With the latest reform of EU Structural Policy, the Highlands and Islands have been excluded from further support by Structural Funds beyond 2013, but the new Scottish Rural Development Programme has increased CAP Pillar 2 expenditures in Scotland. A modified version of a system dynamics model constructed for an EU-wide case-study project (TOP-MARD) was used to simulate the effects of these and other policy changes in Caithness and Sutherland (C&S), a remote rural area in Northern Scotland. Several alternative modelling scenarios were developed, mostly relating to reconfigurations of Pillar 2 spending within the area. The modelling results, i.e. projections from 2001 to 2021, are discussed in terms of agricultural employment, regional population, and economic trends. It is shown that by targeting Pillar 2 money to non-agricultural rural development measures instead of to farm investments, less favoured area or agrienvironmental schemes, the long-term trends in severe depopulation, ageing and deindustrialisation in the area can be alleviated but not avoided. Finally, some conclusions are drawn, both about the implications of the results for sustainability in C&S, and in general for future sustainable rural development policy.