£3.1bn prize for small, marginal farms tackling climate change

Less profitable farms could benefit more from shift to net zero agriculture

By Tricia Curmi


Last updated:

Smaller, marginal farms in poorer, ‘levelling up’ areas could benefit most from private and public net zero funding streams, according to new analysis

These farms tend to be 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.

New postcode-level analysis by the Energy and Climate Intelligence Unit (ECIU) of 25 constituencies in these areas found they already benefit disproportionately more from the current, much-smaller government schemes to support so-called ‘environmental measures’ securing proportionately 50% more funding.

This suggests they are well placed to benefit from private investment from companies keen to offset emissions, which could create a £700 million a year market for storing carbon in vegetation and soils. With public funding available for these kinds of measures set to increase to £2.4 billion by 2028, this would mean a £3.1 billion per year private and public sector funding opportunity. These smaller, more marginal farms are struggling as costs for farming – such as the price of gas and chemical fertilisers - soar in the wake of the Ukraine crisis.

The Government’s latest Farmer Opinion Tracker found that 80% of farmers think the new net zero farming system will be important to their businesses in the future.

Steps such as restoring hedgerows or planting more trees also help farms to store more water in times of drought or provide shade for livestock during heatwaves making farms more resilient, bolstering our food security.

Matt Williams, Climate and Land Programme Lead at the Energy and Climate Intelligence Unit(ECIU), said: "This new private and public funding could be a lifeline for more marginal farms seeking to diversify their revenues in tough times and might just keep them from selling up. Farmers are keen to play a role in achieving net zero and this kind of support will be vital. The research shows some of these farms are ahead of the curve in improving the way they look after soils, planting more trees and hedges, or cutting greenhouse gas emissions.

"This could help offset some of the rocketing costs they have been paying for gas and oil and for chemical fertilisers made from fossil fuels. Farming in a way that restores soil health and helps to limit climate change and extreme weather will underpin long-term food security. More shade for livestock could help to climate-proof farms against future heatwaves.

“But the money available from private carbon markets could be held back by a lack of clear rules creating a “wild west” that short changes farmers. Likewise, many farmers feel the Government’s new farming system is coming too slowly, with a lack of detail holding them back from shifting to net zero practices.”

Following the UK’s departure from the European Union, the Government’s new farming system for England - Environmental Land Management - is divided into three new schemes, with an overall budget of £2.4 billion. This is the same as the current budget, but at the moment only around 15% of it, £360 million, goes to environmental measures; by 2028 it will be the whole budget.

These are farms also tend to be the least productive in terms of food, so diversification of revenue is important. The least productive 20% of farmland in the UK produces just 3% of calories. This least productive farmland overlaps with many of the areas of greatest potential for carbon storage.

Selaine Saxby MP, said: “In North Devon, like so many parts of England, farmers are taking steps towards net zero and nature friendly practices. But for too long they have been taken for granted, left to face the growing pressures of extreme weather and increasing costs, driven in large part by gas prices.

“A new system that encourages net zero practices can make sure farmers are rewarded by future private carbon markets, and by the Government’s farming payments. The poorest and smallest farms – often those with greater potential to store carbon and restore nature – could be the ones that benefit most. A key job in the in-tray of the next Prime Minister will be continuing to roll out these changes to the farming system. This will underpin farmers’ incomes, increase British food security, and help achieve net zero.”

James Robinson, a Cumbria farmer and England Vice Chair of the Nature Friendly Farming Network, said: “Environmental payments have formed an integral part of our approach to farm business management over the past 20 years. They helped us create and restore a network of carbon-rich habitats across the farm while providing a stable income free from marketplace volatility.

“A blunt system of area-based payments has overlooked farmers in areas such as mine. The rollout of ambitious Environmental Land Management Schemes can change that, providing immense opportunities for farmers who already manage an array of natural assets. At a time of existential threat posed by biodiversity loss and climate change, restoring marginal landscapes into thriving and diverse ecosystems through nature-friendly management will bring substantial public benefits.”

Notes to editors:

1. ECIU’s Levelling Up Farming report: https://eciu.net/analysis/reports/2022/levelling-up-farming

2. The analysis by ECIU looked at 25 constituencies across England that overlap with the areas of greatest potential for carbon storage. In these areas, farms on average receive 21% of their subsidy in the form of payments in return for environmental measures. Across England as a whole the average is just 14%.

3. The modest changes to hedgerows, soil management, and trees on farms that are needed to help achieve net zero could generate a private market worth up to £700 million per year in carbon payments.

4. Previous ECIU analysis found that the UK’s famers paid up to an extra £160 million for fertiliser in 2021 due to the rising cost of gas (which is used to make chemical fertilisers). https://eciu.net/analysis/reports/2022/farming-fertiliser-and-fossil-fuels

5. The Government’s April 2022 Farmer Opinion Tracker for England: https://www.gov.uk/government/statistics/farmer-opinion-tracker-for-england-april-2022/farmer-opinion-tracker-for-england-april-2022

For more information:

Patricia Curmi, Communications team, ECIU, Tel: 07908517186, email: tricia.curmi@eciu.net