Green payments generally are defined as payments to agricultural producers for providingenvironmental services on working farms . This discussion will review U.S. green payments within the context ofmodern U.S. agri-environmental policy, which is evolving from programs focusing primarily on landretirement to programs encouraging sound environmental management on working farms. The European Union (EU) views green payments more broadly than does the United States,using them to achieve socioeconomic and rural development goals as well as environmental goals.The EU makes agri-environmental (green) payments to farmers within the framework of its ruraldevelopment policy, which encompasses not only environmental activities but also investments tomodernize farms, programs to help young farmers get established or promote early retirement,assistance with processing and marketing farm products, and programs to promote the non-farm ruraleconomy such as agri-tourism or preservation of cultural heritage. Voluntaryincentives have been dominant in U.S. agri-environmental policy, and are viewed by most agricultureinterests as being central to efforts to improve the environmental performance of producers. U.S. cross-compliance mechanisms, first enacted in the Food Security Act of 1985 ( P.L.99-198 ), include Highly Erodible Land Conservation (also known as "Conservation Compliance"and "Sodbuster") and Wetland Conservation (called "Swampbuster"). Land Retirement Programs. Working Lands Programs. EQIP has been described as the first major U.S. "green payments"program specifically designed to pay farmers for environmental benefits while allowing continuedagricultural production. GRP also targets grasslands threatened with conversion to other uses. Conservation Security Program (CSP) (2002). This contrast has caused some analyststo characterize CSP as the most comprehensive U.S. "green payments" program. (17) These increases have notbeen fully realized, however, because some of the increases authorized in the 2002 farm bill weresubsequently cut in annual appropriations. These include, among others,landscape, rural amenities, and cultural heritage. Successive reforms of the EU's Common Agricultural Policy (CAP) in 1992, 2000, and2003 have placed increasing emphasis on green payments to meet farm policy and social objectives. General EU Environmental Policy and Agriculture

Beginning in the 1970s, the EU issued a number of directives outlining measures to deal withwater pollution, nitrates, pesticides, and habitats and wild birds. Water Protection. (29)
For the agri-environmental accompanying measures, assistance, in the form of payments,would be made to farmers or herders who voluntarily participated in measures to: 
reduce the use of fertilizers and chemical inputs;
introduce or continue with organic farming methods
change production methods toward or maintain extensification ofproduction;
reduce the number of animals per forage unit;
maintain the countryside and landscape and generally promotebio-diversity;
ensure the upkeep of abandoned farmland or woodlands;
set aside farmland for at least 20 years for nature reserves or parks or to protecthydrological systems; and
manage land for leisure activities and public access. Under compulsory modulationfunds from commodity support will be transferred to rural development support. Differences between the United States and the EU in how green payments have been definedand translated into policy and programs may make consideration of EU agri-environmental policyas a model or source of ideas problematic.
Green payments are generally defined as payments made to agricultural producers ascompensation for environmental benefits that accrue at levels beyond what producers mightotherwise achieve under existing market and regulatory conditions. They may support bothenvironmental and farm income objectives.
Modern U.S. agri-environmental programs began in 1985 by paying farmers to retire landand limiting conversion of wetlands and highly erodible land to cultivation, thereby reducingnegative environmental effects associated with production agriculture. These initial programsfocused on a single agricultural benefit, limiting erosion. Since then, these programs haveproliferated in number and overall funding, and now pay farmers to provide additional conservationbenefits either while maintaining agricultural production on working lands, or by retiring land fromproduction. These environmental benefits include stemming wetland loss and wildlife habitatdeterioration, protecting farmland from conversion to other uses, and improving water and airquality. The Conservation Security Program (CSP), enacted in the 2002 farm bill ( P.L. 107-171 ) isthe most recent step in the evolution of U.S. agri-environmental policy. CSP pays producers tocapture environmental benefits across their entire agricultural operation, while producingcommodities. It has been characterized by some as the most comprehensive U.S. "green payments"program.
General environmental policy in the European Union (EU) deals with negative externalitiesfrom water pollution, nitrates, and pesticides, among other issues, and also affects agriculturalproduction. EU farm policy since 1985, however, has included payments to farmers to compensatefor costs incurred or income forgone from undertaking agri-environmental measures that meet farmpolicy and rural development objectives. Such measures include, inter alia , reducing use of fertilizerand chemical inputs, adopting organic production methods, maintaining countryside and landscape,or managing land for leisure activities or public access. Successive reforms of the EU's CommonAgricultural Policy (CAP) have placed greater emphasis on such green payments -- and increasedfunding for them -- as agri-environmental measures have been integrated into a broad ruraldevelopment policy.
Congressional interest in green payments today is driven by pressure from international tradenegotiations and the anticipated development of the next farm bill, which will likely contain the U.S.policy responses to the results of these negotiations. These negotiations create considerableuncertainty over future farm program options, and green payments, in some fashion, are widelyviewed as an option that could be designed so as to satisfy both international obligations anddomestic agriculture constituencies. Differences between the United States and the EU in how greenpayments have been defined and translated into policy and programs may make consideration of EUagri-environmental policy as a model or source of ideas problematic. This report, which comparescurrent U.S. and EU efforts in the area of green payments, will be updated.