Limited demand
At the moment, there is limited demand from buyers for the environmental benefits farmers can deliver. The only notable examples are small pockets emerging from water companies looking at nutrient mitigation and housing developers looking to purchase biodiversity and nutrient offsets to meet their statutory obligations.
On top of this, these markets are very localised and unlikely to reach a scale any time soon where they will be accessible to the majority of farming businesses. This might change if the agri-food chain looks to source more sustainable agricultural produce.
Recent developments have also seen regulators withdraw the use of nature-based solutions for catchment nutrient balancing. In addition, any potential softening of biodiversity net gain obligations of developers could also weaken demand from these already small markets.
Questions and challenges
Alongside the limited demand, there is the question of how these markets would be regulated and controlled to ensure they are fair and work alongside other income streams such as ELMs or SFI.
This is a very active area where the NFU is engaging with the British Standards Institution and green finance initiatives to help develop an appropriate governance framework that works for farmers and growers. Much work is ongoing to crack this challenging area and some positive progress is being made.
There also remain challenges around metrics. Can everyone agree on how these positive environmental outcomes could be accurately measured and valued?
Finally there is a question of timescales. Companies buying environmental benefits may require them to be in place for decades to offset their own long-term negative impacts on the environment. This places significant obligations and risk on farmers which could mean that they need to maintain habitat over multiple family generations.
The NFU is working with a range of market participants to understand how these risks could be better managed and shared between those who are set to benefit.