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European Court of Auditors

EU policies are unable to ensure farmers don’t overuse water

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EU policies are unable to ensure farmers use water sustainably, according to a special report published today by the European Court of Auditors (ECA). The impact of agriculture on water resources is major and undeniable. But farmers benefit from too many exemptions from EU water policy that hinder efforts to ensure sound water use. In addition, the EU’s agricultural policy promotes and too often supports greater rather than more efficient water use.

Farmers are major consumers of freshwater: agriculture accounts for a quarter of all water abstraction in the EU. Agricultural activity affects both water quality (e.g. pollution from fertilisers or pesticides) and water quantity. The EU’s current approach to managing water goes back to the 2000 Water Framework Directive (WFD), which introduced policies relating to sustainable water use. It set a target of achieving good quantitative status for all water bodies across the EU. The common agricultural policy (CAP) also plays an important role in water sustainability. It offers tools that can help reduce pressures on water resources, such as linking payments to greener practices and financing more efficient irrigation infrastructure.

“Water is a limited resource, and the future of EU agriculture largely depends on how efficiently and sustainably farmers use it,” said Joëlle Elvinger, the member of the European Court of Auditors responsible for the report. “So far, though, EU policies have not helped enough to reduce the impact of agriculture on water resources.”

The WFD provides safeguards against unsustainable water use. But Member States grant numerous exemptions to agriculture, allowing water abstraction. The auditors found these exemptions are granted generously to farmers, including in water-stressed regions. At the same time, some national authorities rarely apply sanctions to illegal water use that they detect. The WFD also requires member states to embrace the polluter-pays principle. But water remains cheaper when used for agriculture, and many Member States still do not recover the cost for water services in agriculture as they do in other sectors. Farmers are often not billed for the actual volume of water they use, the auditors point out.

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Under the CAP, EU aid to farmers is mostly not contingent upon compliance with obligations encouraging efficient water use. Some payments support water-intensive crops, such as rice, nuts, fruit and vegetables, without geographical restriction, meaning also in water-stressed areas. And the CAP cross-compliance mechanism (i.e. payments conditional on certain environmental obligations) has barely any effect, the auditors note. Requirements do not apply to all farmers and, in any case, Member States do not carry out enough controls and proper checks to really discourage the unsustainable use of water.

Apart from direct payments, the CAP also funds investments by farmers or agricultural practices such as water retention measures. These can have a positive impact on water use. But farmers rarely take advantage of this opportunity and rural development programmes seldom support water reuse infrastructure. Modernising existing irrigation systems also does not always entail water savings, since the saved water may be redirected to more water-intensive crops or irrigation across a larger area. Similarly, installing new infrastructure that extends the irrigated area is likely to increase the pressure on freshwater resources. Overall, the EU has certainly funded farms and projects that undermine the sustainable use of water, the auditors say.

Background information

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Special report 20/2021: “Sustainable water use in agriculture: CAP funds more likely to promote greater rather than more efficient water use” is available on the ECA website in 23 EU languages.

On related topics, the ECA recently issued reports on agriculture and climate change, biodiversity on farmland, pesticide use and the polluter-pays principle. Beginning of October, it will also publish a report on biodiversity in EU forests.

The ECA presents its special reports to the European Parliament and the Council of the EU, as well as to other interested parties such as national parliaments, industry stakeholders and representatives of civil society. The vast majority of the recommendations made in the reports are put into practice.

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European Court of Auditors

ECA report on regularity of spending in EU cohesion policy

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Today (23 November), the European Court of Auditors (ECA) will publish a special report on the EU’s reporting on the legality and regularity of cohesion spending.

Cohesion policy represents one of the largest parts of the EU budget, with a €373 billion budget in the 2021-2027 period. But expenditure under this policy area is considered to be high-risk. A relevant and reliable estimated level of error in Cohesion policy is therefore an essential part of the European Commission’s efforts to monitor whether spending in this policy area was regular and properly accounted for. The error rate is also the basis for corrective actions which may subsequently need to be taken, making accuracy crucial.

Regularity information in Cohesion policy is based on the work of member state audit authorities, and the Commission’s subsequent verification and assessment of their work and results.

The EU auditors have examined the European Commission’s work of the on the member states’ annual assurance packages. This work provides the basis for the validation of the annual residual error rates reported by the audit authorities. In particular, the auditors have analysed the reliability of the regularity information provided in the Commission’s annual activity reports and its annual management and performance report (AMPR).

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Through their recommendations, the EU auditors aim to improve the functioning of the current management and control system.

The report and press release will be published on the ECA website at 17h CET today.

The ECA member responsible for this report is Tony Murphy.

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Environment

EU forestry strategy: Positive but limited results

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Although forest cover in the EU has grown in the past 30 years, the condition of those forests is deteriorating. Sustainable management practices are key to maintaining biodiversity and addressing climate change in forests. Taking stock of the EU’s 2014-2020 forestry strategy and of key EU policies in the field, a special report from the European Court of Auditors (ECA) points out that the European Commission could have taken stronger action to protect EU forests, in areas where the EU is fully competent to act. For instance, more could be done to combat illegal logging and to improve the focus of rural development forestry measures on biodiversity and climate change. Funding for forested areas from the EU budget is much lower than funding for agriculture, even though the area of land covered by forests and the area used for agriculture are almost the same.

EU funding for forestry represents less than 1 % of the CAP budget; it is focused on support for conservation measures and support for planting and restoring woodland. 90 % of EU forestry financing is channelled through the European Agricultural Fund for Rural Development (EAFRD). “Forests are multifunctional, serving environmental, economic and social purposes, and setting ecological boundaries, for example on the use of forests for energy, is ongoing,” said Samo Jereb, the member of the European Court of Auditors responsible for the report.

“Forests can act as important carbon sinks and help us reduce the effects of climate change, such as forest fires, storms, droughts, and decreasing biodiversity, but only if they are in a good state. It is the responsibility of the European Commission and the Member States to step up actions to ensure resilient forests.”

The auditors found that key EU policies do address biodiversity and climate change in EU forests, but that their impact is limited. For instance, although the EU Timber Regulation prohibits the marketing of illegally harvested timber and timber products in the EU, illegal logging still occurs. There are weaknesses in member states’ enforcement of the Regulation, and effective checks are often missing, also on the part of the Commission.

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Remote sensing (Earth observation data, maps and geo-tagged photographs) offers great potential for cost-effective monitoring over large areas, but the Commission does not use it consistently. 2 EN The EU has adopted several strategies to address the poor biodiversity and conservation status of EU forests. However, the auditors found that the quality of the conservation measures for these forest habitats continues to be problematic.

Despite 85% of the assessments of the protected habitats indicating bad or poor conservation status, most conservation measures aim only to maintain rather than to restore status. In some afforestation projects, the auditors noted clusters of monoculture; mixing diverse species would have improved biodiversity and resilience against storms, droughts and pests. The auditors conclude that rural development measures have had little impact on forest biodiversity and resilience to climate change, in part because of the modest spending on forests (3% of all rural development spending in practice) and weaknesses in measure design.

The mere existence of a forest management plan – a condition for receiving EAFRD funding – provides little assurance that funding will be directed to environmentally sustainable activities. Furthermore, the common EU monitoring system does not measure the effects of forestry measures on biodiversit y or climate change. Background information The EU has endorsed international agreements (the UN Convention on Biological Diversity and the 2030 Agenda for Sustainable Development with its Sustainable Development Goal 15) and therefore needs to respect a number of targets directly related to biodiversity in forests.

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In addition, the EU treaties call upon the EU to work for the sustainable development of Europe. However, the 2020 State of Europe’s Forests report concluded that the condition of European forests is generally deteriorating; other reports and data from Member States confirm that the conservation status of EU forests is in decline. The Commission unveiled its new EU Forest Strategy in July 2021.

