The most surprising discovery of our eight-country investigation into Common Agricultural Policy subsidies is that they have had the perverse effect of encouraging investment in intensive farms whose size and production falls just under environmental reporting requirements.

Read Part I of the investigation here. 

Increasingly, agri-businesses are designing their operations around the blind spots in regulations. They are buying or creating smaller farming enterprises that pollute up to the maximum allowed by the regulations, while centralising and optimising the subsidies of those farms.

The pollution stays at the farm level, divided into discrete units that require no authorisation from environmental authorities, and once step up, the parent firms collect the CAP subsidies and any profits. Taxpayers contribute through CAP subsidies to the enrichment of shareholders in big companies, and pay again to clean up the pollution that these firms create.

Veterinary inspections

Because different authorities at regional, state or national levels regulate pollution differently, the big companies can shop for jurisdictions where they will be least subject to oversight. This is called ‘regulatory arbitrage’, and it is common in multinational enterprises. It is perfectly legal for various industries in numerous European jurisdictions. We are witnessing the migration of those practices into the farming sphere, supported by the CAP. 

The process is particularly visible in Poland – a highly significant case – for several reasons. The country has a thriving livestock sector, driven by competitive labour prices that help to keep costs low for producers and prices low for buyers.

It is also one of the new member states of Europe that has made the strongest efforts to meet environmental standards. To profit from opportunities in the Polish market, agrobusiness firms must therefore operate in a way that stays below the threshold of environmental rules and sanctions.

A welter of conflicting authorities and regulatory requirements makes it easier. One national institution collects the names and addresses of farms whose animal populations, from which emissions are calculated, exceed European reporting levels.

These are the so-called IED (for the “industrial emissions directive” of 2010) farms. Another institution collects data on reported emissions above the European thresholds. A third, in charge of veterinary inspections, is responsible for collecting data on the actual numbers of animals at each farm.

Tons of ammonia

The data is full of holes: all of it depends on declarations of farmers, and in some cases, it is not in their interest to declare their intentions – for example, to build a larger installation than is described on a declaration – or the true number of animals, or even to fill out the forms in the first place. 

Thus one person, or one firm, may own a number of farms, each of which collects CAP subsidies, and each of which reports – or does not report – its emissions separately. Various exemptions allow the owner of a farm, or several farms, to remain anonymous in the official databases. The different members of one family can create a large livestock business in concert, but as individuals in official terms. A corporation can register separate farms as subsidiaries. 

The data from Poland tell us that by splitting big holdings into smaller units, firms can engage in intensive farming practices that would lead to emissions reports if the farms were considered a single unit. According to the national Ministry of the Environment, between 2007 and 2016, at least 113 Polish farms that met emissions reporting requirements were split into at least 245 smaller entities.

As in other industries after the Soviet empire disintegrated, foreign corporations have invested deeply in the Polish pig farm sector. The Danish pig-breeding company Poldanor owns 10 pig farms and five sow farms in Poland. In 2015, nine Polish farms owned by Poldanor reported joint emissions of over 143 tons of ammonia.

The following year, seven Poldanor farms emitted 112 tons of ammonia. Meanwhile, Poldanor’s Polish operations took in 2,632,965 euros of CAP subsidies in 2015. In 2016 its subsidies in Poland dropped by 61 percent, but it remained the second-ranking livestock firm in terms of subsidies. 

Mixed cultivation

The core of CAP subsidies is a ‘basic payment’ for every hectare of land that is or could be under cultivation. The level of the subsidy varies across the EU member states, but it is converging toward a minimum of 196 euros per hectare by 2019. 

It requires only 2000 square meters – one fifth of a single hectare of land – to erect a building that is home to 40,000 chickens, at the rate of 20 chickens per square meter. That is why even experts on the CAP told us that the program doesn’t subsidise intensive farming – because the CAP subsidises land first and most. Without land, one cannot obtain CAP subsidies, at least in principle.

