- Groundwork
- Market Engagement
- Groundwork
- Market Engagement
What market opportunities are available to me based on my land and goals?
This milestone will guide you through an initial assessment of your land as you determine what your broad vision is in relation to nature and help you to identify what opportunities might be available to you to attract private sector finance.
The actions taken at this stage can be taken before you’ve made the firm decision to engage in nature markets. The considerations presented in this milestone will help you determine whether nature market participation makes sense for your goals, the condition of your natural capital and your farming business.
You can also apply many of these considerations to develop a broader vision around your natural capital and other potential funding sources – such as government grant schemes or philanthropic funding.
This milestone contains five subsets of considerations that farmers may want to explore at this stage. Click on each of these to the right to read more.
You can also read case studies of farmers that have successfully addressed the considerations and activities set out in this Milestone, along with other useful resources and a checklist summary of the considerations covered for ease.
Reviewing my land’s current use and condition
A broad assessment of your land’s current condition and productivity will help you to think through what sort of changes you may want to make. Reviewing the land’s history, ecological condition, habitats and social or recreational significance can help guide your thinking and also determine what is possible in your specific context. There are many tools and software programmes available to farmers to conduct this initial assessment before you formalise measurements through baselining which is discussed in Milestone 3.
Before generating your vision for your land and determining whether nature markets make sense for you, you’ll want to take stock of your land and see what you have to work with. The current use and productivity of your land will inform what types of environmental improvements are possible to deliver. It can be helpful to start by asking yourself why you farm certain livestock breeds, or grow certain crops, and to review the farming operation.
Some key questions you can ask yourself are:
- Why am I farming these crops or this type or livestock?
- Is there any unproductive or difficult to manage land on the property?
- Are any areas of the farm degraded or am I noticing productivity declines?
You may consider what ecosystem services the land currently provides (such as sequestering carbon or providing habitats for wildlife) and whether you could take action to improve these ecosystem services to increase your profits. For example, if a field is next to a waterway, a change in management practices or an intervention such as tree-planting or leaky dams might decrease flood risk downstream or help improve water quality.
If your natural capital is already in good condition this is great, and you will need to consider the concept of additionality which stipulates that you can only sell an additional environmental benefit to that which you already provide, and one that you are making only because there is now private payment for it. I.e You cannot sell something that already exists or that you would have done anyway. The concept of additionality is still being debated as whether it has a place in nature markets, but at this stage it is worth considering the extent to which you can make additional improvements.
There is typically always room for uplift, however which a natural capital account or ecological survey may identify. For example, your farm’s soils may be close to saturation level for soil carbon preventing any opportunities in soil carbon sales, but there may be opportunities for biodiversity improvements or reducing nutrient runoff into waterways as a means of providing income.
At this stage you will also want to note the different types of habitat you have. You can then determine if there are obvious environmental improvements you can make, such as restoring a wetland, regenerating a woodland or connecting multiple habitats. You can do this on your own or refer to external resources such as Natural England’s Habitat Networks Map to identify habitats and UKHAB classify them.
Typically, larger tracts of land are required to generate the volume of ecosystem services that would appeal to private buyers. Buyers of ecosystem services prefer to buy at a scale commensurate with the impact they are seeking (such as offsetting their carbon footprint).
That said, small areas of land can still attract buyers for ecosystem services. There are woodland creation sites selling carbon, for example, that are less than five hectares in size, and wetlands of one to three hectares delivering nitrate reductions.
When you are considering areas on your farm where you may want to develop a nature markets project, it will be helpful to take stock of how much land you are willing to include, particularly if you are interested in creating habitats or and/or taking land out of production. You can also look at neighbouring habitats and start thinking about linking your land to that of your neighbours to increase the scale of your project.
More information on increasing the scale of your offering by working with other farmers can be found in Milestone 2.
The site’s history may reveal key insights that inform your project’s design, as well as potential risks. For instance, if a river previously flowed through an area of land, then you may want to prioritise a project with hydrological impact, such as wetland creation. Similarly, if soil fertility has been depleted through extensive pesticide use, you may consider changes in management practices to increase soil organic carbon which could deliver co-benefits for agricultural productivity.
There are some instances in which farmland may have social or recreational significance which might be considered when developing your project. For example, community members may feel strongly that walking access should be maintained through a restored woodland, though access routes may need to be altered to make sure newly-planted areas aren’t damaged. On the other hand, increasing the social value of a site may bring in potential revenue streams through ecotourism, and attract buyers who are looking to support social impact, for example through connecting the local community to nature through the provision of wild camping sites or educational tours.
There are a variety of tools and software programmes available to farmers to map sites and assess their conditions and key features with varying levels of detail. Many programmes are targeted specifically to farmers by incorporating considerations of crop or animal productivity, crop type and other agricultural factors into their models. Some offer the ability to design a land management plan while identifying potential revenue streams, including the sale of carbon and biodiversity credits. Others offer access to groups of potential buyers themselves, with monitoring protocols built in for these buyers once initial work is complete. A selection of available software programmes are discussed in the case studies throughout this Toolkit.
If you do not know what types of ecosystem services your land provides or what kind of project you want to design, a Natural Capital Account measures stocks of natural capital and what benefits or ecosystem services those natural capital assets provide. For instance, a natural capital account may reveal the carbon sequestration potential of your soils or species richness across a landholding.
A full natural capital account is not strictly necessary to start selling ecosystem services. You may not need one if you know with certainty which ecosystem services you want to sell, or if initial project funds are limited.
However, the more data you can gather about your natural capital at this stage, the easier it will be to see if there are multiple ecosystem services which could be sold, and how your intended project might provide co-benefits to your farm.
Many online tools and software programmes offer a free, limited version of their services, and these should be utilised to the project’s benefit as much as possible. However, if a farmer is considering paying for a certain software package or natural capital accounting service, thought should be given to costs relative to the potential revenue generated from the credits. You can see average prices for different ecosystem services in the Introduction. At this stage, keeping costs down is always helpful!
Setting your vision for your land
You will be looking to align potential changes with your vision and overall goals for your farm. Getting clear about your goals at this stage will help you determine whether a nature market project will help you in achieving that vision and in identifying appropriate interventions.
Setting out your vision for your land should take place before engaging with external experts to develop your management plan. After taking stock of your land and practices, consider what changes you would like to see, such as improved water retention in your soil, a decrease or change in livestock mix, or a reduced reliance on fertiliser or pesticides.
You may want to improve the profitability of less productive land. Although some nature market interventions will involve making changes to how productive land is farmed, such as agroforestry or silvopasture, you could also prioritize unproductive land for the development of a nature-enhancing project like planting a wildflower meadow or woodland on marginal land.
You may also want to consider where you have noticed environmental or productivity decline on your farm. You could use your project to both generate saleable credits and improve the environmental condition and resulting productivity of your land, by increasing soil organic carbon for example.
It’s helpful to also develop a long and short-term vision for your land. What sorts of changes would you like to see in 5, 10, or 30 years? It is good to recognise now that some improvements will require long-term commitments. For example, if you are considering improving the biodiversity on a piece of your land to sell Biodiversity Net Gain (BNG) units, you will have to consider how a 30-year contract will be maintained if you sell your farm or pass it down to a family member.
More information about long-term maintenance can be found in Milestone 3. You may also consider what sort of contribution you’d like your farm to make to the wider landscape, such as improved habitat connectivity or better water quality in towns downstream. This process can help guide you toward specific interventions and ensure that your future project will help you achieve your goals.
You may want to consider the areas immediately surrounding your farm to see if there are potential ‘synergies’ with nearby sites that can deliver greater improvements to natural capital. For example, a farmer might collaborate with a neighbour to create a ‘biodiversity corridor’ by connecting two neighbouring woodlands, which could deliver a higher number of Biodiversity Net Gain (BNG) units for sale. Incoming Local Nature Recovery Strategies may also help you to identify changes you might make on your land which will have wider benefits for your area.
