Carbon credits in the UK: A threat or opportunity for farmers?

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Recent figures show that over half of farm sales last year were to non-farmers. There are reports of farmers being outbid for land that will be put into woodland or other offsetting projects. We explore the threats and opportunities of these schemes.

Whilst there are opportunities for farmers to gain extra income streams from carbon credits and other environmental schemes, there has long been concern about food security and the impact on farming and food in the UK. 

The aim of such schemes is to use low-quality farmland for environmental projects. However, it’s likely that, at least in some cases, food-producing land will be lost, particularly in light of the profitability challenges farmers are facing. 

Posting on a private farming group on Facebook, one farmer said he had been outbid by Forestry England for a piece of neighbouring land – which had previously been used for silage.  

The land at Quoditch in Devon will be used for a new woodland to celebrate King Charles’s coronation. Forestry England, which said the land in question was grade four, has said it will be a valuable place for timber, wildlife, and people. It seeks views to shape how the wood will look ahead of a consultation later this year. 

A similar Coronation Wood is being developed in Shropshire. 

Another Facebook group member said a large farm in their area had been sold to a conglomerate that offered a substantially higher bid to plant with trees for offsetting – while another said thousands of acres in Nottingham were going into solar. 

Particular concerns have also been raised in Wales, where the Sustainable Farming Scheme requires that at least 10% of each farm be managed as habitat. 

Farmland being bought by non-farmers 

Recent Strutt & Parker figures, which show non-farmers bought more than half of the farms and estates sold on the open market in England in 2023, reflect an unease over the impact of environmental schemes. 

Farmers accounted for just 44% of transactions, the lowest level on record. Historically, farmers have tended to be involved in 50-60% of purchases. 

Private investors were involved in 28% of transactions, institutional investors in 13%—a rise of 10% from 2022 levels—and lifestyle buyers in 16%. Because these buyers tend to purchase larger farms, they buy a larger land area than farmers. 

However, the property consultant says this does not necessarily mean the land comes from food production.  

Strutt & Parker rural research director Jason Beedell said many farms and estates bought by non-farmers continue to be productively farmed.  

“Although there has been much media attention about land being bought for tree planting, the acreage involved in England at the moment is still tiny,” he cautioned. 

The total land bought and sold yearly typically represents less than 1% of the total agricultural land area.  

“So even if the amount of land being bought by green investors is growing, it still represents a tiny percentage of the total land area,” he added. 

“The reality is that most agricultural land continues to be in the hands of farmers despite what looks to be a significant shift in buyer types.” 

Fears for tenant farmers 

The future for tenant farmers is another ongoing concern, with reports of large landowners putting land into woodland or other environmental schemes, rather than renewing tenants’ leases. 

George Dunn, chief executive of the Tenant Farmers’ Association, said:  

“We must avoid situations where tenants are forced to give up land or to leave their holdings so that their landlords can use the land to enter new schemes.   

“We are already seeing situations where landlords are using the threat of taking land back for tree planting as leverage to require tenants to pay higher rent levels for their continued land occupation. 

“It is easy to see how landlords, incentivised by the availability of grant aid through ELM coupled with emerging schemes in the private sector, will be tempted to take land out of the industry tenanted to be rewarded via the new schemes.   

“This would not sit well with wider Government objectives for the support of the continued development of the landlord-tenant system in agriculture and the promotion of longer-term agreements.” 

To avoid this, TFA believes landlords should not have access to the Sustainable Farming Incentive and should only have access to other schemes with the tenant’s consent. 

Mr Dunn believes giving farm tenants greater rights in this way would encourage landlords to discuss joining schemes with their tenants rather than seeking to impose them. 

One must not come at the expense of the other. 

Speaking to Farmers Guide, the NFU’s chief advisor on renewable energy and climate change, Jonathan Scurlock, said the union is not averse to some opportunities for good-quality carbon offsetting. Still, environmental markets must not undermine domestic food production. 

