WADI PROJECT “Sustainability of European Irrigated Agriculture under Water Directive and

Agenda 2000” Contribution to workpackage B

5th Framework Programme

Contract number: EVK1-CT-2000-00057

DELIVERABLE D5

Future of Institutional framework related with irrigated system in Europe:

combination of Agricultural and Water Policies scenarios

Julio Berbel 1 Joe Morris 2

Manuel Gomez 1 Dieter Boymanns 3

Guido Bazzani4 Vittorio Gallerani4

Davide Viaggi4 Claire Twite2

Keith Weatherhead2 Konstantinos Vasileiou2

(1) University of Cordoba, Spain

(2) Institute of Water and Environment, Cranfield University at Silsoe, UK (3) Joint Research Centre – Seville

(4) University of Bologna, Italy

NOTE: This document is an attempt to integrate previous reports by:

1) WADI Research Proposal. 2) Analysis Of European Water Policy. Dieter Boymanns Joint Research

Centre – Seville. 3) Agricultural Policy Scenarios. Joe Morris and Claire Twite, Institute of

Water and Environment, Cranfield University at Silsoe, UK. 4) Indicators for assessing environmental impact of water use. Guido

Bazzani, Vittorio Gallerani and Davide Viaggi, University of Bologna, Italy.

5) Proposal for joint Agricultural and Water Policy Scenarios. Julio Berbel, Joe Morris, Dieter Boymanns, Guido Bazzani, Vittorio Gallerani, Davide Viaggi, Manuel Gómez, Claire Twite and Keith Weatherhead.

6) Wadi Scenario Analysis: Descriptions and Estimations. JO Morris and Konstantinos Vasieliou.

Index

1. INTRODUCTION ............................................................................................................... 5

2. WADI SCENARIO METHODOLOGY............................................................................ 5

2.1 Approach...........................................................................................................................................5

2.2 Generic Scenarios .............................................................................................................................7

3. AGRICULTURAL POLICY – SCENARIO BUILDING ............................................... 9

3.1 EU Agricultural Policy.....................................................................................................................9

3.2 Prospects for Agricultural Markets ..............................................................................................10

3.3 Market Prospects for Irrigated Crops ..........................................................................................11

3.4 WADI Agricultural Policy Scenarios............................................................................................12

4. WATER POLICY – SCENARIO BUILDING ............................................................... 13

4.1 EU Water Policy .............................................................................................................................13

4.2 Water Framework Directive (2000/60/EC) ..................................................................................14

4.3 WADI Water Policy Scenarios ......................................................................................................15

5. INTEGRATION OF AGRICULTURAL AND WATER POLICY SCENARIOS ..... 16

6. ESTIMATING INPUT DATA FOR SCENARIO ANALYSIS..................................... 17

6.1 Information sources........................................................................................................................17

6.2 Narratives........................................................................................................................................18

6.3 Quantitative Estimates ...................................................................................................................18

3.5 Interpretation and Use of Estimates .............................................................................................19

7. PARTNER ACTION......................................................................................................... 20

BIBLIOGRAPHY.................................................................................................................. 21

APPENDIX 1 ......................................................................................................................... 23

STORYLINES FOR GENERIC SCENARIOS WITH REFERENCE TO THE CURRENT DOMINANT PARADIGM, (ADOPTED FROM: SPRU (1999), DTI (2002))................................................................................................................................................. 23

RATIONALE OF ESTIMATES FOR WADI AGRICULTURAL INPUTS AND OUTPUTS FOR FUTURE SCENARIOS ........................................................................... 26

APPENDIX 3 SELECTED INDICATORS BY AGRICULTURAL SCENARIO .......... 30

APPENDIX 4 ......................................................................................................................... 32

TABLE 4.A EXISTING AND POSSIBLE PRICES FOR AGRICULTURAL INPUTS AND OUTPUTS UNDER ALTERNATIVE AGRICULTURAL POLICY SCENARIOS FOR 2010 (EXPRESSED AS A % OF EXISTING YEAR 2001/2 CONSTANT VALUES) ............................................................................................................................... 32

TABLE 4.B EXISTING AND POSSIBLE PRICES FOR AGRICULTURAL INPUTS AND OUTPUTS UNDER ALTERNATIVE AGRICULTURAL POLICY SCENARIOS BY 2020 (EXPRESSED AS A % OF EXISTING YEAR 2001/2 CONSTANT VALUES)................................................................................................................................................. 34

1. INTRODUCTION The WADI project will explore the implications of policy change on the irrigation sector in Spain, Portugal, Greece, Italy and the UK. The project gives particular consideration to likely impacts of the implementation of the new EU Water Framework Directive (WFD) and the reform of the Common Agricultural Policy (CAP) and implications. The WFD (Directive 2000/60/EC) establishes a framework for community action in the field of water policy. Proposals to reform CAP seek to deliver an internationally competitive agricultural sector which simultaneously supports rural livelihoods and protects the rural environment. Under the existing, and indeed the proposed reformed CAP, European agriculture is not automatically required to meet the criteria for sustainable water resource management incorporated in WFD. Indeed, some aspects of CAP in some EU countries encourage high use of water for irrigation which may not be feasible without the high levels of direct income support and market protection afforded to farmers. It is important, therefore, that CAP and WFD should be integrated to promote a balance between the social, economic and environmental dimensions of agricultural, rural and water resource policy. It is important that the likely impacts of sector-level policy reforms such as CAP and WFD be determined for the European irrigation sector in order to inform the detail of policy design and implementation. This is especially the case where irrigation is a critical component of regional development and prosperity. This document is a contribution to Work Package C of the WADI project. The document considers possible future scenarios for both EU agricultural and water policy. It provides an integration of agricultural and water policy scenarios from a qualitative perspective. Finally, it deals with definition of these scenarios for agriculture in Europe for the purpose of modeling the impact of policy change on the irrigation sector, first, presenting the key assumptions and narratives that describe the various future scenarios and, second, providing estimates for values of key input parameters to be used in modeling of future scenarios for the WADI project.

2. WADI SCENARIO METHODOLOGY This section defines the purpose of scenarios as a basis for exploring the implications of possible futures.

2.1 Approach Scenarios are statements about possible futures. They are not predictions about what will happen. They are statements of what is possible; of prospective rather than predictive futures; propositions of what could be. They are often made up of a qualitative storyline and a set of quantitative indicators which describe a possible future outcome. The scenarios arise as a consequence of drivers of economic and social change, new ideas, fashions, scientific discovery, technology development and innovation, purposeful policy interventions, and of unexpected events which can have a major impact.

Figure 1 shows the different phases for the WADI scenario building process. External and internal drivers both for agricultural and water policy are defined in this document. As a result, scenarios for European agricultural policy and water policy are defined separately, and then in combination. The data and information derived will provide inputs to model the impact of policy change on the characteristics and performance of the irrigation sector. A set of key indicators will be used to interpret the output of the modelling process and to assess the performance of irrigation in terms of economic, social and environmental criteria. The overall purpose of the analysis is to inform policy design and implementation.

Figure 1: The WADI scenario building process as a part of the total project

1. Possible futures definition. 2. Agricultural Policy- scenarios building. 3. Water Policy- scenarios building. 4. Integration of agricultural and water Scenarios. 5. Development of narratives that describe the future scenarios chosen to be

analysed. 6. Estimation for values of key input parameters to be used in the modelling of

future scenarios for the WADI projects. 7. Definition of representative areas and farm typology in each region and suiting

narratives and input parameters to these areas.

Policy Scenarios Definition

Assembling in simple operative models different techniques to assess multifunctional impact of the future scenarios developed on irrigated agriculture.

Modelling

1. Narratives + Input + Output values obtained by modelling defined scenarios show the future of the sustainability of the irrigated agriculture in the countries studied.

2. Sensitive and risk analysis. 3. Informing Policy formulation and implementation.

Results and Interpretation

WADI scenarios aim to inform and advise a range of decision makers such as irrigators, scientists and policy makers.

