Land & Climate Change - Shaping the natural capital market in the public interest
The next in our series of ‘Land &’ blogs, Chief Executive of the Scottish Land Commission, Hamish Trench, looks at how we can shape the rapidly developing carbon and natural capital land markets in the public interest.
There is much talk just now of natural capital and new labels of ‘green finance’ and ‘green lairds’ in Scotland’s land market. So what is happening, what do we know?
One thing is clear – much of Scotland’s land is finding new forms of value. In a decade when climate action is the urgent challenge, Scotland finds itself well positioned by virtue of our geography and nature. Scotland can not only deliver direct action to reduce climate emissions through our land use. We are also well positioned to make the most of the very significant finance that governments and investors around the world are turning to this societal challenge, creating win-win economy and nature benefits.
We know there will be significant land use change ahead – more woodland, large-scale peatland restoration, better soil and carbon management and that private as well as public finance will be significant in driving this. This brings risks as well as opportunities, it’s going to be important that communities and local economies benefit from this change.
Another point on which there seems wide agreement is that uncertainty runs through this. We are in the early stages of rapidly developing markets for carbon and natural capital. The values and future revenues involved are uncertain, the regulatory framework is not yet developed and individual land managers face a wide range of potential choices with imperfect information. So this is the right time to shape these markets in the public interest.
We can already see different ways this will influence the land market and land ownership. Some businesses and corporate institutions are seeing the acquisition of land for off-setting carbon emissions within their business as a key part of their future strategy. Others may be more focused on investing and generating returns through trading in carbon credits, either acquiring land directly to do so or simply trading ‘rights’.
With such a rapidly developing influence in land ownership, land values and markets, the pressing question is how do we do this well? Our focus at the Scottish Land Commission is how Scotland harnesses this ‘green’ value and finance in a way that drives the just transition – one in which the costs and benefits of change are shared fairly. There are some fundamental questions to consider about a fair and productive balance of public and private benefit.
We are looking at two key aspects. First, what the implications are for the land market and second, how the costs and benefits are shared. Through our work we will provide advice to government on the public policy implications and work with those in practice to shape responsible approaches on the ground.
An early step is work to develop a better shared analysis and understanding of the scale and nature of relevant land transactions happening on and off market at the moment. Improving transparency and shared understanding is a necessary start.
We also need to consider ownership and benefit. How the rights to carbon and natural capital are framed in law, their interaction with land rights and the implications for different tenure systems such as agricultural tenancies and crofting need to be considered carefully.
Then the question of who benefits, how carbon and natural capital values are shared productively so this value is retained in the Scottish economy benefitting local communities and economies. If carbon and natural capital values do grow, as those buying in early anticipate, then it’s reasonable that increases in value from a shared national resource create public as well as private benefit.
We think there is learning here from experience in previous natural resource windfalls, for example oil and gas, renewables, and will be looking at both historic and international experience to draw out relevant lessons.
On a more immediate note, those buying land now for carbon, just as for any other motivation, should understand that with any rights in land go responsibilities. There is a clear framework in Scotland setting out these expectations in the Land Rights and Responsibilities Statement and the Land Commission’s Protocols that support its practical implementation.
Those looking to invest or attract investment should also consider responsible governance that engages communities in both decision making and benefit. There is no need to wait for policy or legislation to catch up, though regulatory frameworks will undoubtedly develop. It’s open to us all to shape responsible practice and set shared expectations.