Study Scenario 2040 The European Commission's Joint Research Centre (JRC) provides a comprehensive analysis of the potential impacts of broad “what if” scenarios related to the Common Agricultural Policy policy (CAP) on the EU agricultural sector and its wider environment. The aim of this work is to enrich political discussions on the future of the CAP by providing quantitative knowledge on the general implications of alternative CAP trajectories. The analysis is based on the EU Agricultural Outlook 2023 and the current structure of the national CAP strategic plans. The methodology uses a combination of three agri-economic simulation models, including MAGNET, CAPRI and IFM-CAP.

The study models three main scenarios to examine changes in support:

1. "Productivity and Investment" (Prod&Inv): Directs support to increasing productivity and competitiveness.
2. "Environment and Climate" (Env&Clim): Redirects support to interventions focused more on the environment and climate.
3. Counterfactual NoCAP scenario: Simulates abolition of the entire CAP framework including payments and Good Agricultural and Environmental Condition (GAEC) standards. While NoCAP is not a realistic policy trajectory, it provides a useful reference point for assessing economic, social and environmental impacts.

The essential role of the CAP and the NoCAP scenario

Study results underline the essential role of the CAP in the EU agricultural sector and its wider socio-economic and environmental links. The NoCAP scenario suggests that abolishing the CAP would lead to significant economic, environmental and social impact, with significant heterogeneity between farms, regions and sectors. Farm incomes would drop significantly, which would disproportionately affect smaller farms (which experience the largest relative decline in income). Overall EU agricultural production would be significantly reduced and Utilized agricultural area (UAA) would decreaseConsumer prices would rise, which would increased the share of household spending on foodFrom an environmental perspective, although greenhouse gas emissions from EU agriculture are decreasing due to a decline in production, emissions leaks (relocation of production outside the EU) would lead to net global increase in emissions by 8.2 MtCO2e.

Contrasting trajectories and structural trade-offs

The two alternative CAP scenarios reveal contrasting outcomes in line with their respective narratives.

Prod&Inv Scenario leads to higher competitiveness and production, driven by higher investments and better returns. This increases self-sufficiency and improves the EU's trade balanceHowever, this expansion can intensify environmental pressures, which will be reflected in a slight increase in nitrogen surpluses and EU greenhouse gas emissions. Despite EU emissions increasing, net global greenhouse gas emissions are fallingbecause more emission-efficient EU production replaces less efficient production outside the EU (emission leakage is beneficial).

On the contrary, Env&Clim scenario puts greater emphasis on environmental sustainability, which results in lower productivity, reduced production levels in the EU and higher pricesAlthough this scenario achieves environmental improvements in the EU (e.g. lower GHG emissions and reduced nitrogen surpluses), may increase global challenges as emissions leaks again lead to higher GHG emissions from agriculture outside the EU. Stronger support for more extensive agricultural practices in this scenario leads to increasing crop diversity and reduces high-intensity agriculture.

These findings illustrate critical structural trade-offs between intensification and extensificationWhile policy measures can significantly influence price and production dynamics, especially in sectors with longer production cycles or higher direct support, basic market factors (such as elasticity of demand and efficiency of production) remain primary determinants of production resultsThe JRC therefore stresses the need for revised policy proposal, which effectively addresses diverse needs within the EU and takes into account wider global implications. JRi