ABSTRACT
This article analyzes the evolution of Taiwan’s rice support policies from four perspectives: policy coverage, fiscal expenditure, market supply and demand, and agri-environmental sustainability. It also draws lessons from the institutional design of the European Union’s Common Agricultural Policy (CAP). In particular, the CAP distinguishes among baseline obligations, eco-schemes, and agri-environment-climate measures. Based on these policy experiences, this study proposes that Taiwan should build its green transition on the existing administrative and institutional framework. Taiwan could establish a layered agricultural support system consisting of basic payments and supplementary environmental payments. Area-based basic payments should continue to support farmland use and safeguard food security. At the same time, supplementary environmental payments should reward verifiable environmental public goods and ecosystem services, including water conservation, soil protection, biodiversity enhancement, habitat management, and climate change adaptation. This approach would support Taiwan’s gradual shift from traditional production regulation to a more integrated agricultural support framework that promotes food security, production resilience, fiscal efficiency, and the provision of environmental public goods. It would also enable environmental payment schemes to incorporate flexible adjustment mechanisms to respond to international food crises or extreme weather events, balancing environmental objectives under normal conditions with the need to increase food production during emergencies.
Keywords: agricultural support policy, rice policy, production-based environmental payments, environmental public services, ecosystem services
INTRODUCTION
Agricultural support policies in Taiwan have long centered on the rice sector. Agricultural policy frameworks have largely focused on balancing rice supply and demand, managing farmland use, and supporting farmers’ incomes. Paddy rice accounts for the largest cultivated area in Taiwan, is subject to the highest degree of policy intervention, and is the most closely associated with national food security. Accordingly, adjustments to agricultural and food policy have often focused on the rice sector before extending them to other crops.
Over the past decade, the government has maintained a guaranteed-price rice procurement program while encouraging farmers to shift from rice cultivation to alternative crops. These policies have contributed to fluctuations in both the area under rice cultivation and the volume of paddy rice procured for public stocks, while rice production has persistently exceeded domestic consumption. In recent years, the government has achieved a modest reduction in rice production by implementing a policy that limits rice cultivation on eligible base-year farmland to three out of every four crop seasons. However, farmers’ underlying willingness to cultivate rice remains strong and has been constrained primarily by administrative measures.
As risks to global food supply chains intensify, the impacts of climate change become more severe, and sustainable development receives growing policy attention, Taiwan’s food policy must therefore not only address the balance between rice supply and demand but also pursue a broader set of policy objectives, including food security, agricultural resilience, and environmental sustainability.
Greening agricultural support policies has become a shared policy priority worldwide. Under the World Trade Organization Agreement on Agriculture, governments have increasingly shifted domestic support toward non- or minimally trade-distorting Green Box measures. Taiwan’s rice support system must likewise conform to these international disciplines.
Beginning in the early 1990s, the European Union’s Common Agricultural Policy (CAP) gradually shifted away from production-linked support toward direct payments increasingly linked to environmental requirements. The CAP Strategic Plans for 2023–2027 further established a three-tier green architecture comprising baseline conditionality, eco-schemes, and agri-environment-climate measures (AECMs). In 2021, Japan adopted the MIDORI Strategy for Sustainable Food Systems, which set a series of long-term targets to reduce the use of chemical pesticides and fertilizers and expand the area under organic farming (MAFF, 2023; 2026).
As climate-related pressures increase, the agricultural sector faces increasing responsibility to reduce greenhouse gas emissions. Taiwan’s Ministry of Agriculture has formulated the Agricultural Net-Zero Emissions Strategy around four principal pillars: emissions reduction, enhanced carbon sequestration, resource circularity, and green lifestyles and consumption. The government has announced its goal of achieving net-zero greenhouse gas emissions in the agricultural sector by 2040. Against this policy backdrop, Taiwan’s rice support system is increasingly shaped by domestic climate legislation, methane-reduction targets, and broader international market and policy pressures.
ANALYSIS OF THE EVOLUTION OF TAIWAN’S AGRICULTURAL AND FOOD POLICIES
In the early 1970s, international food prices rose sharply following the first oil crisis. Beginning in 1974, the government introduced a guaranteed-price rice procurement program in response to food security concerns. In 1977, it shifted to a limited-volume procurement system for public rice stocks and established the Food Stabilization Fund, through which it purchased paddy rice at prices set about 20 percent above production costs. The guaranteed-price rice procurement system was established in response to unstable food supplies and the need to stabilize farmers’ incomes. Its principal policy functions were to secure domestic food supplies, stabilize rice prices, and safeguard rice farmers' incomes (Control Yuan, 2020a). A decline in domestic rice consumption, driven by changing dietary patterns, coincided with an expansion in the area under rice cultivation, stimulated by higher government procurement prices. Due to relatively high production costs, domestic rice lacked international market competitiveness. Consequently, the growing surplus strained public storage capacity and imposed a substantial fiscal burden on the government (Chen, 2017).
The implementation of fallowing and crop-conversion policies in Taiwan’s paddy fields was closely tied to structural problems created and reinforced by the prolonged guaranteed-price rice procurement system. The policy framework also gradually incorporated broader objectives related to sustainable farmland use and environmental conservation. Beginning in the 1980s, the government introduced a series of programs to regulate rice production and promote converting paddy fields to alternative crops. These programs were intended to address rice overproduction associated with the guaranteed-price procurement system. At this stage, policy efforts sought to reduce the area under rice cultivation by promoting land fallowing, conversion to alternative crops, and crop rotation.
Prolonged implementation of the fallowing policy led to several unintended consequences, including farmland idling, reduced farmland-use efficiency, and diminished vitality in the agricultural sector. The policy’s focus subsequently shifted from reducing rice production toward encouraging farmland revitalization and promoting crop production based on local agroecological suitability. Between 2018 and 2021, the government began implementing the Green Environment Payment on Land Area Program, which introduced several measures, including the simultaneous implementation of direct payments for rice cultivation and guaranteed-price procurement for public rice stocks, incentives for conversion to alternative crops or contract farming, and measures to maintain the agricultural production environment (MOA, 2022; Agriculture and Food Agency, 2022a, 2022b). These measures were intended to gradually reduce farmers’ dependence on government procurement and encourage market-based sales, contract production, and the cultivation of alternative crops.
From 2022 to 2025, the Green Environment Payment Policy further required limiting rice cultivation to three out of every four crop seasons, while also promoting paddy–upland crop rotation and the cultivation of strategic crops (Executive Yuan, 2022). Its policy objectives expanded beyond balancing rice supply and demand to encompass food security, the supply of domestically produced coarse grains, water-use efficiency, and sustainable farmland use. In 2026, the Agricultural and Food Industry Adjustment and Transformation Policy was introduced because of the existing Green Environment Payment Policy, with continued emphasis on strengthening food-system resilience, facilitating structural transformation of the agricultural sector, and expanding payments for ecological and environmental services. Fallowing and crop-conversion policies have gradually evolved into a broader agricultural support framework that must simultaneously address farmland utilization, food security, agricultural resilience, and environmental sustainability.
