Drop CAP? Brexit and the potential of Natural Climate Solutions

As Brexit ‘day zero’ looms, recedes, and looms again, the possible economic and political fall-out keeps many of us on our toes. However, one possible positive from Brexit is the potential for the UK to more rapidly replace EU agricultural policies with ones urgently required to support CO₂ emissions reduction.

Agricultural land management in the UK is heavily influenced by the EU Common Agricultural Policy (CAP), a system of subsidies for farmers that accounts for 40% of the EU’s total budget. The CAP was introduced in 1962 to support European farmers and streamline production. A rapid switch to mechanised, agrochemical-reliant agriculture ensued, while farmers were initially subsidised based on the quantity of goods they produced (called ‘coupled payments’). Output grew to exceed demand, leading to the formation of butter mountains, beef hills and milk lakes, with the attendant risk of distorting international markets and damaging agricultural sectors in developing countries.

Thinking CAP

CAP has been subject to numerous reforms. Subsidies are now decoupled from outputs, reining in production and instead incentivising land-use practices. A proportion of these subsidies, called agri-environment schemes, reward farmers for environmentally-friendly land management, such as allowing wild-flower meadows to grow, planting trees and creating ponds. However, the other ‘pillar’ to subsidy payments, the Basic Payment Scheme (BPS), which constitutes 85% of all agricultural subsidies, still incentivises land mismanagement, in environmental terms. In the UK, the financial support available through the BPS is subject to multiple conditions; two in particular incentivise land mismanagement. To qualify, owned land must be:

• ‘agricultural’ land (arable, permanent grassland or permanent cropland); and
• used primarily for an ‘agricultural activity’ for the whole of the relevant calendar year.

In simple terms, if you own sufficient land (more than 5ha) and keep it as pasture, you should qualify for the payment. But if you take environmentally preferable actions, such as planting trees or managing areas for the benefit of wildlife, these conditions (amongst others) mean you risk losing BPS income. This would only be partly offset by the smaller and less reliable agri-environment payments.

Figure 1 – Total BPS subsidies and agri-environment subsidies in the UK (2014-18). Source: Defra (2019)

Despite subsidy reforms, the UK’s natural environment is reeling from fifty years of increasingly intensive agriculture. Ecosystems are perilously fragmented. Around 20% of the country’s mammals face extinction, while insects face an ‘Armageddon’. Our ‘green and pleasant’ land is one of the world’s most nature-depleted with one of the lowest levels of tree cover in Europe, at 13%.

However, the Government’s 25-year environment plan focuses on rewarding farmers for the environmental outcomes they achieve, rather than for simply owning agricultural land. It recognises the dire state of Britain’s soils, which have been mined of nutrients and organic matter. It also accepts that our use of pesticides and the spread of monocultures are problematic. There seems to be a sincere appreciation that things need to change.

CAP in hand

However, any change programme will have to deal with the fact that many farmers currently depend on CAP payments (see figure 2). Indeed, subsidies can make up most, if not all, of their net income. For instance, without CAP subsidies, less favoured area farmers would make an average loss of £9,600 per year. Although some farm types are more subsidy-reliant than others, reforms to subsidy distribution could have a huge influence on how farmers manage their land.

Fig 2 – Farm types and their income streams (2017/18). Source: Defra (2019)

When a critical mass of landowners manages land for environmental outcomes, the results can be of national – or wider – significance. Consequently, some of the world’s most influential environmental campaigners have promoted a landscape-scale campaign called Natural Climate Solutions (NCS).

NCS entails the restoration of degraded or low yield agricultural land back to natural forests, peatland, natural grasslands and other carbon sinks. The proposals for NCS were shaped when climate scientists reached a consensus that reducing current greenhouse gas emissions alone will be insufficient to keep global heating below 1.5^oC, and that negative emissions strategies are therefore needed.

Recognising that abatement measures should not compete with feeding a growing population, NCS proposes developing under-utilised and marginal land for negative emissions strategies. This could be highly effective: ecologists estimate that restoring the world’s five billion hectares of degraded grasslands to functioning ecosystems could return ten or more gigatons of excess atmospheric carbon to the terrestrial sink, annually. This is equivalent to taking 2.1 billion cars off the road.

