Barriers and opportunities facing the UK Peatland Code: A case-study of blended green finance

Abstract

Blended finance offers a way of increasing total expenditure on tackling the twin climate and biodiversity global emergencies. However, this requires effective methods for combining private and public funding. As an example of the barriers and opportunities facing practical implementation of a blended finance approach, this Viewpoint paper presents a case-study of the UK Peatland Code which will have relevance to other instances of blended finance initiatives elsewhere. Restoration of degraded peatlands reduces their carbon emissions and can provide emission reductions and other environmental gains in a socially cost-effective manner. However, many benefits are public goods arising as externalities which are difficult to convert into financial returns to private investors. To address this problem, the Peatland Code has been developed as a voluntary certification standard for UK peatland projects wishing to seek additional private funding via the voluntary carbon market. However, uptake of the Peatland Code has been slow. Despite growing demand in the voluntary carbon market, we observe six main barriers to supply-side uptake: lack of awareness amongst land managers; resistance to land use change, particularly when measures are seen to potentially compromise agricultural production; high upfront capital costs; limited equipment and skills; uncertainty over ongoing costs and support; and, administrative bureaucracy/inflexibility. We offer recommendations for how such barriers could be reduced to increase supply-side uptake, including: increased effort to promote sustainable land management and blended financing of it, and restoration activities and the Peatland Code in particular; continued public funding of upfront capital investments, with private funding directed more at ongoing payments; and, simplified and more flexible administrative arrangements, with public and private schemes designed in tandem to improve their practical complementarity.