The rocky road to Net Zero

New York’s new “cap-and-invest” carbon levy discussed below offers an interesting alternative to the greenhouse gas and biodiversity offsetting schemes being used in the UK and around the world to help reduce emissions and offset habitat loss. Instead of creating a credits-based system, the Big Apple is just going to hit the biggest polluters with huge bills and then redistribute the money environmental and climate change mitigation projects, as well as to poorer communities bearing the brunt of higher energy costs. Such a scheme looks ripe for abuse and could well turn into a political football, but channelling money straight from the polluter to those genuinely providing nature-based solutions would solve some of the greenwashing and rent-seeking issues that currently blight carbon markets. I’d be interested to know what you think. Meanwhile, a new weighty critique of the UK government’s progress towards net zero agrees with this bulletin’s conclusions that we need more regulatory oversight of voluntary carbon markets and a coherent land use strategy.

Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update direct to your email here

Andrew Shirley Head of Rural Research

In this week’s update:

• Commodity markets – Grain slide continues
• Net zero – Report calls for sweeping policy changes
• Climate change – Plant health and other impacts
• Wild camping – Dartmoor landowner victory
• Rewilding - Vegans splash the cash
• Tenancy agreements – Rents falling, says Defra
• Land values – Farmland 2022’s top-performing asset
• On the market – 2,000+ acres kickstart 2023
• Staff salaries - New benchmark report released
• International news – New York’s billion $ carbon levy

Commodity markets – Grain slide continues

Cereal and oilseed markets continue to weaken despite last Thursday’s USDA World Agricultural Supply and Demand Estimates report recording a slight fall in US wheat and maize stocks. Bumper harvests around the world mean most markets have seen prices fall back below the levels seen prior to Russia’s invasion of the Ukraine. Meanwhile, Pork producers are still experiencing losses of up to £29 a slaughtered animal, according to the latest figures from AHDB. This despite prices hovering at record levels. On a more positive note, fuel prices are still falling, although diesel continues to lag unleaded at the forecourts.

Net zero – Report calls for sweeping policy changes

Mission Zero, an independent and thought-provoking report commissioned by former Prime Minister Liz Truss to investigate how the UK could better meet its commitment to hit Net Zero by 2050, has highlighted the huge economic opportunities available from the transition. However, it has also been seized on by environmentalists as evidence that the government is failing on nearly every aspect of its net zero policy.

Written by former minister Chris Skidmore, the 330-page tome identifies many areas of the economy, including agriculture (page 174), that require greater certainty, consistency, and clarity across net zero policy. Among the report’s 130 recommendations relevant to rural property owners are:

• The government to publish a Land Use framework as soon as possible, and by mid-2023
• Government to publish full details of all Environmental Land Management Schemes and future plans by the end of 2023 - with a particular focus on how participants can take advantage of both public and private finance
• Deliver accurate monitoring of carbon across broader range of ecosystems, with a view to bringing more habitats into the inventory to drive habitat creation and restoration efforts
• In line with wider thinking on voluntary carbon and ecosystem markets, ensure a pipeline of investible nature-based solutions projects is available
• The government should endorse international VCM (voluntary carbon market) standards as soon as possible and consult on formally adopting regulated standards for VCMs and setting up a regulator for carbon credits and offsets by 2024
• The government should publish its Biomass Strategy as soon as possible
• The government should legislate by 2025 for the minimum energy efficiency rating for all nondomestic buildings, both rented and owned, to be EPC B by 2030
• Consider a Net Zero Homes Standard and Net Zero Performance Certificate as future
  benchmarks for an energy efficient home
• Central government should reform the local planning system and the National Planning Policy Framework (NPFF) now. The reformed system should have a clearer vision on net zero
• Solar farms in the countryside should be not be planned piecemeal but in a co-ordinated fashion as part of a Land Use Strategy

Climate change – Plant health and other impacts

A new action plan to protect plants from pests and diseases was published last week by Defra, in partnership with the Forestry Commission and the Scottish and Welsh Governments. Although much of the strategy focuses on improved biosecurity measures, evidence suggests that a warming climate is making the UK far more attractive to pests and diseases that previously found us a little too chilly. Reading through the strategy, I was reminded of some thought-provoking research produced by our Geospatial and Analytics team. By mapping predicted climatic shifts they were able to pinpoint which parts of the world will see their agricultural sectors most affected. A belt across central Africa is most vulnerable, especially as economies in that region are heavily reliant on farming.

