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How agricultural policies affect the environment is within ecological economics. The EU Commission `Mid-Term Review of CAP of Agenda 2000' of July 2002 proposed to separate production from direct payments, so that farmers would fully compete in the market, without gearing production to the trade-distorting subsidies. The decoupled direct payment to each farm will be conditional upon cross-compliance with the environmental, food safety, animal health and welfare, and occupational safety standards. MTR maintains extra set-aside payment for normal land to avoid overproduction, but no longer for marginal land. This paper suggests not to set aside normal land, because overproduction would be prevented by decoupling; normal land is less environmentally sensitive, and the direct payment would be enough for farmers to keep it in a good agricultural condition; setting-aside normal land would cost money, and make it unavailable for full-time farmers to achieve economies of scale. It recommends to set aside marginal land which is more environmentally sensitive, and the direct payment may not be enough for farmers to keep it in a good agricultural condition. It advises to gradually convert marginal land back to the nature forever, give a conversion payment to its owners to keep it in a good environmental condition, and pursue non-cereal agriculture and off-farm activities. It advocates a tax on those farmers who refuse to keep a good agricultural or environmental condition on the set aside or converted marginal land for maximally two years, and forced land sale afterwards, which would be less harsh than expropriation.


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