treatment under WTO law. Some forms of support may be considered less trade-distorting, while others may be subject to limits or reduction commitments.

The EU must therefore design its agricultural support within both its internal constitutional framework and its international trade obligations. This is particularly significant when agricultural subsidies affect competition with producers in third countries.

13. Contemporary Challenges Facing the CAP

13.1 The distribution of agricultural payments

One of the most persistent questions concerns the distribution of direct payments. Because many payments are calculated on the basis of eligible hectares, larger holdings may receive higher total amounts than smaller farms.

Redistributive support, capping and degressivity seek to address this issue, but the distribution of CAP expenditure remains a matter of political and economic debate.

The challenge is to balance several legitimate objectives: supporting viable commercial agriculture, maintaining smaller family farms, encouraging generational renewal and ensuring that public funds deliver benefits proportionate to their cost.

13.2 Environmental obligations and agricultural viability

Environmental requirements are essential to the long-term sustainability of agriculture, but their implementation can create financial and administrative pressures for farmers.

Changes in crop rotation, soil management, pesticide use, water protection and animal welfare may require additional investment or affect short-term productivity. The CAP attempts to address these costs through eco-schemes, rural development payments and other support instruments.

The central legal question is how to establish environmental standards that are sufficiently ambitious to protect natural resources while remaining workable across very different agricultural conditions.

13.3 Climate change and agricultural resilience

Climate change creates substantial challenges for European agriculture. Droughts, floods, heatwaves, soil degradation and changing patterns of pests and disease can affect production and increase financial uncertainty.

The CAP supports adaptation through investment, environmental commitments, knowledge transfer and risk-management measures. However, agricultural resilience also depends on infrastructure, research, water management, insurance arrangements and national policies beyond the CAP itself.

The increasing frequency of climate-related disruptions makes it necessary to consider agricultural policy not only in terms of annual income support but also in terms of long-term productive capacity and the ability to withstand shocks.

13.4 Generational renewal and access to land

The ageing agricultural population raises questions about the future structure of European farming. Young farmers may face difficulties obtaining land, credit, machinery and access to established distribution networks.

CAP support for young farmers can reduce some of these barriers, but financial assistance alone cannot resolve structural problems involving land prices, inheritance, tenancy arrangements and access to rural services.

Effective generational renewal requires coordination between EU agricultural support and national policies concerning land markets, education, taxation, finance and business succession.

13.5 Administrative complexity

The CAP’s extensive regulatory structure creates obligations for farmers, paying agencies and national administrations. Applications, declarations, inspections, environmental conditions and reporting requirements may be particularly burdensome for small holdings.

Simplification initiatives seek to reduce unnecessary administrative work and improve digital processes. However, simplification must not undermine the reliability of financial controls or remove safeguards that protect public funds and the environment.

The legal challenge is to achieve proportional administration: controls should be effective and sufficiently rigorous, but not unnecessarily complicated or costly in relation to the risks being addressed.

13.6 Food security and strategic autonomy

Agriculture is closely connected to the Union’s capacity to ensure a stable supply of food. International disruptions, geopolitical tensions, transport difficulties and concentration in agricultural input markets can expose weaknesses in supply chains.

The CAP contributes to food security by supporting agricultural production and market stability. Nevertheless, food security also depends on trade, energy, fertiliser availability, infrastructure, research and international cooperation.

The concept of strategic autonomy in agriculture should therefore not be confused with complete self-sufficiency. The EU remains part of global agricultural markets, and international trade can contribute to food availability and economic resilience.

13.7 The future financing model

The post-2027 proposals raise questions about the future relationship between agricultural support and the wider EU budget.

The proposed integration of funding into national and regional partnership plans could change the institutional and financial organisation of agricultural policy. It may provide greater flexibility, but it also raises questions about the preservation of a recognisable common agricultural framework and the predictability of funding.

The negotiations will determine how far the next CAP maintains common financial guarantees while allowing national governments to tailor support to their agricultural conditions. Until the legislation is adopted, the existing 2023–2027 framework, as amended, remains the relevant basis for legal analysis.