2.2 Generic Scenarios The construction of the future agricultural and water scenarios for WADI Project builds on a global and national review of futures scenarios constructed by the UK Foresight programme (DTI: 1999, 2002) and applied, to varying degrees, in a number of EU funded research projects concerned with land use and climate change (notably REGIS, ACCELERATE, ATEAM and MULINO). Scenarios are not intended to predict the future (DTI, 2002). Rather, they are tools for thinking about the future, assuming that:

• The future is unlike the past, and is shaped by human choice and action. • The future cannot be foreseen, but exploring the future can inform present

decisions. • There are many possible futures: scenarios map ‘possibility space’. • Scenario development involves a mix of rational analysis and subjective

judgement. The Foresight Programme (Berkhout et al., 1998; DTI, 1999; 2002) identified 5 main dimensions of change: (a) Demography and settlement patterns (b) The composition and rate of economic growth (c) The rate and direction of technology change (d) Social and political values (e) The nature of governance A, b and c are perceived to be mainly dependent variables, i.e. outcomes of change. D and e are seen to be independent variables, i.e. drivers of change. The latter are particularly difficult to model or predict, yet are perceived to be critical to the definition of possible futures. On this basis, 4 possible futures were constructed which are distinguished in terms of social values and governance. The social values dimension accounts for policy making priorities and patterns of economic activity, including consumption behaviour. At one end of the axis denoted by consumerism, values are dominated by individualism, private consumption and short term considerations. At the other end denoted by community, there is a greater concern with collective interest, social cohesion, equality, and long term goals such as sustainable development. The governance dimension represents the structure of political authority and decision making. At one end denoted by globalisation, governance is increasingly distributed away from the national level towards country groupings or international organisations, such as EU or WTO. In such situations the importance of international boundaries reduce, and economic, social and political agendas are increasingly set above the level of any individual nation or region. At the other end denoted by regionalisation, decision making is retained at national and increasingly regional levels. Sovereignty is retained over key areas of policy: the process of globalisation is weakened. Regional government has greater autonomy over decision making, and economic,

social and political boundaries are strengthened. National and regional development reflects local capabilities and resources. The four scenarios are illustrated in Figure 2. They can be described by narratives or story-lines and selected indicators. The current dominant development paradigm is shown to be mainly a mix of World Markets and Provincial Enterprise.

Figure 2: Possible Futures, based on Foresight (DTI, 1999)

World Markets

ProvinciEnterpri

Conventional development

World Markets are characterised by an empdeveloped and integrated world trading sys Global Sustainability: is characterised byvalues, which are evident in global inscollective action to address social and envmore equitably distributed compared to the Provincial Enterprise is characterised by edecisions made at national and regional leAlthough market values dominate, this is w Local Management is characterised by stremphasise social values, encouraging self-of natural resources and the environment. This scenario framework can be adapted twhich to explore European agricultural irrigation. Annotated descriptions of these generic scebroad generic scenarios define the possibleagriculture, and sub-sectors such as irrigafutures materialise.

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3. AGRICULTURAL POLICY – SCENARIO BUILDING This section reviews EU Agricultural Policy, with particular reference to Agenda 2000 Reform, the midterm review proposal and future prospects for agricultural commodity markets, including those for irrigated crops. Drawing on the aforementioned framework, a number of Agricultural Policy Scenarios are constructed which reflect variations in the type and extent of support to the farming sector.

3.1 EU Agricultural Policy

Agenda 2000 At present, agricultural policy in EU is at a crossroads. The reform process, begun in earnest in the early 1990s, has recently progressed to the CAP reforms under ‘Agenda 2000’. These reforms are strongly influenced by factors external and internal to the EU.

External drivers include an expanding world demand for food, increased liberalisation of world trade, and eastward enlargement of the EU to include countries with relatively large farming sectors. Internal drivers include problems of over-production in some commodity markets, a commitment to environmental protection, increased concern regarding food safety, and reduced administrative complexity. There is also a move towards decentralisation that allows member states to target specific regional priorities, subject to avoiding market distortion.

Thus the reform of CAP seeks to deliver a market oriented, internationally competitive agricultural sector which supplies quality food for consumers, provides sustainable livelihoods for producers, supports the development of vibrant rural economies and simultaneously protects and enhances the rural environment. Quite a challenge given the diversity of circumstances and practices in agriculture across the EU and, in some cases, high levels of dependency on existing levels of price and income support. The new regulations under Agenda 2000 involve a number of initiatives: • Phased reductions in support prices to realign internal EU prices with world

market prices: e.g. 15% for cereals, 20% for beef, 15% for milk; • Increased direct aid mainly in the form of area payments to support rural incomes

(and to compensate for reductions in price support); • Commitment to multilateral free trade negotiations under WTO assisted by market

orientation; • Quality assurance with respect to food safety, animal health and welfare, and

environmental protection;

• Environmental enhancement and protection undertaken by member states under locally defined agri-environmental schemes. Member states may also require that support payments are conditional on 'compliance' with environmental conditions.

• A new rural development framework based on a 'menu' of locally defined, targeted actions to promote a 'competitive, multifunctional agricultural sector' as part of an 'integrated strategy for rural development'. Agri-environmental schemes are a central component of the framework.

• Decentralised decision making whereby part of the direct payments in some farming sub-sectors are defined by member states in accordance with national or regional priority.

• Simplification of support mechanisms and regulations. The CAP reforms make specific references to arable crops, the beef, dairy and small livestock sectors, and wine. There are special measures for sugar, olive oil and tobacco. These are summarised in an EU factsheet (1999c) to which partners are advised to refer.

3.2 Prospects for Agricultural Markets Numerous organisations make predictions about agricultural markets and prices. These include the World Bank/International Monetary Fund, the Organisation for Economic Cooperation and Development, European Union, National Governments and commercial farmer organisations. The World Bank's agricultural commodity forecasts are perhaps the most widely used, but it must be said they have not proved particularly accurate as medium or long term forecasts of actual prices. Over the long term they have tended to under-estimate the decline in real commodity prices. Given the new commitment to trade liberalisation under the Uruguay Round Agreement on Agriculture, there is an expectation that market access will improve and export subsidies will reduce. It is predicted that this will reduce 'dumping' on to the world market of surpluses generated in protected markets. This will lead to a rise in real world market prices, which together with a general increase in global demand for food products, will offer favourable prospects for trade in agricultural products. Although this will present challenges in the short term for producers facing lower domestic prices in hitherto protected markets, it is argued that in the medium to long term, producers will be weaned away from high levels of support to face internationally competitive markets. Prices in these international markets are likely to be higher than those currently prevailing in what is mainly a residual world market. Thus, the protagonists of the liberalisation model argue that the impact of withdrawing price support to producers will be lessened because domestic market prices, which are based on world market prices under a free trade regime, will increase beyond the current levels which are depressed by trade restrictions and subsidised exports. The willingness of EU producers to accept lower levels of protection and reduced export subsidies is influenced by the level of world market prices and the strength of the Euro. Strong world prices and/or a weak Euro diminishes the difference between internal and external market prices, reduces the pressure for export subsidies, and serves to further 'liberalise' the world market. Antagonists of liberalisation, however, argue that reductions in price support to domestic producers will threaten the viability of many farms, especially those smaller

units operating in marginal or less advantaged areas, encourage the growth of large scale relatively intensive agri-business and result in greater environmental degradation. In this respect, they argue, liberalisation will not deliver the social and environmental objectives of CAP reform. Concerns regarding food safety and animal health and welfare have also been used to argue in favour of farming and food marketing systems which focus on local area or regional markets. The assumption here is that farming and land use will reflect local preferences and needs, and that these will be best met through locally defined interventions which provide appropriate incentives to farmers and land managers. These arguments have been evident in the debate and consultation process leading to the CAP Agenda 2000 Reforms. Indeed, for free-traders, the reforms have not gone far enough. The concerns that free-trade would further expose already vulnerable rural populations have been partly addressed by the phasing of the adjustment process and scope for national and regional schemes, including non-agricultural support to rural communities. With respect to prospects for agricultural markets, partners are referred to the report by the Directorate-General for Agriculture of the European Commission (October 2000) which reviews a number of authoritative sources. This focuses on market prospects for the year 2007 within the EU and covers cereals (increasing), oil seeds (declining), meat (declining for red meat, positive for pig and poultry), milk and dairy produce (variable). Reference is also made to market prospects in the ten Central and Eastern European Countries which are candidates for EU accession. Market conditions in these countries vary considerably, some demonstrating import needs and others with export potential. The broad consensus for world markets is 'steady growth in demand generating a sustained expansion in trade'. This is linked to an assumption about 'faster than expected recovery in the global economic situation (in the medium term) towards strong and stable economic growth', notably in non-OECD regions. The report suggests that the current depression in world agricultural markets has been deeper and longer than expected, and that after an initially slow recovery, world market trade and prices will strengthen in the medium term. This prediction is however dependent upon assumptions regarding continued reforms of agricultural policy, the new rounds of multilateral trade negotiations, and relatively favourable forecasts of economic growth and stability in foreign exchange markets.

