Evaluation of the European Green Deal Policy in the Context of Agricultural Support Payments in Latvia

Abstract

The European Green Deal policy will significantly affect the resilience and development of agriculture, which will be determined by the 2021–2027 Common Agricultural Policy (CAP) reforms, entering into force in 2023. Therefore, the European Commission determines that at least 25% of the direct payments should be earmarked for eco-schemes, while 35% of the funding for rural development should be allocated to climate and environmental support measures. Support payments constitute a significant part of farmers’ income and guide their decision-making for production development. Therefore, the goal of the research was set by analysing the existing CAP support payment system in 2019 to determine the possible impact of the reform envisaged for 2023 on farms of various specialisations and sizes in Latvia. The analysis revealed that in Latvia in 2019, 83% of the total number of farms received support, the amount of the support was EUR 5616 per year per farm on average, and within the Single Area Payment Scheme (SAPS), the support was higher by 24%. Among the funding recipient farms, the support accounted for 28% of the farms’ income, calculated per 1 hectare. The detailed calculations carried out indicate that the possible base support payments as a result of the CAP 2023 reform are expected to be higher specifically in cattle breeding and dairy farming, which may contribute to even greater greenhouse gas (GHG) emissions in the future and thus reduce the likelihood of achieving the goals of the European Green Deal policy.

1. Introduction

The European Commission (EC), based on the European Green Deal (2019) policy and the European Recovery Plan (2021), intends to invest 30% of the budget in climate-related programmes, projects and initiatives, which clearly demonstrates Europe’s commitment to becoming the first climate-neutral region by 2050 [1,2,3]. The aim of the European Green Deal is to minimise the negative impact on the environment while maintaining the international competitiveness of the European Union (EU) and use effective instruments for decarbonisation of the economy in the EU Member States [1,4]. The green growth strategy defines five sectors of the national economy, most of which are related to energy development: industry, agriculture, transport, service, and other sectors [5]. This policy will also affect the development of agriculture, because in the EU Member States, in order to achieve safer and more sustainable and resilient agriculture within the framework of the European Green Deal policy, policymakers will have to use the legal framework of the new CAP to introduce new support measures at the national level [6]. However, two strategies will have the greatest impact on the agricultural sector: (1) Farm to Fork Strategy; that is, a system for creating fair, healthy, and environmentally friendly food; (2) Biodiversity Strategy for 2030, which provides for the protection and restoration of ecosystems [1,7]. Agriculture and rural areas thus play a central role in the Green Deal policy, and the CAP is intended to be a key element in achieving the transition from sustainability to environmental compliance [8]. Farmers across the EU have benefitted from the CAP since its establishment in 1962. It is the longest-running EU policy—accounting for more than a third of its total budget—implemented in all Member States, and still amounts to almost EUR 60 billion per year [9,10]. The CAP has been subject to reforms several times. This demonstrates that the CAP is evolving to meet new economic, societal, and environmental needs [11,12]. It offers stable support to farmers, helping to provide them with a standard of living that is in line with other countries’, and defines the conditions that allow the agricultural sector to fulfil its important functions in society [13,14]. Policymakers need to understand how current policies simultaneously affect agricultural productivity, growth, and environmental sustainability [15,16]. By 2030, the EU must introduce regulatory and other instruments that not only reduce greenhouse gas emissions from agriculture, but also increase carbon sequestration, increase the sustainability of agricultural production, improve biodiversity in rural areas, and help ensure quality food for the growing world population [17]. The EU 2021–2027 CAP has great potential to contribute to sustainable development, but changes are needed to unlock this potential [18,19,20,21]. In general, payments for environmental services are not a panacea, but should be part of a policy portfolio to choose from [22]. The new CAP provides Member States with a wide range of choices between different measures. The optimal policy mix will depend on income support and environmental balancing activities that reflect policy priorities [23]. In 2021–2027, for the first time, two pillars of the CAP will work together with a real, complementary approach according to one strategic framework, focusing on three general objectives, nine specific objectives, and one horizontal objective: agricultural knowledge and information systems [24]. Direct payments are the most heavily funded EU support scheme for agriculture, yet research on their impact on the resilience of the sector is limited. These payments have direct and strong indirect effects on resilience, mainly by changing and improving the financial capabilities of farms, as well as farmers’ attitudes and behaviour. [25]. In addition, the European Commission foresees that 25% of direct payments in 2021–2027 will be directed to eco-schemes to provide stronger incentives for climate and environmentally friendly agricultural practices. Rural development, the so-called “second pillar” of the CAP, will devote most of its resources to measures related to climate and the environment [26]. In Pillar II, at least 35% of the budget will be allocated to climate support measures, environment, biodiversity, and animal welfare. In farms with arable land, at least 3% will have to be set aside for unproductive land, thus providing motivation to reach 7% of the managed area for biodiversity [9,27]. According to Chatellier V. et al. (2021), income of French farmers in 2010–2019 was different, which was determined by the type, size, and location of production. This illustrates the dependence of rural farms on different types of direct CAP support [28]. Pawłowska A. and Grochowska R. (2021) admit that the gradual development of priorities and, therefore, the CAP and its instruments to promote environmental issues have so far had a rather negative impact on the income of Polish farms. This support may have a low motivational function and did not lead to changes in farmers’ decisions about production standards. Thus, it is necessary to continue looking for CAP instruments to more effectively implement the European Green Deal in terms of sustainable development (economic, social, and environmental) in EU agricultural development [29]. Maican S.S. et al. (2021) emphasise that the CAP direct payment scheme is designed to facilitate the sustainable management of natural resources and to combat climate change. Moreover, this effect is less significant at the regional level than the local level (at the level of the respective farm) [30].

Therefore, the background of this research is analyses of the significance and effect of CAP reforms, especially support payments, in ensuring and developing the resilience of farms in the future.

The goal of the research was set to determine the possible impact of the reform envisaged for 2023 on farms of various specialisations and sizes in Latvia by analysing the existing CAP support payment system in 2019. To achieve the goal, two research tasks were defined: (1) to evaluate the support payments of the 2015 CAP reform in Latvia in 2019 and (2) to analyse the possible impact of the CAP support payment reform on farms of various specialisations and sizes in Latvia in 2023. A hypothesis was put forward for the research that in the application of the CAP reform which will be introduced from 2023, contradictions between support to small farms, employment promotion, GHG reduction, and efficiency promotion in agriculture could arise.

Primarily, the research presents an analysis of the direct payments in force in 2019 and the support system established by the Rural Development Programme for 2014–2020 for environmental improvement in Latvia. The information contained in the Integrated Administration and Control System of the Rural Support Service (RSS), which ensures the administration of all support payments for agriculture and rural development in Latvia, was used. On the other hand, based on the actual situation in the farms having received support payments in 2019, the impact of the direct payments envisaged in the draft strategic plan of Latvia’s Common Agricultural Policy for 2023–2027 and of the environmental payments envisaged for rural development in 2023 in the four main specialisation groups of farms (cultivation of arable crops, dairy farming, cattle breeding, and vegetable cultivation, which in 2020 accounted for 75% of the total value of final production of agricultural goods (at base prices)) in Latvia [31] was modelled. In addition, detailed calculations were made for farms of different sizes in each farm specialisation group.

2. Materials and Methods

In order to be able to compare the support payments received by Latvian farms with those that could be granted in the period 2023–2027, based on the CAP reformed within the framework of the European Green Deal and the first offer for farmers developed by the Ministry of Agriculture of Latvia, extensive discussions were held with interested stakeholders in the spring of 2021 regarding the application of the EU vision, as contradictions arose between supporting small farms, promoting employment in rural areas, reducing GHG emissions, and promoting efficiency in agriculture.

The research used the database of the RSS Integrated Administration and Control System on the support payments actually received for each farm in 2019. When the study was conducted in 2021, newer data were not available, which constituted a limitation of the study. Thus, a database [32] containing information on 58,644 beneficiaries (n_x = 58,644) (rows in a table) was received from the RSS. For each beneficiary, it was possible to analyse 210 variables arranged in columns (n_y = 210). A total of 1954 farms that only received Natura 2000 support for forest areas were excluded from the total number of beneficiaries because they did not have agricultural land. Thus, in order to establish the support received by the participants of the two main support schemes—SAPS and the Small Farmers Scheme (SFS)—using the managed areas and other indicators, detailed analysis of 56,690 farms was carried out, assessing the indicators related to support payments in farms in Latvia (Task 1). In 2015, when the reform of direct payments for 2014–2020 was introduced, each farmer had to choose which support scheme to participate in. This occurred because, when applying for the SAPS, which is the basic and most comprehensive support payment for agricultural land managed in good agricultural condition, it was also possible to receive a Greening Payment (GP), support payment for Young Farmers (YFP), and production-related support (Voluntary Coupled Support, hereinafter referred to as “VCS”). In order to reduce the administrative costs related to the management and control of direct payments, a simple and special scheme for small farmers was introduced in Latvia from 2015. The payment of the SFS was a fixed payment of EUR 500 per year per farm and replaced all other direct payment schemes [33].

An in-depth analysis of the main indicators was performed by calculating various statistical indicators, namely, the mean, which refers to the arithmetic average; the median, which better represents typical data distribution, shows the sorted middle point in the data set, and removes extreme values from the dataset; and the standard deviation (Stdev), which determines how widely the data are distributed around the mean or how much a group’s data deviate from the arithmetic mean. The distribution, expressed as a percentage, of the standard deviation and of the average arithmetic mean was determined, which characterises how closely or, on the contrary, widely the data are distributed around the average. These statistical indicators were analysed because the mean and the median are the main indicators characterising development trends, and the standard deviation indicates the distribution of data around the average, which provides insight into the analysis of large data sets. A chi-square test was also performed to determine whether there were significant differences between two sets of data, alongside correlation analysis, which examines the strength of the relationship between two indicators.

For a further detailed analysis of possible changes in the CAP direct payments and environmental support for rural development under the influence of the European Green Deal (Task 2), data on farms in four main types of specialisation were used—cultivation of arable crops (wheat, rapeseed), dairy production, cattle breeding, and vegetable cultivation—because in 2020 these sectors contributed to 3/4 of the total value of the final production of agricultural goods (at base prices) [31].

The parameters characterising the farm, which had to be fulfilled simultaneously when selecting certain specialisation farms in the common database, are provided in

Table 1. Criteria for the selection of farms necessary for detailed analysis in the main specialisation groups.

Indicators/Specialisation Groups	Arable Crops	Dairy Production	Cattle Breeding	Vegetable Cultivation
The number of selected farms in the group	997	699	377	36
Revenue from agriculture, EUR	>0	>0	>0	>0
Permanent grassland of the total area of the farm, %	<5	n.a. *	n.a. *	n.a. *
Relevance of arable crops to the total area of the farm	>70%	<0.7 ha per dairy cow	< 0.5 ha per livestock unit	<10 ha
VCS ** for vegetables, ha	=0	=0	=0	>3 ha
VCS for starch potatoes and seed potatoes, ha	=0	=0	=0	=0
Organic farm support, ha	=0	=0	=0	=0
VCS for dairy cows, number	=0	>10	=0	=0
VCS for cattle, number	=0	=0	>10	=0
VCS for goats, sheep, number	=0	=0	=0	=0

* N.a.—not applicable; ** VCS—Voluntary Coupled Support.

. The purpose was to select highly specialized farms, to evaluate the impact on different sectors of agriculture in a straightforward way. In total, 997 arable crop farms, 699 dairy farms, 377 cattle breeding farms, and 36 highly specialised vegetable cultivation farms were selected for further detailed analysis. The total number of farms that corresponded to the specified direction of specialisation was 2109 or 3.7% of the total number of beneficiaries of direct payments in Latvia in 2019, which points towards a small number of narrowly specialised farms, and from this it can be concluded that farms in Latvia have chosen multi-sector diversified production.

Table 1 shows that several indicators must be met in all specialisation groups of farms, because the farms’ income from agricultural activity must be positive (>0); these are not organic farms, they do not grow potatoes or breed sheep and goats. On the other hand, the specific criteria are: arable crop farms are dominated by arable crop cultivation (>70%) of the total area and a minimum share of permanent grassland (<5%), dairy farms should have at least 10 cows with the area of arable crops not exceeding 0.7 ha per cow, cattle breeding farms should have at least 10 cattle with the area of arable crops not exceeding 0.5 ha per cattle, and vegetable farms should have at least 3 ha of vegetables with the area of arable crops not exceeding 10 ha. GHG emissions in various agricultural sectors were calculated using the Intergovernmental Panel on Climate Change methodology used for GHG emissions inventories (National Inventory Report) [34].

To assess the impact of the CAP direct payment system reformed as a result of the European Green Deal on farms of different specialisation groups, actual types of support payments for 2014–2022 and rates per unit in 2019 were compared to possible support payments for 2023–2027 in 2023 (information as of 1 May 2021) both from Pillar I of the CAP (EAGF funding) and agri-environment payments intended for rural development (EAFRD funding).

Table 2. Types of support used in the calculations, their rates in Latvia in 2019, and forecast for 2023 (as of 20 May 2021).

Types of Support	Source of Financing	Rate in 2019	Rate in 2023
SAPS support/Income Support, EUR ha−1	EAGF *	83.73	82.00
Redistributive Income Support Payment, EUR ha−1	EAGF	x	50.00
Greening Payment, EUR ha−1	EAGF	48.12	x
Eco-schemes:
-  nitrogen-fixing crops, EUR ha−1	EAGF	x	112.00
-  preservation of permanent grassland, EUR ha−1	EAGF	x	50.00
-  undersown grassland, EUR ha−1	EAGF	x	59.00
-  stubble field in the winter period, EUR ha−1	EAGF	x	28.00
-  minimum tillage, EUR ha−1	EAGF	x	10.00–20.00
-  precision fertilisation and use of plant protection products, EUR ha−1	EAGF	x	16.00
Young Farmers Support, EUR ha−1	EAGF	49.45	30.00
Small Farmers Support, EUR farm−1	EAGF	500.00	500.00
VCS/Coupled Income Support for protein crops, EUR ha−1	EAGF	75.83	82.00
VCS/Coupled Income Support for vegetables, EUR ha−1	EAGF	502.40	575.00
VCS/Coupled Income Support for barley, EUR ha−1	EAGF	45.56	38.00
VCS/Coupled Income Support for fruits and berries, EUR ha−1	EAGF	141.41	232.00
VCS/Coupled Income Support for dairy cows, EUR ha−1	EAGF	210.24	241.00
VCS/Coupled Income Support for cattle, EUR ha−1	EAGF	108.80	120.00
Stubble Field during the Winter Period, EUR ha−1	EAFRD **	87.00	x
Application of Environmentally Friendly Methods in horticulture (vegetables), EUR ha−1	EAFRD	74.00	105.00
Application of Environmentally Friendly Methods in horticulture (apple trees, pear trees, etc.), EUR ha−1	EAFRD	364.00	364.00
Ensuring Welfare Requirements for cattle, EUR piece−1	EAFRD	x	86.00

* European Agricultural Guarantee Fund; ** European Agricultural Fund for Rural Development.

describes the main changes in CAP policy. From 2023, SAPS support will be replaced by sustainability-promoting income support (Income Support) and redistributive income payment; in addition, a payment will be received if the farm is in a parish where the duration of the vegetation period is shorter than 195 days and the quality rating of agricultural land is less than 38 points (average indicator in Latvia). Greening Payments will be replaced by six eco-schemes. Member States may choose to implement one or more eco-schemes, but farmers will have the option to participate in the schemes or not. The conditions for granting payment participation in the eco-scheme depend on the implementation of the relevant practice on the farm [1]. VCS will be replaced by Coupled Income Support; SFS and YFP support will be continued, only the conditions for their receipt will be slightly changed. Funding for rural development in the field of agri-environment will be expanded.

When conducting a case study at the level of individual farms (by randomly selecting at least four farms of different sizes in each selected specialisation group,

Table 3. Criteria for determining the size of farms in different specialisation groups.

Farm Size	Arable Crops, ha	Dairy Production Dairy Cows, Number	Cattle Breeding Number of Cattle	Vegetable Cultivation, ha
Small	<50	<20	<20	<20
Average small	51–100	21–80	21–80 *	21–80
Average large	101–300	81–200	21–80 **	81–110
Large	>301	>201	>81	>111

* Narrowly specialised farm in cattle breeding; ** in addition to cattle breeding, the farm has a diversified crop structure.

), the possible conditions for receiving the new support in the relevant support area in 2023 were considered. Breakdown of farms in the particular sizes is based on the fact that this type of division is commonly used in policy discussions.

3. Results

This chapter will reflect the results of the research at two levels according to the set tasks: (1) the general description of support and farms in Latvia (Section 3.1) and (2) the results of the detailed case study analysis for support payments in 2019 and the forecast for 2023 in four main farm specialisation types and size groups (Section 3.2, Section 3.3, Section 3.4, Section 3.5 and Section 3.6).

3.1. Description of Farms and Support in Latvia

According to the data of the Central Statistical Bureau on the agricultural census in 2020 (the previous one was carried out in 2010), in Latvia there were 69,000 active farms that managed 1.97 million ha of agricultural land, or 28.5 ha per farm on average [35], which means that almost 57,000 farms (83% of the total number) that managed 1.74 million ha (88% of the total used agricultural land; the average area applied for by the beneficiaries was 31 ha, or 2.5 ha more than the average in Latvia) had applied for support in 2019. Thus, a significant number of farms that manage a slightly larger area of agricultural land than the average in Latvia apply for different support payments (

Table 4. Description of farms and main types of support in Latvia in 2019 (as of 20 May 2021).

Indicators, Unit of Measurement	All Beneficiaries	SAPS		SFS
		Beneficiaries	% to Total	Beneficiaries	% to Total
Number of farms	56,690	45,007	79	11,683	21
Incl. legal entities	11,459	11,129	97	330	3
Incl. natural persons	45,231	33,878	75	11,353	25
Area applied for support, ha	1,740,076	1,711,426	98	28,650	2
Average area applied per farm (mean), ha	31	38	123	2	6
Support payments received in total, thousand EUR	318,361	312,527	98	5834	2
Received support payments on average per farm (mean), EUR	5616	6941	124	499	9
Support payments received per ha, EUR	183	183	100	204	111
Allocated diesel fuel *, number of farms	16,912	16,653	98	259	2
Allocated diesel fuel *, thousand litres	146,528	146,460	100	68	0
Allocated diesel fuel* on average per farm (mean), litres	8664	8795	102	263	3
Allocated diesel fuel, ha	1,465,428	1,464,721	100	707	0
Allocated diesel fuel * on average per farm (mean), ha	100	100	100	96	96
Farms with income from agriculture, number	16,542	16,290	98	252	2
Total revenue from agriculture, thousand EUR	955,285	954,504	100	781	0
Average income from agriculture per farm (mean), EUR	57,749	58,594	101	3100	5
Agricultural income of farms that received diesel fuel *, average per ha, EUR ha−1	648	648	100	1069	165

* Marked diesel fuel with a reduced excise duty rate.

).

Of the total number of beneficiaries in 2019, 79% had applied for the SAPS (Table 4), which includes several types of support payments, such as YFS, GS, and VCS, which are CAP Pillar I support payments, while simultaneously applying for environmental payments of the Rural Development Programme for 2014–2020. The area applied for support by the beneficiaries of the SAPS was 38 ha on average per farm, which is 23% higher than the national average and is 19 times more than that of SFS beneficiaries, which comprised 21% of the total number of beneficiaries. Of the total number of beneficiaries, only 20% were legal entities (an established farm registered in the Register of Enterprises) and 80% operated as natural persons (without registering a farm). Moreover, among SFS beneficiaries, only 3% of farms were registered as legal entities. Out of the total area that support was applied for, 98% was managed by farms of the beneficiaries of the SAPS, and the support received corresponds to the area (98% of the total support paid out), while in the SFS support scheme, 2% of the area has been paid corresponding funding (2%) of the total support funding in 2019. However, when calculating the intensity of the support per 1 ha, it is higher in the farms receiving SFS support, as these have received 11% more for each ha than the farms that applied for the SAPS.

To assess the importance of farms producing and operating on the market, it is necessary to analyse the farms receiving diesel fuel, because when applying for support, farmers can receive marked diesel fuel with a reduced excise duty rate, which is used to produce agricultural products, according to the area of agricultural land they managed and declared for support payments [36]. Thus, it can be concluded that agricultural products are produced and sold by only 30% of the total number of beneficiaries, of which only 2% are small farms that apply for SFS support. Thus, a total of 146,500 tonnes of diesel fuel with a minimum excise tax rate was allocated in 2019, and for this, farmers have received EUR 46.3 million as excise tax relief in addition to support payments, because in 2019 the standard excise tax rate for diesel fuel in Latvia was EUR 372 per 1000 litres, but farmers only had to pay EUR 55.80 for 1000 litres [37]. All the beneficiaries were allocated marked diesel fuel with a reduced excise duty rate for 84% of the total number of declared ha, and on average one farm received 8664 litres, or 100 litres per ha of declared area.

In order for farmers to receive marked diesel fuel with a reduced excise tax rate, they had to ensure a certain level of income per ha—at least EUR 210 in organic farms and at least EUR 350 in other farms [36]. Thus, conclusions can be drawn about the income level of the farms that received marked diesel fuel for the production of agricultural products. The average income of all beneficiaries per farm was EUR 57,749, or EUR 648 per hectare declared for aid.

In Latvia, in 2019, the most significant payments for the beneficiaries of the SAPS were SAPS payments, which totalled 45%, greening support constituted 26% for SAPS recipients, VCS in livestock farming constituted 8%, VCS in crop cultivation constituted 6% (not reflected in the table), YFP constituted 2% (which are CAP Pillar I support payments), and 13% were for organic farm and agri-environment support from CAP Pillar II (

Table 5. Description of SAPS-participant farms and types of support received in Latvia in 2019 (as of 20 May 2021).

Indicators, Unit of Measurement	SAPS Beneficiaries
	Total	On Average per Farm (Mean)	On Average per ha/Animal (Mean)	% of the Total
SAPS support, EUR	141,374,509	3141	183	45
Greening Payments, number of farms	44,998	x	x	100
Greening Payments, EUR	80,924,389	1798	47	26
Greening Payments, ha	1,706,930	38	x	100
YFP support payments, number of farms	3656	x	x	8
YFP support payments, EUR	5,354,620	1465	49	2
YFP support payments, ha	110,363	30	x	1
VCS for dairy cows, number of farms	3884	x	x	8
VCS for dairy cows, EUR	19,745,058	5084	206	6
VCS for dairy cows, number	95,831	25	x	69 *
VCS for cattle, number of farms	4163	x	x	9
VCS for cattle, EUR	6,475,766	1556	106	2
VCS for cattle, number	61,162	15	x	73 *
VCS for ewes, number of farms	734	x	x	2
VCS for ewes, EUR	617,994	842	27	0
VCS for ewes, number	22,584	31	x	36 *
VCS for female goats, number of farms	184	x	x	0
VCS for female goats, EUR	119,191	648	46	0
VCS for female goats, number	2612	14	x	32 *
Organic farms, number	4219	x	x	9
Organic farm support, EUR	27,848,887	6601	99	9
Organic farm land, ha	281,844	67	x	16
Agri-environment payments, number of farms	7831	x	x	17
Agri-environment payments, EUR	13,982,862	1786	89	4
Agri-environment payments, ha	156,538	20	x	9

* At the end of 2019 in Latvia—dairy cows, 138,400; beef cattle, 84,200; ewes, 61,900; female goats, 8200 [39].

). If SAPS support per ha was EUR 83, organic farms received in addition EUR 99 ha⁻¹, while beneficiaries of agri-environment support received EUR 89 ha⁻¹. In livestock farming, VCS for dairy cows is of significant importance, as it gives the opportunity to receive an additional EUR 206 per animal, which was received for 69% of the total number of cows in the country, while VCS for cattle was EUR 106 per animal, which was received for 73% of the number of beef cattle. An amount of 3656 farms, at an average of 30 ha, have received YFP support. However, studies show that there is a need to recommend that sector policies provide additional support for young people to continue working in agriculture and develop this business. Investments are also needed to increase human and social capital [38].

Calculating on average per farm, organic farms received the most support—EUR 6601—which was 2.2 times more than for SAPS beneficiaries on average; farms specialising in dairy farming received EUR 5083, while sheep and goat breeding farms received the least, considering the small number of relevant animals.

An in-depth analysis of the main indicators was performed (

Table 6. Description of the main types of support and farms according to their legal status in Latvia in 2019.

Indicators	General Profile	Legal Entities	Natural Persons	SAPS	SFS	YFP	GP
Support payments received, thousand EUR	318,361	240,206	78,155	141,375	5834	27,580	227,643
Median, EUR	984	7098	738	523	500	2730	1240
Stdev, EUR	22,043	45,384	3520	10,185	6	14,099	18,222
Stdev/mean, %	393	217	204	422	1	187	360
Max, EUR	1,104,788	1,104,788	124,846	617,953	500	286,950	973,057
Area declared for support, ha	1,740,076	1,298,551	441,525	1,711,426	28,650	171,401	1,711,285
Median, ha	7	37	5	6	2	15	9
Stdev, ha	125	261	17	124	1	101	140
Stdev/mean, %	403	231	170	423	50	215	368
Max, ha	7487	7487	757	7487	10	2174	7487
Diesel fuel *, thousand litres	146,528	126,307	20,220	146,459	68	15,148	146,453
Median, litres	2593	5049	1608	2667	222	3885	2668
Stdev, litres	22,041	29,066	3199	22,194	168	13,288	22,196
Stdev/mean, %	260	211	128	257	68	171	257
Max, litres	777,163	777,163	75,300	777,163	1389	213,869	777,163
Revenue from agriculture, thousand EUR	955,285	885,118	70,167	954,504	781	66,081	954,403
Median, EUR	8156	16,510	4921	8357	2013	8631	8356
Stdev, EUR	451,108	615,423	15,003	454,709	3313	126,785	454,749
Stdev/mean, %	815	638	173	809	117	374	809
Max, thousand EUR	48,669	48,669	526	48,669	28	3269	48,669

* Marked diesel fuel with a reduced excise duty rate.

).

The minimum values were 0 in all indicators, while the maximum values differed significantly (Table 6). The total amount of support was from EUR 500 for SFS beneficiaries to EUR 618,000 for SAPS beneficiaries and up to EUR 1.1 million for total support beneficiaries. There have been significant differences in the total support between the farms of legal entities and natural persons—it differed by 8.8 times, which was determined by the maximum area of managed land; for SFS beneficiaries it was 10 ha, while for SAPS beneficiaries it was 7487 ha, so the difference between the managed areas of farms of legal entities and natural persons is 9.9 times. Thus, the maximum income from agriculture for SFS beneficiaries was EUR 28,000; for SAPS beneficiaries, greening payment beneficiaries, and legal entities it was EUR 49 million, and the difference between the farms of legal entities and natural persons was more than 1700 times. A similar trend was also observed as regards the amount of diesel fuel received. Therefore, these indicators point to significant differences in the description of farms in Latvia.

The standard deviations of the analysed indicators indicate a significant distribution of data around the average in support payments, areas applied for, the amount of diesel fuel received and revenues from agriculture for all support beneficiaries, legal entities, and for SAPS and GP beneficiaries. Minimal data distribution was observed for SFS beneficiaries, indicating that this group of beneficiaries is similar, with average differences existing between natural persons and YFP beneficiaries in all indicators analysed. Similar conclusions can be drawn about the differences between the standard deviation and the arithmetic mean.

A chi-square test was also performed, which allows one to compare whether there are any significant differences between two sets of data (beneficiaries include natural persons and legal entities). The null hypothesis (H0) states that there is no significant difference between the observed data sets, while H1 states that there is a significant difference between the data sets. The calculation results are as follows:

(1)

H01: there is no statistically significant difference between the support areas applied for by natural persons and legal entities. Since χ2 = 2.03 is less than the critical value of χ2^0.05, which is 5.99, the null hypothesis is not rejected, which means that the differences between the support areas of natural persons and legal entities are not statistically significant;

(2)

H02: there is no statistically significant difference between support payments received by natural persons and legal entities. Since χ2 =002048.07 is greater than the critical value of χ2^0.05, which is 5.99, the null hypothesis can be rejected and it can be concluded that the support payments received are statistically significantly different between natural persons and legal entities;

(3)

H03: there is no statistically significant difference between the amount of diesel fuel with a reduced excise tax rate received by natural persons and legal entities. Since χ2 = 1066.31 is greater than the critical value of χ2^0.05, which is 5.99, the null hypothesis can be rejected, and it can be concluded that the amount of diesel fuel with a reduced excise tax rate received by natural persons and legal entities is statistically significantly different;

(4)

H04: there is no statistically significant difference between the income from agriculture of natural persons and legal entities. Since χ2 = 30894.30 is greater than the critical value of χ2^0.05, which is 5.99, the null hypothesis can be rejected and it can be concluded that the income from agriculture is statistically significantly different between natural persons and legal entities.

In order to find out the closeness of the relationship between the different indicators analysed, correlation analysis was used, which examines the closeness of the relationship between two indicators. Thus, the following close relationships between the analysed indicators were found (p < 0.05):

(1)

absolutely close positive correlation (r = 1): the area applied for support with the SAPS area; received SAPS payments with the area applied for; the area applied for greening and the GS received with the area declared for support, the SAPS area, the SAPS support received; the area applied for greening, the greening support received; as well as the area applied for YFP support and the received YFP support;

(2)

very close positive correlation (r = 0.96): total support payments with the area applied for support, SAPS area, the area applied for greening, the received SAPS and greening support;

(3)

close positive correlation (r = 0.89): SFS support area with SFS support received;

(4)

moderately close positive correlation (r = 0.63–0.67): area of VCS for protein crops and the support received, with the total support and total area applied for support, SAPS area and support, greening area and support.

