Woodland Investment Partnerships

The Woodland Carbon Code has been set up as a means for landowners to generate income from planting trees, by selling the carbon they capture as offsets in the UK voluntary carbon market. The scheme has great potential for funding the farming sector to plant new woodland and diversity the countryside, except that the price of carbon within the voluntary carbon market is very low, and the high fees incurred by participating in the scheme are a barrier, meaning that it isn't cost effective for most smaller scale landowners who only want to plant a hectare here or there.

On the other hand Treegeneration is being contacted by rewilders, who wish to buy land and plant trees for the environment, and if the Woodland Carbon Code enables you earn a bit of cash on the side, or recoup the cost of buying the land, then that is a bonus! However, the cost of land is very expensive with a long payback period, and establishing a woodland is a complex, time consuming business that is full of risk, stress and hassle.

Rather than going down this route, Treegeneration is recommending to rewilders that you work in partnership with existing farmers to achieve your objectives instead. A win-win situation can be created if you invest the money that you would have spent on land into supporting them to create woodland with you on their own land. As a woodland investment partner you will be allocated a share of the carbon credits that are awarded to the new woodland, which you can sell in the future to recoup your costs.
 

Buying land

Buying land is an expensive, complicated and time consuming business. The general rule is that the more you buy, the cheaper it gets, and prices also vary according to where the land is. In England and Wales, it is feasible that you could pick up a 10 acre piece of farmland for around £4,500 - £5,000 / acre, while in Scotland it is possible to buy land that is a bit cheaper. Generally speaking land that is close to urban centres is expensive, whilst the cheaper land is in remote, upland areas, and can have poor access. In addition not all land is suitable for planting trees: peatland is a natural store of carbon which cannot be disturbed, and there are rare habitats which support biodiversity which needs to be preserved. In short, the process of obtaining the ideal piece of land that is not too big, affordable, in the right location, and is suitable for rewilding may take you several years. Meanwhile the clock is ticking, the planet is warming, and biodiversity is on the decline!
 

Risky business

Once you've secured your land, there are costs involved in establishing the woodland. New woodland is generally planted at around 2,000 trees / hectare, and you can expect to pay around £1.50 per tree. On top of this you need to think about things like fencing, tree guards, mulching and weeding, and other forms of pest control. For the first five years at least the woodland needs a high level of attention, after which it becomes better able to look after itself. In some cases grants are available to cover all or part of the cost, but these tend to come and go, and can be very competitive so cannot be counted on. The woodland is especially vulnerable during the establishment phase, and can be effected by things like pests, disease, drought, fire, lack of attention, and vandalism, meaning that growth is slow, carbon capture is low, and in worst case scenarios a large part of your investment is lost.
 

Tree planting is becoming politicised

• Strange as it may sound, not everybody is into trees! The government target is to plant 30,000 hectares of trees / year until 2050 to attain carbon neutrality, which equates to up to 2.5 billion trees, and around 10% of UK farmland. Planting on this scale will have a big impact on the landscape, and many people do not realise that the biodiversity of a woodland is far superior to a typical farm pasture, which is basically a grass monoculture, or else they have fears about food security. There is likely to be a backlash, and an anti-tree lobby in the future, much like the resistance to wind turbines that has gone on in the UK in recent years.
   
• In Wales concerns have been raised that corporations are buying up large tracts of farmland in order to "grow their own" carbon offsets. Such practices impact on local communities through internalising profits and externalising costs, and can be a threat to the rural economy, and way of life. In response, Ceredigion County Council has called upon the Welsh government to better regulate the carbon market on its own soil, and put in place measures to prevent outside interests from exploiting the land. It is likely that similar motions will be put to government in England and Scotland in the future as well.
   