3.3 Market Prospects for Irrigated Crops The type of crops irrigated varies considerably throughout Europe. In northern Europe, most irrigation, with the main exception of sugar beet, concentrates on crops which are not subject to EU price support. In these cases, domestic prices for potentially tradeable commodities are likely to approach international prices (net of transport and handling costs). In the UK case, this includes potatoes (the main irrigated crop), fruit and vegetables. In central and southern Europe, however, many irrigated crops receive direct support under CAP (eg maize, wheat, oil seeds, grapes, olives, tobacco, cotton), and therefore CAP support critically influences the financial feasibility of irrigation. Reductions in support associated with CAP reform is likely to reduce the absolute profitability of

irrigation for farmers (although this may not reduce its relative attractiveness compared to rainfed cropping). Under WADI activity A partners have identified, for their national circumstances, relevant irrigated and non-irrigated crops, including those subject to EU price support and those that are not. Projections of likely future markets and prices need to be made for these crops. Particular attention will need to be paid in some situations to fruit and vegetable crops. The following agricultural policy scenarios provide a framework for classifying possible future support regimes.

3.4 WADI Agricultural Policy Scenarios The WADI project focuses on changes in EU agricultural policy as they affect the economic, social and environmental performance of irrigation in the partner countries. Table 1 links the Foresight Scenarios with scenarios for agricultural policy, together with a brief description of the agricultural policy regime. . The Baseline is taken as the agricultural policy regime in place in 2000/1, as determined by CAP at that time. This 2000/1 baseline is used to provide a relative reference point for the definition of future scenarios. The Baseline will also be extrapolated to 2010 based on predictions (rather than possibilities) of agricultural markets and prices from EU, OCDE and other sources. This extrapolated Baseline is perceived to be different from the possible futures identified in Table 1, although it shows a tendency, due to predicted reform CAP and greater influence of WTO, towards Global Sustainable Agriculture. At the time of writing, the predictions of the extrapolated baseline have not been included here. They are referred to in Gallerani V, et al (2002) for the Italian Case. Provincial Agricultural Markets are characterized by projectionist regimes similar to that under pre-reform CAP. Local Community Agriculture, as the label implies, emphasizes sustainability at a local level. Table 1: Links Between Foresight and Agricultural Policy Scenarios

'Foresight' Scenario Agricultural Policy Scenario Intervention regime Baseline Moderate: Existing price support, export

subsidies, with selected agri-environment schemes

World Markets World Agricultural Markets (without CAP)

Zero: Free trade: no intervention

Global sustainability Global Sustainable Agriculture (Reformed CAP)

Low: Market orientation with targeted sustainability ‘compliance’ requirements and programmes

Provincial enterprise Provincial Agricultural Markets (Similar to pre-reform CAP)

Moderate to High: price support and protection to serve national and local priorities for self sufficiency, limited environmental concern.

Local Stewardship Local Community Agriculture High: Locally defined support schemes reflecting local priorities for food production, incomes and environment

4. WATER POLICY – SCENARIO BUILDING This section reviews EU Water Policy with particular reference to the WFD and provides a guideline for the development of scenarios on water use in agricultural irrigation. The scenarios are based on the hypothesis that irrigation has an important impact on the water resources. It is presumed that changes in irrigation practice can contribute to sustainable water management. The water policy scenarios are constructed to fit with the broad framework of the Foresight Scenario referred to earlier in that water policy reflects a mix of governance and social preference. The water policy scenarios are further described in terms of the combination of policy instruments used (e.g. full cost recovery), policy style (e.g. the degree of consensus) and configuration of actors (e.g. active involvement of stakeholders).

4.1 EU Water Policy The management and use of water and water resources has been the focus of EU Water Policy since the 1960s. This section gives an overview of EU policies that are relevant for water management and especially agricultural irrigation. When European Communities first agreed on legislation tackling environmental issues, the aim was to protect the environment. Therefore, the early European legislation focused on qualitative aspects: i.e. to reach a high quality environment in all Member States as laid down in the EC Treaty (Art. 174). For water policy this approach manifested in different types of legal acts. The first type consisted of directives leading to protect water determined for a specific use of the water (including use as drinking water) and providing quality objectives: • Fresh waters needing protection or improvement in order to support fish life

(78/659/EEC); • Water intended for the abstraction of drinking water (75/440/EEC); • Quality required of shellfish waters (79/923/EEC); • Quality of bathing water (76/160/EEC) and • Quality of water intended for human consumption (80/778/EEC). In a second type of legal acts Emission Limit Values were agreed for certain substances: • Pollution caused by certain dangerous substances discharged into the aquatic

environment (76/464/EEC) and daughter directives; • Urban waste water treatment (91/271/EEC); • Protection of waters against pollution caused by Nitrates from agricultural sources

(91/676/EEC) and • Placing of plant protection products on the market (91/414/EEC).

These directives tackled the pollution from point sources (i.e. dangerous substances, urban wastewater) and diffuse sources (i.e. nitrates and pesticides). They were aiming at the protection of water against pollution. However, it is obvious that only appropriate modification of the activities that cause pollution would lead to reduction of pollution and respect of Emission Limit Values. By the mid-1980s it was accepted that broader strategies were necessary to regulate the use of natural water resources. Thus the 1990s saw the emergence of 'horizontal' directives to regulate environmental sensitive activities. On this background a third type of legislation was developed referring to an integrative approach. The Integrated Pollution Prevention and Control Directive (96/61/EC) is tackling pollution to the environment in general, taking into account not only water but also all environmental media receiving pollution. Increasingly, water users are seen as competitors (i.e. agriculture, industries and domestic use) in the exploitation of limited water resources. For their part, water resource managers seek fair solutions for the allocation of the resource between users. Therefore, effective water policy needs to involve all actors in the decision making process. Further, new water policy requests a transparent and participative policy style.

4.2 Water Framework Directive (2000/60/EC) The aims of the WFD are: • to establish a framework for prevention of further deterioration, protection and

enhancement of the status of aquatic ecosystems; • sustainable water use based on long-tem protection of available water resources; • progressive reduction of discharges, emissions and losses of certain substances

and the cessation or phasing-out of priority hazardous substances; • to ensure progressive reduction of pollution of groundwater and prevent further

pollution; • mitigating the effects of floods and droughts; • provision of a sufficient supply of good quality surface water and groundwater as

needed for sustainable, balanced and equitable water use; • the significant reduction in pollution of groundwater; • the protection of territorial and marine water, and • achieving objectives of relevant international agreements. The new concept of WFD leaves much responsibility to the Member States. Whether the objectives are met will depend heavily on national decision making processes. The establishment of participative mechanisms are therefore important. Sustainable water management refers to the three dimensions, environmental, economic and social, of considering performance. Besides water quality, the environmental performance needs to consider the impact of abstraction and release of used water has on the environment and on other users of the resource. The economic dimension of sustainable water management refers to water pricing, full cost recovery

and liberalisation of the water market. The social aspects refer to the right to water and equal access to water.

4.3 WADI Water Policy Scenarios Four scenarios are proposed which reflect increasing degrees of commitment to sustainable water resource management namely:

• Unrestricted Water Markets; • Existing Water Policy; • WFD Application; and • Beyond WFD.

