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Introduction toNature Markets Assessing landopportunities Working withother farmers Baselining,planning andmeasuring Workingwith buyers Farm businessplanning Liability & riskmanagement Using repayablefinance Signing legalcontracts Public sectorfunding & policy Tenancy &ownership
  1. Groundwork
  2. Market Engagement
Introduction toNature Markets Assessing landopportunities Working withother farmers Baselining,planning andmeasuring Workingwith buyers Farm businessplanning Liability & riskmanagement Using repayablefinance Signing legalcontracts Public sectorfunding & policy Tenancy &ownership
  1. Groundwork
  2. Market Engagement

Summary of the Bwlch Y Groes Peatland Restoration Project

The Roberts family have been farming at Pennant Farm in Wales for several generation and focus predominantly on beef and sheep farming. In 2020, they started to explore the restoration of one of their peatlands, a 66-hectare degraded blanket bog in Bwlch Y Groes, using a mixture of finance from the sale of carbon units (credits) and public funding from the Welsh government. They sold 2,335 carbon units via the IUCN UK Peatland Code (the Peatland Code) under a 35-year agreement to a brewery company in Cheltenham, England, making this first carbon-funded peatland restoration project in Wales.

 

Farm Profile:

  • Location: Gwynedd, Wales
  • Size of Land: 66 hectares
  • Land Ownership: Owner occupiers
  • Nature Market Primary Focus: Peatland Carbon
  • Interventions: Peatland restoration (rough grazing, revegetating, blocking gullies)
  • Project Partners: Snowdonia National Park Authority, Forest Carbon

 

What do I need to know about nature markets to begin with?

 

This section of the Toolkit provides a brief overview of nature markets in England and how they relate to farmers. It is designed to answer some of the early questions that farmers may have around nature markets. All Toolkit content, including this Introductory section, will be updated regularly.

 

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.

 

Will I need to partner with other farmers, and if so, how?

 

Once you have a vision for your farm, the environmental enhancements or changes you want to make and a sense of the related income opportunities, you may want to consider joining up with other farmers in your area to implement your outcomes at scale to attract buyers.

Aggregation models, often started among  farmer clusters or as farmer cooperatives, bring together multiple farmers or landowners to collectively participate in nature markets. These models aim to harness the combined efforts and resources of farmers to maximise environmental benefits and economic opportunities. This section will introduce the factors that may influence your decision to join up with other farmers and some of the key considerations to keep in mind when setting up and participating in such a group.

 

How do I measure the environmental outcomes that I can produce in a robust way?

 

At this stage you will have developed an overarching vision for your land and a rough plan for what you want to improve. You will now want to make robust baseline measurements of the condition of your land and develop a detailed plan for interventions and intended outcomes. Plans will also include how you intend to maintain your interventions, measure the impact you are having and verify your outcomes in order to sell them.

 

How should I identify and approach buyers for my outcomes?

 

During your initial project scoping, you may have identified potential buyers of the environmental outcomes you are planning to deliver. Now that you have a project plan and a robust baseline, you will be ready to approach and engage buyers more formally.

Buyers will vary in their expectations and requirements. This milestone will help you prepare for initial conversations with potential buyers to ensure you are empowered to ask the right questions and present a project that will attract a fair price. Your buyers may be within your own supply chain such as retailers and businesses, or organisations who benefit directly from your ecosystem services such as water companies or firms who seek to offset their own environmental impacts.

 

How would this project fit in with my current farming business model?

 

Nature market projects are often just one part of a farmer’s wider business. Some people compare building nature market projects to developing ‘micro businesses’ for the farm. As such, much of the content you see here will be familiar to you.

However, these projects also have key features that separate them from the businesses that farmers usually engage in. For example, the longer timeframes associated and the current uncertainties relating to how nature market projects (and the deals that result) can be blended with government schemes.

Below is a list of questions that will help you think through how to incorporate these projects into your current farm business plan. This includes considerations on building a cashflow or partial budget, but also the less quantifiable factors, such as the potential drawbacks and opportunities to your wider farm that sales of present.

 

What kind of risks should I be aware of and how can I manage them?

 

Like with any aspect of a farm business, risk management is critical – especially for nature market projects that can run over several years. As the landholder, you may be leading the development of the project, be part of a wider group of farmers, or be working with a third-party project developer that is taking the majority of the risk.

In any case, it’s advisable to have a clear understanding of the likelihood of the risks involved, what will happen if the risk materialises, what you as the landholder might be liable for, and how the risk is being managed to prevent this liability.

