The North York Moors National Park Authority and Palladium have been working to develop a blueprint for catchment-scale nature restoration, working with a farmer group in the Esk Valley. By exploring options for generating ecosystem services with the farmers and undertaking market research, it has identified a concept for a ‘project aggregation facility’ that could address certain barriers to nature restoration using private finance. The project links to Revere, a UK-wide collaboration between National Parks and Palladium that aims to raise private capital to fund nature restoration.
The North York Moors National Park covers 143,500 hectares in the North-East of England, 20 miles north of the City of York. It is home to 23,000 residents and is one of the most sparsely populated areas in England, with just 0.16 residents per hectare.
The North York Moors National Park Authority (NYMNPA) hopes to restore and improve its natural habitats across this area, including species-rich grasslands, riparian woodland and riverside meadows. The overall aim of the project is to test that such nature restoration can deliver long term economic returns for land managers by generating revenue through sale of ecosystem services. If successful, the project could also be scaled to other national parks.
Working with Palladium
For this project, NYMNPA took part in the wider Revere partnership between Palladium and the UK National Parks Association.
In 2020, the National Parks Partnerships – a company created by the UK National Parks Association to form commercial and philanthropic partnerships – issued a tender for organisations that wanted to explore the use of private finance in nature restoration and preservation. Palladium approached the National Parks Partnerships to offer its commercial services on a pro-bono basis, connecting with each of the UK’s 15 National Parks to scope potential pilots.
Briony Fox, Director of Conservation & Climate Change at NYMNPA, said that the NYMNPA team welcomed the partnership with Palladium, but due consideration was needed on certain factors, such as engaging with landowners. The team wanted to manage expectations and avoid the impression of being able to offer a panacea of financial solutions to the land management community at the project’s end, or bringing in a commercial organisation that would prioritise profit over high-integrity nature restoration.
Conversations to scope the pilot took place over several months, in step with conversations with other National Parks. It was agreed that in its first year or so, the project team would undertake natural capital accounting, conduct market research, engage with landowners to determine potential restoration scenarios, and build a financial model for each of these scenarios to determine whether a catchment-scale restoration would be economically viable.
Subsequently, Revere was launched in October 2021, with the aim of designing restoration projects within the National Parks and raising private capital to fund the restoration. One of its pilots included the North York Moors Esk Valley project, which was funded by the NEIRF (see below). You can watch an overview of the Revere partnership below.
The Esk Valley within the NYMNPA was chosen as the pilot area for the project, primarily due to the fact that the NYMNPA team was already exploring the use of private finance in nature restoration with the Esk Valley Farmers Group. This group hosts 52 farmers that manage over 10,000 hectares.
Fox says that working with an existing cluster that trusted the NYMNPA team was key to saving time and resources. A smaller group of farmers from this cluster agreed to take part in the project (see Milestone 2 for more detail).
The Esk Valley itself is a catchment of 36,000 hectares in the north of the North York Moors National Park. It is characterised by a mosaic of habitat types including moorland, farmland, grassland, woodland and rivers. The landscape demonstrates great potential for connecting and softening boundaries between distinct habitats, improving water quality and conditions for iconic local species.
Natural Capital Accounting
One of the first steps of the project was to capture a natural capital account of the entire Esk Valley. The project team – NYMNPA and Palladium – wanted to understand what natural habitats existed and their quality (stocks), what ecosystem services these were delivering (flows) and therefore where the project may enhance its natural capital with the greatest uplift in quality.
The project team agreed to engage with NatCap Research for this work, due to its expertise in this area and the fact that Palladium had previously established a relationship as part of its wider Revere work. This initial natural capital accounting took around two months to undertake, and NatCap Research used several datasets, including the National Tree Map, OpenStreetMap and the Digital Elevation Model, to name a few. The NYMNPA had its own GIS system that was used to compile these datasets.
The subsequent report, finalised in September 2021, showed that the greatest opportunities for natural capital improvement in the Valley were water quality improvements and carbon sequestration. Most habitats and waterways in the catchment were identified as of moderate or poor quality. It gave a complete spatial overview or ‘heatmap’ of where the largest and smallest quantities of ecosystem service flows were coming from.
Heatmap of Combined Ecosytem Service Flows, Esk Valley Natural Capital Baseline Report, NatCap Research , 2021
Fox says that the report was very useful for taking a wider view of what was possible in the catchment and where the project team may be able to introduce private finance. For instance, the report showed that flood risk was not a serious threat to local populations in the Valley and therefore it was highly unlikely that payments for natural flood management would be made.
Palladium undertook market research to complement this work from November 2021 to February 2022. The research covered the four key ecosystem services for which a market currently exists in the UK:
- CO2e removal and reduction
- Biodiversity Net Gain (BNG)
- Water quality improvements
- Flood risk reduction (ruled out in early scoping)
Palladium first spoke to the businesses located in and around the North York Moors to capture the likelihood of local demand.
Voluntary carbon offsets from woodland creation was seen as the most likely source of revenue for the project in the near term.
The project team view the Woodland Carbon Code as a well-established mechanism for offset sales, with WCC units selling for around £25-40. Palladium spoke to businesses and corporates in the area, such as Quorn and Yorkshire Water, which stated their interest but also highlighted the need for scale to make a viable transaction.
BNG sales were considered but ruled out as an option for the near-term, potentially to be considered in the future. Most developments in England and Wales will need to achieve BNG from winter 2023. However, as sales of offsite units are restricted to the National Character Area of the development and the fact that there are very few developments occurring within the NYM National Park, this greatly limited the potential demand. However, the team considered that there are other routes for paying for biodiversity gain to be considered, such as S106 payments and voluntary biodiversity credits. These were viewed as routes to be explored further down the line.
Payments for water quality improvement were likewise ruled out as an option for the near-term, but may be considered in the future. The North York Moors National Park does not fall within a nutrient neutrality bound local authority, meaning that mandatory payments from developers were not possible. Conversely, Yorkshire Water is the area’s water utility provider and has previously set up several Corporate Social Responsibility funds and initiatives to address the water quality issues in the catchment, and it expressed an interest in smaller up-front payments for habitats, however it was not ready to consider annual payments at the time of engagement.
Finally, natural flood management payments were also explored, but the natural capital accounting showed that flood risk was limited in the catchment and that it was highly unlikely for properties or populations to be impacted.
Fox comments that two key learnings came from this market research – that aggregation of habitats was needed to reach the scale attractive to most buyers, and in general businesses and corporates were keen to understand their obligations and regulatory requirements before considering any voluntary arrangements.
Initial Costs and Grant Funding
The first 15 months of the North York Moors Esk Valley project was predominantly funded through the Natural Environment Investment Readiness Fund (NEIRF), which opened its first round in February 2021.
After submitting an application, the project team received £100,000 in August 2021. This was mainly used to fund a part-time project officer from the NYMNPA team, Palladium’s time including resource from a Project Development Associate, and the natural capital accounting report from NatCap Research. However, Fox says that some time dedicated by the entire team was not captured or was valued at cost only, and that realistically the total cost of the first 15 months was closer to £150,000.
Fox highlights the benefits of speaking to other projects in the NEIRF’s Community of Practice, including the New Forest Net Zero project that is also part of the Revere partnership.