New markets for natural capital look enticing, if not a little intimidating. 4AR explores the prospects and pitfalls for the on-farm innovator.

There’s something unnerving going on when elderly landowners in Wales are cold-called and asked if they’d be interested in selling their farm at an inflated price.

And then farming is feted as the bringer of nature-based solutions, with farmers hailed as Net-Zero Heroes and Climate Change Champions.

The change in the landscape has come about through markets now emerging for carbon and biodiversity which may offer golden opportunities for the on-farm innovator. Equally, there are concerns that those who show their hand too early will suffer fingers burnt as surely as the element that’s found new favour.

“The caution here is carbon – all that glistens is not gold,” notes CAAV Secretary Jeremy Moody. Speaking at a fringe event at the Oxford Farming Conference (OFC), he points out that the carbon market came about through regulation but is itself unregulated.

“There’s a big target for farmers to reduce greenhouse gas emissions, currently 8% of UK total, and we don’t yet have the policy to deliver it. That’s a very big ask, and because it’s so big, the farmer needs to control all their carbon.”

Jeremy believes the requirement for new land developments to deliver a 10% biodiversity net gain may hold more promise than carbon as a new income stream for farmers. Enshrined into planning policy, this adds a sum of what may be worth around £5000-7500 per new house built.

Developers may look to outsource this requirement to local farmers or to the natural capital market, he says, which opens opportunities to complement existing farming activities, especially on more marginal arable and improved grassland areas.

But Jeremy voices reservations over trading carbon. “Managing carbon, sequestering it, holding carbon-reducing emissions are massively important. Selling it to other people is counterproductive. Keep your carbon at home,” is his advice.

A different approach is advocated by Richard Williamson, senior managing director of Trinity AgTech. “While caution may be prudent, don’t let this paralyse you into inactivity,” he notes during an OFC fringe meeting.

Trinity AgTech's senior managing director advocates this new approach to farming, commenting that caution shouldn’t paralyse individuals to inactivity.

“Don’t give away your natural assets in what may turn out to be a poor deal. But do give yourself the right to choose how they are managed and how you can benefit.”

The firm’s digital assistant Sandy accurately assesses a farm’s carbon, biodiversity, water stewardship and agroforestry, he says. “The first step is to take control of what you have – measure it so that you are in a position to make an informed choice, whatever your preference or however you wish to benefit.”

Trinity founder and executive chairman Dr Hosein Khajeh-Hosseiny points out that although about 52% of the world’s annual income of around $94 trillion is reliant on natural capital, less than 2% of this currently comes to its owners and stewards.

“This has led to economic marginalisation and environmental decline, and we end up with greenwashing and inequity.”

Through Trinity Natural Capital Markets, Hosein claims all farmers have access to “fair, efficient and virtuous outcomes where transparency, clarity, collaboration, insight and foresight are advanced.” This addresses greenwashing and safeguards against ‘green grabs’, he says, where capital accumulation is secured under the auspices of supporting environmental gain.

The emerging carbon and natural capital markets formed a theme that threaded through much of OFC. Its report, Natural capital: the battle for control, notes the market for carbon sequestration alone could be worth £1.7bn per year to UK farmers – around half the current value of the Basic Payment.

The demand comes primarily from individuals and businesses looking to reduce their emissions and meet net-zero targets. It’s recognised that some industries may never completely eliminate their emissions, so those who are already doing all they can to minimise their carbon footprint can now buy in the carbon to offset the remainder.

Agriculture is unique in that it can sequester carbon, primarily through trees, peatland and soils, removing it from the atmosphere and slowing down global warming. This is a service that can be offered to the market with or without biodiversity and water quality co-benefits. Taken as a whole, these nature-based solutions are now attracting vast sums of investment, known as green finance.

“Tomorrow’s countryside will look different as both governments and companies invest in natural capital,” predicts Dustin Benton, policy director of Green Alliance and author of the OFC report.

He believes the market for carbon, as for any commodity, will optimise on cost. Transaction expenses for capturing carbon through planting trees and peatland restoration are relatively low, he points out.

“The potential for soil carbon could in theory be as large as trees. But if you look at what you can accurately measure or verify, soil science doesn’t allow you to say, ‘do this simple thing and you’ll sequester this much carbon’ in the same way you can with trees or hedges. That means soil carbon sequestration has high verification costs.”

The rewards could be significant, however. Carbon sequestration for upland farms begins to pay at a carbon price of as little as £3/t CO₂ equivalent, “mainly because income in upland areas is shockingly low,” he notes.

At £50/t CO₂e – below the current traded carbon price – Dustin estimates returns would attract most farms on the average UK net income of around £50,000/year. But in The Fens, the amount of carbon stored in soils means a price of just £35/t CO₂e makes it attractive for a farmer to switch from growing crops to restoring wetland.

