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Scenarios

Two principal scenarios were chosen for the Modulation study, each subject to a number of sensitivity analyses (not further dwelt upon in this article). These are set out in Box 15.1.

Box 15.1. The two principal scenarios of the Modulation study Baseline scenario

Compulsory modulation as agreed as part of the 2003 CAP reform (Article 10 of Council Regulation 1782/2003).

  • • Franchise: EUR 5 000.
  • • Modulation rate: 5%.
  • • EC distribution key: current EAFRD (minimum 80% in member states, 90% in Germany).
  • • RDP allocation: current EAFRD.
  • • Member states co-financing: current EAFRD.

Sensitivity analysis (around the baseline)

Modulation rate:

  • (a) 0%
  • (b) 20%

Franchise:

  • (a) EUR 0
  • (b) EUR 10 000

Health Check scenario

With targeting to “New Challenges.”

  • • Franchise: EUR 5 000.
  • • Modulation rate = 13% (banded, or ‘progressive’, modulation).
  • • European Community distribution key:
    • - 1st 5% = current EAFRD (minimum 80% in member states, 90% in Germany).
    • - Additional compulsory modulation stays within member states.
  • • RDP allocation: targeted to New Challenges.
  • • Member states co-financing: current EAFRD.

Sensitivity Analysis (around Health Check)

  • • RDP allocation: proportional to current EAFRD.
  • • Member states co-financing: 0%.

The first principal scenario, the ‘baseline scenario’, is the current system of compulsory modulation, in which there is a 5% cut of Pillar 1 direct payments that applies to beneficiaries receiving more than EUR 5 000 per year. The proportion of funds returned to the member states are calculated according to an allocation key, and are further allocated between the Pillar 2 measures for each member state in the same way as in their individual parts of the European Agricultural Fund for Rural Development (EAFRD) budget.

The second principal scenario, the “Health Check scenario,” relates to the Commission’s proposals for higher rates of modulation as set out in the Commission Communication of 20 May 2008 concerning the “Health Check” of the CAP. This scenario consists of an additional 8% rate of compulsory modulation, introduced progressively between 2009 and 2012, and further increased according to the level of Pillar 1 direct payments received, as set out in Table 3. This additional modulation is then distributed to measures that can meet the “New Challenges” indicated in the Commission’s Proposal for a Council Regulation amending Regulation (EC) No. 1968/2005 on support for rural development by the EAFRD5 of 20 May 2008, specifically Annex II - Indicative types of operations related to priorities referred to in Article 16a. This distribution pattern is weighted according to an interpretation of the proposal, and the same proportional allocations of the additional funds are made for each member state.

 
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