According to reports in the press, the European Commission has confirmed that Dutch plans to buy out pig farmers on a voluntary basis in areas with a high concentration of livestock do not infringe the EU rules on state aid. The measure envisages to enable the voluntary termination of pig farming businesses in especially the east and the south of the Netherlands, where approximately 84% of all pigs in the Netherlands are being held. In total, the Dutch government has reserved 180 million euros to finance these buy-outs. The principal aim of the plans is to reduce the stench that comes with the exploitation of pig farms. The decision of the European Commission not to qualify the buy-out regime as state aid could pave the way for more and broader agricultural subsidy schemes with the aim of improving the environment and diminish the spread of harmful substances such as ammonia and other nitrogen compounds.

How does it work?

In order to receive the subsidy, pig farmers who are desirous to participate have to apply to the Rijksdienst voor ondernemend Nederland (RVO) between 25 November 2019 and 15 January 2020. In addition, their businesses need to meet certain conditions. First and foremost, the pig farm needs to be located within one thousand meters of any residential home, with the exception of residences that are actually located on a farm (and are normally owned by the farmers themselves). In addition, the applicant is required to comply with the Decision on low-emission housing (Besluit emissiearme huisvesting). Most importantly, pig farmers who already are participants in the Ammonia action plan (Actieplan ammoniak), an older scheme that also provides for the voluntary closure of farms, are excluded from the new subsidy scheme. Finally, the subsidy scheme only applies to farmers who have operated their business for at least five years and, in case they are granted the subsidy, are willing to close their pig farm permanently.

Legal context

EU legislation stipulates that any aid granted by a Member State is to be found incompatible with the internal market, when it effects trade between member states and the aid granted by a Member state distorts or threatens competition. Such state aid needs to be notified to the European Commission for the latter’s prior approval. Since the Commission’s decision and the reasoning behind it are not yet made public, the reasoning behind the Commission’s conclusion that the buy-out scheme is allowed remains unclear. However, the decision may not come as a surprise. Under the EU Guidelines for State aid in the Agricultural and Forestry Sectors and in Rural Areas (2014/C 204/01), the closing of capacity for environmental reasons may constitute a justification for state aid.

Further measures may follow

The approval of the European Commission comes at a time when the Dutch government is struggling with a judgment from the Council of State (Raad van State), the highest administrative court, which qualified the Dutch regime on the reduction of nitrogen compounds as illegal under EU legislation. The judgment implies that the Dutch government will need to search for new ways to ensure the compensation of the emission of nitrogen compounds through all types of industrial activity, including farming. Additional buy-out regimes for farmers are among the various measures that are being considered. These new proposed measures as well will need to be assessed under the EU state aid rules.