“That’s quite surprising. That suggests this could move very quickly if private carbon markets aren’t governed.”

This is a point stressed by NFU president Minette Batters. “If we're serious about biodiversity, about restoring nature, about carbon-neutral food production, the money has got to hit the ground,” she says.

“Farmers currently take less than 8% of the food value chain. We have to reset this – if we let these markets escape from farmers, we’re going to regret it forever.

“These future trades have to be farmer-led and farmer-owned. Farmers are the only working conservationists we have. Whether they're a landowner or tenant, we must have a fair approach whereby all of these farmers can develop these new traits.”

Minette is convinced that farmers can provide the solutions and it’s simply a matter of putting the right technologies in their hands.

“The innovations coming online are going to play a massive part. But this cannot just be a change for the UK. If we can set these new trades up, we can deliver sustainable food production to the world,” she stresses.

“So the revolution that lets everybody lead the quality of life they look for, UK agriculture can provide if it's allowed, if we can excite our political partners into the opportunities that are out there.”

Which is where the on-farm innovator comes in. OFC director and head of research at Savills Emily Norton, who commissioned the OFC report, recognises the governance isn’t yet in place to ensure all farmers a safe and secure income from the nascent markets.

“But the direction of travel is clear. There is a market for high quality carbon credits, where sellers can give assurances on aspects such as additionality, permanence and leakage,” she says.

“One key aspect to explore is that if you’re a UK buyer of offsets, you can purchase carbon credits from anywhere in the world, but a UK provider can only sell credits to UK purchasers. For UK providers to compete against global offsets, they’re likely to need to bolt on other ecosystem services,” notes Emily.

“Another key question is how farmers can work with the supply chain to ensure good return and investment at a farm level, and also help the supply chain reach net zero.”

One opportunity may be in soil sampling and health monitoring. Standard soil tests used currently depend heavily on accuracy of sampling method, time of year the sample is taken, and a range of other factors. This can make it very expensive to obtain an assessment of soil carbon levels that’s reliable enough to trade with.

But in a (literally) ground-breaking project currently underway, led by PES Technologies, a sensor mounted on Small Robot Company’s Tom monitoring bot can ‘smell’ the state of the soil.

Proof of concept has now been achieved for the robot-mounted sensor that detects Volatile Organic Compounds (VOCs) in situ from a 400g sample. Ground-truthing work is now underway on the Lockerley Estate in Hants to verify the 10+ soil health indicators monitored, including microbial biomass and soil organic matter content - the key components of soil carbon.

“Our autonomous robots can already deliver a highly precise per plant view,” notes SRC co-founder Sam Watson Jones. “The next step is to bring this precise viewpoint to soil biology at a level of detail far in excess of current best practice.”

For Fenland arable farmer Tom Clarke, the questions surrounding soil carbon and net zero are more fundamental. “By force or by choice, we’re going to have to reduce our carbon footprint, and the first step is to know what that is.”

Some of Tom’s soils have a carbon content above 30%, and he knows it will be a “complex challenge” for these to deliver what society requires in a way that will balance his needs for the business.

“Farmers are looking for robust and verifiable routes to reduce emissions that don’t come back on us. We’re in the unique position to come forward with solutions, so we shouldn’t wait. We should be collaborating with scientists and other stakeholders to work out what these are.”

Dr Kate Pressland of the Centre for Effective Innovation in Agriculture has for many years successfully brought together groups of farmers with scientists to explore solutions through on-farm trials.

“You can understand the hesitancy, here. It’s particularly unnerving getting involved in a new market – you don’t want to invest all that time and on-farm resource if they’re going to count for nothing.”

But being part of the natural capital market early on has its advantages. “It’s really fast-moving with lots of players coming in. There’s the challenge of shaping how that develops, but you can only do that if you’re involved.”

Kate advises the on-farm innovator to do their own research, and also to be part of the research taking place on their farm. “You get the frontline view and see the technology early on. It’ll cost you time but will connect you into pathways of research and further opportunities you wouldn’t otherwise have come across.

“And give it serious thought – this area more than most needs guidance for policy makers. Those who get involved early on will help shape where the rewards will lie.”

The key to success is to have a clear goal, and that’s particularly important where the potential for carbon capture in soils is to be explored, for example. “We’ve seen that time and again where farmer groups have explored no till or improving soil health sustainably,” she says.

“If your target is to somehow improve the soil, that’s not clear enough. If it’s to increase carbon, bolster nutrient availability, increase drainage, or improve your return on investment, they’re much more focussed targets.

“Farmer-led groups start with 1000 ideas. It’s the ones that distil these into a definitive, and measurable, purpose that make the leap of discovery,” concludes Kate.