Building climate-resilient agriculture in Europe: an economic perspective

The need for an economic shift towards CRA in Europe

CRA refers to farming systems that maintain economic viability alongside a reduced vulnerability to climate shocks. This is achieved by lowering dependency on external inputs and restoring soil, water and ecosystem functions. It is an economic strategy to stabilise farm incomes and food production under accelerating climate risk.

Europe’s agricultural systems are entering a decade in which climate risk and economic fragility are converging. Rising temperatures, shifting rainfall patterns and increasingly frequent extremes — heatwaves, droughts, floods, storms and compound risks — are disrupting production across all European regions (EEA, 2024). These pressures increase exposure across farming systems and regions, making climate resilience an economic as well as an environmental priority.

Europe has experienced several extreme drought and heatwave events in recent decades, most notably in 2003, 2007, 2018, 2019, 2022, 2023 and 2024. These climate shocks — from catastrophic drought in Romania and southern Spain to severe flooding in Greece and central Europe — indicate that no agricultural system in Europe remains insulated from climate pressures. This pattern is also visible in EU-wide loss statistics: over the past decade, extreme climate events have resulted in crop losses up to 30% higher than trends had predicted (EEA, 2023a). At present, drought (54%), heavy rain (21%), frost (16%), and hail (9%) together account for 80% of agricultural losses in the EU (EIB, 2025; EPRS, 2025).

Projected impacts align with observed losses. Climate change could reduce maize and wheat yields by 2050 up to 49% in southern Europe (JRC, 2020). Meanwhile the area of permanent grassland in western Europe has declined markedly (EC, 2026); the European Environment Agency’s (EEA) Member State greenhouse gas inventories indicate an approximate 5% decline in grassland area (managed and unmanaged) between 2005 and 2023 (EEA, 2025a; EC, 2026).

Soils — one of the core buffers for productivity — are also under growing pressure from agricultural intensification (high fertiliser and pesticide use and heavy machinery), compounded by climate extremes such as droughts, intense rainfall and wildfires. These combined pressures are driving widespread soil degradation, weakening the soil functions essential for productivity, water regulation, biodiversity and climate resilience (EEA, 2023b; Báldi et al., 2023). It is estimated that over 60% of European soils are now unhealthy, and the estimated cost of this degradation in the EU is EUR 40.9-72.7 billion per year (from erosion, contamination, nutrient and carbon losses, compaction and sealing). These costs may be around twice as high since the assessments do not include impacts that are not currently accounted for (e.g. biodiversity loss, floods/droughts, off-site erosion and health effects) (Panagos et al., 2025). Extreme events also trigger wider ecological and economic knock-on effects (EEA, 2024).

Taken together, these pressures extend beyond yields and soil condition to systemic risks for water availability, rural economies and the long-term viability of Europe’s food system. The EEA’s European climate risk assessment (2024) highlights that these hazards undermine not only crop and livestock productivity but also water security, rural economies and the long-term viability of Europe’s food system (EEA, 2024). Historical and projected trends align: Europe is moving towards hotter summers everywhere, with drier conditions in the south, and heavier rainfall in northern and central Europe. Europe is forecasted to continue warming faster than the global average, with scenarios suggesting reaching between 2°C and 3°C by 2050 (EEA, 2024).

These trends translate into rapidly rising damages, particularly from drought. Among hazards, drought stands out as the most economically consequential for agriculture. In particularly dry years, crop yields can decline by up to 22%, while a doubling of drought duration could reduce the production of key crops like soy and corn by up to 10% (OECD, 2025b) .Without strong climate action, annual drought losses across the EU and UK are expected to rise from roughly EUR 9 billion today to more than EUR 65 billion by 2100, with the steepest impacts concentrated in southern and western Europe. Under a 4°C warming pathway, drought could reduce regional agricultural economic output by about 10%; keeping warming well below 2°C would prevent most of these losses (Naumann et al., 2021). Agriculture accounts for more than 50% of total drought losses in Europe (about 53% for the EU+UK), with the highest sector share in the Mediterranean region (60%), implying roughly EUR 4.8 billion per year out of an estimated EUR 9.0 billion in baseline annual drought losses (1981-2010) (Naumann et al., 2021).

At the same time, structural economic vulnerabilities amplify the impacts of climate change. European farms remain heavily dependent on external inputs — fertilisers, pesticides, imported feed, energy and irrigation — exposing them to volatile global markets and rising production costs (EEA, 2024; Hedlund et al., 2022). The economic fragility embedded in current production models has been exemplified by the fertiliser price shock of 2022 (EC, 2022), escalating energy costs and disruptions in global supply chains. Evidence from recent EU-wide modelling demonstrates that abrupt reductions in the availability of mineral fertiliser translate into crop-specific and regionally uneven yield losses. These losses are shaped by legacy effects from past fertilisation and by the availability of organic manure, which can partially buffer the impacts in highly manured systems (Pacifico et al., 2024). This uneven exposure reinforces existing structural disparities across farming systems and regions.

