Direct Payments to Provide Environmental Public Goods and Enhance Farm Incomes: Do Allocation Criteria Matter?

Abstract

The Common Agricultural Policy 2023-2027 introduces a new result-oriented approach based on a new delivery model. At the core of this model lies the need to ensure a higher consistence between stated objectives and the implementation of policy tool, such a direct payment. Enhancing farm income and fostering the provision of environmental public goods represent relevant policy goals that the new basic income support for sustainability is aimed to pursue. However, the use of land-based payments has been largely criticized as ineffective and unfair. To this purpose, we use “Italian Farm Accountancy Data Network” data, in order to descriptively analyse whether and how different criteria used to allocate this payment are differently correlated with farm income distribution and the use of chemical inputs and natural resources. Findings reveal that other parameters, rather than land, may be also taken into account in order to improve the effectiveness of the basic income support for sustainability in achieving its specific goals. However, there is not a first-best solution aimed to ensure at the same time a fairer distribution of the income support, by rewarding farmers that make a lesser use of input.