Environmental markets

Environmental markets are a way for you, as a landholder, to receive financial returns for your investment in natural capital and environmental services.

What is an environmental market?

An environmental market is created when people are willing to produce, sell, buy and exchange natural capital and environmental services for a monetary value. In other words, when there is supply and demand for natural assets or activities that protect the environment. Carbon or biodiversity markets are examples of environmental markets you might have heard of.

The stock of natural resources, or natural assets, on your land is known as your natural capital. By managing these resources sustainably, you can benefit from enhancing the value of your land’s natural capital and get a financial return for your actions through environmental market opportunities. As the world seeks to address environmental challenges, governments, businesses and communities are increasingly willing to reward landholders for protecting, restoring and improving those natural resources.

As a landholder, you can benefit from enhancing the value of your land’s natural capital and get a financial return for your actions through environmental market opportunities and improved productivity that often comes from improving your farms natural assets. There are several existing environmental markets in Australia:

Carbon markets
Biodiversity markets
Water markets
Co-benefit markets
Energy and renewable markets
Sustainable and green finance.

If you can demonstrate the benefits and value of your natural assets, ecosystem services and environmental services, you may be able to exchange natural capital for financial rewards through environmental markets.

Cut out of the land showing environmental services including pest and weed control, water use efficiency, grazing management, biodiversity shelter, managing native seed banks for example.
Environmental services you may offer on your property. Source: Environmental Markets Leadership Course (2023).

Environmental markets in Australia

Carbon markets

You can generate carbon credits by reducing your emissions or increasing carbon sequestration (capturing and storing carbon). You can then sell those credits to governments, businesses or individuals who will use the credits to compensate for their own emissions. The Australian Carbon Credit Unit (ACCU) scheme is an example of a carbon market.

Biodiversity markets

You can generate biodiversity credits and premiums by protecting or restoring species or ecosystem biodiversity on your land. You can then sell those credits to governments, businesses and individuals in a market, like the NSW Biodiversity Offset Scheme.

Water markets

Water markets and market-based approaches – such as the Murray Darling Basin Water Markets and Trade – seek to manage water distribution, improve water quality and management, and more.

Co-benefit markets

Carbon farming and other environmental projects often lead to additional positive environmental, socioeconomic and First Nations outcomes. You can be rewarded for these additional benefits through co-benefit markets.

Energy and renewable markets

You can receive financial compensation for energy saving and renewable energy initiatives and investing in hydroelectric, wind, bio, solar or geothermal energy, through schemes such as the NSW Energy Saving Scheme.

Sustainable and green finance.

The finance sector is continually developing financial products and mechanisms to value environmental goods and services, including debt, equity, guarantees, and other investments. These help to balance the risk and below-market rate of return from generating positive environmental impacts. Examples such as green loans and green bonds help to encourage on-farm investments.

What are the opportunities for landholders?

There is a wide range of market-based opportunities available for landholders with different objectives. You may be able to pursue multiple individual opportunities or combine two or more opportunities.

Some environmental market-based opportunities that can come from investing in and protecting the natural assets on your land include:

trading schemes such as carbon and biodiversity markets
an increase in land value
new market opportunities for your products
access to green finance and loans
potential tax concessions, grants or subsidies.

Environmental markets can be created for any natural capital or environmental service – such as controlling pests and weeds or protecting riparian zones – if there is a buyer willing to value and/or pay for it and a willing supplier.

Environmental market opportunities to explore

Environmental trading

You could trade environmental goods and services via regulated or voluntary environmental market trading schemes, such as:

credit schemes (like the Australian Carbon Credit Unit (ACCU) scheme)
tradeable permit schemes
auctions
competitive tenders.

Business and marketing strategies

With the reputational benefits of an environmental, social and/or culturally positive business, you may be able to sell goods at a premium price, and leverage your natural capital for market attraction, retention and expansion strategies and new market opportunities.

Cost saving strategies

You can reduce or eliminate current or future business costs by investing in natural capital and/or using natural capital to offset other environmental impacts.

Asset value

As the market increasingly recognises the value of natural capital, investing in your natural capital may increase the value of your land, business, share price or other assets.

Sustainable finance

In recognition of your environmental services, you may get access to sustainable and green loans and other financial products that provide discounts or other benefits.

Tax management

You may be able to claim deductions, concessions or offsets on existing and future environmental taxes, levies and charges.

Incentive payments

You may be able to access subsidies, rebates, funding, grants and compensation schemes.

What else do I need to know about market opportunities?

Environmental markets can be created for any natural capital or environmental service if there is a willing supplier and a buyer willing to value and/or pay for it. New environmental market opportunities are constantly being considered and developed. These emerging, potential and future markets are important for landholders.

With society’s growing demand and increasing willingness to financially reward natural capital and environmental services, you may be able to create and engage in many new market opportunities.

There are many different avenues to explore when considering what the best choice for you and your business when it comes to natural capital. Read more about the benefits and risks of natural capital and environmental markets for landholders.

How do I engage in environmental markets?

While some environmental markets or opportunities might have different requirements or processes, participating in environmental markets will generally involve five stages:

Identify existing and potential natural assets, ecosystem services and/or environmental services.
Assess the condition of these assets/services.
Determine their benefits and calculate their value.
Implement management practice that protects, restores or enhances natural capital.
Exchange or trade the value of these assets/services for a financial return.
Monitor, measure and, in some cases, report performance.

Local Land Services can help you understand the natural capital and environmental market opportunities available, and the potential benefits and risks, so you can make the best decisions for your property. We are currently building our services to provide independent advice and help you navigate new opportunities in farming.

Our natural capital service finder will help connect you to environmental market opportunities from trusted service providers.

Resources

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The information provided on this webpage is based on knowledge and understanding at the time of writing (August 2023) and may not be accurate, current or complete. The State of New South Wales (including the Department of Regional NSW and Local Land Services), and the author take no responsibility, and will accept no liability, for the accuracy, currency, reliability, or correctness of any information included here (including material provided by third parties). Readers should make their own inquiries and rely on their own advice when making decisions related to material contained in this publication.