Treegeneration supports woodlands that are already registered with the UK Woodland Carbon Code (WCC), or helps develop new projects within the Code.
When your project is registered and validated within the WCC, you can sell the carbon that your woodland sequesters as your trees grow. The chart shows a typical 100 year cycle for a newly planted coniferous woodland, and the rate of carbon sequestration peaks in the 25 -30 year period, when the trees are growing at the greatest rate. During this period the woodland can expect to capture around 60 tonnes of Carbon / hectare every five years. After this, the rate of carbon capture slowly tails off as the trees mature. The amount of carbon captured by broadleaf woodland is less than this, but the shape of the curve is the same.
The life-cycle of a WCC project is broken down into vintages, the first of which lasts for five years, with subsequent vintages lasting ten years each. New WCC projects undergo a thorough approval process, and the first vintage begins as soon as the project has been planted and has been granted a 'Validated' status by the WCC.
The validation process includes the development of projections, which show the amount of carbon your woodland is expected to capture for each vintage, over a 100 year life cycle. At the end of each vintage, your woodland is inspected, and if all goes well, the carbon captured within that vintage will be verified, and you can sell it in the form of Woodland Carbon Units (WCUs) on the carbon market.
You do not have to wait until a vintage has been verified in order to sell carbon units. You can in fact pre-sell the carbon that you expect to capture as Pending Issuance Units (PIUs) based on the projections that you provided the WCC during the project development phase. PIUs for the entire 100 year cycle of the WCC project can be put up for sale on the carbon market as soon as the project has been validated by the WCC.
Carbon Markets and Income potential
Whether you choose to sell your carbon as PIUs, or wait and sell them as WCUs after they have been verified at the end of each vintage, the total income of your project will depend upon the price of carbon in the future. 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 WCUs were selling at around £17.50 / tonne, whilst the price of PIUs dropped to around £7.50 tonne. What is more, 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 fees incurred from the WCC, which mean that they are not very cost effective to smaller scale projects.
Because of the low income potential, and fees from the WCC, Treegeneration is not currently recommending that small scale landowners buy into the scheme. We are however engaging with the Government over these issues and are quietly confident that things will improve in the next few years. We do however recommend the WCC to the following groups of people:
- "Grow your own" carbon offsetters;
- Large scale landowners who can afford to speculate on the WCC becoming linked to the UK ETS in the future.
- For rewilders who's primary motivation is to improve the environment, we have a different proposal.
Potential income if the WCC is linked to the UK ETS
Chart no. 2 shows three scenarios for a 10 hectare planting, based on government projections for 'Low', 'Central', and 'High' carbon prices, if the WCC were to be linked to the UK ETS in the future.
The chart shows that for the 'Low' scenario a 10 hectare woodland planted in 2021 could expect to produce a carbon income of around £90,000 from the 2046 - 2056 vintage, and around £175,000 from the same vintage within the 'Central' scenario. The potential income for each vintage is effected by both the price of carbon in the future, and the amount of carbon sequestered by the woodland within the period. 'Real' Income means that it has not been adjusted to take account of inflation, and as such is representative of purchasing power at current prices.
Within the government projections, carbon prices are expected to rise to over £100 / tonne in the 'Low' scenario, and over £200 / tonne in the 'Central' scenario, by 2050. During the period from 2010 to 2020 carbon sold for around €20 / tonne in Europe, which fitted with the Low scenario, and this was put down largely to the economy never fully recovering from the 2011 financial crises.
From around 2020 prices stared to rise, and in Oct 21, peaked at over €60 / tonne. Because of Brexit the EU ETS has been replaced by the UK ETS, and prices within this market peaked at over £75 / tonne in Oct 21, which is well and truly within the government's High trajectory for future carbon prices.
It is impossible to predict whether carbon prices will continue to rise with the High trajectory in the future, but the impact of climate change is already greater than was predicted ten years ago, and it seems unlikely that global temperature increases will be maintained below 1.5°C, which would imply that carbon prices will continue to be high in the future.
Carbon income v grazing
To put these carbon income projections into context, the average farmer in Wales earns around £600 / hectare / year, which equates to an income of £60,000 / hectare over a 100 year cycle. If carbon prices follow the 'Low' trajectory, the expected income generation from planting woodlands is likely to be around £45,000 / hectare over 100 years, and if they follow the 'Central' trajectory, the likely income is over £100,000 for the same period, which is considerably more than that to be gained from grazing in the current market. Since 80% of Welsh farmers income is presently derived from the direct payments they receive through the EU’s Common Agricultural Policy, the impact of Brexit is likely to be severe on the sector, and combined with the impact of Covid 19, it is difficult to see where the government will get the cash to replace EU subsidies in the future.
Project Development with Treegeneration
Treegeneration will support you to develop your woodland within the WCC and generate an income by selling carbon units. We will do this by:
- Acting as 'Woodland developer' and helping you to design and plant your woodland to specification, and get validated within the Woodland Carbon Code;
- Handling the sale of the carbon you produce in the carbon market.
Pre-selling your carbon units to Treegeneration
One of the biggest barriers to planting woodland is the uncertainty that you will be able to sell the carbon units that you produce in the future. Treegeneration will help mitigate this by agreeing in advance to purchase a quantity of the carbon units (PIUs) that are issued to your project after is validated.
Treegeneration has a unique fund raising model, and will crowd source the investment capital to buy your PIUs from clusters of small businesses in the locality of your woodland. The PIUs that we pre-purchase from you will be retired in the names of the businesses that have invested the cash in your project. Once a carbon unit is retired, it is taken out of circulation, and cannot be resold, but can be used as evidence by the investing businesses that they are taking steps to offset their carbon emissions.
Funding your new woodland
Developing a new woodland is an expensive business, and the WCC expects planting at a density of between 1,600 - 2,500 trees / hectare, so at £1 per tree, a 10 hectare site could cost over £25,000 to get established. If you are unable to get funding from elsewhere Treegeneration can apply our unique fund raising model to raise the finance that you need from local business, to enable you to plant your trees. In return for the investment that we raise, you will give us an agreed quantity of the carbon units that are issued to you by the WCC once your new woodland has been validated, and these will be retired in the names of the businesses that invested the cash.
Woodland projects already validated under the Woodland Carbon Code
The primary goal of Treegeneration is to support the planting of new woodlands. However, if your woodland has already been planted and validated under the WCC, and you have PIUs, or WCUs to sell, we will be happy to hear from you and discuss possibilities for raising funds to purchase your units.