Environmental markets – essential information

Environment and climate
Wildflower meadow with fields in the background

The NFU has been exploring the scope of environmental markets as a potential source of diversified income for members for the past two years. Find out what environmental markets might mean for your business and the five key principles we've outlined as essential for success in these markets. 

The basics

The way that the environment and land use is valued is changing and through public and private investment, new markets are starting to be developed. 

Environmental markets operate on the principle that natural resources and ecosystem services should have economic worth. This introduces the prospect of financial incentives for land managers who can protect or enhance nature that deliver benefits to society or private businesses.

These markets can be structured around financing the many benefits nature provides. For farmers, this could allow them to receive payment for environmental benefits alongside their core agricultural enterprise.

Most focus to date has been on developing markets that reward the delivery of:

  • carbon storage
  • biodiversity
  • water benefits.

These markets could play an important role:

  • in helping with agriculture’s ambition to achieve net zero by 2040
  • increasing the scale of protecting the natural environment
  • providing businesses with a valuable new source of diversified income.

However, these markets are in the very early stages of development. They are still fast evolving with many uncertainties around how to ensure their integrity, fairness and compatibility with other farm income streams, as well as the implications for the broader farm business structure.

The NFU has identified five key principles to ensure that emerging markets are attractive for farmers and growers to engage in with confidence over the long term:

  1. Environmental markets must work alongside the domestic production of food, energy and fibre.
  2. Public policy and government initiatives must support the development of private markets.
  3. Environmental markets require clear rules and standards to allow farmers and buyers to participate confidently.
  4. Markets should be accessible across a range of farm sizes, tenures and business structures.
  5. Farmers must be rewarded fairly for the delivery of environmental goods.

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Biodiversity Net Gain webinar

This NFU Midlands webinar explored how mandatory Biodiversity Net Gain requirements affect businesses. 

NFU Panel Firm Shakespeare Martineau also gave a practical view of BNG legal agreements.

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Environmental markets timeline: our work so far

December 2023

NFU election manifesto

The NFU published its general election manifesto – Farming for Britain's Future – which outlines our key asks of the next government. In it we asked for the development of environmental markets which work alongside domestic food, energy and fibre production, have clear rules and standards to allow farmers and buyers to take part with confidence, are accessible across a range of farm sizes and business structures, and fairly reward farmers for the delivery of environmental goods. Read: General Election 24: Farming for Britain’s environment

1 November 2022

Environmental market principles workshop

The NFU convened an industry stakeholder event, bringing together industry figures from farming, project developers, finance and government. Read: NFU hosts first-of-its-kind workshop into environmental markets

July 2022

Cluster farmer workshop

The NFU hosted a workshop for farmer cluster groups and those working with groups of farmers to look more closely into new economic models.

Second half of 2021

NFU outlines 5 key principles

At the end of 2021, work began on the principles for successful environmental markets. This major piece of policy work focuses on what is needed to ensure that markets are equitable and accessible for members.

First half of 2021

Carbon markets assessment

The NFU commissioned a rapid evidence project on carbon markets looking at their stage of development, the potential for members to get involved and how the NFU could assist. 

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See our manifesto asks

Our manifesto

Our general election manifesto – Farming for Britain's Future – outlines our key asks of the next government to ensure farmers and growers can continue to deliver for the environment, economy and local communities while producing more of the great British food we all enjoy.

NFU members, join our Environment and climate community to comment

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