14. Facts About the Common Agricultural Policy

Subject	Legal position
Treaty basis	Articles 38–44 TFEU
Principal objectives	Agricultural productivity, fair farm income, market stability, food supply and reasonable consumer prices
Current programming period	2023–2027
Principal strategic-plan legislation	Regulation (EU) 2021/2115
Financing and control legislation	Regulation (EU) 2021/2116
Common market organisation	Regulation (EU) No 1308/2013, as amended
First pillar	European Agricultural Guarantee Fund (EAGF)
Second pillar	European Agricultural Fund for Rural Development (EAFRD)
Main direct-payment instrument	Basic Income Support for Sustainability
Environmental payment instrument	Eco-schemes
Main rural development fund	EAFRD
Main administrative mechanism	Shared management through national authorities and paying agencies
Main 2024 simplification legislation	Regulation (EU) 2024/1468
Further simplification	Regulation (EU) 2025/2649, applicable from 1 January 2026
Post-2027 framework	Legislative proposals under negotiation for 2028–2034

15. Key Takeaways

1. The Common Agricultural Policy is one of the European Union’s oldest common policies. It was created to establish a common agricultural market while addressing food security, farm income and market stability.

2. Its constitutional foundation is found in Articles 38–44 TFEU. Article 39 establishes the five principal objectives that continue to guide agricultural policy.

3. The CAP must balance economic, social and environmental considerations. Agricultural productivity, fair income, affordable food, biodiversity and climate protection may require careful reconciliation.

4. The 2023–2027 CAP is governed principally by Regulations 2021/2115, 2021/2116 and 2021/2117.

5. The current system is based on national CAP Strategic Plans approved by the European Commission. Member States select and administer interventions within a common EU legal framework.

6. The CAP operates through two principal funds: the EAGF, which finances direct payments and market measures, and the EAFRD, which supports rural development.

7. The 2021–2027 CAP allocation is approximately €386.6 billion in current prices. This figure relates to the existing financial framework and is distinct from the proposed post-2027 budget.

8. Basic Income Support for Sustainability provides annual area-based, decoupled payments to eligible farmers.

9. Redistributive payments, young-farmer support, coupled income support and small-farmer schemes allow Member States to target assistance towards particular agricultural needs.

10. Conditionality links certain CAP payments to compliance with statutory management requirements and good agricultural and environmental condition standards.

11. Eco-schemes provide voluntary financial incentives for agricultural practices beneficial to the climate, environment and animal welfare.

12. The Common Organisation of Agricultural Markets regulates market organisation, intervention measures, producer organisations, marketing standards and other sector-specific mechanisms.

13. Rural development support extends beyond agricultural production to investment, diversification, environmental management, innovation and local development.

14. CAP expenditure is administered through shared management. National paying agencies process payments and conduct checks, while the Commission supervises the system and protects the EU budget.

15. The 2024 and 2025 simplification reforms amended the original 2023–2027 framework. The applicable rules must therefore be read in their consolidated form.

16. The CAP interacts with EU competition law, food safety, environmental legislation, international trade law and animal-welfare requirements.

17. The future CAP for 2028–2034 remains subject to legislative negotiations. The Council agreed a partial negotiating position in October 2026, but the future framework has not yet been fully adopted.

16. Frequently Asked Questions

1. What is the Common Agricultural Policy?

The Common Agricultural Policy is the European Union’s common framework for agricultural support, market regulation and rural development. It seeks to support farmers’ incomes, maintain agricultural productivity, stabilise markets, ensure food availability and contribute to environmental and social objectives.

2. Which Treaty provisions establish the CAP?

The principal legal basis is found in Articles 38–44 TFEU. Article 38 establishes the common agricultural and fisheries policy, Article 39 identifies its objectives, Article 40 provides for the common organisation of agricultural markets, and Article 43 establishes the principal legislative procedure for implementing the policy.

