How carbon cutting could be a viable new income source for farmers and land managers

peat smallAs we hit the hottest winter temperatures ever in the UK, it‘s clear that the imperative to tackle climate change is becoming ever more urgent. We need to look at every aspect of how our economy is run to find new ways to cut carbon and attention is now turning to the role that land use and farming can play.

In a new report from Green Alliance and the National Trust, out today, we have explored how our Natural Infrastructure Scheme (NIS) idea could be used as a way for landowners and farmers to trade carbon credits with businesses wanting to reduce their environmental impact.

We have already proposed the NIS as a way to reduce flood risk and improve water and soil quality, and the concept is due to be trialled in Cumbria soon. We think that adding climate change mitigation to the mix of services offered by these schemes (sometimes called ‘carbon farming’) would not only help to step up climate change action from land use, but would also make more marginal environmental improvement schemes more viable.

A significant challenge for market based carbon credit schemes is that they focus investment on the cheapest way to create credits. In the case of decarbonising land use, this could lead to an overuse of a particular practice, like monoculture forestry. As we all know, it is possible to have too much of a good thing, and this could lead to suboptimal environmental outcomes or even negative side effects, for example for wildlife.

It is true that a system could be designed in such a way to prevent potential problems and it can be adapted over time if market rules overly benefit a particular intervention. Many existing schemes require consideration of wider environmental, social and economic impacts in the process of validating credits but, because these impacts are not given a monetary value, the requirement serves mainly to limit damage rather than enhance these aspects.

‘Stacking’ benefits helps avoid market distortion
We have proposed a way to ascribe value to environmental outcomes in a system that enables different benefits to be ‘stacked’ and sold to different beneficiaries. Rather than an environmental improvement project selling carbon credits alone to a corporate buyer, different benefits could be sold to different buyers with different needs, increasing the overall value of the project.

STAck

‘Stacking’ saleable benefits like flood prevention and carbon reduction would make more projects viable

‘Stacking’ saleable benefits like flood prevention and carbon reduction would make more projects viable

This would increase the diversity of projects and reduce the likelihood of overusing a particular type of intervention, because in different areas there will be a different suite of environmental benefits which can be cost effectively delivered. In some places the best activity to deliver these might be peatland restoration, in others farm woodland could be combined with floodplain restoration, or cover crops for instance.

The Natural Infrastructure Scheme is a market mechanism that would enable stacking, as it is already designed with agreements between multiple farmers and multiple beneficiaries, so incorporating carbon cutting should be relatively straightforward.

There are still plenty of challenges to address before markets for ecosystem services can function at scale, not least to determine how private investment in the environment can sit alongside the new forms of government funding for environmental land management being devised post-Brexit.

Two things the government could do to help are, first, introduce policy to deliver on its commitment in both the Clean Growth Strategy and 25 year environment plan to create “a stronger and more attractive domestic carbon offset market” which would increase demand for land based carbon credits.

Second, as it develops its new environmental land management system in England, the government should use the current ‘tests and trials’ phase to show how it can buy environmental outcomes alongside private buyers, using a NIS type scheme. This would lead to more investment in more diverse environmental projects that can protect nature and provide new income streams for farmers and landowners, and, as we show in our report, also help to mitigate climate change.

 

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