Working with Sites of Special Scientific Interest (SSSIs) and Areas of Outstanding Natural beauty (AONBs) may also open up access to grant funding to support the early stages of your partnership.
Note: many mapping technologies include scientific analysis on where best to place interventions in relation to neighbouring sites. You may also consider discussing your project with local catchment partnerships, local councils, local planning authorities and environmental NGOs (eNGOs) to identify further synergies.
After assessing the current state of your natural capital and getting clear about your long-term vision for your land, you will be well placed to begin thinking about potential interventions which will deliver your environmental goals and provide income opportunities. Some ‘easy win’ examples include allowing hedgerows to grow out, establishing grass field margins and taking awkward field corners out of production for biodiversity. There may also be opportunities to change practices that provide ecological improvements and income opportunities that are not generated by nature markets directly – such as ecotourism, or higher-priced, premium products. Nature markets are just one tool for farmers to access new income streams.
Once you’ve decided on your high-level goals, you’ll need to get more specific on what interventions will deliver those goals, how best to incorporate them into your farm and where they are best placed to deliver the most value. For example, for natural flood management projects, leaky dams and hedgerow planting are separate types of interventions that will have different impacts depending on where they are used. Likewise, if you are considering planting a new woodland then you will need to consider the correct species mix and planting technique for your land to maximise impact and permanence.
To be certain your proposed interventions will deliver their intended outcomes, seek out external advice from someone with ecological training and expertise, ideally with understanding of the farming landscape.
Often you can find free advice from eNGOs, public bodies, land agents and local partnerships, or from learning from other projects. You can also pay an ecological surveyor or consultancy, which you might have already used to assess the current state of your site. If you have an existing relationship with a farm advisor, consider asking them about their ecological experience and how you could work together to develop a nature markets project.
Legal ability to change land use and tax implications
There may be tax or legal implications of engaging in nature markets depending on the classification of your land, your tenancy and ownership status, and the types of interventions you plan to make. It is important to get tax advice from a qualified agricultural accountant or tax expert.
Note: The information in this Milestone does not constitute any form of legal advice but instead serves as practical guidance on how to manage engagement with lawyers and the process of contract development.
If the site is under such pre-existing legal environmental obligations, this can affect the additionality of any environmental outcomes that the project is claiming it will deliver.
If such environmental outcomes are expected under an existing legal obligation, then the project will not be delivering ‘additional’ environmental outcomes and will not be credible to buyers, investors and other financiers.
Examples of legal obligations include site classifications and subsidy agreements. Relevant site classifications include Areas of Outstanding Nature Beauty (AONBs), Special Areas of Conservation (SACs) and Sites of Special Scientific Interest (SSSIs) and others. You can find out if your land is under any site specification by using Defra’s MAGIC Maps tool. Landowners and managers may have already entered into legal agreements to deliver certain interventions in exchange for subsidies or other benefits. A common example is Countryside Stewardship (CS).
Note: existing legal obligations on a site do not automatically exclude nature-based projects. However, the full scope of the project should be discussed with all parties of both the existing legal obligation and the new project to confirm additionality and maintain integrity. If uncertain, you may seek legal advice on these topics from advisors with experience in this sector, such as law firms or land agents.
If you have already signed up parcels of land to other agri-environmental schemes, you may still be able to access nature markets using the same parcels. As of September 2023 in England, farmers can access private markets on the same land dedicated to Landscape Recovery, Countryside Stewardship and the Sustainable Farming Incentive. It is important for farmers to keep up with emerging guidance around those agri-environment schemes and to clarify your approach with potential buyers.
