Does CAP greening affect farms' economic and environmental performances? A regression discontinuity design analysis.

This article evaluates the impact of the ecological focus area (EFA) requirement—a key component of the European Union's Common Agricultural Policy (CAP) greening payments (GPs)—on environmental and economic outcomes for Italian arable crop farms between 2013 and 2020. Using a regression discontinuity design (RDD) around the 15-hectare farm size threshold that mandates EFA compliance, the study finds that while the EFA obligation led to a modest increase in the share of leguminous (nitrogen-fixing) crops, it had no statistically significant effects on farms' use of fertilisers, pesticide expenditure, crop diversification (measured by a Shannon Index), or economic performance indicators such as variable costs, total costs, and farm income. The analysis is limited to farms near the threshold and relies on indirect proxies for biodiversity due to data constraints. The findings suggest that the EFA requirement's environmental benefits are limited and that its economic impact on farms is negligible, raising questions about the overall effectiveness of CAP greening measures in promoting environmentally sustainable agriculture.