European lawmakers on Wednesday approved plans for a radical overhaul of the EU's Common Agricultural Policy (CAP) by capping subsidies and tying them to environmental concerns.

Members of the European Parliament notably agreed a sea-change in the European Union's controversial farming subsidies -- tying 30 percent of direct subsidies to respect for the environment.

The measures include crop diversity, maintaining permanent pastures, and creating ecological fallows that are havens for plants, animals and insects on arable land.

The CAP traditionally accounts for about 40 percent of the bloc's annual spending and an October 2011 proposal drafted by the European Commission to reform the budget triggered months of heated debate.

The reforms attempt also to reduce differences in EU funding between member states but more significantly to give more to young and small farmers and less to large agricultural holdings.

Parliament thus backed Commission plans to cap direct payments to any one farm at 300,000 euros and reduce payments to those receiving more than 150,000 euros.

While highly-mechanised large farms would be hit, this would not apply to cooperatives which redistribute payments to their members.

Lawmakers also approved moves to limit subsidies to "active" farmers in order to ensure cash does not go to golf clubs and airports as has happened in the past.

The final shape of the new farm policy will be decided by the Parliament, EU farm ministers and the Commission in three-way negotiations which should begin in late March/early April.

Ireland, which holds the current EU rotating presidency, has said it hopes for a deal by June.