The UK government’s ambitious goal to achieve Net Zero by 2050 depends heavily on expanding the country’s woodland. But the way subsidies for tree-planting are currently allocated undermines both taxpayer value and environmental outcomes, according to new research from the University of Exeter Business School.
The government relies on flat-rate payments, offering the same subsidy per hectare to landowners regardless of how suitable their land is for afforestation. While simple, this approach has significant downsides.
Subsidies That Backfire
Flat-rate subsidies often attract low-productivity farms with carbon-rich soils, where trees grow poorly. Worse, planting trees in such areas can dry out peat-rich land, releasing greenhouse gases instead of capturing them. The result: a policy intended to reduce emissions risks increasing them instead.
Researchers propose a better alternative: targeting subsidies based on their expected environmental and social benefits. This “Natural Capital” approach prioritizes areas where tree-planting would have the greatest impact on biodiversity, climate change mitigation, and public access to green spaces.
Using the Natural Environment Valuation (NEV) system, researchers compared three subsidy strategies:
- Flat-rate subsidies (the current method).
- The Natural Capital approach, focusing on high-impact areas.
- Land Use Scenarios, which promote widespread planting, even in productive agricultural areas.
The results were stark. Flat-rate subsidies clustered forests in low-productivity regions, often on carbon-rich soils, delivering poor value for money and failing to meet carbon storage goals. The Land Use Scenarios spread planting more widely but at nearly double the cost, as it included highly productive farmland.
In contrast, the Natural Capital approach delivered the best outcomes. Concentrating planting near urban areas, it provided recreational benefits, boosted biodiversity, and met the climate target of removing 13 million tonnes of CO? annually by 2050. It also offered 50% better taxpayer value than the flat-rate model.
Changing the Way Decisions Are Made
The research highlights the inefficiency of flat-rate subsidies, a model so common globally that its flaws often go unnoticed. By directing public funds where they will have the greatest impact, the UK could achieve multiple goals—tackling climate change, improving biodiversity, and enhancing food security—all while offering better value for money.
“This is no minor technical tweak,” the researchers conclude. “How we design subsidies shapes the results we get. Smarter decision-making can lead to much smarter outcomes.”
