Nature is in trouble, nowhere more so than the UK, one of the most nature depleted countries in the world. The disappearance of formerly common species like the hedgehog or sparrow, the absence of birdsong and the pollution of once vibrant waterways are upsetting signs of what we are losing. But there are hard economic reasons why we should care about this.
Nature is an asset that underpins most economic activity. But in the process of ‘using’ it we are rapidly depreciating it, undermining our economic prospects for the future.
Most of the time when people talk about green investment, they mean technology like electric vehicles, heat pumps and the electrification of heavy industry. But we also need to invest in nature to maintain it. Our economy relies on it for goods and services, like food, fuel and materials, and to keep our air and water clean.
Public investment is needed but won’t be enoughBut, with shrinking public spending budgets, who is going to pay to restore nature so it can keep providing us with these services? With next month’s budget looking set to prioritise tax cuts over future public spending , and Labour’s retreat from its £28 billion spending pledge, it looks like public investment is likely to take a hit. This is bad news for economic growth and bad news for the environment. Many areas of the economy need significant investment to achieve the transition to a green economy.
Public investment in nature is vital. Some of it can come through existing budgets that support farmers to restore nature on their land. In particular, the Landscape Recovery scheme should be prioritised. This funds farmers to carry out large scale, ambitious habitat creation projects. Schemes like this are designed under the principle that public money should pay for public goods, like clean air, rather than for private goods, like food. But public money can’t pay for all the restoration needed. The Green Finance Institute estimates the UK needs to invest at least £44 billion over the next ten years to reach its nature restoration targets.
Businesses should pay to maintain the nature they rely onMany businesses rely on nature for their profits, so shouldn’t they also pay for its upkeep? Recognising that more private investment is needed, the government has set a target for £1 billion of private nature finance by 2030. This requires economic markets for nature, where businesses pay properly for the services nature provides to them, like flood protection, water quality improvements and carbon sequestration. Small markets like this already exist, such as the voluntary carbon market where businesses purchase carbon credits from woodland or peatland creation to offset their emissions.
The government must do much more to create and shape these markets. This includes using public investment to attract private investment. For example, Landscape Recovery projects are only funded for the first two years, after which they are meant to attract private investment to continue. Publicly funded projects need to be able to demonstrate and communicate outcomes that would attract private investors, such as carbon storage or flood protection.
An independent body is also needed to govern nature markets, to decide when standards have been met, and what businesses are able to claim when they buy credits in these markets. Our new briefing sets out the priority actions the government should take to build effective markets.
The Biodiversity Net Gain policy is progressLast week, the government launched one such new nature market, called Biodiversity Net Gain, where building companies are required to deliver a minimum ten per cent increase in biodiversity by creating or enhancing habitats around their developments. This is an exciting step forwards and will increase the amount of private finance flowing into nature restoration in the UK. The Green Finance Institute estimates that this market will be worth between £135 million and £274 million per year. Added to the estimate of existing private finance in nature restoration of £95 million per year, the best case scenario is that private nature investment could now be up to £369 million per year.
Although this number isn’t to be sniffed at – it should deliver genuine improvements – it is still a far cry from the £1 billion a year target the government aims to reach in just six years’ time. Biodiversity Net Gain can’t do that alone. Nor will it be big enough to meet the government’s legally binding target to halt species decline by 2030, or the international agreement it has signed up to, to protect 30 per cent of UK land by 2030 (‘30 by 30’). The government has to create new nature markets to deliver both the scale of private investment and the nature recovery we need by 2030.
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