The likely abolition of nutrient neutrality rules was a big story last week.  The impact of that on the rural land sector has not been the focus of the discussion, instead the debate has been more about that this change pitching house building (a proxy for economic growth) against environmental protection.

The wider impact of this move on natural capital markets should be considered.  The remarkable development of natural capital considerations towards rural land, and the perception that natural capital attributes can have a real monetary value and exist in a market, has been striking.  That has been happening over the past five years or so, but it seems to have really taken off in the last 12 months.  What once seemed like far-off ideas are becoming reality.

The abolition of nutrient neutrality has the potential to be a reality check.   Activity around neutrient neutrality schemes seems in the main to have been the preparation of them, with some schemes getting over the line, and more thought to be imminent.  But suddenly, it looks like the the plug will be been pulled on the statutory requirement for nutrient neutrality.   No doubt some of the proposed schemes will continue in some form, possibly being required in areas where there is particular sensitivity about watercourse quality, but the impact of this on confidence in the wider natural capital market is presently unknown.

And that is important because statutory BNG (biodiversity net gain) requirements are coming this November, and the focus and chatter around BNG makes nutrient neutrality seem like a sideshow.  The 30 year commitments of BNG schemes also seem more comprehensible to many, compared with nutrient neutrality schemes with commitments that might last for 120 years.   

A repeated observation is that there has been movement and decision-making with some rural landowners (with institutions, conservation organisations and private estates with a particular interest in this area at the forefront) but there is a very large middle ground of rural landowners and occupiers who have been listening to what is happening, and have their own views about the future, but have been biding their time, to see how the natural capital markets establish and stabilise. 

This middle ground is important, and they will have to have confidence in the stability and long-term nature of natural capital markets if they are going to get involved.  Seeing any element of that removed in a blizzard of headlines may come as an unpleasant shock and in particular may undermine credibility in other areas of the market.   After all, if it can happen there, then will it happen to BNG?  Or carbon schemes?  From that perspective, a rapid change of this nature is not helpful, as it undermines the credibility of what is still a very young market, only just taking its first steps.  

There are of course plenty of other reasons why it might be beneficial to remove this policy, and the government has gone to some lengths to provide reassurance that through other schemes, the same benefits will apply, without the restriction of house building that nutrient neutrality brought about.  But we should be alive to the prospect that a knock-on consequence from this likely change may be to adversely affect the credibility of the wider natural capital market, which ultimately needs to be established and be stable if schemes in this area are to work.