Once again these are to be viewed as possible rather than probable futures. Table 2 summarises the intervention regimes associated with these four scenarios. They are generally consistent with the four Foresight Scenarios presented earlier. In its extreme form, World Markets, characterised by market led resource allocation and highly developed trading systems, would be associated with unrestricted abstraction and use of water driven by economic imperatives. The protection of water quantity and quality would be induced by economic factors and the individual self-interest of water users. The adoption of WFD demonstrates a commitment to sustainability and is associated with a moderation of market processes in favour of resource and environmental conservation. Hence its association with Global Sustainability. A very strong commitment to water resource sustainability is probably closely linked to the Local Stewardship Foresight Scenario. Table 2: Links between Foresight and Water Policy Scenarios

Linked ‘Foresight’ Scenario

Water Policy Scenario Intervention regime

World Markets Unrestricted Water Markets Zero: market drivers for water abstraction, use, and environment protection, if any

Provincial Enterprise Existing Water Policy (Baseline)

Low : Existing water price regimes, including subsidies, with limited environmental controls.

Global Sustainability WFD Application Medium: Targeted national programmes, environmental targets, cost recovery price.

Local Stewardship Beyond WFD High: Locally defined support schemes, strict application of protection measures (input use, etc.)

5. INTEGRATION OF AGRICULTURAL AND WATER POLICY SCENARIOS The preceding sections identified 4 agricultural and 4 water policy scenarios. These could offer 16 possible combinations. The broad logic of the Foresight Scenarios suggests that there is likely to be convergence of agricultural and water policy within given scenarios. For example, a reformed CAP which places more emphasis on environmental protection and wise use of natural resources is compatible with the adoption of WFD. Local Community Agriculture, with emphasis on local priorities might adopt sustainable water management ‘beyond WFD’. World Markets would imply free trade in agricultural commodities and the establishment of water markets where water is put to its most profitable use, with the risk of negative social and environmental consequences. It is likely, therefore, but not necessary, that particular combinations of agricultural and water policy scenarios are more compatible than others. For this reason, Figure 3 identifies four scenario combinations for modelling the possible impacts of policy change on the irrigation sector in the first instance. Sensitivity analysis will suggest whether further combinations are worthy of investigation. Figure 3: Possible Integrated Scenarios for WADI Project

WADI Agricultural Policy Scenarios

Existing CAP Reformed CAP

Local Management

World Agricultural

Market

Existing Water Policy

WFD Application

Beyond WFD

WA

DI W

ater

Pol

icy

Scen

ario

s

Irrigation Management Transfer

6. ESTIMATING INPUT DATA FOR SCENARIO ANALYSIS

6.1 Information sources Data are needed to describe each agricultural and water policy scenario. This data will then be used as inputs to the modelling process in order to determine the impact of policy change. For the purpose of scenario analysis in the WADI project, narratives and quantitative indicator values have been compiled for each scenario. The quantitative estimates will be used as input values in the modelling of irrigation systems under policy change. Information for narratives and estimates for quantitative indicators have been drawn from numerous sources, namely:

• Foresight (DTI, 1999,2002) and UK Climate Change Impact Study (UKCIP, 2001);

• Statements and predictions on European and global food and water futures, including commodity forecasts (EU, OECD, FAPRI, Rosegrant et al, 2001; 2002);

• Previous WADI documentation (Morris and Twite (2001),Berbel et al (2001) and Gallerani et al (2002);

• Assessments of scenario analysis made under previous and ongoing EU funded land use change and climate change research projects, notably REGIS, ACCELERATE, ATEAM and MULINO). The ACCELERATE programme in particular has recently developed agricultural scenarios through a consensus based approach conducted amongst its partner organisations. Estimates were initially derived by the panel for the year 2025, but these were thought by the panel to be too severe in terms of order of change, so they were used to indicate possible scenario values for 2050, with 2025 values derived as a mid point between existing and forecast 2050. The estimates derived by the panel were used to inform the WADI scenario estimates for 2010 and 2020.

• Personal communications with Eric Audsley (Silsoe Research Institute, UK) and Dr Carlo Giupponi (University of Padova, Italy). It was apparent that attempts to derive quantitative estimates for scenarios under the above EU projects resulted in considerable variation in parameter values amongst panel members. In some cases, there were significant differences in estimates, including differences in the direction of estimated changes, between northern and southern European panels.

6.2 Narratives Appendix 2 contains annotated narratives, which describe agriculture and related irrigation components under the four main scenarios. These take a broad European perspective. The detail of the scenarios must be applied at individual country and regional level in order to draw up a local relevant narrative. For example, member states and regions are currently at different starting points with respect to the structure and size of their farming sectors. The impacts of international trade will vary considerably between regions according to commodity specialisation. Locally defined scenarios will reflect local resource endowments, customs, practices and preferences. Appendix 3 contains annotated narratives showing the differences between agricultural scenarios for key input and output indicators. These need interpreting for local conditions. In general terms, the gradation of commodity prices from lowest to highest (relative to 2000/1 prices received by farmers) are World Agricultural Markets, Global Sustainable Agriculture, Provincial Agriculture, and Local Community Agriculture, largely reflecting degrees of policy intervention. Input commodity prices and non-price support mechanisms and incentives also vary between scenarios in accordance with dominant policy objectives, being relative low in the case of World Agricultural Markets, but high in the case of Local Community Agriculture.

6.3 Quantitative Estimates Drawing on the estimates contained in Appendix 4, Table 2 summarises selected features of the agricultural scenarios for 2010 in terms of indicators expressed as an index of the existing 2002 situation, where .the latter is equal to 100). Table 3 contains estimates for 2020. Table 2: Estimated Indices for Selected Indicators for Modelling Agricultural Scenarios in 2010 (2001/2 = 100) World

Agricultural Markets

Global Sustainable Agriculture

Provincial Agriculture

Local Community Agriculture

Output prices Cereals 80-90 90-100 100-110 110-120 (Area payments) 0 90-100 95-105 105-115 Vegetables 85-95 110-120 100-110 120-130 Fruits 85-95 95-105 100-110 120-130 Livestock: Meat 85-95 90-100 95-110 110-120 Dairy: milk 85-95 90-100 100-110 115-125 Agric environmental payments 55-60 95-105 40-50 115-125 Input prices Fertiliser and pesticides 85-110 130-150 105-115 130-170 Water 115-130 130-150 105-120 140-160 Water infrastructure 130-140 120-130 105-120 110-120 Crop Yields 120-130 110-115 100-110 80-100 Values are likely to fall within ranges shown according to local conditions: See Appendix 4A.

Table 3: Estimated Indices for Selected Indicators for Modelling Agricultural Scenarios in 2020 (2001/2 = 100) World

Agricultural Markets

Global Sustainable Agriculture

Provincial Agriculture

Local Community Agriculture

Output prices Cereals 55-65 75-85 100-110 125-135 (Area payments) 0 80-90 95-105 100-110 Vegetables 65-75 120-130 110-120 155-170 Fruits 65-75 95-105 115-125 160-180 Livestock: Meat 85-95 90-100 100-110 110-120 Dairy: milk 65-75 85-95 105-115 130-140 Agric environmental payments 50-55 110-120 40-50 135-150 Input prices Fertiliser and pesticides 70-85 185-200 105-125 220-270 Water 180-190 150-160 120-140 200-220 Water infrastructure 180-190 145-160 180-190 135-150 Crop Yields 150-170 125-140 120-130 90-100 Values are likely to fall within ranges shown according to local conditions See Appendix 4B. The difference between the two time frames reflects the ‘depth of application’ of a particular scenario pathway over time. The longer is the time horizon, the greater is the expected variance between scenarios that is evident in changes in infrastructure, investment, societal behaviour, and the commitment to and impact of particular policy interventions. Climate change, which is likely to have some incremental effects post-2025, has not explicitly been considered in these scenarios.

3.5 Interpretation and Use of Estimates The estimates in Tables 2 and 3 and supporting Appendix 4 can be used for modelling the impact of policy change. A number of points should be considered by partners when applying them to their country and region situations:

• The estimates are in constant 2001/2002 prices, expressed as a percentage of existing observed values. The estimates are given as ranges: the mid points can be used or some value within the range according to local circumstances, with sensitivity analysis for variations in the estimates.

• The scenarios are broad pictures which need to be interpreted and modified for

the purpose of country and regional circumstances. The possible outcomes of the global markets and global sustainability futures will depend on the degree to which local farming systems are sensitive to international markets for agricultural commodities.

