Land in the UK is really expensive, and unless you know someone who is willing to do a deal, the cost of buying can really take the zing out of generating income through the Woodland Carbon Code (WCC). Like most things though, the general rule is that the more you buy, the cheaper it gets. Landowners tend to parcel of land, and sell small plots of an acre or two near residential areas, at silly prices, like £12,500+ per acre. If you are prepared to head out into the sticks a bit, you start to find more substantial areas of land around 10 acres, going for about £4-5,000 / acre. And if you hunt further afield, you may be able to find large areas of land of 100 acres or more, for as little as £2,000 per acre, particularly in remote upland areas of Scotland and Wales. For most of us though, buying land at this scale is inconceivable.
When you plant a woodland, and it is validated by the WCC, you are allocated a quota of carbon units, based on how much carbon your woodland is projected to sequester over the lifetime of the project, and you can begin to sell these units straight away. If you hold on to your units though, and sell them in the future when the price of carbon has risen, then the income potential from your project will be a lot higher.
The chart shows the potential income from a 10 hectare (25 acre) woodland, using future carbon price projections provided by the UK Government. The projections they provide have three price scenarios: ‘Low’, ‘Central’, and ‘High’, and the potential income is plotted for each of these. The income projections in the chart indicate how much you could earn by selling your carbon quota at future dates, rather than as soon as it is allocated to you. You can read more about this on our Woodland Carbon Code page.
There’s no minimum size for a WCC project, but smaller projects are less cost effective because of the high fees involved in participating in the scheme. For existing land owners there’s not much risk involved, since even if carbon prices follow the Government’s ‘Low’ trajectory, the chances of making a loss are small, and if future prices go high, the income generation potential becomes really good.
If you are considering buying land to plant a woodland however, there is the risk that carbon prices will remain low, and that you will make little or no profit from your investment. The risk is alleviated by buying larger areas of land, which are generally cheaper per acre, and more cost effective in relation to the WCC fees.
For existing land owners, if you’re hoping to generate a good return on your investment, Treegeneration does not generally recommend planting an area less than 1 hectare (2.5 acres). For people who are planning to purchase land to plant trees, larger areas of land are recommended, in order to increase your chances of making a good profit.
If you’re interested in buying land and planting trees for reasons other than personal gain (i.e. to combat climate change, or to help regenerate nature), the Woodland Carbon Code is a fairly safe bet, even for smaller pieces of land. If you are prepared to hold on to your carbon allocation for a while, and sell in the future when prices have risen, then you will probably recoup all your costs, and if you wait long enough you will probably make a profit as well.
For most people, Treegeneration does not recommend borrowing money to buy land for planting trees, since the extra cost of a commercial loan takes the risks onto a new level. Since buying small pieces of land is also risky, this creates an entry barrier for people that want to plant trees, but do not have a lot of capital. However, there are some collaborative approaches to purchasing land that we recommend, that are less risky and are achievable even if you do not have pots of cash.
A group of people can chip in and purchase a piece of land, which is owned collectively and held by a land trust. This is a legal entity which is charged with owning and maintaining the property as set out within the trust’s deeds on behalf of the beneficiaries. A woodland trust can be set up on an altruistic basis, or it can be set up to generate an income for the beneficiaries (the land owners). The benefits of doing it this way, are that lots of people with a modest amount of cash can chip in and buy a larger area of land than they would be able to afford on their own, without having to borrow money. Since larger areas of land are more cost effective within the Woodland Carbon Code, the return on investment is likely to be good, plus the risk and complexity of maintaining the woodland is shared. The downside to this approach is the overhead involved in setting up and running a trust.
This approach is similar to the land trust model, in that a group of people come together to purchase a much larger area of land, than they could afford to buy on their own without borrowing money. Having obtained the land however, the ownership is split up amongst the people that invested in it. There are two advantages to doing it this way. The first is that the cost / acre is less since a larger area of land is being purchased, which increases the chances of making a good profit on the investment. The second advantage is that the WCC allows the creation of group projects, within which the fees for participating in the scheme are a lot less per project. This means that small areas of land that would not be cost effective within the WCC on their own, can be cost effective within a group project scenario. Within group projects like this, individuals have ownership and control of their assets, but have the option to collaborate with others in the group, in sharing the overheads of establishing and maintaining their woodlands. The main downside to this approach is the extra legal costs of splitting up the land after it has been purchased.
The ultra-altruistic Revolving Loan Fund
This model is ideal for organisations, groups, or networks of people with a shared purpose, who want to plant trees for reasons other than personal gain. As with the land trust model, a group of people all chip in to buy a piece of land which is held collectively, by a trust, or some other similar ‘vehicle’. The difference is that the revolving loan fund aims to recoup the investment from sale of carbon as quickly as possible, and to recycle the money, in order to purchase more land and plant more trees.
So for example 150 people investing an average of £1,000 each could afford to purchase 25 acres (10 hectares) at £4,000 / acre, establish a new woodland, and pay the WCC validation fees. A 25 acre woodland would expect to be allocated around 6,000 carbon units based on it being able to sequester 6,000 tonnes of carbon over the next 100 years. As of 2021 the price of carbon within the UK voluntary carbon market is around £20 / tonne, but according to the Government’s projections, this could rise to around £200 / tonnes by 2050 (“Central” trajectory).
By selling the carbon as soon as it was allocated to the project, at a price of £20 / tonne, the woodland would generate an income of £120,000, and would owe it’s investors £30,000. However, by waiting a few years till the carbon was worth £25 / tonne, the project would be able to repay the investors all or the money that it borrowed.
Since it is a ‘revolving’ loan fund, the investors have the option of taking their money out when it is recouped, or else leave it in for re-investment into another piece of land on which to plant more trees.
If the project waited till the price of carbon had risen to £30 / tonne, it would be able to repay all the investors, plus have an additional £30,000 in the pot for re-investment into the next plot of land.
With carbon prices on the increase, if this process was repeated a number of times over a period of a few years, and the investors were encouraged to re-invest rather than withdraw, it could rapidly snowball, enabling the network to purchase increasingly large areas of land at more affordable prices, and plant trees at an accelerating rate.
The are many variations on this basic model. For instance a group could choose to repay investors 50% of their contribution as soon as possible, and to repay the rest at some point in the future when the price of carbon had risen sufficiently. Alternatively, rather than re-investing the profits, they could be distributed amongst the investors as a dividend, meaning that the scheme would be more likely to attract commercial investments.
Since the price of carbon is rising, then a woodland created in this fashion might need to wait 5-10 years until the value of it’s carbon was sufficient to repay it’s investors. However if it repeated the exercise the following year with another group of investors, it would only have to wait 4-9 years. Since the price of carbon is going up a lot faster than the price of land, it is only a matter of time before a piece of woodland paid for in this way will be able to repay it’s investors straight away, without having to wait for the price of carbon to go up at all.