DIRECT PAYMENTS AS A TOOL FOR SUSTAINABLE FINANCE AND THEIR IMPACT ON AGRICULTURE AND THE ENVIRONMENT

Abstract

Direct payments are one of the most important instruments of the European Union's (EU) Common Agricultural Policy (CAP), significantly impacting agriculture and the environment. These financial subsidies aim to stabilize farmers' incomes, promote sustainable farming practices, and mitigate climate change effects. However, questions arise regarding whether direct payments effectively contribute to achieving sustainability goals and whether their distribution is sufficiently precise. This paper analyzes the impact of direct payments on the economic and environmental development of agriculture. It discusses how these subsidies help ensure financial stability for farms, promote investments in modernization, and support employment in rural areas. Additionally, the paper examines their role in environmental protection, particularly in terms of soil quality, biodiversity conservation, and reducing greenhouse gas emissions. While direct payments can serve as an important instrument of sustainable finance, their effectiveness depends on implementation mechanisms and farmers' commitment to meeting environmental requirements. The study results indicate that direct payments are often not sufficiently aligned with environmental indicators, and their distribution is not always fair—most subsidies go to large farms, while small farms receive inadequate financial support. The paper highlights key challenges and possible solutions, including a stronger focus on result-oriented funding and a more equitable distribution of subsidies.