Policy ambition has grown through the European Green Deal, successive common agricultural policy (CAP) reforms, the EU adaptation strategy, national adaptation plans, and the adoption of a Union certification framework for permanent carbon removals, carbon farming and carbon storage in products under the Carbon Removal and Carbon Farming Regulation (EU, 2024). However, significant implementation gaps remain (European Parliament, 2023; OECD, 2025c; OECD, 2024). The Organisation for Economic Co-operation and Development’s (OECD) assessments show that drought and climate-risk management is still largely reactive, and that adaptation indicators are incomplete or absent in most countries. Fewer than one-third of OECD countries systematically monitor whether agriculture is becoming more resilient, despite rapidly increasing exposure and losses.

Taken together, rising climate losses, input-cost volatility, and degrading soil and water functions make resilience inseparable from farm economics and governance. Against this backdrop, CRA offers a systemic strategy that combines changes in farm-level practice with economic and governance support. By reducing input dependency and restoring soil, water and ecosystem functions, CRA strengthens the capacity of farming systems to absorb climate shocks, maintain productivity and stabilise farm incomes — while safeguarding food security and the ecosystem.

Climate hazards, vulnerabilities and farm-level risk pathways

The climate risks to European agriculture vary by region:

• Southern Europe faces chronic droughts, extreme heatwaves and water scarcity.
• Northern Europe can expect more unstable winters and saturated soils, rising temperatures.
• Western Europe faces with increased flood risk, delaying crop harvests and planting due to heavy rainfall.
• Central and eastern Europe face a volatile mix of drought, heat stress, long-term aridification trends and flash flood risks.

Climate hazards cause the greatest damage where farming systems are most sensitive — through high water dependence, degraded soils, exposed livestock, monocultures and heavy reliance on external inputs. These interactions translate rapidly into economic pressure via

• yield losses;
• rising irrigation and input costs;
• livestock heat stress;
• soil erosion;
• increased dependence on fertilisers, pesticides and imported feed.

All these pressures lead to higher production volatility and declining margins.

Climate hazards do not cause economic losses in isolation; losses occur when hazards interact with vulnerable systems. Conventional high-input systems often amplify this vulnerability because their high fixed and variable costs raise the break-even point and leave farmers less room to absorb yield or quality losses when their exposure increase to climate shocks. In contrast, climate-resilient practices reduce risk by:

• rebuilding soil health;
• diversifying production;
• improving water efficiency;
• reducing input dependence.

This context supports the economic evidence for reduced external inputs and decreased reliance that operations as: the most consistent farm-level levers, for resilience. The returns vary by region and farming context and, as such, may require public co-investment where there are public benefits from the measures.

Figure 1. A farm-level model of climate resilience system

Together, the factors included in Figure 1 show how CRA practices and enabling conditions reduce farm sensitivity and input dependence, helping to stabilise incomes by lowering exposure to input costs and, in climate-stressed systems, reducing the yield or price needed to break even.

Farm-level economic signals for CRA:

The following economic synthesis draws on 51 European case studies to illustrate how CRA practices affect farm performance, break the hazard → vulnerability → loss chain and reshape the cost structure of farms across regions facing increasing climate risks.

Map 1. CRA Evidence Case Map

Figure 2. When resilience pays: critical economic insights from 51 European CRA farm transitions

Table 1. Economic mechanisms underpinning CRA farm transitions in Europe

Figure 3. Ten micro-level economic signals from case studies

Regional economic patterns of climate resilient agricultural transitions

Southern Europe — climate resilience as economic survival

Agriculture in southern Europe operates in a context of chronic drought, heat stress, soil erosion and water scarcity, making climate resilience a condition for economic survival rather than an optional transition. Across the cases, the strongest farm-level lever is reducing dependence on costly inputs and operations, lowering the break-even yield or price, while improving soil water retention through practices that rebuild soil function.

• Portugal: Drought-prone. Climate-resilient transitions tend to combine cost-exposure reduction (fuel, fertiliser, water) with upfront investment in machinery and water infrastructure; benefits are often expressed as drought-risk buffering and input savings (sometimes supported by carbon-credit income), with limited quantified profitability evidence in the cases.
• Spain: Water-limited systems. Climate resilience tends to be achieved either by purchasing water security (higher water/fertilisation costs to stabilise output) or by lowering the cost base and break-even point through fewer operations, lower inputs, and improved soil-water buffering; diversification can further reduce risk but often increases labour and coordination requirements.

Economic pattern: In climate-stressed southern Europe, resilience gains often come about as a result of avoiding losses and lowering the yield or price needed to cover costs — through soil protection, water retention and reduced dependence on inputs/operations — rather than from yield expansion.

Policy implication: Viable systems already exist; the main constraints are upfront investment and the time lag before resilience dividends materialise.

Western Europe — cost volatility, public goods and system redesign

In western Europe, the central challenge is not productivity but the rising cost and volatility of maintaining intensive systems in the face of climate, energy and input-price pressures. Economic resilience is driven primarily by reducing costs, redesigning systems and reducing exposure to volatile input markets.

