Following Brexit, devolved administrations will implement their own alternatives to the Common Agricultural Policy (CAP), the farm subsidy scheme under which nature has declined to crisis point.
In England, the Environmental Land Management scheme (ELMs) promised to deliver public goods in exchange for public money. In a bold departure from CAP, these proposals would strip away automatic payments and make them contingent on delivering work that would help recover nature and tackle climate change.
As ideas around ELMs in England have developed, various concerns have been expressed, but particularly around how delivery of public goods might be verified for payment.
Should this be for actions, which may not guarantee the desired environmental outcomes but would provide greater financial certainty for farmers and land managers? Or should focus be on the outcomes themselves, an approach need considerable monitoring as well as time to deliver and prove, resulting in a potential drop in incomes for farmers until outcomes could be demonstrated?
Other concerns relate to whether the transition to the new scheme might be too far, too fast for some farmers and land managers to manage.
Recently, proposals have been set out for a potential transitional arrangement which would pay farmers and land managers subsidies in a not dissimilar way to the current pillar 1 basic payment scheme. These would be paid provided that they deliver certain rudimentary environmental husbandry actions between 2022, when CAP effectively finishes and 2024, when ELMs commences. This could become known as the sustainable farming incentive (SFI).
Larger, highly commercialised farms may be able to cope with the transition to a new regime. However, the argument is that more conditional payments could mean a great many smaller farms – heavily reliant on basic subsidy just to survive – won’t cope.
Environmental NGOs have expressed concern that the proposals amount to a watering down of ambition which could end up perpetuating something close to the current regime. This, they claim, could easily end up as a lasting ‘business as usual’ direction rather than a transition. It could end up wielding a fatal blow to the widely-welcomed environmental ambitions initially set out for ELMs.
The Natural Capital Committee (NCC) noted in its recent final response to the 25 year environment plan (25 YEP) progress report that “the integrated, systems based approach the 25 YEP demands is at real risk of being lost… it is crucial to use the right framework and metrics or risk multiple policy failures including the success of the 25 YEP, all future Environmental Improvement Plans, [and] the delivery of Environmental Land Management schemes.”
The Committee also noted that nine years have now passed since these principles were acknowledged by Government in The Natural Choice white paper with little meaningful progress on the ground to embed them. More delay is unacceptable.
Future agricultural subsidy schemes within the UK will need to ensure that farm and other land management businesses can remain viable to support rural economies, produce high quality food and enable the active delivery of environmental restoration.
At the same time, they will need to challenge farmers and land managers to work in a way which delivers widespread environmental recovery and enables a greater, national-level understanding of the trajectory of this recovery (or decline) through enhanced monitoring, data gathering and systems-based approaches.
As experts told the House of Commons Environmental Audit Committee recently, ELMs is on the cusp of something special. With 75% of the UK’s land area utilised for agriculture, there’s potential to link up all kinds of habitats to help recover nature. More than 80,000 farms could fall within ELMs in England. Currently only a quarter of these are under agri-environment schemes. So, the scaling-up challenge is huge, but then so are the potential gains for our environment.
The recognition that direct payments under CAP account for around 61% of farm profits is instructive of the extent of change that could be brought to the farming sector as ELMs is introduced. Subsidy income is critical to the business survival of many farms and the issue of potential falling net incomes as a result of the move to ELMs is equally so.
Very simply, without the most rudimentary form of subsidy provision, over half of farms could go to the wall. Removing that support – which entails minimal requirement for any kind of public goods delivery – could spell the end for many unless they are well-enabled to start delivering environmental measures as soon as possible.
This situation underlies the development of proposals for an interim scheme and it’s not surprising that Defra and a range of organisations are sharing ideas about how farmers could be eased – and supported – into ELMs.
The risk with this is that a process of change from where we are at the moment to where we could be by the mid-2020s under a new system may not be sufficiently well-supported to drive uptake of new ways of working and delivery.
“Well-supported” doesn’t just mean the continued provision of an economic safety-net, but crucially the ready access to advice and capacity to be able to enhance the environment as standard practice.
This will need to deal with the complexities of potential actions – ELMs and the 25 YEP are targeting a set of public goods which themselves comprise a broad range of outcomes.
Each outcome has its own technical complexity and many inherent metrics that may need to be captured. Reports over the summer suggest that ELMs could have up to 1261 actions farmers could be paid for (considerably more than the current Countryside Stewardship or Environmental Stewardship schemes).