But a single farm can have more than one revenue stream – a practice that is favored by CAP environmental subsidies, which encourage multi-cropping. A farmer, or a corporate owner, can erect a building on a small parcel of land and fill it with chickens or pigs. The rest of the land keeps on generating CAP subsidies. 

The investment in intensive livestock breeding leverages those subsidies. Part of the remaining fields are used to produce feed for the animals. The animal waste is spread onto the fields, so far as is possible. Some countries, like Poland, require that up to 70 percent of manure produced on a farm must be put on the fields, so a livestock farmer must either own sufficient land, or rent a neighbouring field. 

In principle, this is sound ecological practice. It is highly visible in databases of CAP subsidies, where farms are categorised by their main activities, and where “mixed cultivation and livestock” is often seen. But another effect is that CAP subsidies for land may enable a farmer or corporate owner to invest in intensive livestock facilities, because they represent sizeable potential revenues.

Grown in cages

Since 2015, across the EU, 30 percent of CAP subsidies must – as a matter of regulation – be paid out for practices that “green” the environment. Simultaneously, payments based on simply owning land have diminished by a comparable amount. The “greening” practices may include rotating crops to grow animal feed, or maintaining fields for grazing. In principle, these subsidies are not meant to support intensive livestock farming. 

But they do – indirectly, and legally, but certainly. In Poland, 86 percent of Poldanor’s CAP subsidies in 2016 came from the “greening” scheme. Poldanor claimed to use more than 13,000 hectares of land to grow plants for biogas and animal fodder. Part of that land was leased to the company by Polish authorities, which caused massive protests of small farmers who alleged land grabbing.

In France, we ranked farms according to the geometric mean of their ammonia emissions and their CAP subsidies, to find the farms that received the highest subsidies relative to the amount of ammonia emissions they generate. There as well, we found polluters receiving green subsidies.

The seventh farm on our list was du Perrat – a GAEC, which is a type of farm company – which scored fourth for ammonia emissions, and 214th for subsidies in the years 2014-16. When we looked it up in company registers, we saw it had disappeared.

The firm’s principal activity was intensive chicken farming, which had caused it to be targeted by the activist animal rights group L214. An undercover operation produced a film that showed the conditions inside the building where chickens were grown in cages.

Raising pigs

A national scandal erupted, the government intervened, and the farm closed down. Before that happened, the owners begged anyone and everyone to come to the farm and take some chickens home, because otherwise they would be slaughtered.  

The disaster was shared by the company’s farm workers, who are also supposed to benefit from the CAP’s goal of promoting rural development. According to Fabrice Canet, the CGT official who represented the workers, four of them found new jobs, three went on parental leave, and 16 remain unemployed. He notes: “France has chosen to end the practice of raising chickens in cages by 2025.” 

What will take the place of current practices? An intensive pig farmer told us that he knows the problems, but not the solution: “Ammonia is the biggest pollutant in a pig farm, and it’s bad for the animals and for our employees. So we try to control it. If you want me to say that we should only raise pigs outside, it’s not doable on farms like ours.”  

The CAP subsidies for GAEC du Perrat totalled 48,212 euros in 2014-2016. In the last year, 5020 euros was given to the firm for “practices respecting the environment.” In effect, part of the company’s payments for land disappeared, and the payments came back as environmental subsidies.  

The third firm on our list was La Fennetrerie, which raises pigs, and which scored tenth for ammonia emissions and eighth in subsidies, at 356,477 euros in 2014-2016. A main business of this enterprise is raising pigs. In 2014-15, nearly all of its subsidies consisted of payments for land. In 2015-16, following a reform of the CAP structure, 54,526 euros for greening were given to the farm, while it lost a slightly larger amount in land payments.  

Economic parameters

You see how it works. The EU no longer subsidises land to the same degree. Instead it pays the owners of the land for being green, whether or not their principal activities include intensive livestock farming, which pollutes.