The logic underlying the transformation of Taiwan’s agricultural and food policies can be summarized as follows. Implementing the guaranteed-price paddy rice procurement system contributed to rice overproduction and an increasing fiscal burden. In response, subsequent policy adjustments introduced fallowing and crop-conversion measures as supply-management instruments. However, the fallowing policy also generated problems related to farmland utilization and agricultural revitalization. The policy framework was therefore adjusted again through the introduction of the Green Environment Payment on Land Area Program and, subsequently, the Green Environment Payment Policy. In recent years, agricultural policy reform has increasingly addressed food security, climate change, and the need for greater agricultural sustainability. Accordingly, policy reform has expanded beyond structural adjustment within the agricultural sector to encompass broader objectives related to farmland conservation, food-system resilience, and environmental sustainability. Nevertheless, the institutional framework and its core policy considerations remain primarily centered on structural adjustment within the rice sector and the management of rice supply and demand (National Audit Office, 2023).
On December 14, 2018, the National Council for Sustainable Development of the Executive Yuan finalized Taiwan’s Sustainable Development Goals, establishing 18 core goals and corresponding target values for 2020 and 2030 based on the United Nations Sustainable Development Goals (SDGs). To enhance agricultural resilience and promote sustainable development, Core Goal 2 was designated as “Ensure food security, eliminate hunger, and promote sustainable agriculture.” Specific targets under this goal include establishing sustainable food production systems, strengthening climate change adaptation, progressively improving soil and land quality, safeguarding ecosystems, and enhancing the quality and safety of agricultural production. Furthermore, Core Goals 14 and 15 were established as “Conserve and sustainably use marine ecosystems to ensure biodiversity and prevent marine degradation” and “Conserve and sustainably use terrestrial ecosystems to ensure biodiversity and prevent land degradation,” respectively. Within a policy framework that seeks to balance environmental conservation and ecological protection, these goals aim to develop sustainable food production systems, improve agricultural product quality, increase farmers’ incomes, and promote the sustainable use of ecological resources (National Audit Office, 2025a).
FARMLAND PRESERVATION IS ESTABLISHED,
BUT ENVIRONMENTAL SERVICE PAYMENTS REMAIN LIMITED
The most widely implemented support measure under the current policy framework is the Basic Payment for the Agricultural Environment, which was renamed the Land-Based Payment beginning in 2026. The system's underlying rationale is to keep farmland active agricultural production. Farmers receive basic support for farmland that complies with prescribed cultivation and management requirements. This approach helps prevent farmland abandonment or conversion to non-agricultural uses, thereby providing a fundamental safeguard for domestic food security and agricultural production capacity. Whereas the previous subsidy system focused primarily on regulating rice supply, the current Land-Based Payment has gradually shifted the policy emphasis toward maintaining farmland in agricultural use through area-based support.
In terms of policy implementation outcomes, the total area participating in various agri-environmental payment schemes across the two rice-growing seasons in 2023 exceeded 437,000 hectares, benefiting more than 285,000 farmers. Of this total, approximately 330,000 hectares were enrolled in the Basic Payment for the Agricultural Environment, accounting for about 75% of the overall participating area. These results indicate that the scheme has become the most widely implemented support measure for maintaining farmland in agricultural use in Taiwan, with substantial coverage and an important role in sustaining agricultural production and continued farmland use (Agriculture and Food Agency, 2023; MOA, 2023).
An analysis of the functions of the various payment measures reveals that the policy framework is characterized by multiple, coexisting policy functions. The combined area under organic farming and environmentally friendly farming practices is approximately 23,607 hectares, accounting for about 3% of Taiwan’s total cultivated land area. In addition, payments for ecosystem services targeting endangered species and important habitats covered a cumulative area of approximately 2,156 hectares over a three-year period (Agriculture and Food Agency, 2023). Compared with the Land-Based Payment and other measures primarily aimed at maintaining agricultural production, the scale of these ecosystem service payments remains relatively limited.
Currently, Taiwan’s agricultural support system has established a basic support framework centered on the continued agricultural use of farmland, while also promoting a diverse range of measures, including organic farming, environmentally friendly farming practices, and ecosystem service payments. The Land-Based Payment focuses on maintaining farmland in agricultural use and sustaining agricultural operations. Food security–related measures primarily aim to adjust the crop production structure and strengthen the resilience of the food supply. By contrast, organic farming, environmentally friendly farming practices, and payments for habitat ecosystem services are mainly intended to promote environmental conservation and ecological protection. These measures therefore serve distinct but complementary policy objectives.
Further refinement of the agri-environmental payment system requires, first, a systematic review of the policy positioning and functional division of the various existing support measures. This requires clarifying and differentiating the institutional roles of the Land-Based Payment, food security payments, and ecological and environmental payments. For measures that already provide environmental public goods and ecosystem services, further improvements should focus on refining payment eligibility criteria, environmental performance indicators, and outcome verification mechanisms. In this way, the existing agricultural support system can gradually accommodate multiple policy objectives, including food security, production resilience, and the provision of environmental public goods and ecosystem services.
STRUCTURAL ADJUSTMENT IN THE RICE SECTOR: ANALYSIS OF CHANGES IN RICE CULTIVATION AREA AND PUBLIC RICE PROCUREMENT VOLUME
Trends in rice harvested area and public rice procurement volume provide important indicators for assessing the effectiveness of structural adjustment in Taiwan’s rice sector (MOA, 2025a). Taking 2010 as the base year, the annual rice harvested area was 243,900 hectares, while public rice procurement totaled 191,000 metric tons. In 2011, the government raised the planned public rice procurement price by US$0.094[1] per kilogram and introduced additional subsidies for drying and related operations, significantly strengthening incentives for rice production. As a result, the harvested area increased progressively, reaching 270,100 hectares in 2019, the highest level recorded in recent years. Over the same period, public rice procurement rose to 574,000 metric tons, up nearly 200% from 2010. These trends suggest that price-support policies strongly influence farmers’ production decisions (National Statistics, Republic of China, 2025).
This upward trend began to reverse in 2021, primarily because irrigation was suspended in several major agricultural areas, including Taoyuan, Hsinchu, Miaoli, Taichung, Chiayi, and Tainan, and because of the implementation of a policy limiting rice cultivation on eligible base-year farmland to three out of every four crop seasons (MOA, 2020). That year, the rice harvested area fell to 224,000 hectares, while public rice procurement also fell to 358,000 metric tons. By 2024, the harvested area had recovered to 240,300 hectares, while public rice procurement stood at approximately 312,000 metric tons. This recovery reflected the lifting of irrigation restrictions and the continued implementation of the three-out-of-four crop-season policy, indicating that rice production can rebound substantially when production constraints are relaxed.
The National Audit Office (2025b) estimated that the potential rice cultivation area could exceed 270,000 hectares if the 32,300 hectares of eligible base-year farmland left fallow in 2024 under the “three-out-of-four” crop-season policy were returned to rice cultivation. This area is close to, or slightly exceeds, the historical peak recorded in 2019. Such projections suggest that the recent decline in rice acreage is attributable not only to market forces but also to structural policy arrangements. In essence, the institutionalized rotation framework reallocates arable land to alternative crops to improve supply–demand balance and facilitate structural adjustment; thus, the observed reduction in rice cultivation does not necessarily reflect a fundamental decline in farmers’ willingness to grow rice.
