UK: Why Monetising Natural Capital Helps The Argument For Public Subsidy

Last Updated: 22 May 2018
Article by Paul Rice

How do you price a tree – and why would you? I've been wrestling with the concept of natural capital1, and how you actually value it for a while. But what is natural capital? To paraphrase the Natural Capital Committee (NCC), it comprises those assets that make up the ecosystem without which human life cannot survive: air, water, soil, plants and so on. It seems to me that there are two principal arguments for placing a monetary value on natural capital assets: first, so that the general public can understand the importance of natural capital, why we must protect it, and the part farming plays in doing so; and second so that government can justify continued subsidies for the farming industry once we leave Europe. Farming is on the front line of environmental management and two particular natural assets – soil and water – are fundamental to food production. If we know what our soil is worth to us, we can place a price on its protection – and pay farmers to look after it.

Public money for the public good

Defra's Health and Harmony consultation on our future, domestic agricultural policy indicates that any continuation of subsidy should be based on the principle of public money for the public good. The consultation's focus on environmental land management schemes tells me that any future agricultural subsidy must deliver enhanced environmental benefits for the wider public good. But in order to calculate how much any future subsidy could be worth, we need to understand the economic value of the natural capital inputs (primarily soil / water) to our agricultural industry. The NCC suggests that this can be done by applying the same principles used to assess the financial value of the inputs and outputs of any other economic activity. In other words, healthy soil, as an input to food production, should have a price tag in the same way that iron ore does in steel production.

'Reform and eliminate perverse subsidies'

As the NCC points out, our natural assets have always been exploited for economic gain resulting in "our natural environment being mismanaged, over-consumed, and underinvested in"; a state of affairs that has worsened significantly over the last 60 years. The NCC recommends a number of different ways of funding the enhancement and protection of our natural capital, through both public and private investment, one of which is to 'reform and eliminate perverse subsidies'. This appears to be the basis of Defra thinking i.e. that the value of future farming subsidies should reflect the inherent worth of natural capital assets used by farmers, and the subsidy amount should depend on how well farmers manage those assets.

Natural capital investment priorities

The Office for National Statistics has the unenviable task of placing a financial value on our natural capital assets and this is still a work in progress. In the meantime the NCC has carried out a detailed assessment of our natural capital and has listed nine investment priorities, of which five have a proven economic return (including intertidal habitats and peatland – neither of which, of course, are of immediate concern in the Midlands), and four others (including 'improving the environmental performance of farming') which require more evidence to prove their economic worth and thus feed into the decision making process around subsidy levels. The NCC is building on work already done by various bodies. For instance in 2015 the Woodland Trust estimated the value of carbon dioxide locked up in UK woodlands was c.£16,000 per acre, and Defra puts the value of pollination to UK agriculture at £440m a year.

Making the public case for subsidy

Educating the public about the criticality of natural capital to their own health and well-being, and its importance as an essential input for farming, is necessary for arguing the case for continuing public subsidy. Putting a price on improving farming's environmental performance in order to arrive at a meaningful subsidy level should provide the necessary transparency. Calculating the economic worth of natural capital inputs into a farming operation provides an opportunity to justify such expenditure in a language the public understand. One might argue that monetising natural capital within a recognisable economic framework helps to contextualise something which is otherwise taken for granted. However, all that being said, the valuations are likely to be nuanced – the NCC notes that the amenity value of woodland close to an urban centre is higher than say, woodland in the middle of a rural county – although the carbon capture properties of both would be similar.

Farmers understand intrinsic value of natural capital

Although soil and water are critical to any farming operation, other natural capital assets such as habitat, wildlife and biodiversity are equally intrinsic. It is important that the government, in its calculations and justifications, does not overlook the tremendous amount of voluntary investment in improving the environment already being undertaken by a large number of farmers. A recent survey by the Campaign for the Farmed Environment, which sought to uncover the extent of environmental improvements carried out by farmers, discovered that the vast majority were involved in some form of environmental enhancement outside the countryside stewardship schemes. For every farmer being paid to sow pollen / nectar mix, another one is doing the same without the payment; twice as many arable farmers are providing supplementary bird feeding, and four times that number are sowing catch and cover crops. This proves that farmers do understand the importance of natural capital (although not necessarily its value in raw monetary terms), that there is a strong appetite for an improved, simplified agri-environmental scheme, and that better financial support would encourage further, beneficial changes.

Collaborative investment for local schemes

There is no doubt that the redrawing of the subsidy landscape is helping to focus minds and encouraging groups around the country to explore innovative ways of helping farming become independent of government. One such project, reported in Farmers' Weekly, is Exmoor Ambition, a collaboration between the Exmoor Hill Farming Network, local business, and the local community with the aim of producing a single, locally-delivered payment scheme described as 'having the concept of natural capital at its heart'. Exmoor is also the site of a joint investment project between South West Water and farmers, and referenced in the NCC's third report. SWW is investing to help farmers manage the land so that pollutant run off is curtailed. This has led to cost savings for both farmers (reduced inputs) and the water company (reduced treatment costs) with the net result of cleaner rivers. Giving natural capital a financial value everyone can understand may provide the intellectual basis for future subsidy but, fundamentally, allowing communities to work out the right solution for their particular circumstances, with investment from a consortium of public and private interested parties may be the future.


[1] The Natural Capital Committee (NCC) defines natural capital as "those elements of the natural environment which provide valuable goods and services to people, such as the stock of forests, water, land, minerals and oceans".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions