The Privatisation of Biodiversity

Professor Colin Reid and Dr Walters Nsoh presented the conclusions of their research programme at the University of Dundee on 20 February 2014. Their research has focussed on the legal implications of the development of new ‘markets’ in natural capital. The emphasis tended to focus on biodiversity offsetting and payments for ecosystem services. Law Commissioner Prof Elizabeth Cooke provided an extremely helpful update on progress with the introduction of conservation covenants in England and Wales. The Parliamentary Draftsman is working on draft legislation following the Law Commission’s review last year so we are likely to see a new type of land covenant in the next two years or so. These covenants will be distinct because they will be able to bind future as well as current owners to positive works, and they will not require the ownership of adjacent land which benefits from the covenant.

From a practical point of view the presentations from Dr Tom Tew on the work of the Environment Bank, Mary Christie on the Carse of Stirling Area project and Dr Andy Tharme on his work on biodiversity offsetting for wind turbines with Scottish Borders Council all gave very helpful insights, ‘from the ground up’.

I was asked to provide a ‘practising professional perspective’. The key points that would concern a professional adviser seemed to me to start with the client’s objectives (in this case let’s say a landowner). Objectives can be many and varied but for a private landowner, revenue and capital enhancement as well as long-term asset protection are normally high on the list. Succession, continuation and inheritance planning are also normally vital considerations. It can take some time to clarify objectives, but it is invariably time well spent. Advisers are keen to ‘add value’ for a client – it’s the best justification for a fee note after all!

My second fundamental point is that land management rarely if ever starts with a blank sheet. Land may be occupied by tenants, sporting rights and mineral rights may be held separately, farming policy will always be important. Other schemes may already be in place, for example Higher Level Stewardship, Entry Level or older schemes (even forestry dedication covenants). The policy and regulatory environment for land rarely stands still for long either. Currently we are coping with the transition from Single Farm to Basic Farm Payments, wondering what the latest decisions on CAP (Common Agricultural Policy) modulation will mean in practice for the new Rural Development programme and contending with the implications for this year’s IACS (Integrated Administration and Control System) returns. In the medium to longer term there may also be supply contracts to consider (e.g. will that 1,000 tonnes of wheat we have sold forward for September 2014 actually materialise if the weather doesn’t get any better?) as well as questions of continuation and succession.

Water is also rising on the agenda (forgive the pun). The current floods highlight one aspect but mere availability of water in sufficient quantity and quality is also likely to become a key consideration in the near future. With a Water Bill being debated by the House of Lords, while Defra is simultaneously consulting on water abstraction rights and trading there could be much to challenge the farmer who is highly dependent on reliable water supplies for his cropping policy.

So in looking at the potential for the privatisation of biodiversity, my client will need to think carefully about the knock-on effects on agricultural productivity, animal health and welfare, tenants and other rights holders. The potential impact on other diversification opportunities will also be important – will the latest thinking help or hinder?

Asset values and return on capital will also be one of the uppermost considerations. For example few rural estates earn a revenue return of any more than 2% a year. In this situation,Agricultural Property Relief and Business Property Relief from Inheritance Tax become an obsessive worry. Failure to qualify will mean that upwards of 20 years’ profits will be needed to pay the bill. If a landowner signs up to one of the new initiatives will he still count as a ‘farmer’ for these purposes? An error here could be very costly indeed – and with rapidly growing farmland and forestry prices the cost is only likely to climb steeply.

How secure will payments for schemes like PES (Payments for ecosystem services) and biodiversity offsetting be? Will participation lead to the danger of a subsequent designation because, for example, we have inadvertently created a SSSI (Site of Special Scientific Interest). This concern can be exacerbated by the mishmash of schemes which are now used to achieve these outcomes. For example Water Level Management Plans in the Somerset Levels work to a timescale of 100 years, whereas the main mechanism for their implementation is Higher Level Stewardship and the like with timescales of no more than 10 years.

So what makes the ‘privatisation of biodiversity’ good for my client? It needs to be a good fit with long and short term plans for farming, tenure, succession and security of income, a solid business opportunity not just another scheme. The practical schemes highlighted at the conference gave some good ideas of how this can be done. We are undoubtedly standing at the dawn of a new paradigm in land management – but we need to work with the grain of traditional land management and stewardship if we are to make the most of it.

Professor Reid’s research was sponsored by the Arts and Humanities Research Council.  More details of the project can be seen here.

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