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Abstract
The Common European Agricultural Policy (CAP) reform not only has an impact on
agriculture but also has significant effects on nature and the environment. This is specifically
caused by decoupling direct payments from agricultural production, which will increase the
market orientation of agriculture and by implementing cross compliance. A number of key
aspects promoting a future environment-friendly development of the CAP are suggested, based
on an empirical analysis of the impact of this reform in eight German regions. In particular, we
recommend the coupling of direct payments with the provision of environmental and social
welfare services as well as the installation of a long-term monitoring system to enhance the
understanding of the links between policy, behaviour of farmers and environmental systems.