Levelling up farming

Net zero and farm profitability

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Executive summary

Farming has a unique role to play in achieving the UK’s net zero emissions target. Unlike other sectors it can also absorb carbon dioxide emissions, storing carbon in soils, hedgerows, trees and grasslands. As trees and plants grow, thanks to photosynthesis, carbon dioxide from the atmosphere is turned into leaves, stems, branches, trunks and roots, burying it in the soil too. This locking up of emissions from the atmosphere is essential for reaching net zero – indeed it is the ‘net’, compensating for any residual emissions from sectors like aviation.

These measures will help farms become climate and heat-proof too. Hedgerows and trees can help to reduce flooding, keep more nutrients on the farm to support food production, and to shade livestock during heatwaves.

And the drive to net zero presents new economic opportunities and funding streams to farmers and as this report has found, these could benefit some of the smaller, more marginal farms that are struggling in current times. There is a £3.1 billion per year private and public sector funding opportunity coming down the road that many of these farms are uniquely well-placed to take advantage of. For farms on the brink this income could be the difference between going out of business or being able to remain profitable.

Annual £700 million market and £2.4 billion of support for farmers

This reports show that companies keen to offset emissions could create a £700 million a year market for farmers who can increase stores of carbon in vegetation and soils on their land. These companies could effectively pay farmers to compensate for some of their emissions, creating a new private market and new private investment in restoring soils and carbon-storing nature.

On top of this, the government’s new farm payment scheme will provide £2.4 billion of support for farmers who boost carbon and encourage nature on their land.

Smaller, marginal farms likely to benefit

Smaller, marginal farms are often in areas of great potential for storing carbon, such as upland peatlands, described as the UK’s ‘rainforests’ because they are such carbon rich habitats. This postcode-level analysis of 25 constituencies in these areas found they already benefit disproportionately more from the current, much-smaller government schemes to support environmental measures.

In these constituencies farms are already getting a higher proportion of their payments for environmental measures than average. 21% of payments are for environmental measures in these areas, whereas for England as a whole the average is 14%. That means farms in these areas are receiving, proportionately, 50% more of their farm subsidy for environmental measures than farms on average across England.

To date, these farms have relied on funding from just 15% of the total £2.4 billion England farming budget that has been allocated for environmental measures (around £360 million a year). By 2024 57% of the budget, £1.3 billion, should be available for these environmental measures and by 2028 it will be the entire £2.4 billion.

These are often farms where the diversification of revenues is important to their long-term economic sustainability as they are less productive in terms of food. Indeed 20% of farmland in the UK produces just 3% of calories; while 30% of farmland produces 60% of them. The opportunities for carbon storage and nature restoration have significant overlap with the areas of low food productivity.

Many farmers are already aiming to help achieve net zero, including by using new and improved farming techniques and by restoring carbon-rich habitats on their land, planting new hedgerows, or incorporating more trees into fields. New private and public sector funding is set to come online rewarding and boosting these efforts.