Carbon credits: A threat or opportunity for farmers?

Farmers Guide 14 May 2024

Carbon credits: A threat or opportunity for farmers? 

by Sarah Kidby

With recent figures showing over half of farm sales last year were to non-farmers, and reports of farmers being outbid for land that is being 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 around 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 in some cases at least, 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 the coronation of King Charles. 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 is currently seeking 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 member of the Facebook group 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. 

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

Farmland being bought by non-farmers 

Unease over the impact of environmental schemes appears to be reflected by 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. 

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% on 2022 levels – and lifestyle buyers in 16%. Because these buyers tend to purchase larger farms, they bought a larger area of land than farmers too. 

However, the property consultant says this does not necessarily mean the land is coming out of food production.  

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

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

The total amount of land bought and sold each year 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 levels of rent for their continued occupation of land. 

“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 tenanted sector so that they can 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 that landlords should not have access to the Sustainable Farming Incentive – and should only have access to other schemes with the consent of the tenant. 

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 of the opportunities for good quality carbon offsetting, but 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 it’s a new form of diversification income, like quite a lot of the renewable energy activities that our members get involved with, then 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 at all on trying to produce food.” 

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

“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 indeed be the best thing that you could do.” 

However, whilst we do not want to be using ‘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, a better government regulatory framework is needed to ensure what’s being put on agricultural land is certified safe, Dr Scurlock said.

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 a lot of 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. So-called engineered greenhouse gas removals are potentially more robust – for example capturing biological carbon dioxide and storing it or turning it into long-lived products, such as consumer durables or bioplastics, or even fuels, he added.  

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 when it comes to 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 Offer applications on low sensitivity land, avoiding land most suitable for food production. 

Defra said new markets for ecosystem services give land managers the opportunity to make 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. 

Additonally, a portion of Big Nature Impact Fund (BNIF) funding will support projects which sell ecosystem services in new markets for peatland carbon, water quality, and biodiversity net gain.  

The government expects to take a smaller role in future as these markets mature over time and supply and demand grows. 

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

More information will be made available in due course. 

Whilst there are clearly opportunities for farmers to generate new income streams, profitability of farming 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.  
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