What is a Catchment Market?
The Somerset Catchment Market is an income opportunity for farmers who generate environmental benefits from their nature-based projects, specifically water quality and biodiversity. A known quantity of these environmental benefits is known as a ‘credit’.
There are a multitude of private companies, public bodies and investors who are increasingly willing to invest in these nature-based projects to generate these environmental credits.
Some organisations have a regulated compulsory requirement to do this, whereas for others it is a voluntary decision.
A market exists for environmental credits related to water quality and biodiversity improvement, carbon reduction and natural flood management.
The Catchment Market is where buyers and sellers are brought together to trade these environmental credits. The EnTrade platform ensures trades are made at the optimum market price. That is a price that both buyers and sellers are happy with.
“Wessex Water is trialling a Catchment Market as part of our contribution to a green economic recovery from the Covid-19 pandemic in our region. We hope that, by doing so, we will not only inject significant investment into the community and the farming industry without adding cost to our customers’ water and sewerage bills, but also demonstrate how market-led solutions can deliver better outcomes for both farmers and the natural environment.” - Guy Thompson, Group Director of Environmental Futures as Wessex Water
Who buys the credits?
- Private companies e.g. water companies, housing developers
- Public bodies e.g. government, local councils
- Private investors
Water companies have a regulatory requirement to reduce phosphorus entering watercourses from their wastewater treatment processes. In addition to investing in upgrading wastewater treatment processes, some water companies are also investing in schemes that help reduce phosphorus runoff from farmland.
When one industry delivers an environmental benefit on behalf of another industry in this way, it is known as ‘offsetting’.
There are a growing number of offsetting opportunities available to farmers.
Housing developers will soon have a mandatory requirement to deliver biodiversity net gain from their developments. In addition to this, development in some local-authority planning areas must mitigate the adverse effects arising from increased nutrient loading to local waterbodies and provide a nutrient-neutral environment. These housing developers are willing to fund farmers to deliver these nutrient and biodiversity offsets on their behalf.
Other markets are emerging for carbon and natural flood mitigation, credits for these environmental services can also be generated from farmers nature-based projects.
How do farmers make money?
Through Catchment Markets farmers can create nature-based projects on farmland that delivers nutrient and biodiversity credits. Through the EnTrade platform farmers can sell these credits to organisations needing to offset their own impact on the environment. This is a new opportunity for farmers to earn a financial return whilst at the same time improving their local environment.
A project that has a bigger environmental benefit will generate more credits and therefore more revenue for the farmer.
Farmers can potentially generate multiple environmental credits from the same nature-based project, and therefore the same project can attract investment from a variety of buyers all interested in different environmental outcomes.
A Catchment Market gives farmers the unique ability to ‘stack’ revenues from multiple buyers. This means projects have the potential to generate cash flows greater than the current land use or alternative sources of environmental funding.
Benefits to farmers
- Be a price maker not a price taker
- Connect to buyers and revenue streams that you would otherwise not have access to
- Earn better financial returns from less productive land
- Safe, secure and diversified income
- Flexibility: shorter and longer term contracts available
- A secure contract with a well-established utility company
How is the price set?
Once we’ve confirmed your project/s meet the basic criteria and you’ve provided further information on those eligible project/s, you will be invited to bid for funding on the EnTrade platform. Farmers are able to set their own minimum price to guarantee a return they are happy with. You can edit or delete your bid at regular intervals until the bidding closes and whilst price is a factor, the quality of the project and its ability to generate environmental credits is equally important.
Register now or contact FWAG South West for more information.