2020-05-21

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Climate Change Mitigation – Cash for Carbon

Did you know that if you plant woodland now, or have done so recently, you can trade the carbon sequestration?

Registering your carbon units allows your new ecosystem service to become a financially viable environmental asset. So, as well as receiving grants for planting trees, there’s the added bonus of trading your carbon units.

Climate Change Mitigation. Environment. Ecosystem Services. Carbon Sequestration. Public Goods. Words that are being all too familiar with land managers and farmers.

Jack Russell seed mixture Newly planted woodland

Now the UK is within the transition period of leaving the European Union, the funding available for farming, agriculture and managing land and improving the environment is set to change. The catchphrase public money for public goods is now an inevitability.

In the March Budget, the UK Government confirmed provision of £640m for a new Nature for Climate Fund - for protecting, restoring and expanding habitats and capturing carbon. Funding will be for planting of around 30,000 hectares of trees and the restoration of 35,000 hectares of peatland.  

The value that ‘natural capita and ecosystem services’ provide for ‘public good’ is the direction of travel for future countryside funding.

Two landmark pieces of legislation will provide the governance framework on how this will become reality.

The Agriculture Bill 2019-2021 is making its way through the House of Commons and will outline a new Agricultural Policy. Meanwhile the Environment Bill was reintroduced to Parliament in January 2020, which will provide the platform to deliver the Government’s 25 Year Environment Plan and outline the framework to legalise the net zero emissions by 2050 ambition.

Both pieces of legislation will go hand in hand, outlining the mechanisms for managing environmental assets and natural capita for public goods and ultimately deliver environmental benefits.

Whilst both Bills are still passing through parliament, the forestry sector is already ahead of the game.

Carbon Sequestration and carbon units

Trees and forests play a vital part in the carbon cycle. During photosynthesis, trees absorb carbon dioxide from the atmosphere to produce energy and retain the carbon in order to grow. Trees carry out an essential ecosystem service by locking up carbon which is referred to as carbon sequestration. Forestry and woodland creation is therefore one way of mitigating climate change and providing public good. But how is this ecosystem service valued financially?

The Woodland Carbon Code (WCC) is the UK’s voluntary carbon standard for woodland creation projects that recognises the value of carbon sequestration. It enables landowners to trade tonnes of sequestered carbon (carbon units) locked up in newly planted woodland. The WCC enables landowners and forest managers to register newly planted woodlands on a public Environmental Register. Once registered, the new woodland is validated by the Soil Association or Organic Farmers and Growers to validate the number of carbon units the new woodland will sequester over the lifetime of the woodland.

Carbon trading is flexible and there is no longer a requirement to trade all the carbon units upfront. The application process requires varying pieces of supporting evidence to calculate the pending tonnes of carbon  - such as planting plans, ground preparation records, previous land use and a detailed project design document.

At present newly created woodlands can be registered within 2 years of the first planting date. However, it is understood soon new woodland projects will only be eligible to register under the Woodland Carbon Code within 6 months after the first planting date. Registration of the new woodland is free, but validation can cost in the region of £750 - £1,150 and take 4-6 months.

The market at present is buoyant, with carbon trading in the region of £5-15/tCO2e as companies see carbon trading as a way of compensating for environmental loss. In addition, in November 2019 the English Government announced £50 million scheme to incentivise woodland creation including the Woodland Carbon Code Guarantee whereby the Government would purchase Woodland Carbon Units at an agreed price. This is not yet applicable in Scotland. As the trading of carbon credits is still a relatively new concept, it is important to seek professional guidance from the outset, both from surveyors and solicitors.

Davidson & Robertson said “Woodland creation appears a win win. Not only are the UK Government incentivising woodland creation by providing grant funding for planting, but in addition, you can secure extra income from trading the carbon the trees absorb. But time is of the essence… so get planting, get applying, get trading.

The value natural capital and ecosystem services that provide public good is inevitably the direction of travel for future funding for the countryside.”

Don’t wait for the passage of the Agricultural and Environment Bill to find out how you can benefit in the future. It would be prudent to start thinking about how, as land managers and farmers we can adapt to this change, not only providing food security but by aiding environmental benefit too.  

Along with grants for planting trees, the opportunity to cash in on your carbon units makes woodland an attractive proposition for many forward-thinking farmers and landowners.

Davidson & Robertson

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