Natural capital markets in Scotland are at a crossroads
1 November 2024
This article was published as an opinion piece by The Scotsman on 31st October 2024: How ‘Green Lairds’ with dreams of vast profits are pricing out local Highland communities.
Scotland is a country of significant natural beauty and bountiful natural resources, as our tourism, renewable energy and agricultural industries can attest to.
However, alongside these well-established sectors a relatively new force has begun to attract investors and developers to Scotland’s majestic environments.
New opportunities have emerged as we desperately struggle to forge a coherent response to the climate and biodiversity crises. Now Scotland is learning to live with the opportunities and flaws of natural capital markets.
The key idea behind natural capital markets is a financial quantification of the natural world, and its ability to support human life.
It places a market value on particular ‘services’ our natural ecosystem provides. For example, peatland or woodland can be restored as a means of reducing carbon in the atmosphere, theoretically in a measurable way. Thus, these natural features have a new value that can be bought and traded.
This means land can be bought to set up projects to sequester carbon from the atmosphere, or existing landowners can set up their own projects. In both cases the landowner can offset their own carbon emissions using the project or sell the carbon credits to a company who needs to do their own offsetting. The need for offsetting in a carbon-intensive economy, and the ability for companies to do that through spending money rather than changing activities, is a controversial yet key drivers of the natural capital markets.
The philosophical and ethical implications of this financialisation have generated much discussion and deserve more attention than I can provide here. Whether or not commodifying the natural world is right, the unarguable truth is that it is happening. And it has had distinctive impacts upon Scotland already.
The price of land in Scotland has increased considerably in recent years, driven by high commercial forestry prices, land banking by investors, and a speculative natural capital market underpinned by emerging carbon markets.
So-called Green Lairds – new landowners buying land for environmental prestige or the speculative potential of carbon offsetting – are pricing out communities. Natural capital ‘potential’ is a prominent part of such sale catalogues, although the reality of returns is less certain.
Whilst some may be talking up the financial returns from natural capital markets, a no doubt necessary requirement for investments in the sector, it would be wise to approach with care.
These markets are in their infancy and face considerable uncertainties, around greenwashing, realistic financial returns, the role of public funding in supporting nature recovery, and their long-term impacts and benefits on the natural environment and local economic and social development.
Scotland urgently needs to see continued efforts at regulating land purchases and clearer standard-setting for natural capital projects. In all the bluff and bluster around natural capital markets and the theoretical returns from projects which are yet to deliver, we can’t lose sight of the people and environments who are affected by these projects – and the livelihoods and lives that are exposed when landowners and investors play the markets.
We need to sharpen our focus on the collapse of biodiversity, on increasingly dramatic climate change and on the depopulation of rural Scotland. These are the pressing drivers for any functioning natural capital market that serves ecological recovery for people and planet.
There has been a welcome evolution in the debate around natural capital markets over the past 18 months, with ideas of community empowerment, land reform, and meaningful local benefits now being accepted ideas amongst the more progressive and media savvy natural capital actors.
For those of us in the community and land reform sector, we need to ensure these warm words become concrete actions. When promises of community empowerment are based upon shareholder democracy, not true community democracy – as the academic and land reform activist, Alastair McIntosh, would term it – we must be sceptical.
It is possible that natural capital models can contribute to sustainable development as well as ecological regeneration, but we should not assume that they will deliver any wider benefits if left to their own devices.
Communities often want to engage and contribute in these developments but require technical advice and support, as well as the opportunity to own land themselves. We need to learn from renewable energy where developers push through highly technical schemes without the community having an equivalent power to negotiate. High integrity markets – as the Scottish Government intend natural capital markets to be – require equal power relations.
Natural capital markets in Scotland are at a crossroads.
Do we follow the investors and ‘pioneers’ who speak most loudly and urgently about their ability to leverage in finance to nature recovery whilst delivering significant profits?
Or do we accept that nature recovery requires long-term, patient investment in the human and natural capital of Scotland and can deliver much wider benefits if carefully managed?
To do so, delusions of huge investment opportunities and significant financial profits need to be jettisoned.
Communities, philanthropists, citizens and patient investors can work together to create projects that secure the social and ecological change that is needed. Getting private finance to invest in people and planet can contribute to a better shared future but we cannot expect it or desire it to deliver large private profits.
Pretending that it will only delays us meaningfully engaging with what natural capital markets might (and might not) be able to deliver for a Scotland that is tackling the pressing economic, social and ecological crises we face.
Information:
Dr Josh Doble is Policy Manager at Community Land Scotland
- josh.doble@communitylandscotland.org.uk
- 07940 993 555