3.2. Description of Agricultural Specialisation Farms and Assessment of Support

The average profile of specialised arable crop farms in Latvia (n = 997) in 2019 was as follows: these were average large farms that managed 141 ha of arable crops, of which 73% was wheat and 16% was rapeseed, their income from agricultural activity was EUR 90,000; in addition, support payments of around EUR 20,000 were received, which constituted 22% of agricultural income, calculated per ha of managed land (

Table 7. Indicators of specialised arable crop farms and support payments in Latvia in 2019 and the potential forecast for 2023.

Indicators/Farm Size	Small	Average Small	Average Large	Large	Average for a Farm
Revenue from agriculture, thousand EUR	2	15	120	392	90
Income per ha of land, EUR	90	209	675	659	641
Declared managed area, ha	23.9	73.7	178.2	595.6	140.8
Incl. wheat	18.0	59.9	127.8	462.6	102.8
rapeseed	-	-	45.1	106.5	22.0
barley	4.1	1.2	-	1.0	2.9
fallow land	1.8	7.4	2.2	13.9	4.9
broad beans	-	5.0	-	5.7	3.2
potatoes	-	0.2	-	-	0.2
fodder plants	-	-	3.1	-	2.7
vegetables	-	-	-	1.0	0.1
fruit trees	-	-	-	4.9	0.1
Support received in 2019, EUR	3288	13,989	23,388	79,095	20,122
Received support per ha of land in 2019, EUR	137	190	131	171	143
Received support in 2019 against revenue per ha of land, %	152	91	19	11	22
Potential support in 2023, EUR	4263	16,393	28,105	96,118	x
Incl. base payments *, EUR	3136	11,436	24,497	82,419	x
for additional activities **, EUR	1127	4957	3608	13,699	x
Can be received for being located in a specific parish ***, %	0–22	0–16	0–23	0–23	x
Potential support in 2023 vs. support received in 2019, %	130	117	120	122	x
Incl. base payments, %	95	82	101	102	x
for additional activities, %	34	35	20	19	x

* Base payments include: for all farms—income support and equalised farm payment; for average small farms, in addition—rye field during the winter period and VCS for protein plants and for barley; for large farms, in addition—VCS for fruits and berries, for vegetables, for protein plants, for barley; ** payments for additional activities include: for small farms—intermediate crops, spring crops (28%), and green fallow land (6%); for average small farms—intermediate crops, spring crops (20%), green fallow land (6%), precision fertilisation (8%), and minimum tillage for 30% of the area (2%); for average large farms—precision fertilisation (12%), minimum tillage for 30% of the area (3%), intermediate crops, spring crops (3%), and nitrogen-fixing crops (1%); for large farms–precision fertilisation (12%), minimum tillage for 30% of the area (3%), intermediate crops, spring crops (2%) and environmentally friendly horticulture (2%); *** supplement to income support of EUR 20 or EUR 30 ha⁻¹ depending on the location of the farm in the specific parish, where farming conditions are more complicated.

).

From the case study on specialised arable crop farms it can be established that they are significantly different (Table 7). In 2019, a small farm in Latvia managed 24 ha, a large farm managed 596 ha (a difference of 25 times), and an average farm managed from 74 to 178 ha. The income of farms from agricultural activity also changes in proportion to the managed area—from EUR 2000 to EUR 392,000 (a difference of 196 times). The amount of support received by farms is from EUR 3000 to EUR 79,000 (a difference of 26 times, which is close to the difference of managed areas). Thus, the received support payments are significant in small farms, as these payments exceeded the income from agriculture by 1.5 times, but for average small farms they constituted 91% of the income. This shows the minimal activity of these farms on the market, contributing more to the preservation of the rural environment and landscape. On the other hand, the dependence of large and average large farms on support payments is significantly lower, constituting only 11–19% compared to agricultural income.

When evaluating the possible situation in support payments in 2023 in farms specialising in arable crops in Latvia (Table 7), it can be concluded that, compared to 2019, these payments could increase most significantly for small farms—by 30%—and for other farms by 17–22%; thus, the support payments of the new period could contribute to the shift of specialised arable crop farms towards environmental and rural landscape conservation goals.

3.3. Description of Dairy Specialisation Farms and Assessment of Support

Indicators for dairy farms are arranged in

Table 8. Indicators of specialised dairy farms and support payments in Latvia in 2019 and the potential forecast for 2023.

Indicators/Farm Size	Small	Average Small	Average Large	Large	Average for a Farm
Revenue from agriculture, thousand EUR	18	106	333	1 398	165
Income per ha of land, EUR	440	1910	1083	2004	1245
Number of dairy cows, pcs	7	33	114	303	55
Declared managed area, ha	23.9	55.8	307.0	697.8	132.2
Incl. fodder plants sown on arable land	10.7	-	221.0	124.5	57.5
permanent grassland	13.1	55.8	-	0.4	43.0
wheat	-	-	48.2	255.0	9.5
barley	-	-	13.2	-	6.1
alfalfa	-	-	24.4	59.2	2.0
corn	-	-	-	156.5	12.8
rapeseed	-	-	-	101.8	0.9
miscellaneous	0.1	-	0.2	0.4	0.4
Support received in 2019, EUR	6784	17,845	70,552	157,920	29,963
Received support per ha of land in 2019, EUR	284	320	230	226	226
Received support in 2019 against revenue per ha of land, %	65	13	21	11	18
Potential support in 2023, EUR	10,335	27,943	90,825	219,913	x
Incl. base payments *, EUR	10,335	27,943	84,465	191,217	x
for additional activities **, EUR	0	0	6360	28,696	x
Can be received for being located in a specific parish ***, %	0–18	0–9	0–13	0–13	x
Potential support in 2023 vs. support received in 2019, %	152	150	129	139	x
Incl. base payments, %	152	150	120	121	x
for additional activities, %	0	0	9	18	x

* Base payments include: for all farms—income support, redistributive income payment, coupled support for dairy cows, and ensuring welfare requirements/emission-reducing animal husbandry; additionally, for a small farm—preservation of permanent grassland and nitrogen-fixing crops; additionally, for an average small farm—preservation of permanent grassland; for an average large farm—support for young farmers and coupled support for protein crops and barley; ** payments for additional activities include: for an average large farm—nitrogen-fixing crops (4%) and intermediate crops, spring crops (5%); for a large farm—nitrogen-fixing crops (9%), intermediate crops, spring crops (2%), stubble field during the winter (3%), precision fertilisation (3%), and minimum tillage for 30% of the area (1%); *** supplement to income support of EUR 20 or EUR 30 ha⁻¹ depending on the location of the farm in the specific parish, where farming conditions are more complicated.

. The average profile of specialised dairy farms in Latvia (n = 699) in 2019 was as follows: these are average small farms with 55 cows, their average area is 132 ha, of which 43% is used to grow fodder plants sown on arable land and 33% is permanent grasslands; thus, green areas occupied 76% of their area. The income of specialised dairy farms from agricultural activity was on average EUR 165,000; in addition, support payments of EUR 30,000 were received, which constituted 18% of agricultural income, calculated per ha of managed land. Therefore, on average, although the area of dairy farms is 6% smaller than that of arable crop farms, dairy farms generated 83% more revenue than arable crop farms on average, and their dependence on support payments is lower.

