Nature markets available

A range of nature markets are emerging across the UK, offering farmers, landowners and land managers opportunities to generate income from sustainable land use.

These include carbon markets for carbon sequestration, biodiversity markets such as biodiversity net gain schemes, and water-related markets covering nutrient neutrality schemes, water quality improvements and flood management. This page provides an overview of the key nature markets available and where you can find more information.  

Carbon markets 

Farmers create carbon credits by creating or restoring habitats that improve carbon stocks, in line with specific codes and standards. 

The two government-recognised carbon codes are the Woodland Carbon Code and the Peatland Code.  

Demand in carbon markets is driven by businesses that wish to offset their own emissions with carbon credits. 

Businesses, especially food retailers, are also becoming more interested in insetting their carbon units by working with farmers within their supply chains to decrease emissions and increase sequestration.  

Alternatively, farmers can retain rather than sell any carbon credits they create on their land, which could count towards their own farm’s natural capital account. 

Read more about carbon markets

Biodiversity net gain (BNG)

Property developers pay farmers to create or restore habitats that increase biodiversity. This helps them meet the 10% biodiversity net gain (BNG) legal requirement to offset the ecological impact of their projects. 

The resulting BNG sales are based on biodiversity units, calculated using Natural England’s statutory biodiversity metric. Property developers use this metric to determine how many units they need to achieve the 10% BNG target.  

They must first attempt to deliver these units on site, and they can purchase off-site units for any shortfall. Local planning authorities (LPAs) oversee planning approvals and require evidence of any BNG agreements. 

Developers must purchase habitat units that are considered like for like or better of habitat impacted, following the UKHab classification. 

BNG became a legal requirement for major developments in February 2024 and for small sites in April 2024. It will apply to infrastructure projects from November 2025.

Read more about BNG

Nutrient neutrality 

Property developers pay landholders to reduce nitrogen or phosphate run-off into local waterways, helping to offset the environmental impact of new developments. This is measured in nutrient credits, where one credit equals 1 kg of total nitrogen or total phosphate. 

Nutrient neutrality is enforced across 74 LPAs. They determine the requirements for new developments, including the number of credits developers must purchase. 

Natural England provides a standard methodology for calculating credit requirements, though LPAs can tailor their calculators to reflect local conditions. 

To boost the supply of nutrient credits, Natural England is implementing a national nutrient mitigation scheme (NMS). This initiative began in the Tees catchment area, where multiple rounds of nutrient credits have already been sold. The scheme is now expanding, prioritising catchments with the highest housing demand. 

Natural England is also collaborating with farmers and landholders through feasibility studies to guide future efforts.

Read more about nutrient neutrality

Water quality  

Water companies pay farmers to reduce phosphate and nitrate run-off, which helps to lower their operational costs. 

Currently, there are no standardised metrics, codes or regulations governing water quality schemes. However, water companies must present their plans and projected effectiveness to Ofwat as part of the Water Industry National Environment Programme (WINEP) and their price reviews. 

Additionally, Defra is funding Forest Research to develop a ‘Woodland for Water Code’, aimed at attracting private investment in woodland creation that provides water management benefits, such as improving water quality.

Read more about water quality

Natural flood management (NFM) 

Businesses, public bodies and other organisations pay farmers and landowners to implement measures that slow water flow and reduce flood-related property damage. These organisations benefit either directly (if downstream) or through a positive public image. 

Interventions focus on restoring natural hydrological functions, improving soil infiltration and addressing artificial drainage impacts. 

While private finance for natural flood management (NFM) is rare in the UK, interest is growing due to rising flood risks. Defra is funding Forest Research to develop a Woodland for Water Code to attract private investment in woodland creation for water management and flood prevention.

Read more on NFM 

Continue reading about nature markets