The Welsh Assembly Government plans to replace its five existing agri-environment schemes with a new two-tier land management scheme.
Elin Jones, assembly rural affairs minister, told a plenary session that spending would remain at around £89m a year, but the money would be better spent.
The creation of the whole farm Glastir scheme, under Axis 2 of the Rural Development Plan, would ensure that funds were used in the best possible way to meet current and future environmental objectives, particularly the challenge of climate change.
Ms Jones said: “My decision to go ahead with one all-compassing scheme will mean a reduction in red tape for farmers, lower administration costs and greater environmental benefits.
“The current schemes have been effective, but were designed in a different context.
“The land management scheme for the coming decade must respond to the challenges of climate change, water management and bio-diversity, as set out in last year’s Health Check agenda.
“Glastir will help us to do just that. We are shifting the culture in which farmers are paid for providing environmental goods and services.”
The new scheme would replace the Tir Gofal and Tir Cynnal environmental schemes, the Tir Mynydd scheme for less favoured areas, the Organic Farming Scheme and Better Woodlands for Wales.
“There will no longer be a dedicated measure for the less favoured areas, but there will be a 20% premium for LFA farmers entering the first tier of the new scheme.
“This includes dairy farmers, who are currently excluded from receiving LFA payments.”
The last Tir Mynydd payment would be in 2011. The first application window for Glasir would open in the summer of 2010, with the first contracts coming into force in January 2012.
Tir Gofal and Tir Cynnal would be closed to new applicants with immediate effect. But work would continue to process management agreement applications already in the pipeline.
Glastir tier one payments would depend on farmers demonstrating commitment to delivering good environmental management by reaching a threshold on a points system. The reward would be a flat rate payment/ha.
Tier two payments would target specific areas where the aim would be to improve factors like carbon management, water quality and biodiversity.
Ms Jones also announced grant assistance for capital works within Nitrate Vulnerable Zones and financial help with the creation of small scale wind and hydro electric projects.
But all the proposed changes would be subject to European Commission approval.