Understanding the SFI Situation
The Sustainable Farming Incentive (SFI) was introduced as part of the post-Brexit Environmental Land Management schemes (ELMs), replacing the previous EU subsidy system. It was designed to reward farmers for environmental practices. The government had allocated £1.05 billion for the SFI scheme for the round of 2024 which has now been fully allocated amongst 37,000 farmers who successfully applied. The main problem is that while the government still has a big budget, they have closed the door on new SFI applications until they create a “new and improved” version of the scheme. Farmers who were planning to apply for SFI funding but had not done so yet are now stuck waiting. They cannot get any money from this program right now, even though there is still funding for farming overall. The government has not explained exactly when the new version will start or what it will look like, which is why many farmers are worried and upset. Despite the significant overall budget for farming, they cannot access this specific funding stream until the revised scheme launches. Again, with no clarity on when this will happen or what criteria will apply.
Risks to Farmers
- Financial Uncertainty: Sudden termination of new SFI applications created immediate financial uncertainty for farmers. Those who were in the process of preparing their applications are now suddenly facing unexpected shortages of income without clearly defined replacement scheme details available until after the Spending Review. This transition period not only created uncertainty about future environmental commitments and difficulty to make informed investment decisions without clarity on future scheme criteria but also creates problems for farmers who have already incorporated anticipated SFI funding onto their financial planning.
- Losing Years of Progress: Business models specifically built around sustainable practices might not be viable without the supporting payments, undermining years of progress in agricultural sustainability.
- Administrative Burden: The resources already invested in preparing SFI applications have now been lost. Farmers now must take on the additional work of identifying and securing alternative income sources. All the while the uncertainty about eligibility criteria for the ‘new and improved’ SFI scheme remains, forcing farmers to wait until the details are announced so that they can start their planning processes from scratch. Small farms which have less financial resilience and are more sensitive to change, are at a disadvantage compared to larger farms which are better able to handle the transition period.
Opportunities for AD
On 9 January 2025, before SFI closure, the Government announced farming reforms for profitability and food security. After SFI closure, farmers keep measures including monitoring public food purchasing, streamlining planning, supporting renewable energy diversification, ensuring fair contracts, and maintaining trade standards. Farmers still must balance sustainability with profitability despite losing SFI. AD offers a practical solution addressing both environmental and financial challenges, emerging as a cost-effective solution to challenges created by the sudden SFI termination.
- Alternative Income Stream: AD offers farmers an income diversification opportunity to replace revenue lost from the SFI closure. Unlike government schemes which are subject to policy changes, AD can provide stable, long-term revenue streams through waste management and energy production.
- Environmental Goals: For farmers committed to sustainable agricultural practices, AD provides a way to maintain environmental commitments despite the SFI closure. AD facilities can be upgraded to capture both methane and CO2, converting these greenhouse gases into valuable outputs including energy, heat, and new marketable commodities that contribute significantly to the circular economy. AD can offer a practical and cost-effective way for farmers to continue their sustainability pursuits while simultaneously generating income. AD can also deliver atmospheric carbon removals that align with the government’s stated environmental goals which are to reduce carbon emissions by 50% to 203.2t by 2028, 78% to 89.4t by 2035, achieve 100% carbon reduction to Net Zero by 2040, and reach net zero by 2050.
- Supply Chain: One of the most compelling aspects of AD is its ability to process agricultural waste while producing valuable biofertiliser as a byproduct. This agricultural system enhances farm sustainability while reducing input costs. The integration of AD into farming operations directly reduces dependence on external suppliers (e.g. synthetic fertiliser) and creating additional value from materials that would otherwise be considered waste.
- Investment in AD: Under the New Deal, with £110 million allocated for the Farming Innovation Programme, there are significant opportunities to secure fundings for AD technology under the “agri-technology for farmers” initiative. The Farming Equipment and Technology Fund could potentially support AD equipment purchases up to £25,000, making the initial capital investment more accessible for farmers of all sizes.
- Regional Collaboration: Larger AD plants offer economies of scale that can benefit multiple farming operations, creating opportunities for community-based solutions to waste management and energy production. Farmer cooperatives or joint venture centred around common AD facilities could distribute both the costs and benefits across multiple businesses, making the technology more accessible to smaller operations. This approach aligns perfectly with the government’s focus on “rural economic growth” by creating additional jobs and strengthening local agricultural economies.
- Food Security: The digestate produced through AD processes can effectively replace synthetic fertilisers, supporting the government’s “cast iron commitment to food security” by reducing reliance on imported agricultural inputs. This reduces exposure to international supply chain disruptions and price volatility, improving overall farm resilience.
Recommendations for Policy Improvement
We propose the following policy recommendations to address immediate concerns and strengthen future approaches to sustainable farming support.
- Fairness: The current “first-come, first-served” approach to SFI funding has created a system which disproportionately benefits larger farming operations with greater administrative resources and capacity. Many smaller farms simply lack the staff, expertise, and time needed to rapidly prepare complex scheme applications, putting them at a structural disadvantage in accessing support. Future changes to agricultural support schemes should incorporate allocation mechanisms that ensure a more equitable distribution of funding across farm sizes and types. We recommend implementing standardised contracts, cooperative structures, approval in principle, technical assistance, transparent database, regulatory clarity, knowledge exchange, and capacity building to level the playing field and ensure fairness for small and medium-sized farms.
- Reform Rather Than Replace: As the saying goes, “If it isn’t broken, don’t fix it.” While improvements to the SFI scheme are certainly possible, completely uprooting the existing framework creates unnecessary disruption, uncertainty, and inefficiency. Farmers and advisors have already invested significant time in understanding and engaging with the current system, and this institutional knowledge will be wasted if an entirely new scheme is developed. A more pragmatic approach would be to modify and enhance the current framework, building on aspects that have worked well while addressing identified shortcomings. This evolutionary rather than revolutionary approach would minimise disruption to farm businesses while still allowing for necessary improvements. This could be done on an annual basis using guidance evolution as with many other UK government policies.
- Interim Support: Given the unexpected SFI closure and the uncertain timeline for its replacement, immediate attention should be given to implementing transitional funding mechanisms for farmers caught in the gap between schemes. This is particularly important for those who had made business decisions based on anticipated SFI income that is now unavailable. One particularly promising approach would be to prioritise AD development grants for farmers who missed the SFI application. This would serve the dual purpose of supporting farm businesses while advancing broader environmental and energy security objectives.
- AD as a Strategic Solution: The government should develop a targeted programme to help farmers invest in AD technology as one element of the direct response to the SFI closure. AD represents a unique opportunity to address multiple policy objectives simultaneously which will enhance farm income, reducing emissions, managing waste, implementing sustainable agriculture, and generating renewable energy. To maximise accessibility, regional AD hubs could be created to serve clusters of smaller farms that would be unable to individually fund such facilities. This cooperative approach would ensure that the benefits of AD technology are not limited to only the largest farming operations. AD can foster partnerships with local farmers to create a circular economy. On-farm AD plants can process crops and manure into biogas whilst utilising the heat from digesters to dry crops or provide energy for other farming operations.
Streamlining planning and grid connection processes specifically for farm-based AD installations would remove significant barriers to adoption. By implementing these recommendations, the government could address the immediate challenges created by the SFI closure while laying the groundwork for a more effective, equitable and resilient approach to supporting sustainable farming practices across England.
The sudden closure of SFI creates significant risks for farmers but also opens space for alternative approaches like AD that can deliver both environmental and economic benefits while aligning with the government’s stated priorities for farming, renewable energy, and rural economic development.
For more information, contact our Policy Team at policysupport@adbioresources.org.
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