• France: Grassland-based dairy is associated with a higher income per worker and greater value added than a conventional system (LRD_FR_05); This is consistent with the idea that whole-system redesign can improve economic performance mainly by reducing reliance on purchased inputs and retaining a larger share of value on-farm, rather than by maximising yields.
• Belgium: Farmer cooperatives piloting regenerative practices report reductions of ~30% in input-costs and first-year operating savings of ≥EUR 50/ha (CSD_BE_02), suggesting cooperation can lower transition friction.
• Netherlands: Field margins deliver ecosystem-service benefits (notably water quality, biological pest control and recreation/health), but the costs fall mainly on farmers while benefits accrue largely to society — highlighting a private cost-public benefit mismatch (LLM_NL_05; SCBA shows a small positive net societal NPV over a 30-year horizon).

Economic pattern: Western European resilience is achieved mainly through reducing costs and redesigning systems, while measures that deliver public benefits (especially where costs fall on farmers) require stable compensation mechanism.

Policy implication: Scaling resilience requires both incentives for cost-saving transitions and payment mechanisms that align private decisions with public benefits.

Northern Europe — environmental ambition and the cost gap

Northern European transitions highlight the limits of market-based resilience: environmental ambition is high, but private returns are often weak or negative.

• Denmark: The uptake of reduced-tillage is constrained without compensation; the Danish model for CRA transitions quantifies required payments of EUR 22-57/ha/year depending on targeted uptake (SWM_DK_01).
• Norway (buffer zones): Grass buffer zones reduce surface runoff and retain sediment and nutrients (water-quality benefits), but uptake depends on agri-environment subsidies because farmers face land loss and limited farm-level economic returns (LLM_NO_02).

Economic pattern: In several high-ambition cases, environmental gains do not automatically translate into positive private returns. Benefits often accrue to society over time, while farmers bear the immediate land, cost, or management burden — so uptake depends strongly on incentives and mechanisms that pay for environmental outcomes.

Policy implication: High-ambition transitions typically require stable, long-term compensation or co-investment, paired with spatial targeting where public benefits are greatest.

Central and central-eastern Europe — high potential, limited evidence

Central and central-eastern Europe shows strong potential for gains in profitability through the redesign of cost-structures and diversification; however, to date the evidence on this remains limited.

• Slovakia: Regenerative wheat systems achieve higher profits per hectare despite lower yields by sharply reducing input costs (SWM_SK_01).
• Poland: An extensive bale-grazing system using adapted Polish Red cattle offers an example of animals maintaining their health and body condition under climatic variability in a low-input system, however, the case does not report quantified farm-level economic outcomes (LRD_PL_01).

Economic pattern: Profitability gains are driven by cost redesign, diversification and value-chain differentiation rather than maximising yields.

Policy implication: The evidence suggests that this region offers an opportunity for high-gains but it is under-documented to date, warranting targeted data collection, advisory support and policy experimentation.

Conclusion: CRA as Europe’s economic strategy

Policy priorities should follow on directly from the economic signals.

• First, finance and incentives need to address upfront investment and transition risk: some practices require specialised machinery or infrastructure, and where the benefits are primarily public (e.g. landscape features) uptake depends on compensation or co-investment rather than private returns alone.
• Second, farm-level action should prioritise measures that reduce dependence on external inputs and operations (in particular reduced tillage and related soil-water practices) and support diversification where it improves risk-adjusted margin; however, it should also be recognised, that diversified systems can increase the need for labour and involve costs to establish a new system as well as creating seasonal bottlenecks.
• Third, governance mechanisms need to ensure that risk management keeps pace with changing hazards; they should include climate-informed water allocation and basin-scale drought/flood planning.
• Finally, hazards, exposure, vulnerability, impacts and enabling conditions should be tracked through harmonised reporting to close the current gaps in measuring adaptation mechanisms.

Climate pressures and economic fragility are converging. This is exposing the limits of high-input, specialised and environmentally degraded production systems. CRA strengthens not only near-term risk management but also the long-term viability of farming systems. It achieves this by safeguarding soil function, water regulation and ecosystem stability.

The cases reviewed demonstrate that CRA can improve economic stability, reduce cost exposure and strengthen the long-term viability of agricultural systems under increasing climate stress.

At the same time, farms are economically vulnerable in the years when they are transitioning to new systems. Additionally, many recommended practices generate public benefits while imposing net private costs on or weak returns for farmers. Without targeted support, the resilience gap is likely to widen rather than close.

Harmonised indicators and systematic monitoring are not yet in place. This further constrains effective policy delivery. Without comparable information on exposure, reductions in vulnerability and adaptation outcomes, policymakers cannot assess whether CAP measures are reducing climate risk, improving soil and water resilience or stabilising farm incomes. This creates a structural blind spot in the EU’s capacity to evaluate policy and limits its ability to redirect funding towards the most effective resilience pathways.

To secure Europe’s agriculture and food systems, climate resilience needs to be treated as a core economic priority. With strategic investment, stronger governance and a consistent measurement framework, Europe can shift from reactive crisis management towards proactive resilience — protecting rural economies, stabilising production and strengthening the foundations of long-term agricultural prosperity.