• Locally defined scenarios (provincial agriculture and local community

agriculture) will need mapping out according to local circumstances and preferences within the broad framework provided here. This will be particularly the case for regionally specialist production such as vines, olives,

fruits, tobacco and cotton, and for particular features of the local agricultural economy and farming systems, such as dominant farm sizes or tenure systems.

• WADI focuses on agricultural and water policy change. We need to make

sure these aspects are adequately covered in the scenario analysis and that these reflect country/regional circumstances. For example, in some situations, existing water pricing regimes may involve large subsidies, in others this may not be the case. A switch to full cost recovery in situations where there is high current subsidy will necessarily involve a larger relative increase in water price compared to situations where current subsidy levels are low.

• The estimates given here are suggestions. They should be scrutinised to

ensure consistency when applied to a particular case. The scenario analysis rest on the differences between scenarios. It is important that these relative positions are clear and consistent. Refinement may be necessary to ensure this is the case. Furthermore, the estimates should be examined with respect to the crop budgets and other irrigation system characteristics that result from their application in order to ensure consistency.

• The difference between 2010 and 2020 shows the ‘depth of application’ of the

particular scenario, allowing for a longer time period of implementation and adjustment. It could be that the 2020 futures could apply sooner. The impact of this can be tested in sensitivity analysis.

• The future scenarios can be compared with the forecast of agricultural

commodity markets and prices for locally relevant commodities which have been produced and are available up to 2012 from EU, OECD, FAPRI.

7. PARTNER ACTION The following actions are suggested:

• Consider the story lines: interpret for your own circumstances and construct locally relevant narratives.

• Consider the application of the suggested scenario values, generating a consistent set of local relevant input parameters for the modelling exercise.

• Check how these estimates impact on crop budgets and other aspects of the modelling process

BIBLIOGRAPHY ACCELERATES Assessing Climate Change Effects on Land use and Ecosystems;

from Regional Analysis to The European Scale. Further Info: http://www.geo.ucl.ac.be/accelerates/ http://www.sri.bbsrc.ac.uk/science/mdsg/accelerates.htm

ATEAM Advanced Terrestrial Ecosystem Analysis and Modelling http://www.pik-potsdam.de/ateam/

Berbel J, Morris, J, Boymanns D, Bazzani G, Gallerani V, Viaggi D, Gomez G, Twite C, Weatherhead E K (2002). WADI Project: Proposal for Joint Agricultural and Water Policy Scenarios, WADI Project Working Document Berkhout, F., Eames, M. and Skea, J (1998). Environmental Futures Scoping Study.

Final Report. Science and Technology Policy Research Unit: Brighton. http://www.foresight.gov.uk/

Boymanns, D (2002) Analysis of European Water Policy. Report for the WADI Project by IPTS (DG JRC), Seville, Spain. DTI (1999). Environmental Futures. PB 4475 Department of Trade and Industry.

http://www.foresight.gov.uk/

DTI (2002). Foresight Futures 2020 Revised scenarios and guidance. Department of Trade and Industry, HMSO, UK.

EC(2000a). Indicators for the Integration of Environmental Concerns into the Common Agricultural Policy. COM (2000)20. Communication from the Commission to the Council and the European Parlamient.

EC (2000b). Agenda 2000 CAP Reform Decisions – Impact Analyses.

http://europa.eu.int/comm/agriculture/publi/capre/impact/imp_en.pdf

EC(2002). Prospects for Agricultural Markets in the European Union, Commission of the European Communities, Bruxelles, July 2002

EC Factsheets (1998). Olive Oil: Reforming the Olive Oil Sector.

http://europa.eu.int/comm/agriculture/publi/fact/index_en.htm (26/04/01)

FAPRI, The Food and Agricultural Policy Research Institute at the University of Missouri, Further Info: http://www.fapri.missouri.edu/

Gallerani V, Viaggi D, Morganti S, Valeri C (2002). Contribution to Scenario Analysis: Baseline and Local Stewardship for Italy, WADI Draft discussion paper, DEIAGRA, University of Bologna, October 2002

Jänicke, M (1997): Umweltinnovationen aus der Sicht der Policy-Analyse: vom instrumentellen zum strategischen Ansatz der Umweltpolitik. FFU-rep 97 - 3. Forschungsstelle für Umweltpolitik (FFU). Freie Universität Berlin. Fachbereich Politische Wissenschaft: Berlin. http://www.fu-berlin.de/ffu/download/rep97_3.pdf

Morris J., Twite C. (2001). Agricultural Policy Scenarios. Institute of Water and Environment, Cranfield University at Silsoe, UK.

MULINO: Multi-sectoral, Integrated and Operational decision support system for sustainable use of water resources at the catchment scale. Further Info: http://www.feem.it/web/loc/mulino/index.html, http://www.sri.bbsrc.ac.uk/science/mdsg/mulino.htm

REGIS Project (CC0337): Regional Climate Change Impact and Response Studies in East Anglia and North West England (RegIS). Further Info: http://www.silsoe.cranfield.ac.uk/iwe/projects/regis/, http://www.ukcip.org.uk/pdfs/regis/RegIS%20A5%20Summary%20Leaflet.pdf

Rosegrant, Mark W., Michael S. Paisner, Siet Meijer, and Julie Witcover (2001). 2020 Global food outlook:Trends, alternatives and choices. 2020 Vision Food Policy Report. Washington, D.C., U.S.A.: International Food Policy Research Institute.

Rosegrant, Mark W., Ximing Cai, and Sarah A. Cline (2002). World water and food to 2025: Dealing with scarcity. IFPRI-2020 Vision/International Water Management Institute book. Washington, D.C. U.S.A.: International Food Policy Research Institute.

Tol, R.S.J., (1998). Socio-Economic Scenarios in Feenstra, J.F., Burton, I., Smith, J.B., and Tol, R.S.J., (eds.) (October 1998, Version 2), Handbook on Methods for Climate Change Impact Assessment and Adaptation Strategies. United National Environment Programme and the Institute for Environmental Studies, vrije Universiteit amsterdam.

UK Climate Impacts Programme (2001). Socio-economic scenarios for climate change impact assessment: a guide to their use in the UK Climate Impacts Programme. UKCIP. Oxford. See also: www.ukcip.org.uk

Weatherhead, E.K., Knox, J.W and Morris, J. (2000). National and Regional Resource Strategies: Forecasting Spray Irrigation Demand 1997-2024/25. Final Report to the Environment Agency by Cranfield University Silsoe. Ref. So/Con/052.

APPENDIX 1

STORYLINES FOR GENERIC SCENARIOS WITH REFERENCE TO THE CURRENT DOMINANT PARADIGM, (ADOPTED FROM: SPRU (1999), DTI (2002)) World Markets Global Sustainability Provincial Enterprise Local Stewardship Values and Policy Social/political values Personal consumption and material

well-being prevails. Market mechanisms are presumed to deliver these goals. Strong desire for mobility as people are less tied to locality.

Social values oriented toward ‘international community’. Broad consensus to enhance and maintain social equity and environmental quality.

People concentrate on meeting their own needs Little concern about social equity or protection of the environment

Economic growth not an absolute priority. Focus on equity, social inclusion and democratic values. Emphasis on environment protection and prudent use of natural resources.

Role of state Political responsibilities more disparate than today. Fiscal, trade and defence policy increasingly transferred to EU with some devolution in order to improve the efficiency of regional and local decision making. EU enlargement occurs quickly

Governance more globalised. Regional government mainly implement standards agreed at the EU and global levels. ‘One Europe’ model of harmonised standards across international boundaries. Enlargement of EU at slower pace, conditional on social and environmental harmonisation.

Market determines social and economic outcomes. State intervenes to protect interests at national and regional level. Sovereignty to global and European institutions is resisted, as well as EU enlargement.

Community values find expression in practice through purposeful social and political planning. EU develops as a ‘Europe of Regions’ reflecting diversity of social, cultural and political characteristics.

Policy style More open and deliberative decision making. International organisations and private sector increase influence. Growing role for regional government to attract inward investments

Sustainable development realised through participative, open democracies with growing role for regional government within federal political systems

‘Top-down’ policy style leaving little room for local democracy and transparent policy processes

‘Down-top’ policy style in a more federal system of governance. Transparent, participatory and democratic at all levels political system

Welfare and health Declining public services. Increased inequalities in access and quality of social services. Significant new social tensions

Adequate safety net for disadvantaged groups

Social service provision declines, relatively low concern about social inequities. Income disparities grow.

