Transformations  in
Business & Economics

DOES AGRICULTURAL SUBSIDIES IN THE EU IMPROVED ENVIRONMENTAL OUTCOMES?
Corina Saman

ABSTRACT. This paper deals with the role of the Common Agricultural Policy (CAP) in the development of agriculture in a sustainable way taking into account the protection of the global environment. The main target is to assess the role played by CAP subsidies on this important adjustment process. Using multilevel mixed-effects models, with fixed and random effects included to represent data heterogeneity and the importance of the country effects, the paper shows that CAP subsidies for rural development strengthen renewable energy programs in some countries. I also find that Pillar I subsidies had an effect about twice as small as Pillar II payments. In general, CAP payments support the transition to a low-carbon economy, increase the use of renewable energy sources in agriculture, although the extent of the economic effect has been quite moderate and not for all countries.

KEYWORDS:  agriculture and forestry, renewable energy, global greenhouse gas (GHG) emissions, EU CAP subsidies, mixed-effects models.

JEL classification:  Q12, Q18, O13, Q48.