Rewilding – Vegans splash the cash

Those who believe in a meat-free future are opening their wallets to prevent farmland being used for animal husbandry. The Vegan Land Movement has just purchased a seven-acre block of damp-looking former dairy land in Somerset for £44,000 at auction. The strategy is not that dissimilar to the one proposed by the Dutch government, which will see public cash used to purchase and close down livestock units. Earlier last year the crowd-funded group, which says it believes in non-interventionist rewilding and veganic farming, purchased a block of land with planning consent for a poultry unit.

A financially meatier campaign by another group – GEN V - also caught my eye on the way up to London this week. Adverts in the Metro and on the Tube challenge Prime Minister Rishi Sunak to go vegan for a month in return for a £1 million donation to a charity of his choice. GEN V, which boasts the support of a raft of celebrities, claims: “Avoiding meat, fish, eggs and dairy is the simplest and most effective way to halt climate change. It is far more effective than cutting down on our flights, buying an electric car, taking shorter showers, or shopping locally.”

Previous million-dollar campaigns have targeted the Pope and burger-loving former US President Donald Trump.

Wild camping – Dartmoor landowner victory

A judge controversially ruled last week that a 4,000-acre estate in Dartmoor National Park can prohibit wild camping on its land. It had been long assumed that a bylaw in the Dartmoor Commons Act 1985 which provides for open access "to all the commons on foot and on horseback for the purposes of open-air recreation" included wild camping. But High Court judge Sir Julian Flaux said the act did not "confer on the public any right to pitch tents or otherwise make camp overnight on Dartmoor Commons. Any such camping requires the consent of the landowner." Dartmoor is the only area of England and Wales where wild camping has been allowed so the court ruling is likely to be appealed by some very angry ramblers.

Tenancy agreements – Rents falling says Defra

Average rents for all types of longer-term tenancy agreements fell between March 2021 and February 2022, according to the latest numbers from Defra. Traditional Agricultural Holdings Act tenancies slid by 4% to £177/ha, while Farm Business Tenancies (FBT) dropped 6% to £225/ha. There were, however, large variations by farm type and region. Average FBTs in the southwest, for example, actually rose by 12% to £268/ha.

Seasonal rents also rose sharply, up by 20% to £181/ha.

Given the post-Brexit uncertainty around farm support payments it is perhaps unsurprising that rents have weakened overall, although another set of government data recently updated shows that English farm incomes increased in 2021. Total Income from Farming (TIFF) across rose by almost 18% to £4.2 billion. We believe now is the ideal time for landlords and tenants to properly reappraise their relationships with an open mind, looking beyond rents to create mutually beneficial partnerships fit for the 21st Century. For advice on this please contact my colleague Alastair Paul.

Land values – Farmland 2022’s top-performing asset

As predicted, the latest results of the Knight Frank Farmland Index show that agricultural land as an investment beat inflation in 2022 and outperformed other asset classes, including mainstream house prices, luxury London house prices, the FTSE 100 share index and even gold. According to our index the average value of farmland rose by 13% over the year to hit over £21,000/ha, a record high. A shortage of supply and continued strong demand from a wide range of buyers underpinned the market. Download the full report for more facts and figures.

You can also hear some thoughts from my colleagues and me on the outlook for property markets in 2023 in the latest edition of Intelligence Talks, our research podcast.

On the market – 2,000+ acres kickstart 2023

If you’re tempted to acquire some land my colleagues in our Farms & Estates team are kicking of 2023 with the private launch of an estate extending to over 2,000 acres in the north of England. The estate generates a substantial and diverse annual income. For more information, please contact Will Matthews.

Staff salaries - New benchmark report released

Just a reminder that the latest edition of the Knight Frank Estate Staff Salary Survey has recently been published. The report reveals the average salaries paid for a wide range of rural estate and farming roles and level of wage increases being offered by rural businesses. Also highlighted are the key employment issues facing the rural economy. Download your copy here or get in touch with Chris Terrett for more details.

International news – New York introduces billion $ carbon levy

Large greenhouse gas emitters and fuel distributors in New York will be required to pay more than $1 billion per year, according to a new “Cap-and-Invest” program unveiled by Governor Kathy Hochul in her 2023 State of the State address, with proceeds reinvested in emissions reduction initiatives and support for vulnerable communities facing rising energy prices,” writes Mark Segal in ESGToday.