From the case study on specialised dairy farms, significant differences can be established (Table 8). In 2019, a small farm in Latvia kept seven dairy cows and managed 24 ha of green areas. A large farm had 303 dairy cows (43 times more than a small farm) and managed 698 ha of land (29 times more than a small farm). The larger the number of dairy cows in the farm, the smaller the area per animal is needed. On average, 3.4 ha of green area was needed for keeping one cow on a small farm, while for an average small farm this number was 1.7 ha, and for a large farm–0.6 ha, and arable crops for sale are additionally grown. This means that the small farms have used the land extensively, while the large farms have used it intensively, which in the future, when the price of land increases, can significantly slow down the development of small farms. The income of farms from agricultural activity also changes in proportion to the number of cows kept, from EUR 18,000 to EUR 1.398 million (a difference of 78 times, which is less than in arable crop farms). The amount of support received by farms ranges from EUR 6800 to EUR 157,900 (a difference of 23 times, which is similar to arable crop farms). In the small farms in the field of dairy specialisation, the received support payments are of significant importance, which comprise 65% of the agricultural income, calculated per ha, while in the other groups of farms the support payments made up 11–21% of the agricultural income, which indicates a much lower dependence on support payments than for arable crop specialisation farms. Since livestock farms managed a significant share of green areas (from 100% in small and average small farms to 26% in large farms), it can be considered that dairy farms contribute to the achievement of green policy goals.

When evaluating the possible situation in support payments in 2023 in specialised dairy farms in Latvia (Table 8), it can be concluded that compared to 2019, the support payments could increase most significantly in small and average small farms—by 50–52%—and in other farms by 29–39%; thus, in the new period, dairy farms would benefit from support payments to a greater extent than arable crop farms.

3.4. Description of Cattle Breeding Specialisation Farms and Assessment of Support

The average profile of specialised cattle breeding (for meat) farms in Latvia (n = 337) in 2019 was as follows: these were small farms with 27 cattle on average, managing 65 ha, of which 63% were permanent grasslands and 28% were fodder plants sown on arable land. The average income of these farms from agriculture was only EUR 15,000, which is the lowest indicator among the analysed groups of specialised farms. Support payments in 2019 were EUR 12,657 on average per farm and made up 88% of the income, which is the highest indicator among the groups of farms analysed and indicates a significant importance in farm income (

Table 9. Indicators of specialised cattle breeding farms and support payments in Latvia in 2019, and the potential forecast for 2023.

Indicators/Farm Size	Small	Average Large	Average Large	Large	Average for a Farm
Revenue from agriculture, thousand EUR	8	39	70	93	15
Income per ha of land, EUR	224	237	555	276	223
Number of beef cattle, pcs	11	61	65	106	27
Declared managed area, ha	36.4	164.9	126.8	336.2	64.8
Incl. fodder plants sown on arable land	0.4	-	51.5	18.5	18.1
permanent grassland	35.7	159.7	17.7	313.6	40.5
wheat	-	-	21.9	-	1.5
oat	-	5.2	17.2	-	2.4
barley	-	-	16.8	-	0.9
miscellaneous	0.3	-	1.7	4.1	1.4
Support received in 2019, EUR	5944	27,423	24,390	55,143	12,657
Received support per ha of land in 2019, EUR	163	166	192	164	195
Received support in 2019 against revenue per ha of land, %	73	70	35	59	88
Potential support in 2023, EUR	8862	42,309	35,086	81,929	x
Incl. base payments *, EUR	8862	42,309	33,079	81,929	x
For additional activities **, EUR	0	0	2 007	0	x
Can be received for being located in a specific parish ***, %	0–13	0–18	0–16	0–15	x
Potential support in 2023 vs. support received in 2019, %	149	154	144	149	x
Incl. base payments, %	149	154	136	149	x
for additional activities, %	0	0	8	0	x

* Coupled support for cattle and ensuring welfare requirements/emission-reducing animal husbandry; additionally, for an average large farm (with 65 cattle)—nitrogen fixing crops and coupled support for barley; ** payments for additional activities include: for an average large farm (with 65 cattle)—intermediate crops, spring crops (8%); *** supplement to income support of EUR 20 or EUR 30 ha−1 depending on the location of the farm in the specific parish, where farming conditions are more complicated.

).

From the case study on specialised cattle breeding farms it can be established that these are rather similar (Table 9). In 2019, a small farm in Latvia kept 11 cattle, a large farm almost 10 times more, while average large farms kept 61–65 cattle. There is a similar proportion in the areas managed by cattle breeding farms—from 36 ha by a small farm to 336 ha by a large farm (a difference of 11 times)—and, similarly, in proportion to the managed area, a farm’s income from agricultural activity also changes—from EUR 8000 to EUR 93,000 (a difference of 12 times). The amount of support received by farms is from EUR 6000 to EUR 55,000 (a difference of nine times, which is close to the difference of both the number of cattle and the managed areas). There is a difference between the indicators of average large farms because, despite the similar number of cattle (61 and 65), it can be established that the managed area differs by 23% and the structure of the used land is significantly different, since a farm with 65 cattle operated relatively intensively, as there was almost 2 ha per cattle, and 2.7 ha per cattle in a farm with 61 cattle. A large farm operated extensively, because it had 3.2 ha per cattle, while a small farm had 3.3 ha per cattle. In cattle specialisation farms, the support has played an important role in the formation of farm income, as the support comprised 59–73% of agricultural income in extensively operating farms and 35% in intensively operating average large farms.

Evaluating the possible situation in support payments in 2023 for cattle breeding farms in Latvia (Table 9), it can be concluded that compared to 2019, the possible amount of support could increase relatively similarly in all groups of farms—by 44–54%—which is one of the highest indicators in all the four analysed farm specialisation groups.

3.5. Description of Vegetable Cultivation Specialisation Farms and Assessment of Support

The average profile of specialised vegetable cultivation farms (n = 36) in Latvia in 2019 was as follows: these were average small farms that managed 23.7 hectares (

Table 10. Indicators of specialised vegetable cultivation farms and support payments in Latvia in 2019 and the potential forecast for 2023.

Indicators/Farm Size	Small	Average Small	Average Large	Large	Average for a Farm
Revenue from agriculture, thousand EUR	9	40	307	868	104
Income per ha of land, EUR	815	1728	3034	5795	4388
Declared managed area, ha	11.0	23.0	101.0	149.7	23.7
Incl. dill	6.2	1.0	1.3	-	1.3
cabbage	-	4.7	17.8	119.9	6.3
pumpkins, courgettes, marrows, squash	2.1	-	0.9	-	0.9
cucumbers and gherkins	1.3	-	-	-	0.5
turnips, kale, radish, black radish	-	10.1	8.0	-	2.3
red beetroot	-	3.0	5.2	-	0.4
carrots	-	-	12.1	-	1.5
fallow land	-	-	24.2	3.0	1.3
miscellaneous	1.4	4.2	31.5	26.8	9.2
Support received in 2019, EUR	7572	15,654	46,407	81,640	11,972
Received support per ha of land in 2019, EUR	688	681	459	137	527
Received support in 2019 against revenue per ha of land, %	84	39	15	2	12
Potential support in 2023, EUR	9083	19,820	90,075	103,702	x
Incl. base payments *, EUR	9083	18,104	82,884	101,562	x
for additional activities **, EUR	0	1716	7191	2140	x
Can be received for being located in a specific parish ***, %	0–4	0–4	0–6	0–6	x
Potential support in 2023 vs. support received in 2019, %	120	127	194	127	x
Incl. base payments, %	120	116	178	124	x
for additional activities, %	0	11	16	3	x

* Base payments include: for all farms—income support, redistributive income payment, coupled support for vegetables, environmentally friendly horticulture; ** payments for additional activities include: for all farms—precision fertilisation (2% for small, average small, and large farms, 3% for average large farms), intermediate crops (9% for average small farms and 3% for average large farms); *** supplement to income support of EUR 20 or EUR 30 ha⁻¹ depending on the location of the farm in the specific parish, where farming conditions are more complicated.