In terms of its policy mechanism, the three-out-of-four crop-season policy primarily guides farmers in adjusting farmland use through eligibility requirements, cropping arrangements, and differentiated payments. This policy instrument helps maintain rice cultivation at an appropriate scale while also safeguarding food security. This institutional design can effectively regulate rice production patterns in the short term. However, if market prices or policy incentives change, farmers’ underlying willingness to cultivate rice may once again be reflected in their production decisions. In other words, the current policy regulates the area under rice cultivation primarily through institutional mechanisms, rather than fundamentally altering farmers’ economic incentives to produce rice. The long-term stability of the existing policy framework therefore remains uncertain. If future policy is to shift from “production regulation” toward “agri-environmental payments,” the design of differentiated payment mechanisms will be a key area for institutional improvement. Such mechanisms should incentivize farmers to deliver environmental public goods and ecosystem services while maintaining an appropriate level of agricultural production, thereby incorporating environmental benefits into the incentive structure of agricultural support policies.
Market price trends indicate that recent policy adjustments have positively affected farm-gate paddy rice prices. Between 2022 and 2023, farm-gate prices for wet paddy rice remained above US$31.21 per 100 catties (60 kg), reaching their highest levels over the previous five years. During the second crop season of 2023, the farm-gate price in Yunlin County rose to US$40.57 per 100 catties at one point. When converted to an equivalent dry-paddy price, this level exceeded the government’s planned procurement price of US$0.81 per kilogram (MOA, 2023; Agriculture and Food Agency, 2024). These developments suggest that, as the area under rice cultivation has been adjusted and market supply–demand conditions have improved, market prices have gradually become an increasingly important determinant of farmers’ incomes. They also indicate that recent policy effects have been associated with a gradual shift away from direct price support toward greater reliance on market-based adjustment.
Between 2018 and 2020, annual public rice procurement averaged approximately 556,000 metric tons, accounting for about 30% of the average annual paddy rice production of 1.83 million metric tons during the same period (Agriculture and Food Agency, 2024). Farmers sold the remaining approximately 70% through the open market. These figures suggest that higher market prices can substantially improve farmers’ overall returns, reducing their reliance on the public rice procurement system. Accordingly, rather than raising public procurement prices, policies that adjust the supply–demand structure of the rice sector, improve market balance, and strengthen market prices may generate greater benefits for farmers’ incomes.
The institutional analysis indicates that rice support policy has gradually shifted from a system that relied primarily on price support to an approach that combines production management with market-oriented supply adjustment. Nevertheless, maintaining equilibrium in the rice market still depends on policy intervention to keep production at an appropriate scale, and a self-adjusting mechanism through which market incentives induce changes in the crop production structure has not yet been fully established.
BUDGETARY AND FISCAL DIMENSIONS: PRICE SUPPORT REMAINS THE PRIMARY COMPONENT OF FISCAL EXPENDITURE UNDER THE CURRENT SUPPORT SYSTEM
In terms of the structure of fiscal expenditure, Taiwan’s current rice support policy is characterized by the parallel operation of price support and direct payments, with outlays for both instruments generally increasing in recent years. The annual budget for the public rice procurement program increased from US$0.28 billion in 2010 to US$0.48 billion in 2025, a 71.35% increase. Since 2011, actual expenditures under the Grain Administration Program have exceeded the approved budget nearly every year. In 2020, actual expenditure reached US$557.49 million, exceeding the original budget by US$178.59 million - a budget overrun of 47.14%. By 2024, actual expenditure had decreased to US$448.47 million, though it still represented a 1.60% overrun. Moreover, actual expenditure in 2024 was more than twice the level recorded in 2010 (MOA, 2025b). These trends indicate that the public rice procurement system represents the largest single component of fiscal outlays within Taiwan’s agricultural and food support framework. Because expenditures vary with market supply–demand conditions and total procurement volumes, annual spending under the program is highly volatile.
By contrast, revenue from grain sales has trended opposite to fiscal expenditure. Between 2010 and 2025, budgeted revenue from grain sales ranged from US$161.64 million to US$233.86 million. In 13 of the 15 fiscal years, actual revenue fell short of the budgeted target. The shortfalls ranged from US$8.77 million to US$88.95 million, with the largest proportional shortfall reaching 49.79%. The shortfalls in grain sales revenue were associated primarily with ample domestic rice supplies, weak market prices, and lower-than-expected volumes of public rice sales and exports (MOA, 2025b). This indicates that, beyond requiring substantial and sustained expenditure on public rice procurement, the system has generated only limited cost recovery through grain sales. As a result, the price support system has imposed a persistent and substantial fiscal burden on the government.
From a fiscal operations perspective, the current expenditure structure shows that the government continues to allocate substantial budgetary resources to sustain public rice procurement and price support. Following the implementation of the Green Environment Payment on Land Area Program in 2018, the Green Environment Payment Policy in 2022, and the Agricultural and Food Industry Adjustment and Transformation Policy in 2026, expenditures on land-based direct payments, crop-conversion and contract-farming incentives, paddy–upland crop rotation, and related support measures have gradually increased. Consequently, Taiwan’s rice support system has evolved into a dual-track framework combining price support with direct payments. While this institutional arrangement helps balance farm-income protection with food security objectives, it also requires the government to finance both support mechanisms simultaneously (Control Yuan, 2020b).
Existing support measures have gradually expanded from reliance primarily on price support to include direct payments and farmland management measures. Nevertheless, fiscal resources remain concentrated primarily on maintaining agricultural production and stabilizing prices, while payments for environmental public goods and ecosystem services continue to account for a relatively limited share. In other words, the current structure of government expenditure remains oriented mainly toward public procurement of agricultural products and maintaining agricultural production capacity, rather than compensating farmers for the environmental and ecological public benefits they provide. From a public finance and policy perspective, if fiscal resources are to be gradually redirected from traditional price or production support toward a broader set of objectives that jointly address food security and the provision of environmental public goods and ecosystem services, policymakers will need to reassess the functional roles of the various support measures and progressively realign the objectives of specific payment schemes. Such reforms could help improve the overall fiscal efficiency and public value of agricultural support policies.
The public rice procurement system and the Green Environment Payment on Land Area Program, introduced in 2018, have gradually become major expenditure items within Taiwan’s agricultural and food support framework. According to the National Audit Office (2025b), the 2024 budget for the Grain Administration Program (public rice procurement) was US$441.42 million, with actual expenditure reaching US$448.47 million. During the same period, the budget for the Green Environment Payment Policy was US$342.67 million, while actual expenditure stood at US$325.53 million. The comparable scale of expenditure under these two programs indicates that Taiwan’s agricultural and food support system has gradually evolved from one centered primarily on guaranteed-price public rice procurement into a fiscal framework in which price support and direct payments operate in parallel. A closer examination of fiscal expenditures between 2018 and 2024 reveals that cumulative spending on guaranteed-price paddy rice procurement amounted to approximately US$2.442 billion, while cumulative expenditure on crop-sector structural adjustment totaled approximately US$1.720 billion. Together, these two categories of expenditure reached US$4.162 billion (National Audit Office, 2025b; Cheng, 2025). These figures indicate that, while maintaining the public rice procurement system, the government has simultaneously allocated substantial resources to direct payments and structural-adjustment measures. Consequently, the current agricultural and food support system has evolved into an institutional framework in which two distinct support instruments operate in parallel.
The evolution of the Green Environment Payment Policy shows that direct payments were not introduced to gradually replace the traditional guaranteed-price procurement system. Instead, the policy added additional forms of direct support—including land-based direct payments, crop-conversion and contract-farming payments, production-environment maintenance payments, and paddy–upland crop rotation measures—to the existing price-support framework. These measures enable the policy system to address a broader range of objectives, including food security, farmland use, and structural crop-sector adjustment. While this institutional arrangement has diversified the available policy instruments, it also requires price support and direct payments to operate simultaneously. Accordingly, allocating fiscal resources and coordinating policy functions between the two support mechanisms have become critical considerations in designing the overall support system.
