2 The 2005 Rural Development Regulation

2.43 Rural development was further strengthened by the adoption of the 2005 Rural Development Regulation.⁸⁸ This established a European Agricultural Fund for Rural Development, streamlined the administration and financing of rural development by the member states, and provided a much clearer focus for rural development policy – especially in the area of agri-environment measures.

2.44 The 2005 Regulation explicitly linked rural development policy to the implementation of the 6th Community Environment Action Programme, with the key issues to be addressed identified as including biodiversity, Natura 2000 site management,⁹⁰ the protection of water and soil, climate change mitigation including the reduction of greenhouse gas emissions, the reduction of ammonia emissions and the sustainable use of pesticides.⁹¹ It adopted a ‘public goods’ model for agri-environment measures funded through the rural development programme, under which farmers supply environmental services to society, and by so doing support the sustainable development of rural areas.⁹² In this context, it was stressed that the conservation of genetic resources in agriculture should be given specific attention.

2.45 The 2005 Regulation also sought to apply the ‘polluter-pays’ principle, by specifying that agri environment payments should cover only commitments going beyond the relevant mandatory standards eg those set in the cross compliance conditions for receipt of the single farm payment.⁹³ Payments could also only be made for commitments going beyond the minimum requirements for fertilizer and plant protection, product use and other relevant mandatory requirements established by national legislation and identified in the member state’s rural development programme.

2.46 This was a continuation of the previously expressed Community policy on the polluter pays principle in agriculture viz. that adherence to the minimum standard of environmental care for the countryside demanded by compulsory legislation, and represented in good agricultural practice, should be an attribute of the farmer’s property rights and left uncompensated, whereas farmers should be paid for their costs and lost income in providing environmental services beyond this basic level of good practice.⁹⁵ Payments could be made not only to farmers who make agri-environmental commitments on a voluntary basis, but also to other land managers.⁹⁶ Agri-environment commitments would normally be undertaken for a period of between five and seven years.⁹⁷ The payments should be granted annually and cover additional costs and income foregone resulting from the commitments made. Where necessary, they may cover also transaction costs.⁹⁸ The 2005 Regulation expressly allowed for the selection of participants in agri-environment schemes on the basis of calls for tender, ‘applying criteria of economic and environmental efficiency’.⁹⁹ As we shall see,¹⁰⁰ this model had already been used in the UK for agreements under a number of agri-environment programmes established prior to 2005, with considerable success.

2.47 Rural development policy was also given clearer focus, through the reorientation of its objectives around just three ‘axes’. The 2005 regulation stipulated that support for rural development should contribute to achieving the following objectives: improving the competitiveness of agriculture and forestry by supporting restructuring, development and innovation (Axis 1); improving the environment and the countryside by supporting land management (Axis 2); and improving the quality of life in rural areas and encouraging diversification of economic activity (Axis 3).¹⁰¹ Agri-environment measures fell within Axis 2, as specified in Title IV and article 36 of the 2005 Regulation.

2.48 Finally, the 2005 Regulation simplified the administration of rural development policy by adopting Community strategic guidelines,¹⁰³ within which a national strategy plan for each member state will be nested.¹⁰⁴ The individual rural development programmes for each member state¹⁰⁵ would then be evaluated against the relevant Community and national strategic guidelines. Article 7 established the subsidiarity principle at the heart of rural development policy implementation, by stating that the Member States are to be solely responsible for implementing the rural development programmes ‘at the appropriate territorial level’, and in accordance with their own institutional arrangements, under the terms of the 2005 Regulation.