The Common Agricultural Policy (CAP) of the European Union is currently in a state of evolution, where non-productive functions of agriculture are being increasingly recognised. The growing concern for the environmental consequences of farming activity has led European countries to the development of diverse agro-environmental schemes.
This paper reflects on the effect of different policy scenarios, corresponding to old and new regulations of the European Common Agricultural Policy, on the private and social profitability of farming in protected ecosystems. We use as an empirical illustration the case of rice cultivation in the Albufera of Valencia.
We use the Policy Analysis Matrix (PAM) to compute private and social profitability indicators, as well as to foresee the effects on rice farms’ profitability of the recent CAP reform, which will come into force by 2005-2006. The ability of PAM to integrate environmental aspects into the conventional efficiency analysis of farming systems is also emphasised.