This Milestone sets out the different types of risks that nature market projects (and the deals that result from them) often carry. The last section covers the types of legal entities that farmers might form, as these can help to manage certain risks and benefit the overall operations of the project.

 

Is it possible to use repayable finance upfront to meet any of the costs?

 

Repayable finance from investors – typically debt or equity – is not always necessary in nature markets if upfront costs can be met by the buyer or through grants.

It’s also important to note that, even when repayable finance is needed, farmers do not necessarily have to secure this themselves.

In the UK, there are very few examples of individual farmers taking out loans and no examples of farmers issuing shares to use specifically to finance a nature market project. Typically, the upfront capital required is organised by a third party – for example, a third-party project developer, a broker etc.

However, as nature markets develop further, and in the case of larger farms, there is potential for farmers to secure repayable finance and meet up-front costs, as with other parts of their business.

The below therefore sets out some questions that farmers (and, more likely, third party project developers) could ask themselves to secure repayable finance from lenders and investors, whether that’s taking on finance independently, or as part of a larger group or partnership.

 

What do I need to be aware of when signing contracts?

 

This Milestone is about the legal contracts you will use and sign to officially commit to the project and transition it to a fully fledged deal. As business owners, farmers are familiar with contracts and understand the need to carefully review the details before signing any such agreements.

Any nature market deal is likely to involve legal agreements that will be tailored to each set of circumstances. However, for ease this Milestone sets out what contract set-ups are used in this space, common contract types, and other key considerations to ask yourself at this stage.

Disclaimer: The information in this Milestone does not constitute any form of legal advice but instead serves as practical advice that has been written by speaking with lawyers, farmers and other practitioners. We recommend that appropriate legal advice should be taken from a qualified solicitor before taking or refraining from any action relating to your contracts and projects.

 

Can I participate on tenanted land?

 

The tenancy and ownership structure of land can have significant implications for farmers engaging in nature markets in the UK. The rights of tenants in relation to nature markets is still not entirely clear in the UK and may differ on a case by case basis. Below are some key considerations which can help both tenants and landlords in asking the right questions when considering engaging in nature markets as policy and legal frameworks develop. Further guidance prepared by the Tenant Farmers Association and the Country, Land and Business Association can be found here. 

 

How do public sector funding and policy align with nature markets?

 

In England, the role of public funding and support to farmers is undergoing change on a scale not seen in decades. The government hopes to strengthen the link between environmental and farming practices to meet its climate and nature restoration targets, while maintaining food security and the viability of farm businesses across the country.

This section offers a summary of how government is working with farmers to access nature markets, and provides guidance on:

 

  • How nature markets might work with public subsidy schemes,
  • What development funding is available for farmers to explore their opportunities,
  • What ‘market infrastructure’ the government is supporting – including Standards and Codes.

Groundwork

 

We have separated out these Milestones into ‘Groundwork’ and ‘Market Engagement’ to indicate which Milestones you will want to read as you consider and/or prepare for nature markets (Groundwork) and those you will move through if and when you decide to become a seller of environmental outcomes (Market Engagement).  

We recommend all farmers read through the Groundwork Milestones in addition to the Introduction to Nature Markets in order to understand better whether nature markets are for them, and how they can, at the very least, explore and baseline their farms so they are ready for any opportunities that may arise later.  

Market Engagement

 

We have separated out these Milestones into ‘Groundwork’ and ‘Market Engagement’ to indicate which Milestones you will want to read as you consider and/or prepare for nature markets (Groundwork) and those you will move through if and when you decide to become a seller of environmental outcomes (Market Engagement).  

We recommend all farmers read through the Groundwork Milestones in addition to the Introduction to Nature Markets in order to understand better whether nature markets are for them, and how they can, at the very least, explore and baseline their farms so they are ready for any opportunities that may arise later.  

 

Acknowledgements 

With many thanks their time and insight on this case study:

Lisa Roberts, Farmer, Pennant Farm

Rachel Harvey, Peatland Officer, Snowdonia National Park Authority

 

Date published: 11/12/2023

Next Milestone

Key Takeaways

  • To baseline and measure the site, the Roberts family received direct support from Snowdonia National Park Authority (SNPA) that wanted to trial the use of the Peatland Code.
  • Baselining took around a week, led by the SNPA, and showed that of the 90 hectares of blanket bog, 66 hectares was eligible under the Peatland Code.
  • SNPA worked with the Roberts to design the restoration, maintenance and monitoring plans. For example, livestock grazing will be maintained on the peatland in low stocking densities.
  • Going forward, the Roberts are in charge of maintenance works and informal monitoring, but are also receiving further support from SNPA and National Resources Wales.