Support will also need to help farmers prioritise environmental gains achievable at farm-, catchment- or landscape-scale in collaboration with others. This will all need ambitious government investment in underpinning transition to the new approach, which will represent a step up for many, and a steep change curve. The system and its advisory mechanisms will need to cover the necessary detail comprehensively but be simple and clear enough for 80,000 farms to engage with.
Secretary of State George Eustice recently hinted at this, saying some grants would be removed, with Catchment Sensitive Farming being ramped up with more advice and funding available for better farm management.
With the scale of the economic fallout of the Covid-19 pandemic still unknown, transitioning towards ELMs as a mechanism to deliver vital environmental outcomes, at scale, through agriculture must sit squarely at the centre of any ‘green recovery’. We may learn more from the comprehensive spending review this week.
Recommendations for SFI currently appear to be encouraging the delivery of simple measures variously described as “good practice farming” and “’deadweight’ actions that [farmers] ought to be doing anyway”, which will do little to prepare them for the considerably different ELMs landscape, and may be subject to very limited monitoring. Alternative proposals are being developed by a range of organisations led by the National Farmers Union which appear to strike more of a balance between SFI and ELMs.
If an effective transition to ELMs is to be achieved, continued payment of subsidies must, one way or another, be contingent on changes in farm management for those farms not already managing in an environmentally sensitive way. Those who are already giving significant priority to the environment in their management should receive money in recognition of this.
A shift under SFI to a more business as usual direction would mean that those farms who already manage sensitively would continue to do so, but there would be little incentive for others to change their approach fundamentally. This would be a lost opportunity and would severely compromise the chances of achieving 25 YEP ambitions in a timely manner.
The criticality of the need for extensive action on both climate change and nature recovery is such that if the present opportunity – with a shift away from CAP post-Brexit – is not taken, it is difficult to imagine if or when this will ever happen.
There is ample experience now of farming in a far more environmentally sympathetic way, restoring nature whilst maintaining economically viable levels of production. In its ambitions for ELMs, government is aiming to effectively establish markets for the production of goods considerably over and above food, diversifying income streams an enabling access to public and private revenue streams. This will require very different approaches, measurement, valuation and customer base. But it is necessary change which must bring an end to the forced dichotomy between producing food and restoring nature.
Whilst the proposed interim scheme represents a delay in meeting environment challenges, it is not the only driver for change. Widespread commitment to net zero is also driving research and changes through the National Farmers Union and food retailers Carbon Disclosure Project. It is important that information requirements under such industry initiatives are taken into account for ELMs and SFI designs to minimise excessive reporting for farmers and land managers.
To actually deliver public money for public goods under ELMs, we need to understand the full value to society of more sustainable land management. This value includes food provision and employment, but also carbon sequestration, soil health and fertility, water quality, flood risk management, biodiversity, amenity and recreation.
A natural capital accounting approach, taking account of stocks of assets that deliver flows of these benefits over time, is central to this understanding. This is not entirely new to some farmers, but it is to the majority.
If we take a partial approach, for example by excluding some of these benefits (because they may be difficult to deliver or measure), or not measuring and monitoring the stocks and condition of this natural capital, we will get sub-optimal outcomes.
Current approaches under CAP have failed to take all of these benefits into account, which is why they have never delivered the necessary environmental improvement. Nor have they progressed the development of metrics and markets to enable this at scale. A range of tools to help measure benefits are available through Defra, the Natural Capital Protocol or initiatives such as the Cool Farm Alliance.
An important distinction is the difference between recognising the cost of delivering actions (many of which are well-known) and the value of the outcomes those actions should translate to (which there is less clarity on currently, but which will become better understood as natural capital valuation matures further).
Natural capital valuations will need to be regularly reviewed in light of published data and metrics (including take up, measured outcomes where possible, cost-effectiveness calculations and private market demand). Over time the reliance on non-market valuation of ecosystem services will reduce in favour of data from markets and experience.
Linking domestic, local-level actions with global reporting frameworks is vital so that farms and land managers as well as collaborative groups may access private ecosystem services markets by offering impact measurement on a basis that is familiar to the private sector.
This will enable them to sell benefits to the widest possible range of markets making action more economically attractive and developing increased resilience for rural communities. Working this valuation and reporting approach into ELMs will support and embed this access.
Whatever tools and metrics are taken forward in ELMs, they must be compatible with these wider approaches, but be straightforward enough to work on the ground. ELMs must also establish a framework of monitoring and reporting which is consistent with wider global biodiversity and climate change agendas.
