Potential Future Markets – Investing in Nature LCR

Future Markets

Future ecosystem services markets

The following markets, based upon the trading of units related to specific ecosystem services, all offer potential future opportunities for sustainable income streams. These markets are still latent, or in their early development stages, so should not be counted on for immediate funding, but should be seen as potential future avenues for supplementing income in the medium to long term.

Nutrient Neutrality (water quality)

Nutrient neutrality (nitrate and phosphate trading) is an important emergent source of finance for habitat management in England, enabling built developments such as new housing to occur. However, it has initially been centred on specific areas of nutrient management concern associated with the national sites network, notably in Southern England.

See Nutrient Neutrality Generic Methodology - NECR459 (naturalengland.org.uk) and Nutrient-Neutrality-a-summary-guide-March-2022.pdf (push.gov.uk).

Currently, the Liverpool City Region is not in a nutrient neutrality zone and this will be carefully monitored as practice emerges nationally, including the nutrient neutrality assessment tools. This is not to say that nutrient enrichment is not an issue in our area, and Environment Agency catchment data shows less than 1% of our rivers are in good ecological status. An important consideration is how natural flood management and sustainable urban drainage projects will make a positive contribution to nutrient status and thus reduce nutrient-related risks to the aquatic environment.

The reduction of nutrients in water courses, as mitigation for housing development, commercial or agricultural activities, can be carried out by the onsite treatment of wastewater and surface water runoff, or the offsite treatment of the affected watercourse. This mitigation should use nature-based solutions such as the creation of woodlands or wetlands.

Air Quality

Air quality (NOx gasses and airborne nitrates) is a material planning consideration and if it becomes an issue (i.e. affecting human health or a protected environmental site (e.g. a SSSI)) then an AQMA (Air Quality Management Area) is identified and closely managed. Currently, air quality issues are then addressed and mitigated via Section 106 obligations, but there is also the potential to develop air quality offsetting markets in the UK based specifically on nitrogen deposition.

Because of the nature of airborne pollution’s creation and its effects on natural habitats, in order for this market to be feasible the pollution must occur in close proximity to a protected site. For example ancient woodlands being affected by airborne pollution from a nearby development or transport/traffic-related pollution from the development of road infrastructure. If feasible, this market could be an important income stream for areas of ancient woodland or other such sensitive habitats.

Although there is currently no air quality offsetting market in existence in the UK, it has long been recognised by air quality specialists and Natural England that something needs to be done to address the incremental deterioration of the UK’s habitats due to nitrogen deposition.

The Liverpool City Region Combined Authority developed an Air Quality Action Plan in December 2020 Microsoft Word - LCRCA AIR QUALITY ACTION PLAN 2020.docx (liverpoolcityregion-ca.gov.uk).