The principle of ‘polluter pays’ has the ring of justice to it. But when a pollutant is also a nutrient, and one that is so heavily used in global farming that our food supply is built on an abundance of it, it’s not so clear who should be footing the bill for the environmental damage that it causes. That is the challenge posed by nitrogen fertiliser, which is credited with big increases in food production since the Second World War but wreaks havoc on natural ecosystems.

In Wales for instance, misuse of fertilisers and livestock manures is a regular cause of nitrate pollution in water courses. In response to a number of major incidents, Welsh Rural Affairs Secretary Lesley Griffiths recently announced tougher new regulations, while environmental groups, including the Sustainable Food Trust in evidence for Defra’s consultation on the Clean Air Strategy, have called for all of Wales to become a Nitrate Vulnerable Zone (NVZ), an EU designation which places strict limits on farmers use of nitrates. The farming unions, however, counter that the costs of improving slurry storage would drive many farmers out of business, and argue that sewage works and industry must share the blame.

In Pembrokeshire, a combination of dairy farming and the presence of an oil refinery, alongside a marine Special Area of Conservation and a strong tourism industry bring the debate sharply into focus. Water quality is compromised, and algal blooms are spreading blankets of green along the shoreline of Milford Haven, suffocating wildlife and getting tangled in ship propellers and fishing tackle. In the judgement of Natural Resources Wales, the Cleddau catchment is “full” and no further discharges into the river can be allowed from farming, industry or sewage works. The result has been a brake on economic development – but it hasn’t been enough to bring any improvement in water quality.

Paul Renfro of the Pembrokeshire Coastal Forum thinks that it’s time for a new approach. “Even with the new regulations and NVZ coming in, it still won’t unlock the potential for growth and development in the Haven, and it won’t fix the environmental issues that we currently have. There is a need for both a well thought out and well enforced regulatory approach and something which can take us further.”

Finding that extra reduction in nitrate pollution is the goal of a project called Building Resistance in Catchments or BRICs, which Paul project manages. BRICs brings together partners from farming, wildlife conservation, Welsh Water, Natural Resources Wales, ADAS and others to develop a nutrient trading scheme that would reward farmers for going beyond the basic regulations. This might be by putting buffer strips along water courses, planting cover crops and using fertiliser more carefully. The idea is that if a company wants to build a new hotel in the area, for instance, it will be able to buy credits to offset the associated pollution. Farmers will be able to sell these via a trusted broker.

There is a precedent for this. In 2005, Welsh Water served notice that they would no longer treat the effluent from First Milk’s Haverfordwest cheese factory at their sewage plant, because they needed the capacity for new housing development. After prolonged negotiations between First Milk and Natural Resources Wales, an agreement was reached in 2011 whereby treated effluent from the cheese factory could be discharged directly into the Cleddau, providing that the farmers offset these nutrients by changing farming practices upstream.

First Milk member Mike Smith explains how the scheme was developed with help from ADAS, whose Farmscoper software allows farmers to match nitrogen inputs with crop requirements. Building on this, he and his colleagues are now seeking funding for a more ambitious scheme called Blue Flag Farming, which would work alongside the nutrient trading scheme. The idea is to have a farm certification analogous to the Blue Flag that is given to beaches, which would allow farmers to choose how they manage their nitrogen budgets and record the benefits they are providing.

At Mike Smith’s farm near Haverfordwest, we inspect a bucket of slurry fresh from the lagoon. Soil consultant Jon Williams scoops out a cupful and puts it into his portable Quantofix-N-Volumeter which measures its available nitrogen concentration. “If we know how much available nitrogen we’ve got in the slurry, then we can be sure we don’t apply too much fertiliser,” Jon explains. “But we also need to do a full soil analysis. Welsh soils are often deficient in magnesium, so we need to put that right, and then the crop will be more efficient at using the nitrogen.” He also recommends a slurry additive called Plocher which when applied in minute quantities helps to oxygenate the slurry and stop ammonia release.

Mike makes good use of his slurry to fertilise cereals and grass. Before growing maize, he sows a cover crop such as forage rye or Italian ryegrass over the winter to reduce nitrate leaching, then spreads the slurry in May, directing it to the surface of the soil with a band spreader rather than broadcasting from above. He then ploughs it all in before seeding the maize. “Arable crops are great for holding nitrogen, and potassium and phosphorus too – it’s an argument for mixed farming,” he says.

Sitting at the kitchen table, Mike shows us his latest results. “We calculate that nitrate losses from our member farms have dropped from 283 to 248 tonnes annually, which is about one tonne per farm or 7 kg per hectare. That’s double what the cheese factory is releasing, so it’s more than offsetting, it’s a net gain,“ he says, adding that he has cut his fertiliser bill by two-thirds as well. Blue Flag Farming would build on this, expanding to take in hundreds of farmers. It would develop the precision farming approach further, by measuring the flow rate of slurry delivery in real time and linking it to GPS data, to give more savings. There’s even infrared technology that can measure the nitrate concentration in the slurry as it is being applied – “but the kit costs £25k and fertiliser would have to be much more expensive for farmers to bother with that,” he says. This underlines the critical point about nitrogen pollution and additional business costs in farming, which is that tight margins for farmers simply do not allow for such investments.

The BRICS scheme would rely on detailed record-keeping and a high level of scrutiny, but he says he would rather take that on than work with a set of regulations that are imposed from above and take no account of local knowledge. “This way, we can de-risk the situation for farmers and contractors and build up a really good bank of information about soil health across Wales. Then we can demonstrate the extra environmental benefits we’re delivering and be rewarded for that.”

Similarly, the SFT has recommended to the Welsh Government that it introduces a sustainability assessment that farmers would have to complete annually to demonstrate eligibility for Government support and to enable the delivery of public goods effectively. The assessment proposed could provide the necessary data needed to determine the level of support each farmer receives as well as helping Government to understand and monitor successes and failures.

Mike points out that the system would be externally audited and he believes that would better deliver the Welsh Government commitment to work in partnership with its stakeholders rather than impose solutions on them from above (one of the ‘new ways of working’ set out under the Well-being of Future Generations Act). Once established, it could pay for itself through savings on fertiliser and payments for public goods. Paul Renfro agrees, seeing the Blue Flag approach as a “tremendous opportunity” for farmers to demonstrate accurately the additional benefits they are delivering, and a strong component of the nutrient trading scheme.

Out in the field, Jon supports a farmer-led approach. “The fields here are full of worms and the soil is healthy and aerobic. Mike’s really showing what can be done, and the government should go with that. Here on the farm, this is where the action is, and this is where the decisions should be made.”