“We don’t want one at the expense of the other. If it’s an add-on and a new form of diversification income, like many of the renewable energy activities that our members get involved with, then that’s good.  

“This just brings more income into the sector, and it supports food production even under circumstances like this year, where quite a lot of farmers are probably not going to make any money trying to produce food.” 

He added that taking quality land out of food production and throwing it back to nature, expecting it to ‘heal itself’ rapidly, is naïve and perhaps a waste of good farmland.  

“On the other hand, if you have some really unproductive, poor quality problem land that’s really difficult to farm, then arguably you could say, income from managing it for carbon storage and biodiversity may be the best thing you could do.” 

However, while we do not want to use ‘best and most versatile land’ for these schemes, Dr Scurlock acknowledged that some farmers will be in areas where all the land falls into this category—and if farmers need the revenue from solar panels, for example, good-quality farmland could be taken out of production. 

Potential opportunities 

Opportunities for farmers include spreading biochar, or enhanced rock weathering which involves applying crushed basalt to farmland due to its benefits for soil fertility and biology, and crop yield and health. The rock also removes carbon dioxide from the atmosphere.   

These offer potential income opportunities that do not compete with food production. However, Dr Scurlock said a better government regulatory framework is needed to ensure that what’s being put on agricultural land is certified safe.

The Oxford Offsetting Principles make it clear that it’s not sufficient to offset a flight by saving a piece of rainforest, as there are major issues with permanence in many nature-based carbon offsets, Dr Scurlock explained. 

Carbon credits must be based on robust, measurable carbon removals, especially if you’re putting them against fossil fuel emissions. He added that so-called engineered greenhouse gas removals are potentially more robust – capturing and storing biological carbon dioxide or turning it into long-lived products, such as consumer durables, bioplastics, or fuels.  

While some NFU members are enthusiastic about carbon markets, the union has been cautious about the difficulties of measuring soil organic matter and the potential for farmers to increase soil organic carbon in the long term. 

The NFU would also like to see more flexibility for new woodlands – such as a 25-30-year impermanent woodland scheme – as the permanence of the change of land use is an issue for many. The only exception is currently growing an energy crop of a woody species such as willow or popular. 

Food supply chain ‘a priority’ 

Commenting on woodland creation and productive farmland, Defra said supporting the food supply chain remains a priority.  

‘Our agroforestry and tree planting schemes are designed to work hand-in-hand with food production. We are ensuring we plant the right tree in the right place, where doing so provides a net benefit to the environment and society,’ the department said. 

Recent developments include: 

-Higher payments and a fast-track application process for planting on less productive land to make it simpler, faster and more financially attractive to plant trees on marginal land 

A new payment (£1,100/ha) was introduced to encourage England Woodland Creation to Offer applications on low-sensitivity land, avoiding land most suitable for food production. 

Defra said new markets for ecosystem services allow land managers to profit from woodland creation projects by selling carbon credits to buyers who want to offset their emissions.  

‘Developing and increasing this revenue stream helps overcome barriers to investment in woodland creation because it gives investors an increasingly reliable return on their investment,’ the department said. 

Defra’s Woodland Carbon Guarantee promises that government will buy carbon credits from woodland creation in the future, for successful bidders, if the market does not offer a higher price. 

Additionally, some Big Nature Impact Fund (BNIF) funding will support projects that sell ecosystem services in new markets for peatland carbon, water quality, and biodiversity net gain.  

The government expects to play a more minor role as these markets mature and supply and demand grow. 

Defra’s Land Use Framework for England will be published later this year. According to the department, it will help inform how we manage land trade-offs, ensuring that food security is balanced alongside climate and environmental outcomes.  

More information will be made available in due course. 

Whilst there are clearly opportunities for farmers to generate new income streams, profitability remains the key issue. Although the aim may be to encourage tree planting on poor-quality land and supplement farming income, more farmers may be forced to put even higher-quality land into environmental schemes if they cannot make money from food production.  

Source: Farmers Guide

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