Lost in the Maze?
Times of change can present great opportunities, but at the moment, in the world of agriculture and land management, it can feel as though there is simply too much changing at once. The Environment, Food and Rural Affairs Select Committee’s latest report “Environmental Land Management and the Agricultural Transition” (published on 28th October 2021) summed it up:
“The scale of environmental, social and economic change facing English farming cannot be understated. This includes the global challenge of climate change and the need to operate in new trading conditions, but it also includes the Government’s decision to fundamentally change the basis of agricultural policy.”
Society has long demanded that rural land supplies food, fibre, timber and minerals; provides clean water, fresh air and renewable energy; creates space for development, conservation and recreation; and supports communities and employment. Now, though, it must do all that while reducing greenhouse gas emissions, sequestering carbon and extensifying farming systems in the face of volatile prices, labour shortages, the threat of unfavourable trade deals and the withdrawal of the Basic Payment Scheme’s financial support.
It’s no wonder that this challenge can feel overwhelming and to make matters worse, farmers and land managers are trying to plan ahead in a world of incomplete information. As the EFRA Select Committee report put it
“Considerable uncertainty remains about how the 7-year agricultural transition will affect English farming, and there is a risk that farmers will resort to less environmentally sustainable methods to make up for lost income, leave the sector, or go out of business entirely.”
To many involved in farming and land management, it feels as though we are lost in a maze, unsure which path to take to find the way out.
By way of a practical example, we were recently asked to advise the new owners of an estate about the potential options for its short- to medium-term future. Here are just a few of the questions that we contemplated:
What will happen to agricultural rents in the next 5 – 7 years?
How will the income from the future ELM programme compare to the Countryside Stewardship Scheme?
Will the ELM Local Nature Recovery Scheme or the Landscape Recovery Scheme offer opportunities at an estate scale?
Is private investment a realistic alternative to taxpayer-funded grant schemes?
Will this particular location be suitable for offering biodiversity gain sites? If so, what income might they generate?
If the land is entered into a Stewardship Scheme now, will that adversely affect its potential for biodiversity net gain in future?
What might be the impact on overall estate strategy of entering into long term agreements for 30 years or more?
What else does this estate have going for it which might generate an income stream?
The answers to most of these questions are far from clear, so how do landowners and farmers make decisions in this complex, confusing environment?
One tool which might help to indicate the way ahead is a set of natural capital accounts. The process starts by identifying the various natural capital assets and what we refer to (for want of better language) as the “goods” and “services” that flow from them – from water quality and climate regulation to biodiversity and human wellbeing. Many of these have long been thought of as simply by-products of good land management or agriculture – if they have been much thought of at all. That perspective can be changed when values are ascribed to these goods and services, which enables us to start identifying the most beneficial use to which that particular land can be put.
The methodologies behind the valuation process are sometimes unfamiliar and far from perfect, but they are a starting point for a conversation about the hidden values in the land and how it might be managed to enhance those goods or services which could offer the greatest benefit to society.
For example, land situated close to urban areas might be particularly valuable for its ability to help filter harmful particulates from the air if planted with suitable trees, shrubs or hedges. In the uplands, society might recognise the benefits of implementing natural flood mitigation measures to smooth out the flow in the upper catchments. Lowland farming areas might offer enhanced biodiversity through the creation of ponds to boost protected species populations.
Who will pay for these services, how much will they pay and what they will want in return may not always be immediately apparent, but each of the examples quoted in the paragraph above is happening already in schemes which are funded by the private sector, the public sector or a combination of the two. The first step in being able to realise such an opportunity is to understand where the value lies.
A set of natural capital accounts can be used in a number of ways, including:
To establish a baseline for the business, against which progress can be measured in a host of areas
To support decision-making within the business and contribute to strategic business plans
To provide evidence to use when consulting communities and stakeholders on proposals, or to support applications for third party consent
To help build a brand for a business or a farmer cluster.
The science – or art? – of preparing natural capital accounts is still a relatively new one and there is a plethora of different tools available to identify and value the various assets, goods and services. Some are better than others, but by using these tools we will learn more about their strengths and weaknesses and over time, develop better ones which more accurately reflect the values that society places on these “non-market” benefits.
As familiarity with and confidence in these approaches grows, natural capital accounts are likely to develop into an important tool to inform and encourage the private and public sector to invest in rural land and businesses. They may provide some of the signposts that help us to find our way out of the maze.
Do get in touch if you would like Tellus Natural Capital to help you find your way in these challenging times. Contact Kate Russell at kate@tellusnatcap.com.
29th October 2021