Some nature-based projects will require environmental permits or planning permission. For example, to build a treatment wetland that removes nutrients from a waterway, a particular permit is needed from the local planning authority. Before designing your project, you will want to consider whether you will require planning permissions or permits to deliver your interventions. These processes will take time and may incur additional costs and should be integrated into your overall timeline and financial model.
If unsure of whether you need specific permits or permissions, farmers should check with the their local planning authority or local Environment Agency office.
If you are a tenant, you will also need permission from your landlord to make substantial land use changes and to engage in nature markets. More information on navigating nature markets as a tenant can be found in the Tenancy and Ownership section of the toolkit.
A key consideration for farmers engaging in nature markets is how changes in land use will impact their tax position. Removing land from agricultural production will make the land ineligible for Agricultural Property Relief (APR) from inheritance tax for the time being. As an example, an arable field taken out of production for a wetland can no longer be used to apply APR. For biodiversity, some projects are maintained through agricultural management techniques such as grazing and can remain eligible for APR.
However, in the March 2024 response to the public consultation on the taxation of environmental land management and ecosystem service markets, HM Treasury announced that agricultural property relief from inheritance tax will be extended from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies. APR will be available where there is an agreement in place for the environmental land management scheme on or after 6 March 2024. This includes an agreement entered into before 6 March 2024 if it remains in place on or after 6 March 2024. The government will also consider extending APR to accredited codes and schemes following the release of the British Standards Institute’s Nature Investment Standards.
It is not yet clear how developing nature market projects on farmland will affect land prices. The roll out of Biodiversity Net Gain (BNG) may result in increased demand for land. Defra estimates that 5,400 ha of land will be needed annually for habitat creation to account for BNG and that 75% of that may be able to be delivered on site. This would mean 1,300 ha of offsite land would be required annually.
On the other hand, tax implications of taking land out of production and long-term maintenance contracts which need to be taken on by new buyers of land may decrease values. Although there is no clear answer to how nature market participation will impact land values, it is something to bear in mind at this early stage. Speaking with other farmers who have engaged in nature markets in your area may help clarify potential impacts of your own project.
It is likely, given government commitments globally to reduce climate change and halt biodiversity loss, that farmers will be required through their supply chains to deliver on environmental outcomes in the future. Farmers should engage with their supply chain to understand what they may be expected to deliver down the line.
This is important to know because farmers may be required by their supply chains to be net zero in the future – and if farmers have sold carbon credits beyond their own on-farm emissions, farmers may be not be able to meet net zero requirements. It is therefore recommended that you only sell credits above what it would take to offset your own emissions. In this way, you can ensure you can demonstrate that you are ‘net zero’, while still selling additional carbon sequestration to external buyers. You can make sure you have enough credits to compensate for your own emissions by conducting a whole-farm carbon audit. More information about carbon auditing can be found in Milestone 3.
Tenant farmers can participate in existing nature markets in England with their landlord’s permission and pending certain conditions. Tenants will need to ensure that their tenancy contract shows that they have management control of the land for the entirety of the environmental market contract period. Tenants may also want to develop plans with their landlord for when their tenancy ends to ensure permanence of the environmental benefit of the project.
Defra has worked with the tenanted sector to produce specific guidance for tenants and landlords on tree planting and woodland creation on tenanted land. It is expected that government will put out more guidance on how the tenanted sector can participate in nature markets following the publication of BSI’s Nature Investment Standards.
Some key considerations for tenants will be further explored in the Tenancy and Ownership section of the Toolkit.
Assessing market opportunities
Once you have developed a broad vision for your land and have identified the types of improvements you hope to make, you will want to determine what market opportunities there are to help you deliver those changes.
You will want to consider early on whether there are potential buyers for their nature credits or units. Buyers will typically be beneficiaries of the land use change, or those seeking to mitigate their environmental impact. For instance, if there are businesses downstream from you that suffer from or are at risk of flooding, then there may be an appetite for you to provide natural flood management to reduce that risk. If you live in an area where housing development is planned, then local developers may be looking to purchase BNG units. Demand for soil, woodland and peatland carbon might come from local businesses or from those further afield looking to compensate for their own emissions. A ‘beneficiary analysis’ could entail a simple online desktop research and casual conversations with potential buyers and brokers.