High level provision of social services accessible to all

Education Access to high quality education becomes very uneven. Focus on

Equal access to high quality public education which reinforces social

Basic skills for an economically-oriented society, with little concern

Equal and broad access to everyone. Focus on social equity

basic skill, IT and personal fulfilment. No promotion of local culture, social equity and environmental issues

and environmental values. about social inequities or the environment

and environmental protection

Environmental policy

Relies heavily on economic instruments and focuses on problems immediately affecting the population (noise, air). Areas accessible to wealthier people more protected. Long term global issues tend to be neglected

Sustainable development is a political priority. Based on a mix of market based and regulatory instruments, and voluntary measures

Economic development and personal freedom given priority over environmental policy. Little concern about global environmental issues. Environmental policies are driven by economics

Conservation of resources and the natural environment are strong political objectives. Based on structural and behavioural changes, and technological change and innovation in pursuit of sustainable development

Economic Development Economic policy

Liberalised national andinternational markets. High growth. Income distribution widens

Growth achieved by balancing commercial andsocial/environmental objectives. Moderately High Growth

Though growth is a priority, protectionism regime limits income generating and investmentopportunities resulting in low growth achievement.

Relative slow long-term growth, but protection and enhancement of natural and social capital. Smaller scale production of goods and services

Economic development

Widespread application of World Trade Organisation rules leads to the removal of trade barriers in goods and services. Companies face international competition. .

Economy increasingly export-oriented, with mobile highly skilled labour force.

Little state intervention except support against foreign competition. No EU enlargement.

Small and medium sized enterprises. Co-operatives and locally based activities International trade plays a less important role. National champions re-emerge in energy, water, transport

Services Service sector dominates overall economic activity.

Increased role for services but resource intensive agriculture and manufacturing decline

Sectors operating in global markets grow more slowly

Local service provision, catering for local needs

Energy Domination of fossil fuels. Energy prices remain low, little concern for energy efficiency. Reduced adoption of renewable energy

Natural gas dominates till 2010 but renewables increase significantly thereafter. Solar dominantrenewable source. High energy price. Hydrogen significant energy carrier after 2020.

Prices are relatively high, however, energy efficiency is limited due to lack of investments

Based on plentiful supplies of fossil fuels.

Renewables do not develop.

Exploit local energy resources and renewable energy technologies. Green tariffs and high energy prices lead to the adoption of energy efficiency measures

Settlement Population (UK) Slow population growth, mobile

workforce, migration, higher Population grows slowly. but tendency towards larger household

Slow increase, little migration, stable household size and numbers

Stable, but lower incomes lead to increased household size, lower

incomes, smaller household size, increased number of households

sizes, stable household numbers. number of household

Appendix 2

RATIONALE OF ESTIMATES FOR WADI AGRICULTURAL INPUTS AND OUTPUTS FOR FUTURE SCENARIOS World Agricultural Markets Global Sustainable Agriculture Provincial Agriculture Local Community Agriculture Agricultural Policy Framework

Abandonment of CAP. WTO led reduced protectionism of agricultural markets, increased international trade. Tendency towards large scale, technologically sophisticated farming.

Reformed CAP, WTO promoted liberalisation. Policy interventions to deliver environmental and social objectives. Limits on very intensive farming: promotion of sustainable agriculture, eg integrated crop management protocols

Protectionist agricultural policies, reinforcement of CAP type and national regimes. Limited WTO liberalisation. Intensive agriculture focussing on self sufficiency. Limited environmental and social concerns. Slowed technological development.

CAP withdrawn, introduction of national/regional support regimes in accordance with local needs and priorities. Emphasis on self reliance, social and environmental objectives as defined at local community level, and sustainable agricultural technologies.

Agricultural trade

Increased global trade in agriculturalcommodities. WTO led reducedprotectionism of agricultural markets

Global trade but commonenvironmental, animal welfare andethical standards are applied in EU

Self-sufficiency increases slightly.Diets do not change radically. Lessglobal trade for seasonal and high-quality food.

Emphasis on procurement of local supplies. Exotic fruits and out-of-season vegetables sale decline. Reduced food-miles

Food SupplyChain

Increased domination of major foodretailers

Retailers transmit consumer concerns to farmers through purchasing policies and quality assurance schemes.

Retailers have strong influence overfarmers requiring uniform high quality products but not sustainable farmingpractices

Local area produce and market. Local ‘brands’ which emphasise environmental and social attributes

Consumer food demand

Consumer requires and obtains highquality produce at competitive prices,

procured in international market. High convenience.

High quality, food safety important,with quality assurance incorporatingenvironmental and social criteria.International procurement standards

High quality produce, but littleconcern for social and environmental credentials. Regional foods.

Healthy diets important, emphasis on organics. Less emphasis on appearance more on nutrition. Local

Farming practices

Agriculture concentrated,industrialised and global in scope.Adoption of precision farming.Widespread use of GMOs.

ICM protocols applied result in lower agro-chemical inputs. Gradual uptake of GMOs with tight regulatorycontrols. Reduction in intensivlivestock systems.

e

Moderate trend towards large farms

High inputs of agro-chemical. Variable uptake of GMOs.

Growth of organic and low input farming. GMOs banned. Agro-chemicals use decrease

Agricultural production

Increased output because of higheryields.

Increase in agricultural productivityand production slows down. Areataken out of production used tosupport nature conservation.

Short term productivity increase but long-term gradually slows because of limited investment on agricultural research. Decrease the agricultural area

Decreased productivity but total agricultural area increases.

Cereals, Oil seeds, proteins

Demand for cereals will increaseconsiderably under this scenario.However, the wide adoption of GMOs of high yields and fewer needs for(chemical) inputs and the prevalenceof large farms will reduce production costs per unit. Reduced protectionism: thus, prices are projected to reduce.

Demand for cereals will increaseunder this scenario and area payments are used only for environmental and social issues. Although, large farms

prevail, the hesitation to adopt widely GMOs. The adoption of green taxes increases production costs per unit... Prices are projected to fall marginally, towards world market prices because of less protection and global trade, but only to levels necessary to recover full costs of production, inclusive ofenvironmental protection ,

Demand for cereals will increasemoderately under this scenario asinternational trade declines. However, the some adoption of high yieldGMOs may reduce some (chemical)inputs and moderate increase in farm size will reduce production costs per unit. Area payments will be at suchlevels that meet national food security. Thus, prices are projected to increase mainly reflecting a commitment toprotectionist, farm income supports

Cereals will be produced to meet mainly the local demand (international trade rather limited) and area payments are used only for environmental and social issues. Relatively medium sized farms prevail, GMOs are rejected, yields fall, organic produce increases fast and green taxes are adopted. Thus, production costs per unit increase and prices are projected to increase significantly.

Vegetables Vegetable production cost declines and due to international trade prices decrease. Some locally produced (sensitive to transport) and niche vegetables may see prices stable or falling a little, but for others like potatoes, carrots prices will decrease considerably

Demand for vegetables may increase due to healthy diet issues. Increased importance on the environmental impacts of vegetable productions may offset any gains from the relative increase in farm size. High transport costs will encourage local production. Prices are likely to increase.

Demand for locally produced vegetables increases, as imports fall. Intensive systems prevail, with economies of scale. Limited competition and selected subsidies keep prices stable or marginally increasing.

Demand for locally produced vegetables will rise considerably, while organic products may reach 40% share of output. Emphasis on crop management protocols. Low yield increases, higher costs, prices rise Considerably.

Fruits Fruit production cost declines and due to international trade, local farmers face strong competition. Some locally produced (sensitive to transport) and niche fruits (strawberries, raspberries) may see prices stable or falling a little. Apples, pears and plums will face very strong competition from imports and their market share diminishes.

Demand for fruits may increase due to healthy diet issues. Increased importance on environmental impacts of fruit production may offset any gains from the relative increase of farm size. ICM protocols. Locally produced fruits increase their market share because of food miles issues. Prices are likely to increase considerably.

Demand for locally produced fruits increases, as imports tend to fall in face of protectionism. Support measures to protect local producers result in considerable price increases. Selected subsidies to local growers.

