Can markets in 'ecosystem services' secure the future of the English countryside?

Can we secure the future of our countryside - like this landscape in the Yorkshire Dales - with markets in 'ecosystem services'? Robert J Heath via Flickr (CC BY).
Can we secure the future of our countryside - like this landscape in the Yorkshire Dales - with markets in 'ecosystem services'? Robert J Heath via Flickr (CC BY).
The EU is already paying farmers and landowners for creating and maintaining valuable habitats, write Dominic Hogg & Luke Dale-Harris. But could the UK do better by creating markets in 'ecosystem services' that would put financial value on clean water, key wildlife habitats, endangered species and precious landscapes?
Crucial services such as the purification of the water we drink, cleansing of the air we breathe and prevention of the floods are factored out of the economic equation. But we pay for them anyway - once the damage has already been done.

Ask an English person to think of the natural landscape, and most would imagine a walk through the countryside: a green, gold and brown patchwork of fields, split and pierced by hedgerows and church spires, and punctuated by country pubs.

The impression - diligently cultivated by the likes of Country Life and the National Trust - is one of profound Englishness, as culturally and politically peripheral to Europe as it is geographically.

Yet the countryside we see around us is as much a work of artifice as a Constable painting or the Wind in the Willows. And that artifice has been profoundly shaped by the European Union.

For the last two decades, the English countryside has been reliant on the EU for its income, environmental regulation and rural development programs.

Last year alone English farmers received over €3 billion in subsidies, a sizeable chunk of which is reserved for funding environmental measures. Without this, our landscape would begin to look very different.

Mercantilising nature

Perhaps the best way to understand this is to skim through the Countryside Stewardship Manual, which details how subsidies are distributed for different habitats and management activities. It describes our countryside as a series of complex economic equations.

Each habitat is valued at a fixed price, payable to the landowner on condition they maintain it to standards. A sky lark plot gets you £9, a beetle bank £573. If you create species rich grassland (not an easy task), you take home £267 per hectare.

It's a clinical and sobering way to think of nature, but it is this economic framework which, arguably, has protected biodiversity in rural areas from free-falling in a landscape increasingly dominated by intensive agriculture based on monocultures and ecologically barren pastures.

By building nature into the monetary considerations of farmers, it has offered a mercantile motive for its protection. It's not enough, as demonstrated by the continuing declines in UK wildlife, but it is something, and there is reason to believe that in its absence, things may have been worse.

This was certainly the case with the previous model, where subsidies where pinned only to outputs and ecosystems were ignored.

Now what, Mrs Leadsom?

Now, this may well be about to change. As the new environmental secretary, Andrea Leadsom is in charge of deciding the future of agricultural and environmental subsidies after our exit from the EU. And Leadsom is a weathered sceptic of the subsidy system.

In 2007 she wrote that farming "subsidies must be abolished" and in June this year she came out in support of "reducing burdensome EU red tape, saving farmers time and making food cheaper". For now, she is promising that subsidies will stay the same "in the short term" - at least until 2017. Beyond that, the future looks uncertain. But with uncertainty comes opportunity.

Crucial services such as the purification of the water we drink, cleansing of the air we breathe and prevention of the floods are factored out of the economic equation. But we pay for them anyway - once the damage has already been done.

Though the CAP deserves some credit for offering farmers payments for environmental protection, it has not been enough to stem the tide of biodiversity loss. The reasons are manifold, but the relatively low size of environmental subsidies and the complexity of applying for them has certainly put many farmers off.

It is often easier to simply apply for the high income Direct Payments (which are available to almost any agricultural landowner, and come with very few environmental stipulations), and then work the land to the bone.

To change this, we need to consider alternative forms of funding for environmental protection, funding that can (hopefully) supplement environmental subsidies to make environmental protection an integral part of rural economics.

Payments for 'ecosystem services'

Over the last ten years, there has been increasing noise around the idea of Payments for Ecosystem Services (PES), a model that builds environmental provisions into the market by paying farmers or landowners to manage their land in a way that provides ecological services.

For example, a farmer working upstream from a reservoir could receive payments from the local water provider for reducing his use of specific pesticides, or for maintaining soil quality to reduce run off. This would then reduce water treatment costs for the water provider.

The idea of ecosystem services is often categorized, somewhat lazily, as the 'commodification' of nature. It is easy to understand why. The simple act of pricing something fundamental - whether it is love, life or nature - has a tendency to alienate its audience. Imagine if Watership Down was rewritten for the ecosystem services age: it would serve not as a tale of rabbits coming under threat from human development, but of the misevaluation of asset classes in an ecosystems market.

But this fails to take into account the alternative. Our landscape is already commodified but, with a few exceptions, the only commodities that hold any market value are timber, food and fuel, which are consequently cultivated at the expense of almost everything else.

Crucial but easily overlooked services such as the purification of the water we drink, cleansing of the air we breathe and prevention of the floods that periodically wreck many houses are factored out of the economic equation. But we pay for them anyway - retroactively when the damage has been done - through the NHS, flood repairs, utility bills and insurance, including taxpayer-funded government schemes to make insurance more affordable for homes at risk.

Solving problems at source - not once the damage has already been done

Why not redirect these payments back to the source of the problems, to the ecosystems that have been undervalued in our drive for ever higher yields? If we do this, we can prevent these problems at source and build the environment back into local economies and communities. It is a tool to break the monopoly that food production holds over our countryside, and start valuing - both socially and economically - ecosystems.

For all the potential benefits of PES, they must not come at the expense of environmental legislation or be used as a blanket replacement for environmental subsidies.

This is the great fear of PES - that the Conservative Government, with its great faith in the healing powers of the market, will hold up ecosystem services as the solution to environmental ills with one hand, while cutting the legislation that keeps agriculture in check with the other.

But the market cannot act alone. With the myopic tendency of markets to focus only on the immediate, an ecosystems market would be poorly equipped to provide the comprehensive support needed for something as complex as the natural world.

Instead, Ecosystem Services should be used to provide funding and incentives to landowners and farmers to protect their land, but supported by rigid regulation and targeted environmental subsidies.

Unromantic - but effective

As we become increasingly conscious of the role ecosystems play in sustaining human life - from air quality to mental health, carbon sequestration to drought protection - the potential breadth of the application of PES grows:

  • Should part of the NHS budget be diverted to fund the planting of urban woodland to improve air quality?
  • Could property developers be charged an 'ecological tariff', so that the development of one parcel of land funds the maintenance of high biodiversity meadows and hedgerows nearby?
  • And can we quantify the economic impacts of ecosystem services well enough to set robust prices that reflect the benefits they bring and stand up to the scrutiny of the business lobby?

If PES are to play a growing part in shaping our countryside - and they should - these are just a few of the questions we will need to resolve. It may be an unromantic way to consider nature, but it might be the best tool we have.



Dominic Hogg is Chairman of Eunomia Research & Consulting.

Luke Dale-Harris is Technical Writer at Eunomia Research & Consulting.

Established in 2001, Eunomia is an independent consultancy helping to make sustainable choices the obvious ones. The company has recently led a study for Defra investigating the potential for Payments for Ecosystem Services (PES) to deliver changes in land management.

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