A fundamental shift in how land-use subsidies would give taxpayers better value for money and improve the UK’s chances of meeting its environmental targets. 

The government’s commitment to the biggest expansion in woodland for half a century to reach Net Zero by 2050 requires them to pay landowners to convert agricultural land into woodland.

These payments are allocated using flat-rate subsidies, which provide a consistent per-hectare payment to landowners regardless of the suitability of the land for tree-planting.  

Researchers from the University of Exeter Business School have demonstrated that these flat-rate subsidies are not only ineffective but could actually increase net greenhouse gas emissions. 

This is because paying a flat rate for land incentivises subsidy uptake from lower agricultural productivity farms, frequently located on carbon rich soils where tree growth is poor and where planting acts to dry out peaty soils, resulting in greenhouse gas emissions rather than sequestration.

The solution, they argue, is to stop offering subsidies everywhere and instead target subsidies based on their expected effects. This ‘Natural Capital’ approach prioritises areas with the greatest environmental, climate change, biodiversity and recreational value.

In a study published in PNAS, the researchers tested three approaches to subsidy allocation: the current flat rate, the Natural Capital approach, and the ‘Land Use Scenarios’ approach, as set out by the UK National Ecosystem Assessment which promotes tree planting in most areas.

The researchers compare these three approaches using the NEV (Natural Environment Valuation) decision support system, which integrates natural, physical and economic science models to quantify environmental, agricultural and economic outcomes.

Maps of new afforestation show the spatial distribution of the different approaches, with flat-rate subsidies leading to forest planting clustered into areas where financial returns to farming are lowest, making planting subsidies more attractive.

Although this approach delivers a number of benefits it provided poor value for money against the policy’s main objective of carbon storage. Uptake of subsidies on carbon rich soils led to the overall release of greenhouse gases to the atmosphere.

The Land Use Scenarios, while spreading woodland across the largest area of Great Britain and storing high volumes of greenhouse gases, almost doubled the cost of subsidies with planting on some of the most agriculturally productive areas the country.

The Natural Capital approach was found to deliver the best results environmentally, socially and in terms of value for taxpayer money.

Based on the Natural Capital Framework – the basis of the UK Government’s 25 Year Environment Plan – the approach resulted in a greater concentration of planting in and around major urban areas, which generated improved recreational access to high quality environments for large urban populations and delivered an overall net benefit that is 50% higher than the current flat-rate approach.

The approach also improved biodiversity and, perhaps most importantly, resulted in a much better outcome for the climate, meeting the net zero requirement of removing 13MtCO₂ annually by 2050.

Professor Ian Bateman, Director of the Land, Environment, Economics and Policy Institute at the University of Exeter Business School, said: “The flat-rate payment approach to the implementation of policy objectives is so globally commonplace that its relative inefficiency goes unnoticed. This study lays these failings bare and shows that the decision-making approach adopted to implement policy can have a very highly substantial impact on the effectiveness of that policy. 

“By targeting public money to those places it has its greatest benefits we can address climate change, biodiversity loss and food security, and hugely improve value for money to the taxpayer. 

“This is no minor technical issue; if different approaches yield different results, then how we make decisions changes the decisions we make.”

“How to make land use policy decisions: Integrating science and economics to deliver connected climate, biodiversity and food objectives” is published in the journal PNAS (Proceedings of the National Academy of Science).