Demand for locally produced vegetables will rise considerably, while organic products may reach their share up to 40%. Subsidies/protection to deliver environmental and social targets. Prices rise considerably.

Cotton, tobacco, olives, protein crops

Prices reflect vulnerability to competition from world trade, and impact of removal of support. GMO yield improvement, Favours large

Protocols to protect environment, some selected GMO use, increased costs, competition from international market, , reduced tobacco sector,

Support to regionally relevant crops in form of import protection and general subsidies. Modest improvements in yields, but prices kept relatively high

Targeted support, with commitment to social and environment objectives. Emphasis on meeting local needs. Relatively low yield increases, higher

scale production to reduce costs. Olives particularly exposed

depending on significance to local economy

production costs, rising prices.

Meat and dairy Reduced input prices (cereals, equipment), reduced costs but international competition reduces prices. Reduced subsidies. Large scale, intensive high input high output livestock systems encouraged but prices fall, in spite of strong demand for livestock produce,

International competition and improved yields. However, there are restrictions on stocking rates and some intensive methods on environmental and welfare grounds. Meat and dairy production increases but prices remain reasonably stable or increase marginally, partly reflecting higher costs and willingness to pay

Some moderate reduction in input prices (cereals, equipment) and moderate yield increases. Protectionism and subsidies fail to prevent some fall in meat prices, given relatively lower demand for livestock products. Prices are stable or reduce slightly.

Yields improve marginally but farmer and agro-environmental support measures increase considerably, and animal rights issues gain much importance. Thus, meat and dairy products prices increase considerably, with preference for local produce.

Agro chemicals

Fewer restrictions on agri0-chemicaluse, some reduction in demand due to GMOs adoption. No green taxesimposed, considerable world agro-chemical industry, thus prices fall.

Priority to environmental protection,organic produce is promoted and green taxes are imposed. Although,moderated by world competition, agro chemical prices are projected toincrease considerably.

Demand for agrochemicals rises,offset by moderate adoption of GMOs. Prices stable in the absence of green taxes, but do not fall because oflimited effect of global competition.

Environmental policy strict, organic produce is promoted and high green taxes are imposed. Prices are projected to increase considerably, with restrictions on use...

Energy Energy prices relatively low, continued dominance of fossil fuels. Limited imposition of energy or environmental taxes. High energy uses may promote alternative sources but within low energy price economy.

Energy price increases as renewable sources of energy increase their share, promoting energy efficient technology. Environmental taxes imposed

Assumed continued access to plentiful supplies of fossil fuels. Prices relatively high as energy efficiency is limited due to lack of investments. No green taxes.

Exploit local energy resources and renewable energy technologies. Green tariffs and high energy prices lead to the adoption of energy efficiency measures. Considerable price increase.

Labour Availability of local labour reduces. High cost skilled labour. Foreign migrant workers provide relatively low cost unskilled labour. Moderate increase of skilled agricultural wages associated with intensive agriculture, large farms and high general economic growth.

Availability of local manual labour reduces but use of foreign labour. There is relatively high economic growth, distribution of income is relatively fair, labour law protects employees more, thus labour prices tend to increase.

Some agricultural wage protection to support local economy and populations. Controlled use of temporary migrant workers. Variable commitment to employer rights. Medium sized farms. Moderate increases in wages of skilled workers.

Medium to small farms providing high level of employment and commitment to equitable distribution of income, labour law to protect employees. Small size farms and implementation of high environmental and social standards mean increase in labour requirements and costs. Wages increase.

Land Land value next to tourist and urban areas increase, while agricultural land

Environmental value of agricultural land is important, more diverse uses,

Land value next to tourist and urban areas increase. Land prices, reflecting

High social and environmental value placed on land management, subsidies

becomes cheaper, partly as a result of reduced subsidies and area payments.

payments for stewardship. This maintains land prices independent of agricultural values, which increases marginally.

agricultural potential, heavily influenced by production subsidies, remaining stable

targeted accordingly. Land ownership provides livelihood opportunities and is valued by society. Prices rise.

Water demand Increase significantly due to economic growth, higher living standards and minimal environmental concerns

Tends for increased water demand are balanced by demand side management and clean technology adoption.

Increased water demand because investment in water efficiency is low. Leakage high.

Reduced due to low growth and adoption of water conservation technologies.

Water supply Reduced water leakage and development of new sources of supply. Little resistance to new reservoirs development

Little need to develop new sources of water supply.

Increased demand met by extending traditional water sources. Difficulties arise in the south and east of England.

Exchange of water resources between regions more difficult. Reduced water leakage

Water quality Agricultural and run-off water quality is severe problem. River’s improves in recreational areas Groundwater’s declines

Increases due to reduced agro-chemicals sue and shift to cleaner production in industry

River and groundwater quality deteriorates because of agriculture intensification, weak control of industrial pollution

Improved dramatically due to reduced agrochemical use and changes in industry structure. Dry waste systems increasingly adopted

Water price High prices reflecting water as a traded commodity and full cost recovery. High investment in water sector in response to high water values.

High prices in pursuit of full cost recovery and wise use of water. Differential prices for social and environmental objectives.

Water as a traded commodity. Increase and tradable abstraction permits used in industry. Prices increases moderate, with some subsidies for regional users

High prices reflecting environmental and social components and objectives. Licensing and quotas used more than pricing as allocative instruments.

Water for irrigation

Water price increases: irrigators pay the full cost of water. High prices promote water saving technologies in pursuit of efficiency gains. Application depths decline as a consequence, and due to widespread adoption. Irrigation is market driven: irrigation of crops giving marginal response decline

High increase in water price, because polluter pays principle (green taxes) is fully implemented. Innovation in irrigation technology to achieve water saving and reduce environmental impacts, as well as save costs. Development of drought resistant varieties.

Environmental issues, in general, are not important. Water is treated as a commercial commodity, but possibly subsidised to meet national objectives. Full environmental cost recovery is not pursued, water prices rise moderately. Low drivers for technology change, in irrigation sector, increase application depths and areas irrigated.

Water demand is reduced due to lower growth and adoption of water conservation technologies, including alternatives to irrigation. Environmental and social issues are important considerations in the formation of water price which will reflect local priorities, but this is likely to increase.

APPENDIX 3 SELECTED INDICATORS BY AGRICULTURAL SCENARIO

World Agricultural

Markets

Global Sustainable Agriculture

Provincial Agriculture

Local Community Agriculture

Markets World, international procurement

National/world procurement

National/ regional procurement

Local /regional procurement

Prices World market, no subsidies or area payments

Decoupled, near world market plus area payments, and compliance requirements

National regimes with protection and subsidies, plus area payments

Local/regional regimes with protection and subsidies, strong conditionalities

Yields and Intensity of Production

High yields, intensive systems

High yields, but options for , modulation in favour of smaller, less intensive farms

Moderate to high yields, set-aside.

Low inputs, outputs and yields. Targeted extensification to deliver social and environmental objectives

Econ

omic

Capital grants and technical assistance

No grants, Market driven

Yes, for small farm development and environmental protection

Yes, for selected farm types

Yes to meet social and environmental objectives

Pollution control Market driven to protect commercial interests

Regional Nitrogen/phosphate/pesticide controls, Limited application rates

Voluntary codes of good practice

Locally defined controls, possible ‘permitting’ scheme

Waste Market driven to protect commercial interests

Waste regulations, farm waste management plans

Voluntary codes of good practice

Locally defined waste regulations, and farm plans

Product assurance Market driven quality assurance, eg supermarket schemes, GM produce

Possibly conditional for farm support, support for organics

Voluntary systems Local areas produce and brands, increased organics

Agri-environment schemes

Market driven, reflecting willingness to pay

Management agreements, compliance requirements

Some selected area schemes

Local area environmental schemes, and payment regimes

Irrigation Water Access and Use

Market led water use based on willingness to pay

Restrictions to meet environmental standards

Historic Licences limit abstraction

Restrictions on abstraction and use to meet social and environmental objectives

Env

iron

men

tal

Irrigation efficiency Market led efficiency in response to rising costs of water.

Compliance with good irrigation practice as a condition of licence and commodity support.

