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Abstract
Direct payments have progressively become the largest and most visible form of
support in the CAP tool-box. Analyses on direct payments have always highlighted a large
inequality in their distribution, both between Member States and, within them, among farmers
and territories where, on one side, a relevant amount of payments is concentrated in the hands
of a few beneficiaries; on the other, a small share of support is divided among many heads.
The European Commission has faced the problem of the volume and the distribution of the
direct payments with two main instruments: the modulation and the capping.
Modulation was originally conceived as a temporary tool aimed at filling the gap
between pillars, but in the last years it has changed shape and rules alongside with the CAP
process path and it has become one of the milestones of the CAP tool-box. The capping has
received high attention during each step of the recent CAP reform process, however, it has
been never implemented so far. Both the instruments have relevant implications about the
total amount of payments received by farms and by the Member States and about their
distribution; however, the way they are implemented and combined together is crucial to fully
evaluate their effects.
The main goal of this paper is to reconstruct the evolution of modulation in the process
of CAP reform, from the voluntary one launched by Agenda 2000 till the most recent
proposal of the CAP Health Check, that combines in one single tool modulation and direct
payments’ capping.
Simulations of the most recent proposal of modulation show that the goal of Pillar 2
reinforcement has prevailed over the distributional one, through the creation of a sort of
national envelope that shifts resources from Pillar 1 to Pillar 2, even though it is not very clear
so far how and for what that envelope will be spent. Moreover, the capping goal within the
progressive modulation is not very effective and only affects to some limited extent direct
payments in few Member States.