These findings are consistent with the preceding analysis of structural adjustment in the rice sector, which shows that the area under rice cultivation has declined in recent years while market prices have improved. However, estimates by the National Audit Office (2025b, 2025c) indicate that farmers’ underlying willingness to cultivate rice remains strong, suggesting that direct payments have not yet fully offset or substituted for the production incentives generated by price support. Price support and direct payment schemes therefore continue to jointly protect farmers’ incomes and stabilize domestic food production and supply. This indicates that Taiwan’s agricultural support policy is currently in a transitional stage, moving gradually from traditional price support toward a more diversified set of support instruments, rather than having completed a full institutional substitution.
AGRICULTURAL ENVIRONMENTAL STEWARDSHIP: GRADUAL INTEGRATION OF ENVIRONMENTAL OBJECTIVES INTO MANAGEMENT PRACTICES, WITH OUTCOME-BASED PAYMENT MECHANISMS YET TO BE ESTABLISHED
The current agricultural production and environmental management framework has gradually incorporated environmental considerations into policy design, including soil fertility conservation, appropriate crop rotation, pest and disease management, and sustainable water use. According to the Ministry of Agriculture, the policy limiting rice cultivation on eligible base-year farmland to three out of every four crop seasons not only helps regulate rice supply and demand and safeguard food security but also helps mitigate problems associated with continuous rice monoculture, such as the accumulation of pests and diseases, soil nutrient imbalances, and soil degradation. By promoting crop rotation, this policy may also reduce farmers’ reliance on chemical fertilizers and pesticides, thereby enhancing the resilience of agricultural production systems and improving agri-environmental management (MOA, 2023). These developments indicate that Taiwan’s agricultural and food support policies have begun to embed environmental management principles into institutional design, enabling farmland management to address sustainable resource use alongside agricultural production objectives.
From an implementation perspective, environmental benefits are currently generated largely as co-benefits of cultivation and management practices, rather than serving as the primary basis for determining payment eligibility or evaluating policy performance. The National Audit Office (2025b) reported that, in support of air pollution control policies, the Agriculture and Food Agency promoted the use of straw-decomposing microbial agents and organic fertilizers to reduce the open burning of rice straw. However, implementation results showed that rice-straw burning continued to occur in some counties and cities, while progress in reducing chemical fertilizer use fell short of expectations. Moreover, the Agriculture and Food Agency’s existing fertilizer price subsidy measures may weaken incentives for reducing fertilizer use. In addition, the fertilizer real-name registration system still contains incomplete information on cultivated areas and crop registration for some farmland parcels. These findings indicate that, although an environmental management framework has gradually been established, its effectiveness remains constrained by a range of institutional factors.
From the perspective of institutional evolution, Taiwan’s agricultural and food support policies have gradually expanded from an early emphasis on farmland use and food security to incorporate environmental management as an additional policy objective. Nevertheless, the overall system remains predominantly practice-based and has not yet developed into a payment framework centered on measurable environmental outcomes or ecosystem services. Drawing on the institutional design of the European Union’s CAP—specifically eco-schemes and AECMs—Taiwan could strengthen its agri-environmental support measures by establishing quantifiable environmental performance indicators and robust outcome verification mechanisms. Under such an approach, in addition to complying with specified cultivation and management practices, farmers could receive additional payments for delivering measurable environmental public goods and ecosystem services. This approach could serve as an important direction for the future development of an outcome-oriented agri-environmental payment system.
CONCLUSION
As agricultural support policies have gradually incorporated environmental, ecological, and broader public-interest objectives, the range of existing support measures has become increasingly diversified. However, because these measures were established at different times to address distinct policy needs, their institutional functions and policy roles require further clarification and systematic alignment.
Taiwan’s rice policy provides a foundation for transitioning toward an agri-environmental payment system
The current policy framework has established a solid administrative foundation, encompassing parcel-level farmland identification, crop-season declarations, crop verification, and farmer data management. Furthermore, the Agricultural and Food Industry Adjustment and Transformation Policy, introduced in 2026, incorporates food-system resilience, industrial competitiveness, and sustainable governance among its core policy objectives. This development indicates that the existing system has considerable scope to evolve beyond supply–demand adjustment and income support toward a broader governance framework encompassing agricultural production, environmental objectives, and system resilience.
Accordingly, transforming the rice following subsidy policy into an agri-environmental payment system does not require building an entirely new system from the ground up. Rather, policymakers can build existing institutional and administrative foundations by progressively incorporating environmental conditions, clearly defined environmental public goods and ecosystem-service objectives, and robust outcome-evaluation mechanisms.
Incorporating environmental and climate functions as key objectives of policy transformation
The institutional transformation examined in this study does not imply that all existing rice support measures should be uniformly converted into environmental payments. Current policies serve multiple functions, including stabilizing farmers’ incomes, safeguarding food security, regulating rice supply and demand, and supporting agricultural development. Because these policy objectives are not fully equivalent to those of payments for environmental public goods and ecosystem services, they should not be replaced by a single policy instrument.
The EU Common Agricultural Policy (CAP) is relevant because its differentiated policy architecture distinguishes between farmers’ baseline obligations and environmental actions eligible for additional payments through multiple tiers of support, including basic support, environmental measures, and longer-term ecological and climate commitments. For Taiwan, a more appropriate direction for reform at this stage would be to build a layered framework of basic support and environmental top-up payments, given existing rice and farmland support programs.
For example, organic farming and environmentally friendly farming practices could constitute a higher-intensity tier of environmental payments. The policy limiting rice cultivation to three out of every four crop seasons could be reframed as an eligibility condition linked to crop rotation and environmental management. Crop-conversion and contract-farming measures, meanwhile, should distinguish between incentives intended to support agricultural development and food security and additional payments specifically designed to reward the provision of environmental public goods and ecosystem services.
The Payments for Ecosystem Services for Endangered Species scheme could provide a useful reference for measures based on target species, farmer reporting, and community-based monitoring. Similarly, the Payments for Ecosystem Services for Important Habitats scheme is particularly relevant to the role of rice paddies as wetland habitats, as it already incorporates a three-tier payment structure covering habitat maintenance, habitat enhancement, and environmental outcomes. These arrangements could provide an important institutional foundation for developing an outcome-oriented agri-environmental payment system for rice farming.
Such a system would enable farmers to maintain an appropriate level of agricultural production and contribute to food security, while also receiving additional compensation for undertaking actions that go beyond baseline cultivation requirements and generate measurable benefits for water conservation, soil conservation, biodiversity, habitat maintenance, and climate adaptation.
The Agricultural and Food Industry Adjustment and Transformation Policy should retain its core focus on structural adjustment within the agricultural sector and on food security. For ecological, environmental, and climate-related public goods and ecosystem services, priority should be given to systematically reviewing and strengthening existing policy instruments that already perform environmental functions. Through closer coordination and integration among these measures, a more coherent and performance-oriented environmental payment framework can be developed progressively.
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[1] New Taiwan dollar amounts were converted into U.S. dollars at an exchange rate of NT$32.04 per US$1, based on the average exchange rate reported by the Department of Statistics, Ministry of Economic Affairs, for August 2026.
