Trialling environmental income streams

By 2027, landowners in England must make the transition from subsidised agricultural production to an income underpinned by environmental payments as support through the Basic Payment Scheme and de-linked payments ends.

Alternative funding, such as the government’s Environmental Land Management scheme and markets for private agreements, are still developing. The situation has created uncertainty, and most farms are unsure about how to make the transition. However, Castle Howard, near York in North Yorkshire, has started its transition journey, and Estate Chief Executive Jasper Hasell hopes its pioneering work will help guide others.

Jasper is the first to recognise that, because of its scale, income diversity and historical footing, the 3,650ha mixed farming and woodland estate has a higher degree of resilience than many farms.

“Although we have a responsibility to be profitable, our situation means we can trial new strategies on some areas of the estate at, perhaps, less risk overall than there would be to a smaller-scale farm unit.

Work began in 2020 with a financial review and a structured approach to establishing a baseline of the estate’s natural assets. Low gross margin or break-even areas were identified as possible starting points for enhancements to their natural capital value. Mapping was carried out with support from consultants at Fera Science, a science-based research organisation part-owned by Defra.

The Fera Science team included Guy Thallon, who has since joined Castle Howard in a new role as head of natural environment. Explaining the mapping process, Guys says: “The starting point was to establish basic units of natural assets like hedgerows, woodland or field margins within zones on the estate.”

To do this, Fera Science uses satellite imaging, detailed mapping and verification by ecologists on the ground. A total of 6,093 different habitat units, referred to as ‘polygons’, were recorded, and include elements such as hedgerows, woodland, meadow, pasture and arable land.

The ecologists then apply the UK Habitat Classification process (UKHab) - a standard recognised by Natural England and Biodiversity Net Gain (BNG) and carbon calculators. Detailed UKHab codes were applied economists then created a baseline of the potential BNG and carbon capture, and the 6,093 polygons were clustered into manageable habitat types.

Creating an accurate picture of a farm or estate is an important step in generating income from natural assets. Fera Science environmental economist Dr Glyn Jones says: “The government wants to promote activities that will help meet national targets for biodiversity gains and carbon reduction. These will be encouraged through publicly-funded incentives such as Environmental Land Management, but private funding will also be needed to hit targets for biodiversity and carbon.”

Any deals will be based on a habitat’s potential for additional BNG or carbon sequestration. Without having a mapped, authenticated baseline, landowners will not be able to demonstrate the potential for improvement, so will not be in a strong position to negotiate and optimise value for themselves.

Fera Science’s calculations of the potential to produce carbon and biodiversity credits can be completed to 90-95% accuracy. Costs are about £5-10/ha, depending on the complexity of the landscape surveyed. This information can then be converted into income, and landowners can then look to enter agreements via government schemes.

“Alternatively, landowners may enter private contracts where there are possibly higher financial rewards,” Glyn suggests. “For example, it is possible to attract payments of £900-1,000/ha per year for biodiversity credits using an intermediary like the Environment Bank. However, these are long-term commitments of at least 20-30 years, requiring changes to the nature and flexibility of the farm system.”

Following the baselining initiative, the estate management team has identified several projects that could yield public goods.

Hall Moor

The estate’s 40ha Hall Moor area is a mosaic of pasture, arable, watercourses, mixed species of native wood and scrub. Identified as a break-even, low-yielding area, a habitat creation proposal was co-designed with Environment Bank and the estate’s natural environment team.

The plan’s aim was to wood and scrub development by extending ‘lobes’ of woodland into the arable and pasture. Scrub would also be allowed to generate in the margins to make a seamless transition from agricultural land to natural woodland habitat, and a watercourse would be widened to slow its flow. The proposal has been readied to be offered to Environment Bank - although it and other larger plots are still under consideration.

“BNG credits pay about £950/ha per year for a 30-year period for this type of project,” says Guy. “By comparison, a traditional grazing licence would be less than 10% of this per annum.” Further income could be generated through an option to retain conservation grazing on the pasture land and overlay other activities, such as eco-tourism.

While this project remains under consideration, other initiatives are underway on the estate.

Large-scale habitat creation project

Estate-wide, with likely funding via environmental, social and governance offsetting with select local businesses. The focus is on taking marginal arable and pasture out of production and increasing habitat complexity and connectivity. The estate is also evaluating the re-introduction of keystone species.

Woodland management

Established commercial-scale trials of novel planting approaches, including a 1.6ha trial of biodegradable tree guards, through Farming in Protected Landscapes funding.

Regenerative farming

Leaving land fallow, trialling cover crop mixes and assessing minimum tillage drills. Longer term intercropping options and agroforestry will be assessed.

Tree nursery

Expansion of the estate’s tree nursery, including taking on additional land, implementing more efficient processes and looking at automation options.

Carbon

Assessing the estate’s carbon footprint and moving towards net zero while also looking at options to offset visitor journeys.

R&D projects

Providing access for research with Fera Science, Newcastle University, York University and British Grassland Society, including soil monitoring, 3D drone mapping of hedges and monitoring insects.