Valuing Agriculture’s Natural Capital

Katie McRobert

Stewardship of productive land has become an increasing area of policy focus for the AFI and other agricultural advocates in the past 18 months. With the urgent need for climate response recognised (1) at AGMIN (2) (shortly after the publication of AFI’s research on this topic), attention is turning to practical strategy to incentivise land management practice to improve climate resilience.

This year the Federal Government has set aside $30 million to compensate and reward farmers for their role in managing the environment by improving biodiversity and sequestering carbon. In addition to $2 billion for the Climate Solutions Fund (3) over 10 years from 2020 (adding to residual funding of $226 million) and $134 million allocated under Smart Farms (to support the uptake of best practice, tools and technologies to improve the resilience and productive capacity of soils, water and vegetation), this combination of funding represents a significant investment in protecting Australia’s natural capital. (4)

Natural capital accounting is increasingly being used by the business community to better understand assets and manage risk. However, the consistent valuation of that capital and practical implementation of its regeneration is not yet well understood across the agriculture sector. To this end, the AFI chose to focus its fifteenth annual Australian Agriculture Roundtable on the theme of Valuing Agriculture’s Natural Capital.

The Roundtable, held in Canberra on 15 October, focused on natural capital management in the sector and the opportunities to apply payment for ecosystem services models in farming systems.

Key takeaways

Improving triple-bottom line outcomes in Australian agriculture has been an enduring policy challenge for the past 30 years, ACCC Deputy Chair and founding AFI Executive Director Mick Keogh told the Roundtable in the opening presentation. (5)

Mr Keogh noted that reduction in regulation and the development of mature markets in Australian agriculture has been a significant factor in agricultural output growth over the past two decades. It is time, he said, to apply this same learning to environmental services.

“Increasing market-based incentives and minimising regulation has the potential to generate very significant environmental benefits and provide farmers with a drought-proof income stream that would have major benefits in relation to farm business viability. 

“Making this change happen will be a major policy challenge for the farm sector, but one that is essential for future agricultural prosperity.”
Speakers and panellists also discussed the threat posed to natural capital by climate change, drought and even low commodity prices, which send a signal that volume at all costs matters more than the quality and sustainability of production. Concern was expressed that many current incentives drive a short-term planning approach, and the complexity of pushing for funded policy was also canvassed.

Delegates’ input

Roundtable delegates were invited to post question and ideas to an online platform throughout the event. Policy workshops in the afternoon generated a number of interesting responses and themes, including the need to accurately measure and account for natural capital on-farm. 

Other comments included:

“We talk about holistic solutions and landscape-scale change but how do we tailor policy to drive ecosystem change across boundaries: geographic, sectoral, demographic, political?”

“Would the measurement of carbon sequestration outcomes on farm be a useful proxy for ecosystem services? Baseline soil carbon content – financed via a HECS-type system – could be a great starting point for farmers wanting to engage.”

“We must develop a common language and understanding around natural capital and ecosystem services to facilitate sharing of research and resources in delivering a landscape outcome that meets community expectations.”

“Like Landcare, this work would benefit from a shared vision and advocacy (and technical cooperation) by farm and conservation sectors, working together. Government will have an important role in funding support for conservation by landholders – it will take time for private-sector markets to mature.”

The provision of finance via dedicated banks or schemes was debated, and questions to speakers tended to cluster on the themes of avoiding perverse outcomes, the resource squeeze, defining true value and appropriate market mechanisms (see In my view).

Related initiatives

It is heartening for the sector to see further investigation of this topic by government and industry. Last month Agriculture Minister Bridget McKenzie announced a grant of almost $2.5 million for a La Trobe University project to provide a proof-of-concept for valuing the natural assets on-farm. This coincided with the release of a Natural Capital Roadmap (6) produced by ClimateWorks, which was developed in collaboration with the Queensland Government and NAB after extensive stakeholder consultation.

These projects are aimed at encouraging climate resilience and rewarding on-farm sustainable practices. In conjunction with the issues discussed at the Roundtable, there seems to be strong potential for an ecosystem services scheme to support the cost of best-practice land management, improving agriculture’s natural capital for not only the sector’s long-term benefit but for the greater public good.


2. AGMIN membership comprises Australian/state/territory and New Zealand government ministers with responsibility for primary industries and is chaired by the Australian Government Minister for Agriculture.

3. Formerly the Emissions Reduction Fund.

4. Natural capital is the store of natural resources that we rely on for agricultural production, such as healthy soils, plants, animals and climate and the capacity of people to manage these resources.

5. Speakers’ presentations available at: