Vicky West explains how the woodland carbon code enables companies to offset their emissions and help to mitigate some of the impacts of climate change
The emerging market in carbon offsets from domestic forests offers companies a way to compensate for their unavoidable greenhouse-gas (GHG) emissions in the UK, while providing other social and environment benefits. Woodlands cover around 12% of the UK’s land and act as a natural form of carbon capture. As woodlands grow they sequester, or capture, carbon dioxide and store it as wood and in the soil, releasing oxygen back into the atmosphere.
Tree planting provides a low-cost option for businesses that want to compensate for emissions that also benefit the natural environment and society, as well as support other corporate and social objectives. Such initiatives, for example, provide new habitat for wildlife, sources of timber and opportunities for recreation. In the right place, woodlands can also reduce flooding and improve water quality. Furthermore, there may be opportunities for community engagement or for employees to volunteer and learn something about how forests are managed.
UK woodland carbon units, which are generated by projects verified as meeting the Forestry Commission’s woodland carbon code, can be reported against gross emissions, to lower the net figure. Since January 2014, such units have been listed for sale, in advance, on the Markit Environmental Registry.
A quality standard
Backed by the government, the forest industry and carbon market experts, the woodland carbon code is unique in providing UK-based carbon credits. The standard, which launched in 2011, covers the measurement of CO2 uptake, assurance of sustainable forest management practices, the management of risks and permanence through a “pooled buffer” of carbon credits. The code incorporates similar criteria to other leading international standards on carbon sequestration, covering assessing the baseline, leakage and permanence of the benefits delivered. The code is robust, consistent and transparent, while ensuring that the bureaucratic burden is minimised.
To provide buyers of carbon units with reassurance, projects must be certified by an independent body approved by the UK Accreditation Service. Two companies – Scottish Food Quality Certification and SGS – currently perform this role, initially validating projects to assess intentions at the outset, and subsequently verifying them at regular intervals to confirm the number of carbon credits, as well as wider benefits, that have been delivered.
In common with other international carbon standards, the woodland carbon code operates a shared “carbon buffer”: each project contributes an amount of unsold carbon units, which can be drawn upon should one particular project suffer any losses. In effect, this provides a guarantee to a buyer that any verified unit they purchase is “permanent”, as the buffer can be accessed to provide replacements should any individual project subsequently lose a significant number of trees – for example, due to disease or windthrow (trees uprooted or damaged by wind). The buffer is aimed at providing buyers with extra confidence when purchasing carbon units.
Buying units
The launch of the woodland carbon code on the Markit Environmental Registry – which enables organisations to track projects offering carbon, water and biodiversity offsets, as well as issue, trade and retire credits – provides greater transparency on when carbon credits are sold, transferred, reported and retired. Project developers and buyers have accounts on the registry containing details of the units they own.
There are two types of carbon unit available from projects certified by the woodland carbon code, and these reflect the long-term nature of woodland growth:
- The woodland carbon unit (WCU) is a tonne of CO2 that has been sequestered in a woodland. It has been verified to guarantee that the carbon has been sequestered and can be used to report against an organisation’s emissions as soon as it is purchased. Purchasing a WCU could, however, be more expensive than buying credits in advance.
- The pending issuance unit (PIU) is a “promise to deliver” a WCU during a given period. It is not “guaranteed” and cannot be used to report against your emissions until verified. A PIU does, however, give the buyer the chance to purchase advance credits in a world where carbon reduction is set to become even more important than it is now.
Every 10 years, projects are verified to ensure that the predicted carbon has in fact, been locked up, and at that point the PIUs delivered are converted to WCUs. PIUs are available from a growing number of projects, and some have already been sold. The first verified WCUs will be available in 2016.
There is a £400 one-off setup cost for corporate buyers – £200 for charities or businesses with fewer than 10 employees – to create an account on the Markit Environmental Registry, but once an account is created it can hold units from any number of projects.
Reporting sequestration
Defra’s environmental reporting guidelines set out three ways in which a company can compensate for its gross GHG emissions: buying international carbon credits; buying domestic WCUs; or by generating renewable energy that is exported to the grid or to a third party. The UK’s largest listed companies are now required to report gross GHG emissions in their annual reports, but whether a company reports on a mandatory or voluntary basis, using WCUs to help account for unavoidable gross emissions is an increasingly attractive option.
Whatever method is used to compensate for gross emissions, the reporting of carbon credits must be “ex post” – that is, after the emissions have been saved. In the case of woodland carbon, this matches the time profile of tree growth, so only verified WCUs, not PIUs, can be reported. PAS 2060, the specification on carbon neutrality from the British Standards Institute, is currently under review. The revised version is likely to clarify the use of WCUs in claims of carbon neutrality.
In practice
By 31 December 2013, 192 woodland projects had registered under the woodland carbon code. These projects cover more than 15,000 hectares of new woodland in the UK. Although planting has so far focused on native species, the new woods are diverse in structure, scale and location, and are predicted to sequester more than 5.6 million tonnes of carbon over the next 50–100 years. Around one-third of current projects have already been validated and will sequester more than 1.1 million tonnes of CO2.
Twenty-eight organisations, including Marks & Spencer and the Green Investment Bank, have already purchased PIUs to use at a later date.
Like other commodities, the price of a carbon unit varies with supply and demand. The average global price of woodland carbon credits is currently about £6 per tonne of CO2. However, there is a significant variation in price, with the cost depending on the nature of the project and the extra social and environmental benefits provided. In advance, the woodland carbon code’s PIUs are being sold at up to £15 per tonne of CO2.
Firms usually buy woodland carbon code credits to compensate for CO2 emissions, although some credits are being banked in anticipation of higher prices in future. In general, companies have been attracted to the code by its strong environmental and social governance processes, which provide confidence that projects will not only deliver carbon sequestration, but also a range of benefits for nature and local communities.
Learn more about the type of forestry creation projects registered with the woodland carbon code and where to buy credits by clicking here
For information on the woodland carbon code visit: forestry.gov.uk/carboncode
