Economic results and production choices of Italian arable farms under the CAP 2023–2027 first pillar reform: The role of crop rotation eco-scheme

The European Common Agricultural Policy (CAP) 2023–2027 reform introduced significant changes to first-pillar payments, including Eco-Schemes designed to promote environmentally beneficial practices. This study examines the impact of the CAP first-pillar reform on Italian arable farms through the AGRITALIM agro-economic supply model and a sample of 5803 farms from the Farm Accountancy Data Network database, providing a national-scale assessment of the reform under the Italian CAP Strategic Plan considering also climatic conditions. The voluntary decision to participate in Eco-Scheme 4 (ES4), specifically targeted at arable farms, is modeled using binary variables. Moreover, logistic regression identifies the main drivers of ES4 participation. Main results show a 6.9% decrease in income, land-use shifts from cereals to legumes incentivized by coupled payments and ES4, and partial mitigation of income losses through ES4 participation, with 82.2% of farms choosing to adhere. Participation is highly sensitive to cereal price increases, which reduce enrolment, while it is less responsive to higher ES4 payments. Additional positive drivers include water and labor availability and farm diversification. Overall, first-pillar instruments effectively encourage legume expansion and nitrogen reduction, but cereal areas may decrease, and income pressures persist. These results underscore the need for targeted and coherent policy design within the Italian CAP Strategic Plan and offer insights for ESs implementation aimed at balancing environmental ambition, income stability, and adaptation to climate variability.