Relatively low Targets to reduce pressure on water resources and environment

Support for family farm

None, tendency towards large commercial farms

Moderate, to meet regional rural development objectives

Limited targeted support, tendency to favour larger farms

High: preference given to small farms in pursuit of sustainable rural livelihoods

Regional/area support

None, regional development reflect comparative market advantage

Moderate, targeted to address regional needs, and potential advantage

Limited, mainly national programmes

High: in pursuit of self reliance and self sufficiency So

cial

Diversification of farm based activities

Tendency to specialisation

Moderate, with targeted support

Limited diversification, mainly conventional cropping

Strong Diversification Programme

Skills and Technology

Agri-business: intensive farming and business acumen, high technology systems

Conventional farming, agri-environmental management, enterprise diversification

Conventional farming: commercial and technical knowledge

Sustainable farming, Traditional and new skills and technology to balance commercial farming and environment

APPENDIX 4

TABLE 4.A EXISTING AND POSSIBLE PRICES FOR AGRICULTURAL INPUTS AND OUTPUTS UNDER ALTERNATIVE AGRICULTURAL POLICY SCENARIOS FOR 2010 (EXPRESSED AS A % OF EXISTING YEAR 2001/2 CONSTANT VALUES)

Existing (2002) WorldAgricultural

Markets

Global Agricultural Sustainability

Provincial Agriculture Local Community Agriculture

Crops % % % % %Grains and oil seeds . Wheat 100 80-90 90-100 100-110 110-120 Barley 100 80-90 90-100 100-110 110-120Cereal area subsidy 100 0 95 100 100 Maize 100 85-95 95-105 100-110 100-110Maize area subsidy 100 0 75-85 90-100 85-95 Rice 100 85-95 95-105 110-110 110-120Oil seed rape 100 80-90 85-95 95-105 100-110 Oil seed area subsidy 100 0 95-105 95-105 110-120 Set aside subsidy 100 80 100 100 110-120 Set aside quota 100 0 95 100 105 Roots Sugar beet 100 80-90 85-95 90-100 100-105 Potatoes 100 85-95 95-105 105-115 120-130 Veg and Salad crops Vegetables 100 85-95 110-120 100-110 120-130Brassicas 100 85-95 110-120 100-110 120-130Tomatoes 100 85-95 110-120 100-110 120-130Salad crops 100 85-95 110-120 100-110 120-130 Soft Fruit

Strawberries 100 95-105 100-110 105-115 110-120Raspberries 100 95-105 100-110 105-115 110-120 Tree fruit Apples 100 85-95 95-105 100-110 120-130Pears 100 85-95 95-105 100-110 120-130Citrus 100 85-95 95-105 100-110 120-130 Tobacco 100 85-95 90-100 90-100 105-115Soya bean 100 75-85 90-95 90-95 105-115 Soya bean area subsidy 100 0 90 85 85 Cotton 100 80-90 90-100 85-95 110-120Cotton subsidy 100 0 85 90 105 Olives 100 80-90 85-95 90-100 100-110Olive area subsidy 100 0 95 95 105

Livestock 100 Beef (liveweight) 100 85-95 90-100 95-110 110-120 Sheep (deadweight)

100 85-95 90-100 95-110 110-120

Milk 100 85-95 90-100 100-110 115-125 Inputs prices . Fertilisers 100 85-100 130-140 100-110 150-170Pesticides 100 85-95 135-145 100-110 140-150Energy 100 85-100 140-150 100-110 150-160Seeds 100 110-120 100-105 105-115 95-100Machinery 100 85-95 120-130 100-110 130-140Contractor services 100 100-110 110-120 120-130 130-140 Water prices 100 115-130 130-150 105-120 140-160 Irrigation infrastructure 100 130-135 120-130 130-140 110-120 Labour 100 110-120 125-140 110-120 130-150

Land 100 80-90 100-110 95-105 110-120 Animal feed 100 80-90 100-110 90-100 110-120 Other inputs 100 90-100 100-110 95-105 110-120 Irrigation efficiencies 100 130-140 145-155 130-140 135-145 Crop yield changes due to technology

100 110-120 110-125 100-110 85-95

Restriction on chemical use 100 85-95 125-135 85-95 130-140 Restriction on rotations* 100 80 100 90 110 Yield of milk per cow 100 140-155 115-125 120-130 105-115 Farm Sizes 100 160-170 130-140 120-130 100-110 .Agri-environment scheme payments

100 60 100 40 120

*Note: indices for non –numeric variables such as restrictions on rotations and chemical use indicate and order of relative difference against the existing baseline at 100

TABLE 4.B EXISTING AND POSSIBLE PRICES FOR AGRICULTURAL INPUTS AND OUTPUTS UNDER ALTERNATIVE AGRICULTURAL POLICY SCENARIOS BY 2020 (EXPRESSED AS A % OF EXISTING YEAR 2001/2 CONSTANT VALUES)

Existing (2002) WorldAgricultural

Markets

Global Agricultural Sustainability

Provincial Agriculture Local Community Agriculture

Crops % % % % %Grains and oil seeds . Wheat 100 55-70 75-85 100-110 130-140 Barley 100 55-70 75-85 100-110 130-140Cereal area subsidy 100 0 80-90 100-110 110-120 Maize 100 75-85 95-105 105-115 110-120Maize area subsidy 100 0 50-60 80-90 70-80 Rice 100 60-70 80-90 100-110 130-140Oil seed rape 100 50-60 70-80 80-90 110-120 Oil seed area subsidy 100 0 95-105 100-110 130-140

Set aside subsidy 100 40-50 90-100 100-110 130-140 Set aside quota 100 0 80-90 100-110 110-120 Roots Sugar beet 100 50-60 70-80 85-95 100-110 Potatoes 100 65-75 90-100 130-140 160-170 Veg and Salad crops Vegetables 100 70-80 120-130 110-120 140-150Brassicas 100 70-80 120-130 110-120 140-150Tomatoes 100 70-80 120-130 110-120 140-150Salad crops 100 70-80 120-130 110-120 140-150 Soft Fruit Strawberries 100 95-105 115-125 120-130 130-140Raspberries 100 95-105 115-125 120-130 130-140 Tree fruit Apples 100 70-80 95-105 115-125 140-150Pears 100 70-80 95-105 115-125 140-150Citrus 100 70-80 95-105 115-125 140-150 Tobacco 100 70-80 75-90 90-100 120-130Soya bean 100 50-60 80-90 90-100 115-125 Soya bean area subsidy 100 0 60-70 90-100 100-110 Cotton 100 60-70 80-90 90-100 130-140Cotton subsidy 100 0 55-70 70-80 110-120 Olives 100 50-60 70-80 90-100 110-120Olive area subsidy 100 0 95-105 100-110 140-150 Livestock 100 Beef (liveweight) 100 85-95 90-100 100-110 120-130

Sheep (deadweight)

100 80-90 90-100 100-110 120-130

Milk 100 70-80 85-95 105-115 140-150 Inputs prices . Fertilisers 100 80-90 180-200 120-130 250-270Pesticides 100 75-90 180-200 100-110 200-220Energy 100 80-90 170-180 110-120 200-210Seeds 100 130-140 100-110 110-120 80-90Machinery 100 70-80 140-150 110-120 180-190Contractor services 100 105-115 140-150 130-140 180-190 Water prices 100 180-190 150-160 120-140 200-220 Irrigation infrastructure 100 180-190 145-155 180-190 130-140 Labour 100 180-200 170-190 130-140 120-130Land 100 75-85 110-120 105-115 125-135 Animal feed 100 70-80 110-120 85-95 125-135 Other inputs 100 85-95 110-120 95-105 125-135 Irrigation efficiencies 100 180-190 230-250 180-190 200-210 Crop yield changes due to technology

100 150-170 130-140 120-130 100-110

Restriction on chemical use 100 85-95 170-180 85-95 170-180 Restriction on rotations* 100 50-60 220-230 70-80 230-240 Yield of milk per cow 100 180-190 135-145 150-165 110-120 Farm Sizes 100 260-270 170-180 160-170 110-120 Agri-environment scheme payments

100 50-60 110-120 30-40 140-150

*Note: indices for non –numeric variables such as restrictions on rotations and chemical use indicate and order of relative difference against the existing baseline at 100