).

The main crop, cabbage, occupies 28% of the area; the rest of the area is quite fragmented and there is no distinct dominance of any crop (Table 10). The revenue of vegetable farms from agricultural activity was almost EUR 104,000; in addition, support payments of around EUR 12,000 were received, which constituted only 12% of agricultural income, calculated on ha of managed land, and was the lowest indicator in all analysed groups of specialised farms, even though the income per ha was the highest, namely, EUR 4388. This means that vegetable farms are the least dependent on support payments, but their development is driven by the market.

From the case study on specialised vegetable cultivation farms, it can be established that these farms are significantly different (Table 10). In 2019, a small farm in Latvia managed 11 ha, a large farm managed 150 ha (a difference of 14 times), an average small farm managed 23 ha, and an average large farm managed 101 ha. The income of farms from agricultural activity also changes in proportion to the managed area—from EUR 9000 to EUR 868,000 (a difference of 96 times). The amount of support received by farms was from EUR 7600 to EUR 81,600 (a difference of 11 times, which is close to the difference of managed areas). Thus, the received support payments played a significant role in small farms, because in small farms they accounted for 84% of agricultural income and in average small farms they were 39%, while the dependence of large and average large farms on support payments is insignificant, making up only 2–15% of agricultural income.

Evaluating the possible situation of support payments in 2023 in horticulture specialisation farms in Latvia (Table 10), it can be concluded that compared to 2019, the support payments could increase similarly in all farm size groups (20–27%), the exception being the analysed average large farm group, where an increase in the amount of support by 94% can be expected, but this will happen thanks to the these farms being active not only in vegetable cultivation, but also in other sectors, which is evidenced by the dominance of various other crops in the structure of crops (32%).

3.6. Summary of Land Use Efficiency and Support Intensity in Specialised Farm Groups

To summarise the results of the case study in groups of specialised farms in Latvia, a median (not arithmetic mean) was used for the land use efficiency of the relevant group of specialised farms, income and support payments per ha, and the GHG emissions generated in 2019, and these indicators were compared with the potential forecast amount of support in 2023 per ha (

Table 11. Land use efficiency of specialised farm groups compared to the intensity of support in Latvia in 2019 and the potential forecast for 2023.

Agricultural Sector	Sectors Footprint in 2019			Recent Sector Development	Support Proposal
	Incomes EUR per 1 ha (Median)	GHG Emissions CO2 eq. per 1 EUR (Typical)	Support Payments per 1 EUR (Median)		Base	+ Some Regions Can Get Additional
Cattle breeding	210	~8	0.92	very strong	+50%	+15%
Arable crops	420	~1.5	0.34	strong	0%	+22%
Dairy production	835	~3	0.26	weak	+20% * +50% *	+13%
Vegetable cultivation	2465	~0.5	0.25	weak	+20%	+5%

* There will be a 20% increase in support payments for intensively operating farms that grow grasses sown on arable land, and an increase by up to 50% for extensively operating farms that manage permanent grassland.

). Based on the results of the case study, vegetable farming and dairy farming can be considered the most efficient sectors in Latvia, as they are the least dependent on support payments, since support payments in 2019 made up 25-26% of agricultural income, while for arable crop cultivation it was 34%, and 92% for cattle breeding, calculated per ha of the area for which support was applied for (Table 11).

Whereas, when comparing GHG emissions in 2019, kg per EUR 1 ha⁻¹ of revenue, a completely opposite situation emerges, as this indicator is the highest in cattle breeding, exceeds the dairy sector indicator by 2.7 times, and is 5.3 times higher than in specialised agricultural farms and 16 times higher than in specialised vegetable farms. This means that support payments and their possible increase in the future should be coordinated with reducing the negative consequences of climate change, including the limiting of GHG emissions. However, the case study analysis carried out showed that potential base support payments are predicted to be highest in cattle breeding and dairy farming, which will contribute to even higher GHG emissions. A similar trend is also predicted in Finland, as the dairy and beef sectors throughout the country still depend on support payments linked to production [40]. However, the lessons learnt in previous studies should be considered, which suggest that the development of farms specialising in breeding of herbivores is necessary, because in Latvia about 1/3 of the agricultural land is an area of various grasslands, and this would be necessary from the point of view of land use, and, these sectors provide a higher level of employment in rural areas [41,42].

4. Discussion

The agricultural sector provides food and is the main source of employment, income, and economic activity in rural areas. The Food and Agriculture Organization of the United Nations considers family farms to be the key to a sustainable future in Europe and Asia [30]. Farmers can undoubtedly improve their activities in a sustainable way to improve the situation on our planet, without excluding the possibility of developing the local economy in which they operate [43]. At the EU level, agriculture and the food industry have played a key role in improving labour productivity. On the one hand, employment in agriculture has significantly decreased, but on the other hand, the most significant increase in the share of employment has occurred in the food sector, which is characterised by productivity above the average EU level [44]. The results of the studies show that the granting of subsidies stimulates the creation of added value in agriculture and related sectors, positively affecting the overall gross domestic product. However, scientists note that support payments to agriculture are capitalised in the price of land, and thus the benefits of receiving support are partially transferred to landowners, not to producers. This aspect is particularly important in countries where a large part of the land is cultivated by producers who do not own the land [45]. At the same time, if direct payments are completely abolished, a negative impact on employment can be expected, which shows that direct payments play a positive role in the economy. However, the impact of direct payments on farmers’ incomes is limited, so farmers’ living standards should be supported by policy instruments other than direct payments [46]. In Finland, a CAP budget reduction of 20% would reduce farm income by 20–25% in cereal production, which was dominant in the south of Finland, while in the central and northern parts of the country, where farms are more dependent on state payments for milk and beef production, the reduction in income would be smaller [40]. Agricultural subsidies are an important factor influencing farm owners’ decision-making on production lines. Agricultural subsidy reform could therefore make an important contribution to the transition to a healthier and more sustainable food system, including improving population health, environmental pollution and economic well-being. However, the abolishment of agricultural subsidies could be economically and environmentally beneficial, but could have a negative impact on the health of the population. In contrast, directing all subsidies to the production of healthy and environmentally friendly food could improve the health of the population and reduce GHG emissions, but have a negative impact on the economy [47]. EU Member States have different levels of development. This also applies to the new EU Member States (accession to the EU in 2004 and later), which often face less competitive agriculture due to the insufficient use of intermediate raw materials and low farmers’ income from the market. The development of EU agriculture is largely dependent on the CAP. This is especially true for the new EU Member States, as CAP payments make up a relatively large share of income. EU support has influenced capital investment, which has contributed to increased farm productivity, increased agricultural output and income [48]. However, scientists recognise that the CAP subsidy system needs to be streamlined and made stable so that it is no longer an obstacle to increasing production potential. The establishment of new eco-schemes is therefore left to Member States, and in some countries the reforms may not be ambitious enough [49]. The CAP in its original form was very productive given the needs and expectations of the time, which have led to serious problems (e.g., overproduction, price increases) after self-sufficiency was achieved. To deal with this, five reforms followed (in 1992, 2000, 2003, 2008, and 2013). Based on practical experience, it is clear that farmers thought rationally and responded to changes in the support system [50]. Over the last 20 years, the EU CAP has developed into a multifunctional policy instrument. As part of this transformation, most farmers receive income that is paid independently of production, giving this payment category a production-neutral or “fully” decoupled status. The current CAP emphasises the provision of non-market public goods through rural development policies, as well as market measures and a system of direct payments that is not linked to production, yet provide farmers with income [13]. This study also confirms this, since in Latvia, 70% of the beneficiaries in 2019 maintained the rural landscape, contributing to the provision of public goods for society. However, will it also be the case in the future, with the introduction of the new CAP reforms from 2023? Scientists recognise that this CAP reform will allow: (1) maintaining of support for farm income, which will facilitate the viability and sustainability of farms; (2) achievement of greater ambitions in environmental protection and climate-friendly practices, helping to achieve the goals of the European Green Deal: reduce the use of chemical plant protection products, fertilisers, and antimicrobials; increase organic farming areas; preserve and restore biodiversity (pollinators and high-diversity landscape elements); and expand broadband connections in rural and remote regions [14]. CAP reforms should preserve both investment incentives and agri-environment payments. The first type of subsidies would be important for small- and medium-sized farms to increase their economic potential and accelerate the concentration of capital in agriculture, but this does not have to be at the expense of the environment [51]. This will also be possible in Latvia, because when the reformed CAP is implemented in 2023, it is the small and average small farms that will receive a proportionally larger increase in support payments compared to average large and large farms in arable crop, dairy production, and cattle breeding farms.