The development of assurance for nascent ecosystem services markets is a vital component of ELMs, without which it will not become the leading approach that was initially conceived. High levels of adoption and uptake of ELMs will be essential to embed new approaches.
For this to develop quickly, payment rates should reflect both the opportunity cost of delivery (income forgone for agricultural businesses) but also the natural capital value of the services delivered. The quicker they achieve a clear market value, the sooner ELMs will succeed as a mechanism to deliver a diverse range of products and services for a long-term area of need.
Fundamentally, the principles and approach set out under ELMs look to deliver environmental outcomes for the long-term. The kind of measures proposed, particularly at tiers 2 and 3 of the scheme, will only deliver their full potential over this timescale. Thus, long-term planning, funding and support (independent of political cycles) will be vital in providing land managers with the confidence to invest in systems and approaches where outcomes may take many years to materialise and/or mature.
ELMs will need to embed extensive monitoring of delivery to give a picture of how consistently actions are being deployed, how they are leading to outcomes and how effective these are in delivering targets for nature recovery, carbon sequestration, natural flood management, etc.
Most existing government datasets on the extent and health of habitats aren’t updated enough to show trends effectively. Future monitoring and measurement will need to be regular in both time and space and ELMs must be a fundamental pillar of this expansion. Citizen science can play a role here; there are increasingly phone-based sensors which can monitor water quality or soil health for example.
These tools will need to become far more widely used because one way or another, a large evidence-base will be needed to create a robust baseline across different farm types and geographies, and reflect ELMs natural capital impact predictions, including interactions between different actions.
There are still a lot of gaps even within the evidence base for countryside stewardship (e.g., soils, flooding, water resources, engagement, etc). And even where data does exist it isn’t always straightforward to convert this to metrics from which natural capital value can be calculated.
So, a lot of ground needs to be made up to compile a robust evidence basis for ELMs and the technical challenge involved in the transition from a specification-based approach to an outcome/public goods-based approach shouldn’t be underestimated. The size and budget of the ERAMMP programme in Wales (£3.6m direct and £1.3m indirect over 3 years) gives an idea of what might be needed for England.
In the short-term, supporting such a new approach, deployed widely, could appear expensive and burdensome. However, there are means to reduce this:
Nature’s decline since the 1950s has occurred because the services it provides society and the economy have not been valued enough – either intrinsically or through natural capital valuation and accounting mechanisms. The scale and value of these services are now far better understood and can be reflected and incorporated into the new ELM scheme.
In seeking to recalibrate things, ELMs as conceived and discussed to date represents a significant and welcome change of emphasis and priority. It is seeking to apply what we now know but which don’t yet practice extensively. It is seeking to drive real change in land management.
Any transitional scheme designed to bridge the gap between current CAP requirements and ELMs must be genuinely transitional – and transformational. It will have to support farmers and land managers through a period of significant change; without support the negative impact on the agricultural sector could be profound.
But, this must end up at a place where actions are leading to outcomes and those outcomes can be measured, valued and sold into markets which trade in both public and private goods. Farmers and land managers, widely skilled to deliver quantifiable environmental services to a range of markets, in addition to producing high quality food, should end up occupying a resilient industry.
As the Natural Capital Committee recently made clear, without an extensive national dataset for nature that allows a meaningful baseline to be established against which progress on nature recovery can be monitored, the 25 YEP will be baseless as a driver of nature recovery.
Moreover, without such a dataset, the Office for Environmental Protection, the independent environmental watchdog to be established by the Environment Bill, will have little to base its work on. ELMs and monitoring against it could and should be a key mechanism for assembling large parts of this dataset.
A transition which backs away from the trajectory proposed to implement ELMs will further exacerbate what the NCC describe as “a lack of progress and some worrying declines” with it “very likely the next generation will inherit a poorer set of natural assets.”
Progress against the 25 YEP is plainly lagging, at a time when our nature and climate are in crisis. The Covid-19 pandemic must not weaken ambition to implement change and drive new approaches at the pace these crises demand. Farmers and land managers will need significant support in the early stages of transition in particular, but the prize is a far more robust and diverse market for goods delivered by farmers and land managers in the longer term.
We only have this one opportunity to make timely change through ELMs. Ministers must not let it pass.
Statement by Alastair Chisholm, Director of Policy - CIWEM
contact Alastair at Alastair.chisholm@ciwem.
For more on delivering nature-based solutions through ELMs see free recordings of our webinar series from earlier in the year here.
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