Efficiency of rural conservation and supply control policies

This paper examines the technical and economic efficiency of popular European agricultural policy instruments within a framework that carefully specifies the trade-offs between agriculture and the rural environment. Instruments that focus primarily on supply control are technically inefficient, since they do not take advantage of potential complementarity between reducing agricultural output and increasing output of rural environmental goods and services. Thus recently agreed-upon CAP reforms will not achieve their potential contribution to agri-environmental efficiency under current implementation proposals. The first-best social optimum might be approached, without dismantling existing supports, using a type of cross-compliance policy. -Author