3. Why was the CAP created?

The CAP was created to address the agricultural and food-supply challenges facing post-war Europe. Its original objectives included increasing agricultural productivity, ensuring a fair standard of living for farmers, stabilising markets, guaranteeing supplies and providing reasonable prices to consumers.

4. What are the two pillars of the CAP?

The first pillar covers direct payments and agricultural market measures and is financed primarily through the EAGF. The second pillar supports rural development through the EAFRD, including environmental commitments, investment and economic diversification.

5. How much does the CAP cost?

The allocation for the 2021–2027 financial framework is approximately €386.6 billion in current prices. This is divided between the EAGF and the EAFRD. The amount should not be confused with annual expenditure or with the proposals for the 2028–2034 period.

6. What is a CAP Strategic Plan?

A CAP Strategic Plan is the national framework through which a Member State organises its agricultural support measures for the 2023–2027 period. It identifies national needs, selects eligible interventions, sets targets and explains how the measures contribute to the common EU objectives. Each plan requires Commission approval.

7. What is Basic Income Support for Sustainability?

BISS is an annual area-based payment to eligible farmers. It is generally decoupled from the production of specific agricultural products and is intended to provide a baseline income safety net.

8. What is the difference between coupled and decoupled payments?

Decoupled payments are not directly linked to the production of a particular agricultural commodity. Coupled payments are linked to specified sectors or products where the relevant conditions justify targeted support. Coupled support is subject to legal and financial limits to reduce the risk of market distortion.

9. What are eco-schemes?

Eco-schemes are voluntary agricultural interventions financed under the first pillar of the CAP. They reward eligible farmers for practices that provide environmental, climate or animal-welfare benefits beyond the applicable baseline requirements.

10. What is conditionality under the CAP?

Conditionality is the system of statutory management requirements and good agricultural and environmental condition standards that farmers must respect to receive certain CAP payments. It connects public agricultural support with compliance with specified legal and environmental obligations.

11. What is the difference between conditionality and eco-schemes?

Conditionality establishes the baseline requirements associated with receiving relevant support. Eco-schemes provide additional payments for voluntary practices that go beyond that baseline and contribute to environmental or climate objectives.

12. Can small farmers receive CAP support?

Yes. Small farmers may qualify for direct payments and other interventions if they satisfy the relevant eligibility conditions. Member States may also provide simplified small-farmer schemes to reduce administrative burdens.

13. How does the CAP support young farmers?

The CAP provides complementary income support, installation assistance, investment support and rural development measures for eligible young farmers. Member States must dedicate an amount corresponding to at least 3% of their direct-payment budget to support young farmers through the permitted interventions.

14. What is the Common Organisation of Agricultural Markets?

The CMO is the regulatory framework governing the organisation and functioning of agricultural product markets. It includes market measures, public intervention, private storage aid, producer organisations, marketing standards and sector-specific provisions.

15. Does the CAP exempt farmers from EU competition law?

No. Agricultural markets have specific competition-law provisions under Article 42 TFEU and the CMO Regulation, but there is no general exemption. Agricultural businesses and organisations must comply with competition law unless a specific legal provision permits the relevant form of cooperation.

16. How does the CAP protect the environment?

The CAP contributes to environmental protection through conditionality, eco-schemes, agri-environment-climate commitments, organic-farming support and rural development measures. It operates alongside, rather than replacing, the wider body of EU environmental legislation.

17. What happens if a farmer does not comply with CAP requirements?

Depending on the nature and seriousness of the infringement, national authorities may reduce payments, recover incorrectly paid amounts or impose administrative penalties. Decisions must comply with the applicable legal procedures and safeguards.

18. What changed under the 2024 CAP simplification reform?

Regulation 2024/1468 amended certain environmental standards, simplified procedures for amending national strategic plans and introduced greater flexibility for Member States. It also changed the treatment of certain small farms under conditionality controls and penalties. The reform did not repeal the underlying EU environmental and agricultural legislation.

19. What is the status of the CAP after 2027?

The Commission presented proposals for the 2028–2034 framework in July 2025. The Council agreed a partial negotiating position on 26 October 2026. The final legislation and financial framework remain subject to negotiations and adoption by the EU institutions.