NCS could provide as much as a third of the greenhouse gas mitigation we require globally between now and 2030. In the UK, an estimated 1,600,000 ha of low-grade agricultural land could be rejuvenated to deliver carbon sequestration, alongside societal benefits.

Not fleecing the countryside

To maximise the potential benefits of NCS, it is important to recognise that the UK has a wide range of landscapes and farms. By targeting different landscapes with different forms of support, we should be able to make the most of the available land, whether it’s ecosystem services, or food production, or – more usually – a combination of the two. This would involve a reversal of the spending pattern seen in Figure 1, and considerable investment in improving agri-environment schemes, moving away from singular interventions and towards coordinated, landscape-scale efforts.

Upland areas provide an interesting example. The hills, valleys, mountains and moors of the UK’s uplands make up around 40% of the country. Due to their harsher climates and more marginal soils, they are mainly used for sheep grazing. While sheep hold an important place in countryside heritage, the damage they have caused on many upland areas is astonishing. Sheep farms account for around 15% of the UK’s land area yet provide only 1.5% of the national diet, indicating low productivity. They are also facing a challenging future, with a rapidly aging workforce and the trade implications of Brexit potentially decimating export demand.

The uplands have the potential to sequester vast quantities of carbon in soils, forests, peatlands and meadows. As over 70% of the UK’s drinking water falls within the uplands, co-benefits include improving water quality and lessening the need for treatment, while providing natural flood mitigation by managing water flows. Utilising this relatively unproductive land for NCS should counter the objection regarding its potential impact on food security and self-sufficiency – current hot topics for the National Famers’ Union (NFU).

Upland top ranking

Upland farmers are well placed both to enjoy the benefits of, and enact, NCS. NCS could shape a sustainable rural economy in which these farmers have access to support administered in ways tailored to deliver landscape-appropriate benefits.

While NCS may seem like a distant prospect, there are examples of existing and proposed policy interventions that are laying the groundwork for a redesigned finance system that channels funds into environmental management.

Biodiversity net gain is one such example. In March, then-Chancellor Phillip Hammond announced that biodiversity net gain requirements would be mandated for new developments. Developers would have to show how onsite biodiversity will be left in a “measurably better state” than before; and, where this is not possible, pay for ecosystem enhancement elsewhere – thus creating a market for the restoration of biodiverse landscapes. Landowners could use money from developers to create large habitat banks that would provide offsetting opportunities.

Green investment bank?

A net gain requirement was included in the 2019 Environment Bill, although this had reached only an early stage in its parliamentary progress when the general election was called, putting its progress in doubt. While its proposals, if enacted, would not achieve all that has been hoped for from NCS, they could create the building blocks for further spending on environmental services, contributing to ecosystem restoration.

Another example is the development of national carbon offsetting standards, such as the UK’s Woodland Carbon Code. The aim is to channel private finance into reforestation and carbon sequestration projects, with the co-benefit of restoring landscape-scale natural habitats. Through the Code, businesses and individuals can buy carbon credits to offset their emissions, which are then used to finance environmental land management. Like the biodiversity net gain legislation, the Code offers land managers the chance to earn money while providing a public good.

Designing policy that incentivises engagement with NCS is a complex task. Eunomia has contributed to the early stages by assessing different models which the government could use to evaluate farmers’ responses to policy changes. Once developed, these models will provide insights into what the most effective incentives will be. The farmers we’ve talked to are very clear that they want any system that incentivises nature friendly farming to be simple, commercial and fair.

How farming evolves will be central to national efforts to combat climate change. Politically, we are at a point from which we can be ambitious in rethinking the role our rural environments can play in providing not only food, but also, climate solutions. The EU, too, appears to recognise this, and there are proposals for further CAP reform, with greater environmental focus, from 2021 – though they are not yet finalised. While the Brexit forecast may look stormy on many fronts, the opportunity for the UK to pursue NCS more rapidly and far-reachingly than it could within the EU is one possible silver lining.

Featured image: Mhx (CC BY-NC-ND 2.0), via Flickr