Shaping a lower-carbon future for UK agriculture

Agriculture will play a pivotal role in the UK’s transition to a net zero economy. While the sector represents a relatively small share of national economic output, it has a large emissions footprint and an increasingly important role to play as decarbonisation accelerates across the wider economy. Sector innovation and land use potential, such as carbon sequestration and regenerative practices, can reduce emissions as well as provide diversification and resilience benefits for farmers.

A new report, HSBC UK Net Zero Insights: Agriculture is key to meeting UK net zero goals, examines how the agriculture sector’s emissions profile, investment requirements and land use potential position it as a critical enabler of the UK’s net zero pathway. It sets out the pace and scale of change required as the UK works towards its legally binding climate targets, highlighting both the challenges ahead and the opportunities emerging across farming, land management and the wider agricultural value chain.

The report also underscores the sector’s fundamental economic and social importance. According to the Office for National Statistics, agriculture supplies around 62% of the UK’s food¹, while supporting livelihoods and employment across rural communities.

As such, it has a crucial role to play in meeting national net zero ambitions. The report analyses emissions trends, policy direction and investment needs, noting that the sector accounts for around 12% of UK greenhouse gas emissions despite contributing less than 1% of GDP. While emissions have fallen since 1990, progress has been slower than some other sectors, increasing agriculture’s share of national emissions.

Looking ahead, the Climate Change Committee’s Balanced Pathway indicates that agricultural emissions will need to fall by 39% by 2040 and 45% by 2050, compared with 2022 levels, for the UK to remain on track for net zero. Even with these reductions, agriculture is expected to remain one of the UK’s largest emitting sectors, highlighting the need for coordinated action across policy, industry and finance.

The report also considers agriculture within a broader global context, noting that food and agriculture systems are both a significant contributor to climate change and highly exposed to its physical impacts. Direct agricultural activity accounts for around 12% of global greenhouse gas emissions², rising to approximately 34% when the full food value chain is included³, reflecting the sector’s scale, complexity and sensitivity to climate risks.

At the same time, farming and land use offer important solutions through carbon sequestration, nature based approaches and regenerative practices. UK agriculture already performs relatively well on emissions intensity compared with global averages, particularly in livestock production; reinforcing the importance of a balanced transition that avoids displacing emissions overseas.

Achieving meaningful emissions reductions will require a combination of changes to farming practices, improvements in efficiency and productivity, and wider adoption of lower carbon approaches across the sector. Changes in land use – including woodland creation, peatland restoration, agroforestry and energy crops – will also be essential to enabling the sector and wider land system to reach net zero by mid-century.

Investment will be a key enabler of this transition. Under the Balanced Pathway, additional investment in agriculture and land use is expected to rise to £1–£2 billion per year between 2031 and 2050⁴, directed towards low carbon machinery, on farm measures and land based solutions. Alongside reducing emissions, these investments could bring wider benefits to businesses, including cost savings, diversified income streams, and increased yield output.

Despite the challenges facing the sector, the report concludes that UK agriculture has an outsized role to play in the net zero transition. With the right mix of policy support, targeted investment and cross sector collaboration, the sector can cut emissions, strengthen natural capital and sustain food production – creating long term opportunities for farmers, businesses and investors as the transition accelerates.

Download the full report for further insights into agriculture’s role in the UK’s net zero transition.

At HSBC UK, we are poised and ready to support businesses as they respond to the transition. From discussing business plans to suggesting the right funding solution, our experts can help. Talk to us today about your needs.

Today we finance a number of industries that significantly contribute to greenhouse gas emissions. We have a strategy to help our customers to reduce their emissions and to reduce our own. For more information visit www.hsbc.com/sustainability