Greening Obligations, Avoidance behavior, and Farms' Environmental and Economic Performance: Insights from FADN

Starting in 2014, a new European Union-wide environmental regulation aimed at curbing soil degradation and promoting biodiversity has required farmers to diversify the type of crops cultivated on their land. A significant part of Direct Payments to farmers were made conditional on compliance with Greening requirements. In this article, we estimate the causal impact of the crop diversification Greening requirement among farms. Leveraging data from the FADN survey, we examine the effects on avoidance behavior, as well as the environmental and economic performance of farms that were not previously compliant with regulatory requirements. We show that the crop diversification measure is effective in increasing the average number of crops cultivated on arable land held by holdings above 10 ha, but also induced avoidance behavior among a portion of farms under the scope of the policy. Additionally, we identify increases in pollutant inputs per hectare. Furthermore, we observe positive shifts in total farm output consistent with some ex-ante simulations.