The potential markets for ecosystem services available to farmers are laid out in the Toolkit’s Introduction to Nature Markets section.
Markets which are currently available to farmers in England are:
- Biodiversity Net Gain (BNG)
- Soil Carbon
- Woodland Carbon
- Peatland Carbon
- Natural Flood Management
- Water Quality (through payments from water companies)
Nature Markets are relatively new in England, however the UK Government is committed to scale up these markets to help deliver on their climate and nature targets. The Nature Markets Framework, published in March 2023 provides some clarity and guidelines around stacking and bundling of different benefits, additionality, and blending public funding such as ELMS payments with private finance through nature markets.
It will be up to each individual farmer to decide whether to engage in nature markets now, or to wait for further development. Some markets, such as those for woodland and peatland carbon are more advanced in their development and have clear rules set out in the Woodland Carbon Code and the Peatland Code. These markets may be attractive to farmers who wish to take part in more established markets.
As mentioned in previous considerations, farmers are likely to be expected to deliver environmental outcomes through evolving legislation or through their supply chains in the future. Private nature markets offer an opportunity for farmers to be paid to shift their management practices and land use before delivering environmental outcomes potentially becomes a ‘license to operate’.
Taking part in nature markets will not be for everyone, however, nor are they the only way to improve profitability. Farmers should carefully consider the benefits and drawbacks of nature market participation, engage with their supply chain on emerging expectations and talk to other farmers who have or are considering developing nature market projects. More information about working with other farmers can be found in Milestone 2.
You may not need to engage buyers until a later stage when the design of the project and full modelling of benefits is near completion. For example, the sale of carbon credits via the Woodland Carbon Code is an established process and many project developers approach buyers when they have a confirmed number of credits they can deliver.
However, it’s a good idea to open conversations with some potential buyers early on. For example, you may want to contact your Local Planning Authority and enquire about demand for BNG units. You may also want to contact your regional water utility to see if they are looking to engage farmers around within the catchment to make environmental improvements. Milestone 4 of the Toolkit explores identifying and engaging with buyers.
Many farmers across the United Kingdom are beginning to engage in nature markets which can offer opportunities for shared learning. The Natural Environment Investment Readiness Fund (NEIRF) Community of Practice offers resources, project summaries and guidance which may be useful when developing your project. The case studies within this toolkit can also help you understand what other farmers are doing and identify key challenges and opportunities.
More information about working with other farmers through aggregation models can be found in Milestone 2.
Conducting initial budgeting
Before implementing any changes to your land or engaging external service providers to conduct baselining and measurement, you may want to get a rough idea of the potential costs of your project and make an initial budget. Project development costs (those costs of developing a project plan, engaging other farmers in an aggregation model and some initial measurement) are separate to the implementation costs of the project. Grants and philanthropic funding can often be helpful in this initial phase.
Although at this stage you may still be deciding on whether to engage in nature markets, there are some costs you should keep in mind. The following are early costs that may be incurred to analyse the current condition of your land, develop a broad vision for what you want to accomplish and understand what the legal or tax implications of your project may be.
- Software programmes
- Natural Capital Account
- Accountant or Tax Lawyer fees
- Farm Advisor
- Land Agent
- Ecologists
You will not need all of the above services but they should all be kept in mind as you are moving through the first three Milestones. Finding ways to limit costs at this early stage is important as baselining and project implementation costs can be high.
There may be public funding available to aid in the development of your project plan. The Natural England Investment Readiness Fund (NEIRF) Round Three was focused on aiding farmers who are working collaboratively to access private finance for environmental projects. You may also find grant funding through your local authority or eNGOs. Accessing funding for up-front costs can significantly reduce the overall cost of your project.
