Natural capital income streams available for farmers

Extracts from an article by Tom Price, which first appeared on the AHDB website. The article lays out options to farmers wanting to gain additional income for their natural capital.

Regulated carbon schemes
The two specific regulated, voluntary schemes available are the Woodland Carbon Code (WCC) and Peatland Carbon Code (PCC).

Woodland Carbon Code – This allows the planting of new woodland to generate independently verified carbon credits. Pending Issuance Units (PIUs) can first be sold to demonstrate the quantity of potential future sequestration. However, the full value of woodland carbon sequestration can only be received once these credits have been verified and turned into Woodland Carbon Units (WCUs) through measuring the actual sequestration levels.

Peatland Carbon Code – This scheme generates carbon credits by sequestering greenhouse gases through storing carbon in peatland. Much like for the WCC, the PCC generates PIUs, and once a project is verified, Peatland Carbon Units can be sold.

Unregulated schemes
Soil carbon sequestration – Since soil carbon sequestration does not fall into the government-backed schemes, unregulated voluntary schemes have emerged to fill this gap. Since there are no government-set regulations, the quality of credits between the different schemes can vary.

If you’re looking to get involved in a scheme, it is important to consider the following:

  • Monitoring and verification methods required
  • Cost and length of each project
  • The price of the credits now and how this could change in the future

More information here

New and novel schemes – Most carbon schemes are targeted at arable farmers due to a focus on soil carbon sequestration to create additionality to carbon stocks. However, schemes and trials are popping up related to livestock farming. Some schemes have implemented grazing practices as part of a regenerative approach to farming to sequester carbon as well as rebuilding soil health.

Some schemes are taking on a holistic approach to produce credits from carbon sequestration – not just through soils, woodland and peatland, but also through wetlands and marine habitats and other methods. Some require biodiversity improvements to go hand-in-hand with this.

With the ever-expanding ways to produce carbon credits, we have started to see alternative schemes to the government-backed WCC and PCC which claim to produce similar credits but use different auditing and measurement systems.

Biodiversity improvement and BNG credits – In line with the UK government’s Green Finance Strategy, which aims to improve environmental outcomes through mobilising finance for environmental projects, private investment and support is available. Some banks are offering green finance loans to help you reduce your carbon footprint and become more energy efficient, and private investment is also available for habitat creation.

The Biodiversity Net Gain (BNG) initiative came into effect from January, working to increase the biodiversity of new development sites by a minimum of 10% compared to baseline, pre-development levels. BNG is mandatory for all new developments regardless of whether this improvement is seen on or off-site. For off-site biodiversity improvements, farmers can often lease their less productive land to developers and/or gain payment from these organisations for managing and improving the habitat in line with the management plan to improve the biodiversity. Often, the organisation renting the land covers the set-up and management costs. The habitat improvement also helps create biodiversity units once additionality has been proven. These can be sold to meet BNG requirements, such as ensuring the habitat improvement is secured for at least 30 years.

Nutrient neutrality credits are also available in some places. Property developers can pay landholders to reduce nitrogen or phosphate run-off in local waterways to mitigate the impact of new property development. The permanence periods can range from 80 to 125 years.

Generating additional income without producing credits – It’s also possible to generate additional income through environmental improvement without producing carbon credits, through on-farm practices.

In a similar way to how farmers and land managers can generate additional income from sequestering carbon or reducing emissions, they can now participate in other voluntary schemes. These schemes measure the improvement in soil carbon stocks and provide compensation for this through payments (rather than through selling credits), met through adopting specific on-farm practices. Some schemes even provide payments for water and biodiversity improvements.

Schemes also exist which produce novel products linked to low carbon farming and which can be sold at a premium, rather than being used to produce carbon certificates. Through incentivising to produce lower carbon produce through being paid a premium, rather than generate certificates, this helps tackle some of the uncertainty surrounding the quality of credits.

Government schemes for environment improvement
Additional government funding is also available through Environmental Land Management Schemes (ELMS) to help manage and improve the environment which can also have benefits for your on-farm productivity as well.

Farmers can receive three types of payment:

  • Countryside Stewardship
  • The Sustainable Farming Incentive
  • Landscape Recovery

Read the full article in its original location

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