We need to re-set the role of ELMS

After a window extended by the Covid pandemic, the government has just closed its policy consultation on the Environmental Land Management Scheme (ELMS). We now await the launch of a national pilot before the end of the year.

The government’s commitment to restore the environment within a generation will depend on transformative change in land management. Given the impact of the Covid-19 pandemic in the six months since the consultation opened, this is an important moment to take stock and assess whether the government’s design assumptions are commensurate with the scale of its policy ambition.

As a company that provides market mechanisms for delivering, accrediting and verifying ecosystem services, EnTrade wants to see the government’s 25 Year Environment Plan goals translated into joined-up delivery on the ground. ELMS is an important piece of the post-Brexit architecture and a massive opportunity for a step-change in the way we manage our land for people and nature. The notion of a transition is therefore central to its design.

But what are we transitioning to and why? The conventional wisdom is that we are shifting the emphasis away from general support for agricultural activities and towards targeting of public funding for the provision of public goods.

This premise has been around in a UK agriculture policy context for a while, having first emerged in the late 90s and then been given resonance in the Food and Farming Policy Commission chaired by Sir Don Curry in 2001. It requires a clear understanding of the benefits that farming can provide, which of these are private goods best provided by markets, and which are public goods requiring public support.

The defining characteristic of public goods is that their supply cannot be secured through markets. The ELMS consultation echoes this, saying that “the market does not adequately reward delivery of environmental public goods”.

However, well-designed markets in environmental services have emerged over the last 20 years, both in the UK and internationally. This has primarily been in the form of Payment for Ecosystem Services (PES) schemes - as gave birth to EnTrade - and more well-established markets in energy efficiency, renewable energy and air quality.

A transition to integrated local delivery

In the context of a green recovery from Covid-19, a transition to a system of public funding for public goods will not be enough. Nor will a siloed approach to delivery of the 25 Year Environment Plan.

Instead we need to reset the ELMS design to facilitate transition to:

  • agricultural systems that integrate food production with action on climate change and delivery of environmental goods and services;
  • provide a system of incentives that rewards delivery of environmental public goods in combination with private benefits delivered through market mechanisms.

To support a transition to integrated local delivery of national environmental targets, the scheme design could be strengthened by providing a clearer exposition of the purpose of, and outcomes expected from participation in, each tier. The scheme needs to recognise different starting points and provide strong incentives to progress to higher tiers.

A system of incentives

There is huge potential to involve the private sector and NGOs in the funding of environmental public goods. For example, private PES schemes in nutrient balancing deliver both private benefits, through reduced water treatment costs to companies; enhanced incomes to farmers and public benefits, in the form of cleaner rivers. Similarly, the Facilitation Fund of Countryside Stewardship has highlighted the important added value of NGOs and independent farm advisers as delivery partners in landscape-scale projects.

However, the ELMS design does not account for mechanisms by which private goods can be paid for by private beneficiaries.

Mechanisms to allow the private sector to deliver net environmental gain to comply with environmental legislation through offsets, such as net biodiversity gain for developers and nutrient balancing for water companies, will play a substantial role in delivering the land and water-based goals in the 25 Year Environment Plan. As I have written before, public funding will not be enough to deliver nature’s recovery – and the impact of Covid will only serve to exacerbate that fact.

The Woodland Carbon Code, supported by the Woodland Carbon Guarantee, is an important example which is already enabling landowners to access private funding for carbon offsets. With the passage of the Environment Bill, a well-designed biodiversity net gain mechanism will establish a market for biodiversity offsets that can provide access to private funding for nature recovery.

It is therefore critical that the ELMS design not only anticipates, but actively facilitates, the development of environmental services markets. There needs to be a straightforward mechanism by which landowners can access funding available through both markets and ELMS.

Most importantly, to maximise the value of public funding, the ELMS design needs to demonstrate how it will fund outcomes over and above those delivered through markets and avoid the risk that it crowds out private funding.

EnTrade is collaborating in two ELMS trials over the next year – one with Wessex Water in the Poole Harbour catchment (a multi buyer, multi outcome auction) and one with the RSPB in Suffolk to explore how auctions can facilitate cost-effective choices to reverse farmland bird decline. We look forward to working with our delivery partners and stakeholders to support the government in enabling a transition that will shift the dial in nature’s recovery.