• The rewilding movement can be somewhat separatist, and has rapidly created a rift with the farming community. Although farming isn't perfect, and biodiversity is on the decline, farmers in general have been doing an excellent job for hundreds of years, stewarding the countryside and feeding the population, and need to be recognised and applauded for this. Absentee landlords who buy property to plant trees, can be at odds with the local community, and a certain amount of resentment or even hostility may be expected in cases like this.
   

Carbon markets and potential income from the Woodland Carbon Code

There are two carbon markets in the UK. The WCC is tied into the Voluntary carbon market, where individuals and businesses buy offsets out of choice, due to concern for the environment, or to present a good image. The second carbon market is the UK ETS (Emissions Trading Scheme), which is the 'compliance' or 'regulated' market, and is used to offset carbon by businesses that are bound by law to reduce their emissions. The UK ETS was established in 2021 in response to Britain leaving the UK, and in it's first 6 months prices peaked at £75 / tonne.

In contrast, prices with the Voluntary market have remained low, and in the first half of 2021 carbon was selling at a maximum of £18 / tonne, and in some cases as low as £7.50 tonne. Because nobody is forced to buy voluntary carbon units, it is unlikely that the income potential from the WCC will be very high, unless there is a change in government policy, and it becomes possible to sell WCC generated carbon credits within the UK ETS. In addition to the low income potential, there are high fees incurred from the WCC, which mean that they are not very cost effective to smaller scale projects.
 

The Partnership Deal

Farmers need to be planting woodlands to improve their land and help fight climate change, but until there are changes in government policy it is not cost effective for them to participate in the Woodland Carbon Code.

Rewilders want to plant trees, but the price of land is prohibitive, and the risks are high. In a best case scenario the payback period for the Woodland Carbon Code is likely to be 20 years, and the worst case is that you will never get your money back. 

Treegeneration will match rewilders with farmers, in a win-win partnership so that both parties achieve their objective of creating woodland and rewilding the countryside, but without the risk and hassle of you having to buy land.

To achieve this, you will become a woodland investment partner and give the money that you would have spent on buying land to the farmer, in order to create woodland. In return for the investment you will receive a share of the carbon units that are awarded to the project by the Woodland Carbon Code.

The carbon units that you receive for your investment are valued at the rate that carbon is fetching on the UK ETS, rather than the amount that it is going for in the voluntary carbon market. So for example if the price is £75 / tonne in the ETS, and £7.50 / tonne in the voluntary market, an investment of £7,500 will get you 100 carbon units. 

In a worst case scenario the Woodland Carbon Code does not get integrated into the ETS, prices in the voluntary carbon market remain forever low, and the carbon credits that you own attain very little value, but you have achieved your objective of creating woodland.

In a best case scenario the Code is integrated with the ETS, and the value of the carbon units that you own becomes very high, and if you hold on to them a while, they will be worth more than the investment that you made.

The farmer has received a chunk of cash, which has enabled them to plant woodland, improve their farm, and have money left over in the bank. Because you have rights to the first 20 years (for example) of carbon credits from the project, they are bound to preserve the woodland for this period of time at least, and if they chop it down they will need to repay you your investment.

After the 20 year period ends, the farmer can at their discretion remove the woodland, but hopefully by that point, the Woodland Carbon Code will have been merged with the ETS and it will be worth their while to keep it. Failing that it is hoped the farmer will have learned to love and value the woodland for other reasons, and will want to keep it regardless of it's market value.
 

The Terms

As a Woodland Investment Partner you enjoy certain rights:

• A proportion of the project's carbon units are allocated to you to sell or retire at your own discretion;
   
• The farmer cannot chop down the woodland for at least a specified period of time;
   
• As a major stakeholder you get a say in the planning and maintenance of the woodland, including choosing what species are planted;
   
• You get to name the woodland;
   
• You get access to the land, including where appropriate, camping and / or glamping rights.

Also as a partner you have responsibilities:

• To help ensure the health and wellbeing of the woodland;
   
• To contribute to the costs of participating in the Woodland Carbon Code, in proportion to the percentage of carbon units that you have been allocated as an investor.