Special report 21/2021: EU funding for biodiversity and climate change in EU forests: positive but limited results

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European Court of Auditors

EU 'not doing enough to stimulate sustainable investments'

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The transition to a net-zero emission economy will require significant private and public investment, but the EU is not doing enough to channel money into sustainable activities. That is the conclusion of a special report by the European Court of Auditors (ECA) that calls for more consistent EU action. The European Commission has rightly focused on increasing transparency in the market, but the auditors criticize the lack of accompanying measures to address the environmental and social cost of unsustainable economic activities. According to the report, the Commission needs to apply consistent criteria to determine the sustainability of EU budget investments and better target efforts to generate sustainable investment opportunities.

“The EU’s actions on sustainable finance will not be fully effective unless additional measures are taken to price in the environmental and social costs of unsustainable activities,” said Eva Lindström, the member of the European Court of Auditors responsible for the report. “Unsustainable business is still too profitable. The Commission has done a lot to make this unsustainability transparent, but this underlying problem still needs to be addressed.”

The main issues are that the market fails to price in the negative environmental and social effects of unsustainable activities, and that there is a general lack of transparency on what is sustainable. The Commission’s 2018 Sustainable Finance Action Plan addressed these issues only partially, the auditors say; many measures suffered delays and require further steps to become operational. The auditors highlight the need to fully implement the action plan and underline the importance of completing the common classification system for sustainable activities (the EU Taxonomy) based on scientific criteria. They recommend additional measures to ensure that the pricing of greenhouse gas emissions better reflects their environmental cost.

The report also highlights the important role the European Investment Bank (EIB) plays in sustainable finance. As regards EU financial support managed by the EIB, the auditors found that support provided by the European Fund for Strategic Investments (EFSI) did not focus on where sustainable investment is most needed, in particular in central and eastern Europe. In addition, only a very small part was spent on adaptation to climate change. To change this, they recommend that the Commission, in co-operation with member states, should develop a sustainable project pipeline.

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Finally, the auditors also found that the EU budget has not fully followed sustainable finance good practice and lacks consistent science-based criteria to avoid significant harm to the environment. Only in the InvestEU-programme are investments assessed against social and environmental standards comparable to those used by the EIB. This brings with it the risk that insufficiently strict or inconsistent criteria may be used to determine the environmental and social sustainability of the same activities funded by different EU programmes, including the EU’s recovery fund. Furthermore, many of the criteria used for tracking the EU budget’s contribution to climate objectives are not as strict and science-based as those developed for the EU Taxonomy. The auditors therefore recommend that the “do no significant harm” principle should be applied consistently across the EU budget, as should the EU Taxonomy criteria.

The audit report will feed into the implementation of the 2021 Strategy for Financing the Transition to a Sustainable Economy, published by the Commission in early July.

Background information

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Many economic activities in the EU are still carbon-intensive. To achieve the 55 % greenhouse gas emissions reduction target by 2030 will require additional annual investment of around €350 billion in the energy system alone, according to the Commission. Experts have estimated that reaching net-zero emissions in the EU by 2050 will require total capital expenditure of around €1 trillion per year in the 2021-2050 period. Of that amount, EU financial support could currently help provide over €200bn per year in the 2021-2027 period. This shows how big the investment gap is, and demonstrates that public funds alone will not be enough to achieve the above goals. Under the 2021-2027 Multiannual Financial Framework, the EU plans to support public and private investment by allocating at least 30 % of the EU budget to climate action. In addition, member states will have to allocate at least 37 % of the funds they receive under the Recovery and Resilience Facility (“the EU’s recovery fund”) to supporting climate action. InvestEU, which succeeds EFSI, is the EIB’s new investment support mechanism to mobilise private investment in projects of strategic importance for the EU. At the moment, the reporting arrangements for InvestEU do not include the actual climate and environmental results of the projects underlying the financial operations and do not disclose the amounts of the InvestEU financing which is tracked in accordance with the EU Taxonomy criteria.

Special report 22/2021: 'Sustainable finance: More consistent EU action needed to redirect finance towards sustainable investment' is available on the ECA website.

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