20. Is the CAP relevant to consumers as well as farmers?

Yes. The CAP influences agricultural production, market stability, food availability, prices and rural economic conditions. Although many of its financial instruments are directed towards farmers and rural beneficiaries, its objectives include ensuring that food supplies reach consumers at reasonable prices.

Conclusion

The Common Agricultural Policy is a central element of European economic integration and one of the most complex systems of EU public administration. Its original purpose was to establish a stable common agricultural market and address the food-supply challenges of post-war Europe. Over time, however, it has developed into a broad regulatory and financial framework that also addresses environmental protection, rural development, generational renewal, market competitiveness and food security.

Its constitutional foundations remain Articles 38–44 TFEU, particularly the objectives established in Article 39. These provisions reveal that the CAP was never intended to be exclusively a mechanism for increasing production. It was designed to reconcile agricultural productivity with the economic position of farmers, market stability, the availability of food and consumer interests. Contemporary environmental and social objectives have expanded the policy’s responsibilities without replacing its original constitutional foundations.

The 2023–2027 framework represents an important stage in this development. National CAP Strategic Plans provide greater flexibility in implementation, while the common EU regulations preserve shared objectives, financial discipline and minimum legal requirements. The EAGF and EAFRD continue to provide the financial structure, supporting both immediate agricultural income and longer-term rural development.

The legal complexity of the CAP arises partly from its interaction with other areas of EU law. Agricultural payments must be administered consistently with competition rules, environmental obligations, food-safety legislation, animal-welfare standards and international trade commitments. The CAP therefore cannot be understood in isolation from the broader European legal order.

The reforms adopted in 2024 and 2025 demonstrate that the system continues to evolve in response to administrative pressures and changing agricultural conditions. At the same time, negotiations concerning the 2028–2034 period raise important constitutional and financial questions about the future organisation of agricultural support. The outcome will influence the balance between common EU guarantees and national flexibility.

Ultimately, the CAP is more than a system of agricultural subsidies. It is a legal expression of the Union’s commitment to maintaining a viable agricultural sector, supporting rural communities, protecting natural resources and securing a stable food supply. Its future effectiveness will depend on whether it can reconcile the economic realities of farming with the environmental, social and strategic responsibilities of European integration.

Principal Legal Sources and Further Reading

EU primary law

• Treaty on the Functioning of the European Union — Article 38: Agriculture and the internal market
• TFEU — Article 39: Objectives of the CAP
• TFEU — Article 40: Common organisation of agricultural markets
• TFEU — Article 42: Application of competition rules to agricultural products
• TFEU — Article 43: Implementation of the CAP

Principal CAP legislation

• Regulation (EU) 2021/2115 — CAP Strategic Plans
• Regulation (EU) 2021/2116 — Financing, management and monitoring of the CAP
• Regulation (EU) 2021/2117 — Amendments concerning agricultural markets and quality schemes
• Regulation (EU) No 1308/2013 — Common Organisation of the Markets in Agricultural Products
• Regulation (EU) 2024/1468 — Targeted simplification of the CAP
• Regulation (EU) 2018/848 — Organic production and labelling of organic products
• Directive (EU) 2019/633 — Unfair trading practices in the agricultural and food supply chain
• Regulation (EC) No 178/2002 — General Food Law

Official institutional resources

• European Commission — CAP at a glance
• European Commission — CAP funds and financing
• European Commission — CAP Strategic Plans
• European Commission — Direct income support
• European Commission — Conditionality
• European Commission — Eco-schemes
• European Commission — CAP and environmental sustainability
• European Parliament — Common Agricultural Policy: instruments and reforms
• Council of the European Union — The Common Agricultural Policy explained
• Council of the European Union — CAP funding rules 2023–2027
• European Commission — CAP after 2027

This article provides general educational information on EU agricultural law and policy. It does not constitute legal advice concerning an individual agricultural holding, subsidy application, payment dispute or regulatory proceeding.