Livestock are indirectly subsidised by environmental practices that may or may not compensate for the pollution created by animals. This much is certain: the greening subsidies do not make all the pollution disappear. Otherwise, our air, rivers and lands would be healthier than they are now.

This is not what the CAP was originally meant to achieve. At the outset in the 1960s, the system was designed to enable Europe to feed itself, and to raise the living standards of millions of farmers whose physical comfort more closely resembled the 19th than the 20th century – barely enough production to feed the farmers’ families while leaving a tiny cash surplus for what they couldn’t grow or make at home.

Those homes featured outdoor toilets, were heated by wood, and often had neither running water nor electricity. One of our team lives in such a house in a French town that lives from raising veal for fattening in Italy. The house was abandoned in 1962, and rebuilt in 2001, when the hamlet finally got electricity. During that period, the town’s population fell from about 600 to 170. It was hoped that CAP subsidies would help to stop the decline and keep farmers on the land.

Did they succeed? Yes and no. To this day, for many farmers the CAP makes the difference between a revenue that (barely) suffices to live, and no revenue at all. Researcher Alessandra Kirsch discovered in a recent doctoral thesis comparing economic parameters of intensive and ecological farms that CAP subsidies account for up to 94 percent of the cash income of French cattle farmers. Without those subsidies, they would disappear – or more exactly, disappear even faster. 

Share of subsidies

The CAP is failing in its declared goal of supporting rural development, if rural development means sustaining a population and jobs for them. In the past ten years alone, over one-fourth of France’s farmers and farm workers left the land, leaving just under one million still active – 20 years ago, there were more than twice as many, according to the Ministry of Agriculture. 

Behind that trend, across Europe, is a movement toward fewer and bigger farms, and more intensive livestock operations. 

Our best analysis of the movement toward fewer, bigger farms comes from Denmark, where our colleague Nils Mulvad, co-founder of the Global Investigative Journalism Network and principal of the data investigations firm Kaas og Mulvad, has studied the distribution of CAP subsidies since 2006.

He found that the total subsidies paid out to Danish farmers declined by nearly one-fifth through 2017, to 948 million euros annually. During that same period, the number of firms that received subsidies declined more than twice as fast, by 43 percent. In absolute terms, the farms Europe subsidised in Denmark fell from about 69,000 to 39,000. 

But this movement was even more startling among the 20 percent of Danish farms that claimed 75 percent of the subsidies. There were nearly 14,000 of them in 2006; by 2017, their numbers dropped to 7,879. In that same period, the average subsidy claimed by members of this elite group rose from nearly 55,000 euros annually in 2006 to over 85,000 euros in 2017. The subsidies for the biggest farmers leaped an average of 55 percent over this time, because fewer farm were dividing the same share of subsidies.

Big concentrations

What about the ordinary folks? In 2006, the 37 percent of farmers who got less than 2500 euros annually amounted to 2.1 percent of total CAP payments. There were over 25,000 of them in 2006, but over the next five years their numbers dropped by nearly half. By 2017, there were just over 12,000 of them, and their share of total subsidies had fallen to 1.9 percent.

There is reason to think that big, intensive farmers who negatively impact the environment are disproportionately rewarded for it by the CAP. Alessandra Kirsch, comparing farms in France, the UK and Germany, writes that “the farms classed lower [by their environmental practices] receive on average more direct subsidies per hectare than better-ranked farms.”

In Austria, CAP payments have driven a similar movement toward bigger farms, including for livestock. Farms are growing, and pig farms are growing faster than the average. Today the average pig farm in Austria has 110 pigs; twenty years ago, it had 35, a near-tripling in two decades. We can safely guess that what tripled the average was intensive farms.

That certainly happened in Italy. Between 2003 and 2013, 78 percent of pig raising companies disappeared from the market (with the absolute numbers falling from 124,000 farms to 26,000), while the number of pigs raised each year remained stable (from 8,58m in 2003 to 8,60m in 2013). In other words, the average surviving farm produced five times as many hogs.