Greening Agricultural Support Policies: From Rice Supply–Demand Management to Environmental Public Service Provision
ABSTRACT
This article analyzes the evolution of Taiwan’s rice support policies from four perspectives: policy coverage, fiscal expenditure, market supply and demand, and agri-environmental sustainability. It also draws lessons from the institutional design of the European Union’s Common Agricultural Policy (CAP). In particular, the CAP distinguishes among baseline obligations, eco-schemes, and agri-environment-climate measures. Based on these policy experiences, this study proposes that Taiwan should build its green transition on the existing administrative and institutional framework. Taiwan could establish a layered agricultural support system consisting of basic payments and supplementary environmental payments. Area-based basic payments should continue to support farmland use and safeguard food security. At the same time, supplementary environmental payments should reward verifiable environmental public goods and ecosystem services, including water conservation, soil protection, biodiversity enhancement, habitat management, and climate change adaptation. This approach would support Taiwan’s gradual shift from traditional production regulation to a more integrated agricultural support framework that promotes food security, production resilience, fiscal efficiency, and the provision of environmental public goods. It would also enable environmental payment schemes to incorporate flexible adjustment mechanisms to respond to international food crises or extreme weather events, balancing environmental objectives under normal conditions with the need to increase food production during emergencies.
Keywords: agricultural support policy, rice policy, production-based environmental payments, environmental public services, ecosystem services
INTRODUCTION
Agricultural support policies in Taiwan have long centered on the rice sector. Agricultural policy frameworks have largely focused on balancing rice supply and demand, managing farmland use, and supporting farmers’ incomes. Paddy rice accounts for the largest cultivated area in Taiwan, is subject to the highest degree of policy intervention, and is the most closely associated with national food security. Accordingly, adjustments to agricultural and food policy have often focused on the rice sector before extending them to other crops.
Over the past decade, the government has maintained a guaranteed-price rice procurement program while encouraging farmers to shift from rice cultivation to alternative crops. These policies have contributed to fluctuations in both the area under rice cultivation and the volume of paddy rice procured for public stocks, while rice production has persistently exceeded domestic consumption. In recent years, the government has achieved a modest reduction in rice production by implementing a policy that limits rice cultivation on eligible base-year farmland to three out of every four crop seasons. However, farmers’ underlying willingness to cultivate rice remains strong and has been constrained primarily by administrative measures.
As risks to global food supply chains intensify, the impacts of climate change become more severe, and sustainable development receives growing policy attention, Taiwan’s food policy must therefore not only address the balance between rice supply and demand but also pursue a broader set of policy objectives, including food security, agricultural resilience, and environmental sustainability.
Greening agricultural support policies has become a shared policy priority worldwide. Under the World Trade Organization Agreement on Agriculture, governments have increasingly shifted domestic support toward non- or minimally trade-distorting Green Box measures. Taiwan’s rice support system must likewise conform to these international disciplines.
Beginning in the early 1990s, the European Union’s Common Agricultural Policy (CAP) gradually shifted away from production-linked support toward direct payments increasingly linked to environmental requirements. The CAP Strategic Plans for 2023–2027 further established a three-tier green architecture comprising baseline conditionality, eco-schemes, and agri-environment-climate measures (AECMs). In 2021, Japan adopted the MIDORI Strategy for Sustainable Food Systems, which set a series of long-term targets to reduce the use of chemical pesticides and fertilizers and expand the area under organic farming (MAFF, 2023; 2026).
As climate-related pressures increase, the agricultural sector faces increasing responsibility to reduce greenhouse gas emissions. Taiwan’s Ministry of Agriculture has formulated the Agricultural Net-Zero Emissions Strategy around four principal pillars: emissions reduction, enhanced carbon sequestration, resource circularity, and green lifestyles and consumption. The government has announced its goal of achieving net-zero greenhouse gas emissions in the agricultural sector by 2040. Against this policy backdrop, Taiwan’s rice support system is increasingly shaped by domestic climate legislation, methane-reduction targets, and broader international market and policy pressures.
ANALYSIS OF THE EVOLUTION OF TAIWAN’S AGRICULTURAL AND FOOD POLICIES
In the early 1970s, international food prices rose sharply following the first oil crisis. Beginning in 1974, the government introduced a guaranteed-price rice procurement program in response to food security concerns. In 1977, it shifted to a limited-volume procurement system for public rice stocks and established the Food Stabilization Fund, through which it purchased paddy rice at prices set about 20 percent above production costs. The guaranteed-price rice procurement system was established in response to unstable food supplies and the need to stabilize farmers’ incomes. Its principal policy functions were to secure domestic food supplies, stabilize rice prices, and safeguard rice farmers' incomes (Control Yuan, 2020a). A decline in domestic rice consumption, driven by changing dietary patterns, coincided with an expansion in the area under rice cultivation, stimulated by higher government procurement prices. Due to relatively high production costs, domestic rice lacked international market competitiveness. Consequently, the growing surplus strained public storage capacity and imposed a substantial fiscal burden on the government (Chen, 2017).
The implementation of fallowing and crop-conversion policies in Taiwan’s paddy fields was closely tied to structural problems created and reinforced by the prolonged guaranteed-price rice procurement system. The policy framework also gradually incorporated broader objectives related to sustainable farmland use and environmental conservation. Beginning in the 1980s, the government introduced a series of programs to regulate rice production and promote converting paddy fields to alternative crops. These programs were intended to address rice overproduction associated with the guaranteed-price procurement system. At this stage, policy efforts sought to reduce the area under rice cultivation by promoting land fallowing, conversion to alternative crops, and crop rotation.
Prolonged implementation of the fallowing policy led to several unintended consequences, including farmland idling, reduced farmland-use efficiency, and diminished vitality in the agricultural sector. The policy’s focus subsequently shifted from reducing rice production toward encouraging farmland revitalization and promoting crop production based on local agroecological suitability. Between 2018 and 2021, the government began implementing the Green Environment Payment on Land Area Program, which introduced several measures, including the simultaneous implementation of direct payments for rice cultivation and guaranteed-price procurement for public rice stocks, incentives for conversion to alternative crops or contract farming, and measures to maintain the agricultural production environment (MOA, 2022; Agriculture and Food Agency, 2022a, 2022b). These measures were intended to gradually reduce farmers’ dependence on government procurement and encourage market-based sales, contract production, and the cultivation of alternative crops.
From 2022 to 2025, the Green Environment Payment Policy further required limiting rice cultivation to three out of every four crop seasons, while also promoting paddy–upland crop rotation and the cultivation of strategic crops (Executive Yuan, 2022). Its policy objectives expanded beyond balancing rice supply and demand to encompass food security, the supply of domestically produced coarse grains, water-use efficiency, and sustainable farmland use. In 2026, the Agricultural and Food Industry Adjustment and Transformation Policy was introduced because of the existing Green Environment Payment Policy, with continued emphasis on strengthening food-system resilience, facilitating structural transformation of the agricultural sector, and expanding payments for ecological and environmental services. Fallowing and crop-conversion policies have gradually evolved into a broader agricultural support framework that must simultaneously address farmland utilization, food security, agricultural resilience, and environmental sustainability.
