Are private environmental payments a potential goldmine, or a minefield for farmers?

Payments for carbon sequestration, Biodiversity ‘Net Gain’, ecosystem services such as natural flood management, or habitat creation and ‘nutrient trading’, are showing an increase in interest from the private market.

The FUW’s Land Use Committee have recently published a report outlining five key ‘needs’ to ensure farmers can take advantage of, but also be protected within, these new markets. These include clarity and transparency; regulation and protection; access to schemes and rewarding active management; a balance between land use demands and permanence and last but not least; a fair price. It’s important the Union engages in the design of these markets to ensure they work for Wales’ family farms whilst protecting food production and our rural communities.

Clarity and transparency is needed as it can be difficult for farmers to find opportunities, trusted brokers, and information on the practical and financial implications of these actions. In addition farmers need clarity on how these opportunities will interact with public financing via government-led schemes.

Whilst standards and ‘principles’ have been published by the UK, Scottish and Welsh Government to improve the integrity of these markets, the FUW has argued that these do not go far enough in providing regulations which protect farmers. For example, climate change brings more extreme weather, pathogens and pests but this is not considered a ‘force majeure’ (e.g. wildfires in planted woodlands) as the unpredictability of climate change has been predicted. Such a situation has the potential to leave the farmer with costly replanting liabilities.

Access to these schemes is currently the biggest barrier for smaller farms, especially tenants. The average size of a farm in Wales is 48 hectares, yet the cost of registration, validation and monitoring per project via, for example, the Woodland Carbon Code, means economies of scale are better suited to take advantage of the income available. This perhaps explains why Scotland’s estates are already active in these markets.

Balancing sometimes conflicting land use demands with the long term commitment of some of these schemes is a real challenge for farmers, in an uncertain trading and political climate, both domestically and globally. Farmers have to weigh up current and potential future income streams with what works for their businesses, families and land types and find projects which complement the farming system, such as Soil Carbon payments.

A fair price should be a prerequisite but in reality farmers have seen dwindling government budgets for the maintenance and management of habitat, or schemes which provide ‘income foregone’ or capital contributions as opposed to genuinely reflecting the management skills, vision, planning time, local knowledge, capital costs and commitments these actions require. The private market, if they are to succeed in their ambitions, will need to prove to farmers that it can provide a long term and fair return for their work.