The vast majority of the Italian farms that are responsible for big concentrations of ammonia pollution receive substantial EU subsidies. In 2016, 67 percent of Italian farms that reported ammonia emissions over EU thresholds obtained a total of over 25.6 million euros in CAP payments. In general terms, the largest farms – raising more than 100,000 pigs a year – are among the biggest polluters and get the highest subsidies. 

Big farms

The biggest agricultural company in Italy, Genagricola, which is controlled by one of the biggest insurance companies, Generali, operates by acquiring local medium-sized farms. One of them – a pig raising farm – appears in both the E-PRTR and in CAP subsidy lists.

Genagricola is a major recipient of CAP subsidies, with over 2,5 million euros in 2016. Individual operators are following the same logic. Luigi Cascone controls three different large companies, which between them got over 340,000 euros in CAP subsidies in 2016.

The companies operate farms in the Mantova and Verona provinces. Five of the farms report ammonia levels big enough to appear in the EU database, and one of the companies was recently classified by local authorities as “harmful” because its emissions were found to damage the health of local citizens.

Clearly, this is a sturdy business, because Cascone has applied to build three more intensive pig farms over the last couple of years. Only fierce opposition by local residents is halting his plans temporarily. 

Farming pyramid

The concentration of farming impacts pollution in an indirect but powerful way. Of course, the same number of animals, whether they are on big farms or small farms, produce the same amount of excrement and emissions. But it is harder to manage industrial amounts of pollution than artisanal quantities.

Land must be found where manure can be spread, or trucks must be hired to take the excrement from a landless site to a processing plant or a field elsewhere in Europe.

If a waste storage tank explodes or leaks – French authorities have catalogued an average of two such incidents yearly over two decades – on a small farm, the farmer may have time to put up barriers to stop the runoff from reaching the nearest stream and may be able to handle the mess with a tractor.

If an industrial-scale accident occurs, the mess is far harder to control. The French farm union official was witness to one such incident, when an excrement collection site that served several livestock farms was flooded by heavy rains.      

Faced with such difficulties, some farm managers cheat. “A truck arrives at a farm to take away the stuff,” explains the union official. “A paper is signed saying the truck was filled, in principle to be taken away to another site in the EU. But the truck drives away empty. This happens on a massive scale.”  

Most ironic of all, the agriculture that is being shaped to the needs of the top of the farming pyramid is an export industry, continually building its output to satisfy the demand for meat in Asia, Africa and the Middle East.

Wrong direction

Europe’s farms currently produce about 115 percent of the meat that Europeans can buy, every year, and the excess capacity is growing. The meat goes abroad, while the excrement stays in Europe. That is not the only or entire result of the CAP, but it is certainly a growing result, and it is just as certainly a difficult achievement to defend.            

We can say without hesitation that regulatory arbitrage, coupled with incomplete and fragmented reporting of emissions, have concealed the environmental effects of intensive livestock farming from effective citizen oversight.

We are equally certain that the taxpayers of Europe are paying to clean up the mess created by livestock farming whose raison d’être, more and more, is to serve markets outside Europe. We affirm that current CAP policy and administrative practice favour big polluters over small farmers and the citizens who live with the pollution. 

The next reform of the CAP is currently underway. We conclude that if it does not at a minimum address these issues, the CAP will be “reformed” in the wrong direction.

These Authors

This investigation was conducted by the following authors: Mark Lee Hunter (France), Stefan Wehrmeyer (Germany), Nils Mulvad (Denmark), Delphine Reuter (Belgium), Matteo Civillini (Italy), Benedikt Narodoslawsky (Austria) and Patryk Szczepaniak and Julia Dauksza (Poland). They also thank colleagues Luuk Sengers and De Groene Amsterdamer for sharing information from their parallel investigation in the Netherlands.