The logic underlying the transformation of Taiwan’s agricultural and food policies can be summarized as follows. Implementing the guaranteed-price paddy rice procurement system contributed to rice overproduction and an increasing fiscal burden. In response, subsequent policy adjustments introduced fallowing and crop-conversion measures as supply-management instruments. However, the fallowing policy also generated problems related to farmland utilization and agricultural revitalization. The policy framework was therefore adjusted again through the introduction of the Green Environment Payment on Land Area Program and, subsequently, the Green Environment Payment Policy. In recent years, agricultural policy reform has increasingly addressed food security, climate change, and the need for greater agricultural sustainability. Accordingly, policy reform has expanded beyond structural adjustment within the agricultural sector to encompass broader objectives related to farmland conservation, food-system resilience, and environmental sustainability. Nevertheless, the institutional framework and its core policy considerations remain primarily centered on structural adjustment within the rice sector and the management of rice supply and demand (National Audit Office, 2023).
On December 14, 2018, the National Council for Sustainable Development of the Executive Yuan finalized Taiwan’s Sustainable Development Goals, establishing 18 core goals and corresponding target values for 2020 and 2030 based on the United Nations Sustainable Development Goals (SDGs). To enhance agricultural resilience and promote sustainable development, Core Goal 2 was designated as “Ensure food security, eliminate hunger, and promote sustainable agriculture.” Specific targets under this goal include establishing sustainable food production systems, strengthening climate change adaptation, progressively improving soil and land quality, safeguarding ecosystems, and enhancing the quality and safety of agricultural production. Furthermore, Core Goals 14 and 15 were established as “Conserve and sustainably use marine ecosystems to ensure biodiversity and prevent marine degradation” and “Conserve and sustainably use terrestrial ecosystems to ensure biodiversity and prevent land degradation,” respectively. Within a policy framework that seeks to balance environmental conservation and ecological protection, these goals aim to develop sustainable food production systems, improve agricultural product quality, increase farmers’ incomes, and promote the sustainable use of ecological resources (National Audit Office, 2025a).
FARMLAND PRESERVATION IS ESTABLISHED,
BUT ENVIRONMENTAL SERVICE PAYMENTS REMAIN LIMITED
The most widely implemented support measure under the current policy framework is the Basic Payment for the Agricultural Environment, which was renamed the Land-Based Payment beginning in 2026. The system's underlying rationale is to keep farmland active agricultural production. Farmers receive basic support for farmland that complies with prescribed cultivation and management requirements. This approach helps prevent farmland abandonment or conversion to non-agricultural uses, thereby providing a fundamental safeguard for domestic food security and agricultural production capacity. Whereas the previous subsidy system focused primarily on regulating rice supply, the current Land-Based Payment has gradually shifted the policy emphasis toward maintaining farmland in agricultural use through area-based support.
In terms of policy implementation outcomes, the total area participating in various agri-environmental payment schemes across the two rice-growing seasons in 2023 exceeded 437,000 hectares, benefiting more than 285,000 farmers. Of this total, approximately 330,000 hectares were enrolled in the Basic Payment for the Agricultural Environment, accounting for about 75% of the overall participating area. These results indicate that the scheme has become the most widely implemented support measure for maintaining farmland in agricultural use in Taiwan, with substantial coverage and an important role in sustaining agricultural production and continued farmland use (Agriculture and Food Agency, 2023; MOA, 2023).
An analysis of the functions of the various payment measures reveals that the policy framework is characterized by multiple, coexisting policy functions. The combined area under organic farming and environmentally friendly farming practices is approximately 23,607 hectares, accounting for about 3% of Taiwan’s total cultivated land area. In addition, payments for ecosystem services targeting endangered species and important habitats covered a cumulative area of approximately 2,156 hectares over a three-year period (Agriculture and Food Agency, 2023). Compared with the Land-Based Payment and other measures primarily aimed at maintaining agricultural production, the scale of these ecosystem service payments remains relatively limited.
Currently, Taiwan’s agricultural support system has established a basic support framework centered on the continued agricultural use of farmland, while also promoting a diverse range of measures, including organic farming, environmentally friendly farming practices, and ecosystem service payments. The Land-Based Payment focuses on maintaining farmland in agricultural use and sustaining agricultural operations. Food security–related measures primarily aim to adjust the crop production structure and strengthen the resilience of the food supply. By contrast, organic farming, environmentally friendly farming practices, and payments for habitat ecosystem services are mainly intended to promote environmental conservation and ecological protection. These measures therefore serve distinct but complementary policy objectives.
Further refinement of the agri-environmental payment system requires, first, a systematic review of the policy positioning and functional division of the various existing support measures. This requires clarifying and differentiating the institutional roles of the Land-Based Payment, food security payments, and ecological and environmental payments. For measures that already provide environmental public goods and ecosystem services, further improvements should focus on refining payment eligibility criteria, environmental performance indicators, and outcome verification mechanisms. In this way, the existing agricultural support system can gradually accommodate multiple policy objectives, including food security, production resilience, and the provision of environmental public goods and ecosystem services.
STRUCTURAL ADJUSTMENT IN THE RICE SECTOR: ANALYSIS OF CHANGES IN RICE CULTIVATION AREA AND PUBLIC RICE PROCUREMENT VOLUME
Trends in rice harvested area and public rice procurement volume provide important indicators for assessing the effectiveness of structural adjustment in Taiwan’s rice sector (MOA, 2025a). Taking 2010 as the base year, the annual rice harvested area was 243,900 hectares, while public rice procurement totaled 191,000 metric tons. In 2011, the government raised the planned public rice procurement price by US$0.094[1] per kilogram and introduced additional subsidies for drying and related operations, significantly strengthening incentives for rice production. As a result, the harvested area increased progressively, reaching 270,100 hectares in 2019, the highest level recorded in recent years. Over the same period, public rice procurement rose to 574,000 metric tons, up nearly 200% from 2010. These trends suggest that price-support policies strongly influence farmers’ production decisions (National Statistics, Republic of China, 2025).
This upward trend began to reverse in 2021, primarily because irrigation was suspended in several major agricultural areas, including Taoyuan, Hsinchu, Miaoli, Taichung, Chiayi, and Tainan, and because of the implementation of a policy limiting rice cultivation on eligible base-year farmland to three out of every four crop seasons (MOA, 2020). That year, the rice harvested area fell to 224,000 hectares, while public rice procurement also fell to 358,000 metric tons. By 2024, the harvested area had recovered to 240,300 hectares, while public rice procurement stood at approximately 312,000 metric tons. This recovery reflected the lifting of irrigation restrictions and the continued implementation of the three-out-of-four crop-season policy, indicating that rice production can rebound substantially when production constraints are relaxed.
The National Audit Office (2025b) estimated that the potential rice cultivation area could exceed 270,000 hectares if the 32,300 hectares of eligible base-year farmland left fallow in 2024 under the “three-out-of-four” crop-season policy were returned to rice cultivation. This area is close to, or slightly exceeds, the historical peak recorded in 2019. Such projections suggest that the recent decline in rice acreage is attributable not only to market forces but also to structural policy arrangements. In essence, the institutionalized rotation framework reallocates arable land to alternative crops to improve supply–demand balance and facilitate structural adjustment; thus, the observed reduction in rice cultivation does not necessarily reflect a fundamental decline in farmers’ willingness to grow rice.