The existing support policy should be orientated away from the types of coupled support towards support not linked to production; thus, the CAP reform would support both economic efficiency and environmental issues. Policymakers have an important role to play in creating policies that could be both economically and environmentally effective [52]. Research shows that the world as a whole has missed an opportunity to “better recover” from COVID-19 through a green recovery. However, such claims ignore the emerging trends that the governance of the global green recovery is embedded in the “Global Green New Deal” package of norms. This research programme can also provide more detailed insights into the heterogeneous impact of COVID-19, climate change, and its economic impact [53]. Scientists believe that the gap between policy goals and their implementation by land managers needs to be reduced quickly and effectively in order to achieve the European Green Deal’s climate, biodiversity, and rural development goals [54]. Eco-schemes and agro-ecological schemes will therefore play a key role in ensuring the objectives of the European Green Deal to meet the environmental and climate requirements set by 2030 [6]. However, there is an opinion that with the introduction of the new, green policy, overall EU food production could decrease, thereby increasing food prices. This means that consumers will have to bear these additional costs [55]. This and other possible risks should be carefully evaluated by both farms and policymakers in order to make more reasonable decisions for the development of agriculture. The introduction of environmental measures is predicted to result in lower yields and an increase in production costs; together with a decrease in support, the viability of farms will be affected in some European regions, especially where financial margins are already very limited [56]. However, positive perceptions and responses to climate risk, even if they increase the environmental costs for companies in the short term, can significantly impact the overall economy in the long term. In the long run, however, it is important to keep the whole economic system on track towards carbon neutrality [57]. The CAP reform for the years 2023–2027 also provides support to promote risk management tools that help farmers manage the production and market risks to reduce the negative impact of price and market instability, as well as income instability in agriculture [58].

Therefore, further research is needed to assess the risks caused by the European Green Deal policy to find the best solutions in the future on the impact of CAP direct payments on EU agriculture at both the sectoral and regional level. This would also be relevant for every Member State, including Latvia. Considering the ongoing reform of the EU CAP, the net added value in agriculture should be increased through targeted income support for small- and medium-sized farms. The source of funding for the support could be the funding provided for in the European Economic Recovery Plan. Furthermore, the further improvement of financial integration across the EU would provide funds for investment in agriculture [59].

In addition, the public shows more and more interest in food culture, food origin, and hunger, but less interest in purely scientific topics. To understand the topics of interest mentioned above, a certain level of general knowledge will be required as a basis for building further knowledge and creating a better understanding of agriculture and how food is made. Interest in society has changed from agricultural producers to modern food consumers, whose interest in agriculture has changed from “farm” to “taste”. If we want a sustainable society, then we need sustainable food production systems and more public awareness and interest in it. This could be achieved by increasing investment in agri-food promotion and research covering the entire food chain from farm to fork [60].

5. Conclusions and Recommendations

By 2030, on the basis of the European Green Deal policy, the EU must introduce instruments that not only reduce greenhouse gas emissions from agriculture, but also increase carbon sequestration and the sustainability of agricultural production, improve biodiversity in rural areas, and help ensure quality food for the growing global population by envisaging substantial resources for dealing with these issues. Therefore, the European Commission established that in the CAP support for 2023–2027, at least 25% of the direct payments should be earmarked for eco-schemes, while 35% of the funding for rural development should be allocated to climate support measures, biodiversity, and animal welfare. Researches have shown that support payments have contributed to increases in labour productivity and value added, and contribute to a certain share of farmers’ income. Therefore, support payments influence farm decision-making when planning the direction of agricultural production development.

In Latvia in 2019, 83% of the total number of farms received support; out of 57,000 beneficiaries, 79% participated in the SAPS, and only 20% of the total number of beneficiaries were legal entities. On average, each farm received EUR 5616 per year; beneficiaries of the SAPS received 24% more. Only 30% of the total number of beneficiaries have requested to be allocated marked diesel fuel with a reduced excise tax rate, which shows the proportion of farms producing agricultural products of the total number of beneficiaries, leading to the conclusion that the other beneficiaries ensure public benefits for the population. Income from agriculture in farms that received marked diesel fuel with a reduced excise duty rate averaged almost EUR 58,000, or EUR 648 on average per managed ha. All beneficiaries received on average EUR 183 per ha; therefore, it can be concluded that the support accounted for 28% of agricultural income.

Comparing the indicators in all the four groups of specialised farms in Latvia, it can be found that vegetable farming and dairy farming can be considered effective sectors, because they are least dependent on support payments, which in 2019 accounted for 24–26% of their income, calculated per ha, while in arable crop farming the support accounted for 34% of the income, and in cattle breeding, 92%. This indicates that support payments are essential in ensuring the viability and resilience of farms. Therefore, when assessing the expected risks from European Green Deal policies, including CAP reform from 2023, farms need to adopt strategies to reduce the risks of climate change and policy changes and maintain agricultural productivity and farm profitability.

In Latvia, GHG emissions in 2019 per EUR 1 ha⁻¹ of revenue were the largest in cattle breeding (8 kg); this indicator was 2.7 times higher compared to that of the dairy production sector, 5.3 times higher than that of arable crop cultivation farms, and 16 times higher than that in specialised vegetable cultivation farms. This should be considered when determining the reformed CAP support for farms from 2023. However, the detailed calculations carried out show that the possible base support payments are expected to be higher specifically in cattle breeding and dairy farming, which may contribute to even greater GHG emissions in the future and hinder the achievement of the goals of the European Green Deal. Thus, the hypothesis put forward for the study, namely, that in the application of the CAP reform introduced from 2023, contradictions arise between support to small farms, employment promotion, GHG reduction, and efficiency promotion in agriculture, is confirmed.

Implementing the European Green Deal policy would cause changes in the support system in Latvia. The responsible institutions need to create extensive information campaigns for farmers and their non-governmental organizations to justify the necessary activities and their possible costs, so that farmers can assess possible risks and make optimal decisions in the implementation of the new policy conditions in everyday farming practices. Therefore, it would be recommended that national governments, based on this research and similar ones, develop detailed action plans and offer risk-management strategies to help farmers mitigate the effects of climate change and the policies caused by it, thus increasing the long-term resilience of agriculture and increasing farm profitability.