Biodiversity funding crucial to long term security of UK farming

This week, the UK’s food security is once again in the spotlight. Events in the Middle East have resulted in warnings of food shortages including chicken and pork if the Iran war continues, and the National Farmers’ Union has cautioned the price of cucumbers and tomatoes could rise in the next six weeks.

Breakdowns in the supply of carbon dioxide and fertiliser are being primarily blamed for the trouble that may lie ahead, and the International Monetary Fund’s analysis indicates the UK is set to be hit hardest of the world’s advanced economies.

It’s not the first time we’ve been here and it’s why biodiversity can no longer be seen as a ‘nice to have’ for Scottish agriculture. Increasingly, it is being recognised as central to the sector’s resilience, profitability and future viability.

Without biodiversity and healthy, functioning ecosystems, the implications are serious.

A new report from Defra, National Security Assessment on Global Ecosystems, warns that significant disruption to international markets as a result of ecosystem degradation or collapse would put UK food security at risk.

This is not only due to impacts on UK food production, but on production in other nations with whom we trade to meet the food security needs of the UK population.

Benefits provided by healthy ecosystems include clean air and water, soil formation and quality, crop pollination, nutrient cycling, and the provision of critical resources.

Threats to ecosystems could result in a cascading series of risks such as pest outbreaks, crop failures, and increasing competition as well as the potential for conflict over scarce resources.

So, what needs to be done to ensure our ecosystems are thriving and in the strongest possible state to protect food security?

As the most important land managers in the UK, farmers sit at the crux of biodiversity, both exposed to these risks but uniquely able to take action and make a difference.

The Scottish Government is pursuing multiple complimentary channels to address the biodiversity crisis and reward farmers for making a positive impact.

There have been a flurry of relevant policies introduced over the past few years, including the Scottish Biodiversity Strategy and Delivery Plan, the Natural Environment Bill, and the Biodiversity Investment Plan.

Through these strategies, plans and policies, Scottish Government is seeking to put the necessary infrastructure in place to channel both public and private investment into nature recovery at scale.

The major new development to be aware of is the rollout of the Ecosystem Restoration Code (ERC).

For most farmers in Scotland, access to private finance to restore natural resources has so far been limited to the Woodland Carbon Code and the Peatland Code.

These have rigorous criteria for the actions and habitats that can be funded, which is restrictive for many farms in Scotland. For example, if your farm does not have peatlands, or is too small for a woodland project to be viable.

While the new ERC will also be rigorous, the intention is to unlock a finance mechanism for a much broader range of actions and habitat types, for example restoring species-rich grasslands, re-meandering waterways, or managing moors and heaths for habitat provision.

The Scottish Government has now published an ERC ‘competent model’, essentially a prototype that sets out the basics of how the full ERC will function while leaving some flexibility for ongoing testing and development.

A lot of details are yet to be nailed down; however, the core of the offer will be for a land manager - or groups such as farm clusters or a catchment partnerships - to create a land management plan.

The land management activities under said plan will enable the restoration of ecosystem condition - in the qualifying area for a minimum project duration currently proposed to be 25 years.

Projects will then be audited or verified at regular intervals to quantify the biodiversity gain or improvement in ecosystem condition, thereby creating biodiversity credits and tradeable assets.

A key question within the consultation on the ERC was whether to include regulatory or compliance demand within the market for these biodiversity credits.

Regulatory demand drives the Biodiversity Net Gain (BNG) market in England because developers need to offset or compensate for any unavoidable negative impacts on biodiversity (i.e. due to regulation).

This creates a demand for projects which create biodiversity uplift. This regulatory demand could be critical, because there is uncertainty about how willing the private sector will be to pay for biodiversity credits.

While some corporations and financial institutions have indicated interest in purchasing credits to meet self-imposed sustainability goals, a regulatory mechanism would be a significance market driver for ERC credits.

Crucially, the ERC is intended to add to the existing landscape of support and finance available to farmers and land managers rather than replacing it.

It is being designed to be compatible with established mechanisms such as the Woodland Carbon Code and Peatland Code, as well as future agricultural support, Peatland ACTION, the Forestry Grant Scheme and the Nature Restoration Fund.

In practice, this means farmers should be able to layer and align funding streams where appropriate, creating coherent, long-term land management plans, rather than being forced to choose between narrow or mutually exclusive options.

By unlocking a new route to market for a wider range of nature restoration activities, biodiversity finance could soon be a core component of thriving, diversified rural businesses, embedded in integrated Scottish landscapes.

With the right options in place, the ERC could become an important string to farmers’ bows, a funding stream which supports the sector’s objectives of contributing to biodiversity recovery, ecosystem resilience and national food security.

Brady Stevens is a consultant with SAC Consulting (part of SRUC)