In terms of its policy mechanism, the three-out-of-four crop-season policy primarily guides farmers in adjusting farmland use through eligibility requirements, cropping arrangements, and differentiated payments. This policy instrument helps maintain rice cultivation at an appropriate scale while also safeguarding food security. This institutional design can effectively regulate rice production patterns in the short term. However, if market prices or policy incentives change, farmers’ underlying willingness to cultivate rice may once again be reflected in their production decisions. In other words, the current policy regulates the area under rice cultivation primarily through institutional mechanisms, rather than fundamentally altering farmers’ economic incentives to produce rice. The long-term stability of the existing policy framework therefore remains uncertain. If future policy is to shift from “production regulation” toward “agri-environmental payments,” the design of differentiated payment mechanisms will be a key area for institutional improvement. Such mechanisms should incentivize farmers to deliver environmental public goods and ecosystem services while maintaining an appropriate level of agricultural production, thereby incorporating environmental benefits into the incentive structure of agricultural support policies.
Market price trends indicate that recent policy adjustments have positively affected farm-gate paddy rice prices. Between 2022 and 2023, farm-gate prices for wet paddy rice remained above US$31.21 per 100 catties (60 kg), reaching their highest levels over the previous five years. During the second crop season of 2023, the farm-gate price in Yunlin County rose to US$40.57 per 100 catties at one point. When converted to an equivalent dry-paddy price, this level exceeded the government’s planned procurement price of US$0.81 per kilogram (MOA, 2023; Agriculture and Food Agency, 2024). These developments suggest that, as the area under rice cultivation has been adjusted and market supply–demand conditions have improved, market prices have gradually become an increasingly important determinant of farmers’ incomes. They also indicate that recent policy effects have been associated with a gradual shift away from direct price support toward greater reliance on market-based adjustment.
Between 2018 and 2020, annual public rice procurement averaged approximately 556,000 metric tons, accounting for about 30% of the average annual paddy rice production of 1.83 million metric tons during the same period (Agriculture and Food Agency, 2024). Farmers sold the remaining approximately 70% through the open market. These figures suggest that higher market prices can substantially improve farmers’ overall returns, reducing their reliance on the public rice procurement system. Accordingly, rather than raising public procurement prices, policies that adjust the supply–demand structure of the rice sector, improve market balance, and strengthen market prices may generate greater benefits for farmers’ incomes.
The institutional analysis indicates that rice support policy has gradually shifted from a system that relied primarily on price support to an approach that combines production management with market-oriented supply adjustment. Nevertheless, maintaining equilibrium in the rice market still depends on policy intervention to keep production at an appropriate scale, and a self-adjusting mechanism through which market incentives induce changes in the crop production structure has not yet been fully established.
BUDGETARY AND FISCAL DIMENSIONS: PRICE SUPPORT REMAINS THE PRIMARY COMPONENT OF FISCAL EXPENDITURE UNDER THE CURRENT SUPPORT SYSTEM
In terms of the structure of fiscal expenditure, Taiwan’s current rice support policy is characterized by the parallel operation of price support and direct payments, with outlays for both instruments generally increasing in recent years. The annual budget for the public rice procurement program increased from US$0.28 billion in 2010 to US$0.48 billion in 2025, a 71.35% increase. Since 2011, actual expenditures under the Grain Administration Program have exceeded the approved budget nearly every year. In 2020, actual expenditure reached US$557.49 million, exceeding the original budget by US$178.59 million - a budget overrun of 47.14%. By 2024, actual expenditure had decreased to US$448.47 million, though it still represented a 1.60% overrun. Moreover, actual expenditure in 2024 was more than twice the level recorded in 2010 (MOA, 2025b). These trends indicate that the public rice procurement system represents the largest single component of fiscal outlays within Taiwan’s agricultural and food support framework. Because expenditures vary with market supply–demand conditions and total procurement volumes, annual spending under the program is highly volatile.
By contrast, revenue from grain sales has trended opposite to fiscal expenditure. Between 2010 and 2025, budgeted revenue from grain sales ranged from US$161.64 million to US$233.86 million. In 13 of the 15 fiscal years, actual revenue fell short of the budgeted target. The shortfalls ranged from US$8.77 million to US$88.95 million, with the largest proportional shortfall reaching 49.79%. The shortfalls in grain sales revenue were associated primarily with ample domestic rice supplies, weak market prices, and lower-than-expected volumes of public rice sales and exports (MOA, 2025b). This indicates that, beyond requiring substantial and sustained expenditure on public rice procurement, the system has generated only limited cost recovery through grain sales. As a result, the price support system has imposed a persistent and substantial fiscal burden on the government.
From a fiscal operations perspective, the current expenditure structure shows that the government continues to allocate substantial budgetary resources to sustain public rice procurement and price support. Following the implementation of the Green Environment Payment on Land Area Program in 2018, the Green Environment Payment Policy in 2022, and the Agricultural and Food Industry Adjustment and Transformation Policy in 2026, expenditures on land-based direct payments, crop-conversion and contract-farming incentives, paddy–upland crop rotation, and related support measures have gradually increased. Consequently, Taiwan’s rice support system has evolved into a dual-track framework combining price support with direct payments. While this institutional arrangement helps balance farm-income protection with food security objectives, it also requires the government to finance both support mechanisms simultaneously (Control Yuan, 2020b).
Existing support measures have gradually expanded from reliance primarily on price support to include direct payments and farmland management measures. Nevertheless, fiscal resources remain concentrated primarily on maintaining agricultural production and stabilizing prices, while payments for environmental public goods and ecosystem services continue to account for a relatively limited share. In other words, the current structure of government expenditure remains oriented mainly toward public procurement of agricultural products and maintaining agricultural production capacity, rather than compensating farmers for the environmental and ecological public benefits they provide. From a public finance and policy perspective, if fiscal resources are to be gradually redirected from traditional price or production support toward a broader set of objectives that jointly address food security and the provision of environmental public goods and ecosystem services, policymakers will need to reassess the functional roles of the various support measures and progressively realign the objectives of specific payment schemes. Such reforms could help improve the overall fiscal efficiency and public value of agricultural support policies.
The public rice procurement system and the Green Environment Payment on Land Area Program, introduced in 2018, have gradually become major expenditure items within Taiwan’s agricultural and food support framework. According to the National Audit Office (2025b), the 2024 budget for the Grain Administration Program (public rice procurement) was US$441.42 million, with actual expenditure reaching US$448.47 million. During the same period, the budget for the Green Environment Payment Policy was US$342.67 million, while actual expenditure stood at US$325.53 million. The comparable scale of expenditure under these two programs indicates that Taiwan’s agricultural and food support system has gradually evolved from one centered primarily on guaranteed-price public rice procurement into a fiscal framework in which price support and direct payments operate in parallel. A closer examination of fiscal expenditures between 2018 and 2024 reveals that cumulative spending on guaranteed-price paddy rice procurement amounted to approximately US$2.442 billion, while cumulative expenditure on crop-sector structural adjustment totaled approximately US$1.720 billion. Together, these two categories of expenditure reached US$4.162 billion (National Audit Office, 2025b; Cheng, 2025). These figures indicate that, while maintaining the public rice procurement system, the government has simultaneously allocated substantial resources to direct payments and structural-adjustment measures. Consequently, the current agricultural and food support system has evolved into an institutional framework in which two distinct support instruments operate in parallel.
The evolution of the Green Environment Payment Policy shows that direct payments were not introduced to gradually replace the traditional guaranteed-price procurement system. Instead, the policy added additional forms of direct support—including land-based direct payments, crop-conversion and contract-farming payments, production-environment maintenance payments, and paddy–upland crop rotation measures—to the existing price-support framework. These measures enable the policy system to address a broader range of objectives, including food security, farmland use, and structural crop-sector adjustment. While this institutional arrangement has diversified the available policy instruments, it also requires price support and direct payments to operate simultaneously. Accordingly, allocating fiscal resources and coordinating policy functions between the two support mechanisms have become critical considerations in designing the overall support system.
