The European Commission on Wednesday authorised a Danish state aid to compensate farmers for losses due to the presence of genetically modified organisms in conventional and organic crops.

This is the first case where the commission has authorised such state aid. The compensation will be granted only if the presence of GM material exceeds 0.9 % and is limited to the price difference between the market price of a crop that has to be labelled as containing GM material and a crop for which no such labelling is required, the commission said. The compensation is entirely financed by obligatory contributions from farmers who cultivate genetically modified organisms.

The admixture of conventional crops with GM material may cause economic losses to the farmer with conventional crops if his products have to be labelled as containing GM material and he gets a lower price for them. This is in particular the case with products from organic farming. At this point no insurance products against this risk exist in the European Union.

The Danish compensation scheme institutes a compensation fund, wholly financed by the producers of GM crops with an annual parafiscal tax of DKK100 (US$15.8) per hectare of land cultivated with such crops, to cover the economic losses due to admixture with GM material. The scheme is administered by the Danish authorities.

The payment of compensation does not free the GM farmer from any civil or criminal liability under Danish law. The Danish authorities will in all cases take action to recover the compensation paid from the farmer from whose fields the GM material has spread.

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The compensation fund will be replaced by private insurance as soon as such is available. The duration of the compensation scheme is limited to 5 years.