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Expert Insights

17 January 2022

Whose carbon is it anyway?

Farmers and landowners must retain control of their natural capital while collaborating with their local communities if they want to make a lasting environmental difference on their own terms.

DEFRA’s ‘launch’ last week of the Local Nature Recovery Scheme and Landscape Recovery Scheme could have perhaps been something of a damp squib, considering DEFRA had been talking about Environment Land Management Schemes (ELMS) (comprising these schemes and the Sustainable Farming Incentive, albeit referred to as ‘Tiers 1, 2 and 3’ before ‘Tiers’ became covidly unfashionable), since at least January 2020. Instead, these schemes have succeeded in being attacked by farmers, environmental organisations and MPs alike and have even managed to make Ed Sheeran unpopular in some quarters.

Having attended some truly inspiring talks at the CLA conference in December and last week’s Oxford Farming Conference, I am confident of the rural community’s desire and drive to achieve the NFU’s stated ambition of carbon net zero across UK agriculture by 2040. That said, the journey to net zero and the transition from the current basic payment scheme of farming subsidies to the incoming ELMS will pose plenty of challenges along the way. Three key (c-) words come to mind (alongside climate change and carbon) to help farmers and landowners navigate that journey: control, collaboration and commitment.

Control

While agriculture is generally considered responsible for c.10% of the UK’s greenhouse gas emissions, it is unique in being the only land sector capable of naturally absorbing and storing carbon. Agriculture is part of the solution and farmers have the potential to be its modern day heroes in the fight against climate change. That power should not be underestimated or given away. Farmers’ share of the food supply chain offers a cautionary tale with farmers now receiving around 8% of the customer pound in the supermarket-driven system (i).

The policy behind ELMS envisages farmers and landowners being able to receive both public and private funding in return for environmental benefits. Fledgling carbon and biodiversity markets offer valuable new revenue streams to farmers and landowners with the market potential value of UK land-based carbon credits alone potentially equating to as much as £1.7bn annually (ii). However, there is a danger that entering into such schemes could result in a loss of control, which could prove costly in the future. As industries and brands alike look to achieve net zero throughout their supply chains, farmers and landowners will be expected to demonstrate their own net zero credentials – a task which will be considerably tougher if they have already sold their land’s carbon sequestration capacity as carbon credits. We recommend that farmers and landowners ensure their own house is in order in terms of their net zero goals before entering any additional carbon agreements and that such agreements are perhaps most safely made within rather than external to their existing supply chains.

Collaboration

Much of the recent backlash against ELMS and in particular the Landscape Recovery Scheme (and Ed Sheeran’s rewilding plans) has been from smaller and often tenant farmers who feel their skills and heritage are being sacrificed to an overly simplistic drive to replace farming with nature without stopping to consider the wider social consequences of doing so (iii).

Considering that one third of total farmland is tenanted, if ELMS is to be a success it must be accessible to tenant farmers and provide them with new opportunities rather than making their way of life redundant. Achieving this will require a combination of public policy and private action. Tenants and landowners should review their tenancy agreements to understand where the value of environmental benefits currently lies and to what extent that should be updated. Equally government needs to further consider how they can engage with tenant farmers in light of a lack of security of tenure in many farm tenancies. For example, how can a tenant farmer access a 30 year biodiversity agreement if his or her farm business tenancy lasts five years? (iv)

The sustainability advisers, 3Keel, in partnership with Nestlé, have created a blueprint for landscape-specific collaboration in creating Landscape Enterprise Networks, which connects investment from local businesses looking for specific environmental outcomes to land-based organisations which can deliver those outcomes on the ground (v). In a similar vein, James Rebanks, the author and shepherd, is collaborating with his neighbours to regenerate the valley in which he farms.

Rural communities have both demonstrated their anger at having environmental initiatives imposed by external sources without consideration for local livelihoods and shown how they can work together to achieve successful environmental outcomes. It seems clear that the success of ELMS will depend on its ability to engage with, not alienate, these local communities.

Commitment

The question of commitment is connected to that of control – when signing up for an ELMS or privately funded initiative farmers and landowners will need to understand its extent, duration and flexibility. They will need to ask themselves whether they are in a position to make that commitment; whether there are others in the business or family who need to be involved; and what obligations or landscape they want to pass on to the next generation. These questions will naturally lead to the bigger question of what their succession plan is and whether they have such a plan in place. This article sets out some themes to consider in relation to succession planning: Strategic Planning for Modern Landed Estates.

Despite the negative press and the continuing lack of detail, ELMS and privately funded environmental initiatives are likely to offer valuable opportunities to farmers and landowners. The key will be in ensuring that such initiatives involve local communities and champion farmers and landowners in the net zero journey that is right for them.

i) How short supply chains benefit everyone | Sustain (sustainweb.org)

ii) OFC launches ground-breaking reports on natural capital | Oxford Farming Conference

iii) ‘It’ll take away our livelihoods’: Welsh farmers on rewilding and carbon markets | Rewilding | The Guardian; Bridgette Baker: Ed Sheeran's rewilding plans are off key - Farmers Weekly (fwi.co.uk)

iv) Natural_capital_the_battle_for_control.pdf (ofc.org.uk)

v) Landscape Enterprise Networks – A 3Keel initiative to support resilient landscapes.


This article was written by Hannah Connors an Associate in our Private Client team, and Phil Webb a Senior Associate in our Real Estate team. Please do contact us if you require assistance.

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