Last week’s abrupt announcement to pause all new applications to the Sustainable Farming Incentive (SFI) without warning has left the sector in shock. Farmers and environmentalists alike reacted to the news with frustration and disbelief. Ministers have repeatedly said that they didn’t want to “upset the apple cart” on schemes which mark the biggest change to farming policy in half a century – yet with this announcement the apple cart is now not just upended but in the ditch, apples akimbo.  

The need to reform the SFI was predictable, and Defra should have been better prepared for this eventuality. An uncapped, high-uptake, broad-and-shallow scheme with high payment rates was always at risk of unsustainably cannibalizing the farming budget. In this sense, Defra is right to look to evolve the scheme, but to do so overnight has pulled the rug from beneath the feet of many farmers looking to move to more nature-friendly practices.   

This might not be such a surprise given the rhetoric from Defra in recent months. At the NFU conference in February, the Environment Secretary Steve Reed signaled that the responsibility for profitable farm businesses will have to be shouldered by private money – the era of public money propping up unviable farms was over. Profitability, rather than public money, will be the central pillar of the farming sector of the future – but what does this mean for public goods?   

Greater profitability through resilient farming is undoubtedly a key element of the transition to a nature-positive farming sector. High input costs, tight margins, and unfairness in the supply chain are the unsustainable drivers which have led many farmers to be overly reliant on the public purse, and hamstring businesses’ ability to take risks and invest in new practices.

I often hear farmers say “you can’t be green if you’re in the red”, and The Wildlife Trusts’ work on the profitability of farm businesses has found that working with nature is the path to maximizing a farm’s profitability through lowering input costs significantly – profitable business and sustainable practices go hand in hand. 

However, if the Government is to meet national and international commitments to restore nature and fight climate change then it must do more than rely on farms to be profitable – there has to be significant public investment.

Farming produced more planet-warming greenhouse gas emissions in UK than electricity for the first time this year, and could well become the single biggest emitter in the future. Independent economic analysis on behalf of The Wildlife Trusts, RSPB, and National Trust has found the cost of meeting environmental targets in England to be £3.1 billion per year. To expect supply chain reforms, increased exports, and technological innovation to support farmers through difficult times and address the climate and biodiversity crisis is to dangerously underestimate the scale of the challenge. 

This is why it is critical that Government do not see the farming budget as something to be whittled down, abandoning farmers to the whims of the market. The principle of “public money for public goods” enshrined within the Agriculture Act rings hollow if there is no public money, and withdrawing this funding whilst emerging markets for green capital are still nascent will only undermine pioneering farm businesses. The current farming budget of £2.5 billion per year must therefore be maintained, and if the Government is serious about hitting its environmental targets then funding for the new Environmental Land Management (ELM) schemes needs to increase. 

So this begs the question, where is this money going to come from? With cuts in international aid and welfare, an increased focus on defense spending, and a post-EU farming budget without a protective ringfence now competing with other Government priorities, there are slim pickings for Defra rattling their tin to the Treasury. 

Profit capture

One area the Government might look to is the huge profit expected to be made from energy companies following the £22 billion investment into Carbon Capture and Storage (CCS) technologies. The Committee of Public Accounts has identified a major flaw with the scheme – profits from the new ‘net zero’ power plants, funded by vast sums of money from UK taxpayers, will go straight into the pockets of energy company shareholders.  

There is a clear ethical and commercial case for the Government to intervene to secure a share of profits derived from public money going into the scheme for the public, ensuring a healthy return on investment to the taxpayer.

This would preserve the jobs retained and created by the scheme around the proposed ‘carbon clusters’, whilst ensuring that profits don’t just benefit a small number of multi-national energy companies.

Natural Carbon Capture  

Instead, a share of the profits of CCS investments should be re-invested into habitat restoration for natural carbon capture and climate adaptation such as peatland rewetting and restoration, reconnected floodplains, agroforestry and woodland creation. These nature-based solutions are tried-and-tested methods which deliver carbon capture and multiple other benefits – and farmers are best placed to deliver them.  

Not only would this funding support farmers to diversify their business and access alternative revenue streams, investing in habitat restoration could create 16,050 jobs across the 20% of British constituencies experiencing the most severe employment challenges.

This is a cost-effective approach to climate mitigation which increases farmers’ resilience to a changing climate - new research published last week found that Wildlife Trust natural flood management schemes deliver £10 of benefits for every £1 invested. The funding could evolve in time to also support marine projects to capture ‘blue carbon’. 

Besides the economic benefits, investing in nature projects can have wider co-benefits to wellbeing and mental health, while making communities more resilient to extreme weather events caused by climate change. Across the UK, public access to woodlands is estimated to save the NHS £185 million per year due to boosts in mental health and wellbeing. 

Emissions Trading Scheme 

It will take time for the profits from the Government’s £22 billion CCS investment to become available to reinvest back into public goods, and we know that farmers are facing the challenges of a potential funding cliff edge now. 

A short-term solution would be to source funding for farmers through the UK Emissions Trading Scheme which requires large companies to pay to cover their emissions. Revenues from the scheme currently go straight into Treasury funds, and in 2024-25 those revenues were estimated at £3.6 billion.  

Instead of this money disappearing into the general pot, a proportion of these revenues should be directed into a strategic nature-based solutions fund supporting the creation and restoration of habitats which naturally capture and store carbon and build climate resilience.

This would release funding to support farmers taking ambition action for nature from next year, filling the gap until profits across from the £22 billion carbon capture investment start to come in. Re-allocation of more of the flooding budget to natural flood management schemes could also help with this.  

A Just Transition 

There is huge uncertainty for the future of many farmers in England, and without public funding to support them to diversify and navigate the biggest transition in farming policy for half a century, the prospects look bleak.  

Reforming the sector and ensuring equitable supply chains fairly reward farmers to increase farm profitability is critical, but without public money the Government is at risk of putting thousands of hard-working farmers out of a job, whilst at the same time handing billions of pounds to transnational corporations. 

This would not just be a betrayal of Government’s promise to farmers, it would also leave Defra ill-equipped to deliver its ambitious targets for nature and represent a huge, missed opportunity to reinvigorate rural economies.

Farmers and land managers can capture carbon as effectively as big energy companies, with far more social benefits. The Government’s carbon capture plans can and should be tweaked to include them, to spread the economic and social benefits of this investment across the country.