 

Why did the Roberts want to use the Peatland Code?

Lisa Roberts and her husband participate in several agri-environment schemes, including a Wales-based pilot that explores ways for farmers to develop their natural capital.

As part of this pilot, in 2018, the Roberts family assessed the farm’s peatland, including one site covering a 90-hectare degraded peatland that is used for non-intensive grazing. It is located on the edge of Snowdonia National Park in a valley called Bwlch Y Groes.

Roberts came across the Peatland Code, which had launched three years before, in her research around peatland restoration and its carbon benefits. She then connected with an officer at Snowdonia National Park Authority (SNPA), Rachel Harvey, who was seeking a farming partner to trial peatland restoration using the Peatland Code.

After the Roberts’ agreement to participate, Harvey was assigned with leading the process, including the site surveying and project design.

The Peatland Code offered the Bwlch Y Groes project several advantages. It sets out a scientific methodology for assessing the current state of peatlands and how much carbon can be avoided when they are restored. It measures this in tonnes of ‘CO2 equivalent’ (CO2e), the key metric on which sellable units are based. It also set out several processes for monitoring, community engagement and additionality, which also help to increase buyer confidence.

 

How long will the agreement last?

Under the Peatland Code, sites must be maintained for 30 years minimum. The Roberts family, who had owned the site for several generations, agreed to commit to 35 years. “Luckily, we’re a young family and we plan to retain ownership of the farm, so we were able to get comfortable with this aspect,” comments Roberts.

 

How was the peatland baselined?

Harvey and the SNPA team undertook ground surveying and desktop mapping using digital datasets.

Desktop mapping initially took around four hours on GIS software. Harvey used several different aerial images to identify the site and annotate a ‘site map’ with details such as the site boundaries, access points, notable features, and the GPS co-ordinates.

The ground surveying of the site then took around four days by Harvey, who used a peat probe for measuring soil depth across 68 survey points, and a mobile phone for tracking GPS co-ordinates, taking pictures at each survey point, and recording information.

This baselining confirmed that the site was eligible under the Peatland Code. Of the 90 hectares within the site, 66 hectares were classified as blanket bog with peat soils of over 0.5m depth across 70% of the survey points. The condition of the peatland was confirmed as a mixture of ‘actively eroding’ and ‘drained with haggs and gullies’, as defined by the Peatland Code. You can find a copy of the site map here.

Harvey has since put together a How To’ Guide for navigating the Peatland Code process.

 

What did restoration involve?

While the SNPA had research and expertise in peatland restoration, there were certain elements to clarify with the Roberts family to get them comfortable with the project.

For example, the Roberts family want food production to remain the central activity of Pennant Farm. “As one of the first movers in this space, we wanted to show that peatland restoration can be done alongside sustainable food production,” says Roberts. The peatland is used as rough grazing for livestock, but because the area is an SSI protected site and stocking densities are regulated, there was no need to reduce the number of grazing animals.

The restoration took two months to plan, but Harvey now notes with experience this can take as little as one week.

The restoration activity focused on reprofiling the eroding haggs, with one main gully blocked for rewetting and some re-vegetating of bare peat.

Roberts comments that the restoration work went smoothly over several weeks in January 2019 with no notable issues, assisted by the road access to the site and mild weather conditions at the time.

Across 35 years, the restoration will have prevented over 2,335 tons of CO2e from entering the atmosphere, with an equivalent 2,355 units being verified over this time.

 

How is the site being monitored and maintained after implementation?

Different levels of monitoring are undertaken by the Roberts family and the SNPA.

The Roberts family handle informal monitoring of the site, including visual checks over the hagg complexes and the gully block. The SNPA undertake more detailed reviews, including the monitoring reports required by the Peatland Code. More regular monitoring is planned for the first five years of the project, as this is when the peatland restoration activities are at highest risk of reversal.

As for maintenance, the Roberts family is in charge of any necessary maintenance activity, and costs are built into the financial model of the project.

The Roberts family had initial concerns about being able to maintain the peatland without a formal skillset, but Harvey and the SNPA have agreed to provide advice and support on this where needed. The Roberts also signed an agreement with National Resources Wales to officially help with monitoring over the long-term.

 

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