These findings are consistent with the preceding analysis of structural adjustment in the rice sector, which shows that the area under rice cultivation has declined in recent years while market prices have improved. However, estimates by the National Audit Office (2025b, 2025c) indicate that farmers’ underlying willingness to cultivate rice remains strong, suggesting that direct payments have not yet fully offset or substituted for the production incentives generated by price support. Price support and direct payment schemes therefore continue to jointly protect farmers’ incomes and stabilize domestic food production and supply. This indicates that Taiwan’s agricultural support policy is currently in a transitional stage, moving gradually from traditional price support toward a more diversified set of support instruments, rather than having completed a full institutional substitution.
AGRICULTURAL ENVIRONMENTAL STEWARDSHIP: GRADUAL INTEGRATION OF ENVIRONMENTAL OBJECTIVES INTO MANAGEMENT PRACTICES, WITH OUTCOME-BASED PAYMENT MECHANISMS YET TO BE ESTABLISHED
The current agricultural production and environmental management framework has gradually incorporated environmental considerations into policy design, including soil fertility conservation, appropriate crop rotation, pest and disease management, and sustainable water use. According to the Ministry of Agriculture, the policy limiting rice cultivation on eligible base-year farmland to three out of every four crop seasons not only helps regulate rice supply and demand and safeguard food security but also helps mitigate problems associated with continuous rice monoculture, such as the accumulation of pests and diseases, soil nutrient imbalances, and soil degradation. By promoting crop rotation, this policy may also reduce farmers’ reliance on chemical fertilizers and pesticides, thereby enhancing the resilience of agricultural production systems and improving agri-environmental management (MOA, 2023). These developments indicate that Taiwan’s agricultural and food support policies have begun to embed environmental management principles into institutional design, enabling farmland management to address sustainable resource use alongside agricultural production objectives.
From an implementation perspective, environmental benefits are currently generated largely as co-benefits of cultivation and management practices, rather than serving as the primary basis for determining payment eligibility or evaluating policy performance. The National Audit Office (2025b) reported that, in support of air pollution control policies, the Agriculture and Food Agency promoted the use of straw-decomposing microbial agents and organic fertilizers to reduce the open burning of rice straw. However, implementation results showed that rice-straw burning continued to occur in some counties and cities, while progress in reducing chemical fertilizer use fell short of expectations. Moreover, the Agriculture and Food Agency’s existing fertilizer price subsidy measures may weaken incentives for reducing fertilizer use. In addition, the fertilizer real-name registration system still contains incomplete information on cultivated areas and crop registration for some farmland parcels. These findings indicate that, although an environmental management framework has gradually been established, its effectiveness remains constrained by a range of institutional factors.
From the perspective of institutional evolution, Taiwan’s agricultural and food support policies have gradually expanded from an early emphasis on farmland use and food security to incorporate environmental management as an additional policy objective. Nevertheless, the overall system remains predominantly practice-based and has not yet developed into a payment framework centered on measurable environmental outcomes or ecosystem services. Drawing on the institutional design of the European Union’s CAP—specifically eco-schemes and AECMs—Taiwan could strengthen its agri-environmental support measures by establishing quantifiable environmental performance indicators and robust outcome verification mechanisms. Under such an approach, in addition to complying with specified cultivation and management practices, farmers could receive additional payments for delivering measurable environmental public goods and ecosystem services. This approach could serve as an important direction for the future development of an outcome-oriented agri-environmental payment system.
CONCLUSION
As agricultural support policies have gradually incorporated environmental, ecological, and broader public-interest objectives, the range of existing support measures has become increasingly diversified. However, because these measures were established at different times to address distinct policy needs, their institutional functions and policy roles require further clarification and systematic alignment.
Taiwan’s rice policy provides a foundation for transitioning toward an agri-environmental payment system
The current policy framework has established a solid administrative foundation, encompassing parcel-level farmland identification, crop-season declarations, crop verification, and farmer data management. Furthermore, the Agricultural and Food Industry Adjustment and Transformation Policy, introduced in 2026, incorporates food-system resilience, industrial competitiveness, and sustainable governance among its core policy objectives. This development indicates that the existing system has considerable scope to evolve beyond supply–demand adjustment and income support toward a broader governance framework encompassing agricultural production, environmental objectives, and system resilience.
Accordingly, transforming the rice following subsidy policy into an agri-environmental payment system does not require building an entirely new system from the ground up. Rather, policymakers can build existing institutional and administrative foundations by progressively incorporating environmental conditions, clearly defined environmental public goods and ecosystem-service objectives, and robust outcome-evaluation mechanisms.
Incorporating environmental and climate functions as key objectives of policy transformation
The institutional transformation examined in this study does not imply that all existing rice support measures should be uniformly converted into environmental payments. Current policies serve multiple functions, including stabilizing farmers’ incomes, safeguarding food security, regulating rice supply and demand, and supporting agricultural development. Because these policy objectives are not fully equivalent to those of payments for environmental public goods and ecosystem services, they should not be replaced by a single policy instrument.
The EU Common Agricultural Policy (CAP) is relevant because its differentiated policy architecture distinguishes between farmers’ baseline obligations and environmental actions eligible for additional payments through multiple tiers of support, including basic support, environmental measures, and longer-term ecological and climate commitments. For Taiwan, a more appropriate direction for reform at this stage would be to build a layered framework of basic support and environmental top-up payments, given existing rice and farmland support programs.
For example, organic farming and environmentally friendly farming practices could constitute a higher-intensity tier of environmental payments. The policy limiting rice cultivation to three out of every four crop seasons could be reframed as an eligibility condition linked to crop rotation and environmental management. Crop-conversion and contract-farming measures, meanwhile, should distinguish between incentives intended to support agricultural development and food security and additional payments specifically designed to reward the provision of environmental public goods and ecosystem services.
The Payments for Ecosystem Services for Endangered Species scheme could provide a useful reference for measures based on target species, farmer reporting, and community-based monitoring. Similarly, the Payments for Ecosystem Services for Important Habitats scheme is particularly relevant to the role of rice paddies as wetland habitats, as it already incorporates a three-tier payment structure covering habitat maintenance, habitat enhancement, and environmental outcomes. These arrangements could provide an important institutional foundation for developing an outcome-oriented agri-environmental payment system for rice farming.
Such a system would enable farmers to maintain an appropriate level of agricultural production and contribute to food security, while also receiving additional compensation for undertaking actions that go beyond baseline cultivation requirements and generate measurable benefits for water conservation, soil conservation, biodiversity, habitat maintenance, and climate adaptation.
The Agricultural and Food Industry Adjustment and Transformation Policy should retain its core focus on structural adjustment within the agricultural sector and on food security. For ecological, environmental, and climate-related public goods and ecosystem services, priority should be given to systematically reviewing and strengthening existing policy instruments that already perform environmental functions. Through closer coordination and integration among these measures, a more coherent and performance-oriented environmental payment framework can be developed progressively.
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[1] New Taiwan dollar amounts were converted into U.S. dollars at an exchange rate of NT$32.04 per US$1, based on the average exchange rate reported by the Department of Statistics, Ministry of Economic Affairs, for August 2026.