Future environmental policy: the role of natural markets

Today, Patrick Begg, our Rural Enterprises Director, is a speaker at a Westminster Energy, Environment & Transport Forum event considering next steps for natural environment policy in England.  Patrick’s speech, below, emphasises the importance of our country’s natural capital and the potential for new markets to secure the future of our environment.

“We live in febrile times, buffeted it seems almost from month to month by a new national poll, each one as significant and potentially far reaching in outcome as the previous one. And that’s just in the UK! It is helluva hard to plot a course for the future when the political context is so uncertain.

Our own election is the big one, of course, and it will be dominated by the behemoth which is Brexit. And it seems to me there are real risks for the environment precisely because of the potential for the bigger national debate to be sucked into the vortex of exit deals and trading scenarios.

The natural environment could easily be squeezed out. So any elbow room we can create to insert strong signals for the future of the natural environment will be very hard won, but critical.

River Esk at Eskdale and Duddon Valley, Cumbria ©National Trust Images/Paul Harris.

What should we be looking for?

First, let’s make sure we secure the ground already gained, at least in terms of sympathy and existing commitments.

This means:

  • committing to transpose all EU environmental protections into domestic law as well as introducing an ambitious new Environment Act; and
  • cementing this Government’s promise to be the first generation to leave the natural environment in a better state for the next.

These represent two major pillars to build from.

We also need to pay real attention to how land management policy will be framed and structured post-CAP.  If we are to restore our rapidly declining natural environment and create a sustainable future for farming – two utterly interlinked bedfellows – we’ll need some new thinking.

There are three things I’d like to see, and the pre-election signals from Ministers have been positive:

  • Number one is a commitment to keep investing in our countryside from the public purse. But we need to rebalance the deal, moving away from direct subsidy, to investing in soil, water, habitats and biodiversity, beautiful landscapes and the rural heritage which creates distinctiveness, cements our own sense of well-being and generates huge tourist revenues.
  • Second, we need support for creative but deliverable ideas on new private and public sector money which can augment the public money that we will need to support farming and land management. We absolutely want a profitable, thriving farming industry but it needs to move beyond the fundamental dependence on direct subsidies that currently prevails. Government cannot be expected to pay for everything and even before Brexit the squeeze on public funding has been biting in the countryside. We need an engaged private sector helping us fund the kind of healthy natural environment that makes sense for business too.
  • And third, we should seek a commitment to think long term and engage farmers in the journey: moving to a payment system which buys outcomes, not just activity. This is the route to real innovation, where accountable and incentivised farmers are thinking hard about how they can deliver a destination rather than simply following a list of remotely determined prescriptions.

And all three of these could be made much more possible if we could establish a functioning, universally accepted natural capital accounting system. At the moment, it is quite easy to relegate natural capital to the realms of academic, self-serving fancy. Intellectually challenging, clever, but in terms of sleeves rolled up, day to day land management and business utility – remote.

This reputation needs to change and I think we can make a persuasive case for why.

We know there is potential for new, functioning markets based on private investment in environmental restoration. For example, power network operators investing in upstream land management to reduce the costs and risk profile of flood protection, or food businesses investing in soil restoration on the farms in their supply chains. These are tangible business outcomes and benefits.

There are already some small-scale examples such as Wessex Water’s N-Trade, a market in reducing farmers’ nitrogen inputs to improve water quality, and the National Trust’s and Green Alliance’s work on what we call a Natural Infrastructure Scheme, which is exploring markets for flood alleviation and water quality through payments to land managers and farmers.

How a Natural Infrastructure Scheme would work.

These ‘toe in the water’ initiatives point to and expose some fundamentals of supply and demand, where natural capital methods could be the turnkey in sparking progress.

On the supply side, land managers need confidence that investments in nature will be recognised, through long-term contracts and markets. On the demand side, potential buyers—such as developers, utilities, local authorities—need confidence in the product they are buying.

We will need better, universal metrics – something to purchase and then account for – and auditable outputs to demonstrate that value has been delivered and how it stacks up compared to other products and suppliers. This underpins competition and, long term, is likely to drive innovation in suppliers.

It will also be vital that natural capital methodologies are consistent and ‘assured’. New market players will also want a level playing field and to avoid distortions or manipulations, which is where Government can provide the confidence and ‘refereeing’ role.

Sophisticated corporates on the ‘buyer’ side may be comfortable and adept at managing new accounting demands. But on the seller side – very often our farmers – we know that complexity will stifle uptake. So in promoting a universal natural capital accounting system it will be crucial to keep things as simple and manageable as possible. We need farmers and land managers to be able to participate without the need for a degree in statistics.

The Trust’s experience at Wimpole, our in-hand farm in Cambridgeshire, where we ran one of the pilot natural capital accounts, showed just how complex things can get if you aim for a detailed, bottom-up approach.  We are an organisation with more data and experts than you can shake a stick at, but finding, assembling then making that information really work proved incredibly difficult and burdensome.  The priority Government has been giving to providing ‘big data’, accessible to as many people as possible, plays into this issue. If sellers and buyers can rely on nationally-available information which embraces natural capital and which is at a level of granularity that works locally, we’ll be well on the way to removing one of the practical barriers.

Wimpole Home Farm in Cambridgeshire. ©National Trust/ Megan Taylor.

I’m going to conclude with a couple of suggestions for policy moves, linked to natural capital, which might help spark the concept into life.

How about these thoughts?

Government could make available seed funding to support the development of new institutions and payment mechanisms, such as development grants to fund the up-front costs of farmer consortia who want to sell ecosystem services, provided from land under their control.

We could also consider creating Natural Capital Allowances, based on an extension of the existing capital allowances scheme, that are available to businesses at all levels of supply chains, not just land managers.

And lastly we could attempt to polish up the tarnished reputation of regulation and use it to stimulate and provoke the creation of units of measurement; trading periods; certification; and sanctions for polluters. All of these could help create demand for the systems and the products which are nourished by and spring from the concept of natural capital.

There’s a risk that politicians may see Natural Capital Accounting as a waning star. I don’t agree. With a renewed push from Government and business, and a strong eye to practicality and utility, I think it could still be a major player in helping unlock new sources of funding for sustainable, public benefit-focussed farming and land management”.

Speech by Patrick Begg, Rural Enterprises Director at the National Trust.


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