08 Feb Is There a Market for Slow Clean Water?

A report from the Green Alliance suggests there is a market for slow clean water and describes a new payment mechanism for establishing one to bring new income streams into farming, supporting a fundamentally different approach to land use.


Is There a Market for Slow Clean Water?The agriculture industry is under increasing amounts of pressures, including increasing production, reducing its environmental impact and eliminating its dependence on public subsidy. The report, ‘New markets for land and nature: How Natural Infrastructure Schemes could pay for a better environment’, claims that many farming businesses are at the limit of their profitability, potentially harming soil health, water quality and biodiversity.

However, could farmers be in a unique position to play an important part in restoring and protecting the natural environment by selling their land’s ecosystem services alongside food? With the declining health of UK land reducing our ability to withstand and defend against problems like flooding and climate change, the Green Alliance put forward the idea of a new Natural Infrastructure Scheme.

Producers don’t tend to produce things that nobody pays for…

The Green Alliance points out that markets are failing because they recognise “only a tiny fraction of the value of services provided by land”. Although farmers sell food on the market, the land produces many other services, such as woodland, beautiful scenery, the pollination provided by bees, wetlands (which provide habitats and water filtration); these are all valuable to the country and so farmers could sell them.

The report sets out some ways that we could overcome this failure in the market. The belief is that a combination of business and government action is required to ensure land provides what we need. Both landowners and managers have a role in making markets for all the products from land work better. For farmers, they have a unique position in which to restore and protect the natural environment, but there’s no commercial gain to be made from the provision of ecosystem services from farmland.

This undervaluing of the ecosystem services that the land can provide places significant costs on society, with water companies alone spending £1,065 million annually on the level of pollutants in water courses. Another costly issue is flooding, with £642 million a year spent on insurance pay-outs, public agency and local authority rebuilding of infrastructure. The Environment Agency and others have also spent £526 million on flood defences, but little spend is attributed to holding water in the upper catchment to reduce flood risk.

A market in avoided costs

“…the price assigned to a service does not have to reflect its true value. Economists and environmentalists can get hung up on calculating the right value for natural assets or ecosystem services.”

The report recognises that, although it is “conceptually interesting” to try and assign the value of these wider benefits to society, it may not be a helpful basis on which to build a payment mechanism because setting the right price to incentivise a change in behaviour is difficult. Instead they believe it is useful to think of these services in terms of ‘avoided cost’. If the demand for slow clean water can be calculated from the cost of not having it, i.e. costs of decontaminating water, flood protection and reparation, these then give an indication of how much we might be willing to pay to avoid these issues.

There are strong figures to support this way of thinking. If we consider only two key issues: river flooding and water contamination; the costs are equivalent to £24 million annually for every one of the river catchments in England (the catchments designated by Defra under the Catchment Based Approach). And the cost of this lack of provision of “slow, clean water” is already being paid for by us through our taxes, utility bills and insurance premiums.

What’s the solution?

The Green Alliance proposes the Natural Infrastructure Scheme (NIS), “‘an area based market in avoided costs, delivering environmental improvements by bringing groups of land managers together to sell environmental services to groups of beneficiaries.” Both the buyers of slow, clean water (water companies, power companies, the Highways Agency, the Environment Agency, local authorities etc.) and the sellers (farmers and land managers) would be organised into consortia.

To develop the NIS, a designer would work on behalf of the land managers’ consortium to identify and present the natural engineering solutions in the catchment to meet the needs of the buyers (the beneficiaries). But it must also limit the risks borne by the sellers, as flooding and water contamination cannot be completely eliminated. The downstream beneficiaries would then jointly negotiate the purchase of the NIS.

There are numerous technical, environmental and economic challenges to be overcome to implement such a scheme across the country, but pilot catchments are already being considered and developments will be watched with interest by all stakeholders.

You can access the full report here: http://www.green-alliance.org.uk/natural_infrastructure_schemes.php