Natural capital is no panacea, warns CAAV

Although there are likely to be some profitable options, disadvantages to trading natural capital can include long-term agreements and punitive measures should the terms not be met.

You need to think about whether the management fits in with other farming activities and consider the effect of any agreement on tax and tenancy terms.

It is no more or less a transaction than any other, so treat it as such.

It’s also vital to consider emerging demands from consumers and commodity buyers. So, while selling carbon credits to other people for fixing organic matter into the farm’s soil may look like a win-win, what happens when a retailer then insists on the farm itself being carbon neutral? The value in selling carbon credits right now is trivial – it’s far more valuable to retain the carbon on your farm; helping another business become net zero will not help the farm itself.

Commercial forestry is also more profitable than planting trees for carbon sequestration. There is significant commercial demand for forestry and prices for both timber and woodland have risen sharply. Given the risk-reward ratio, it’s better business to trade the timber. If you sell the carbon and the trees fail or burn down, what happens then?

However, there are times when selling environmental services is mutually beneficial. And some agreements might be ‘stacked’ to garner greater income for differing benefits yielded from management practices. For example, rewetting peatland might encourage greater biodiversity, sequester carbon, and provide clean water, each of possible value to different buyers.

All developers will soon have to deliver a 10 per cent biodiversity net gain as well as the development. Where this is better achieved off-site, that would generate demand for environmental services from farms.

Jeremy Moody is secretary and adviser to the Central Association of Agricultural Valuers (CAAV)