Environmental Credits User Guide
Download our UK Environmental Credits User Guide ebook free of charge here
How do you create and manage Environmental Credits?
1. Decide on site.
We can assist you in acquiring a suitable site, if you do not already own one. The choice of site will affect carbon sequestration potential not just through the choice of tree species, but also through soil type and previous land use.
Tree species, stocking density, frequency of thinning, access routes and additional methods of income generation must all be taken into account before the woodland is planted. We will use decision support tools such as the Ecological Site Classification to carefully match tree species to site conditions including soil type, drainage, elevation, exposure, and aspect. Other areas such as access for future management and the level of protection required during establishment will be considered and factored in.
3. Funding for establishment
This can be provided through grants such as the English Woodland Creation Offer, Forestry Grant Scheme, Glastir Woodland Creation and the Forest Expansion Scheme. Schemes in England can also consider applying for the Woodland Carbon Guarantee via reverse auction. This creates a safety net, should you be accepted, as the Government will pay the amount bid for your credits, should you not be able to sell for a higher price in the open market.
4. Receive planting consent under relevant Environmental Impact Assessment Regulations
Planting in Northern Ireland is governed under the Environmental Impact Assessment (Forestry) Regulations (Northern Ireland) 2006; planting in Scotland is governed by The Forestry (Environmental Impact Assessment) (Scotland) Regulations 2017; planting in England and Wales is covered by the The Environmental Impact Assessment (Forestry) (England and Wales) (Amendment) Regulations 2017
In England these consents can be partially funded under the Woodland Creation Planning Grant which will pay £1,000 towards Stage 1 of the scoping study and £150/ha (minus £1,000) for Stage 2.
5. Registration with the Woodland Carbon Code
From 1st July 2021 the project must be registered before planting. This may be as a single or group project.
The woodland can now be planted. If necessary, we can manage this process for you, including instructing contractors on your behalf and inspecting and reporting on the project’s progress.
7. Validation by accredited body
This must occur within 3 years from the date of registration, all trees must be planted by this point. Organic Farmers and Growers and Soil Association are accredited by the UK Accreditation Service to validate woodlands under the Woodland Carbon Code. This is a relatively complex process requiring a large volume of documents and a case to be properly made as to why the woodland passes several key tests. The process is much simpler therefore if the woodland was designed from the outset with carbon sequestration in mind, so that these tests are passed without issue and all appropriate documents are available when needed.
8. Initial Verification
This occurs 5 years after planting was completed, but the validator should be contacted 12 months before this date.
9. Further Verifications
Every ten years after the initial verification, there must be a further verification resulting in further conversion of PIUs (Pending Issuance Units) into WCUs (Woodland Carbon Units). A site visit will not necessarily be needed. If the woodland has performed well and rules have been followed, every other verification can be a “self assessment,” which is a simpler process that does not involve a validator.
1. Decide on Site
You will either already own peatland or we can assist you in acquiring some.
The peatland will be registered on The Peatland Code Registry.
3. Site Survey and Creation of Restoration Plan
This will establish the suitability of the project, how it will be restored and calculate the carbon that is retained.
Validation will take place before the implementation of the restoration plan by an approved validation/verification body who will provide a validation statement.
5. Implementation of Restoration Plan
The Restoration plan must be implemented before the expiry of the validation statement. PIUs will be issued.
Verification will take place after one year of the start of the project. It will evaluate the restoration and condition of the peatland in accordance with the validated restoration plan. The project will be listed on the Peatland Code Registry as verified. A proportion of PIUs will be converted to Peatland Carbon Units.
7. Ongoing verification
This occurs at year 5, and every 10 years afterwards for the length of the agreement.
This is currently unregulated with a lack of standardisation in measuring volumes and permanence of carbon sequestered. We anticipate the Government supporting a Soil Carbon Code as part of the push for carbon neutrality by 2050. DEFRA and the ADHB are working together to develop a carbon foot printing tool for soil carbon to be applied at a UK wide level by 2023.
You may be producing soil carbon credits via a modelling-based approach implementing new ways of soil management and then comparing this to the old farming practices to estimate the carbon sequestered. However, there is currently limited accreditation of these credits, which in turn limits their tradeable value. Instead, the calculators claiming to allocate these credits may best be used to inform about the best actions to improve soil carbon for when the Soil Carbon Code is introduced. They should at this stage be seen as business planning tools, rather than a source of tradeable assets in themselves. Any improvements now may well not provide carbon credits to trade if the same principle of additionality is applied as with the WCC.
We can market credits produced this way and have a register of vendors and purchasers.
Biodiversity net gain
If you have land that may be suitable for the ‘biodiversity gain register’ then contact us to discuss your options and help you with the next stage. We can help you register/work out:
- The location and area of the land;
- The works to be carried out on the land and the habitat enhancement to be achieved by them;
- Information about the habitat of the land before the commencement of those works;
- The person who applied to register the land and (if different) the person by whom the requirement to carry out the works or maintain the habitat enhancement is enforceable;
- Any development to which any of the habitat enhancement has been allocated;
- The biodiversity value using the Biodiversity Metric.
- This information will be added to the Government’s biodiversity gain register (yet to be established)
- The biodiversity value will be worth an estimated of £9,000 to £15,000 per biodiversity unit according to DEFRA.
At this stage the Government register is yet to be released however we have our own register of clients interested in going forward with biodiversity net gain. Contact us to register your interest and we will contact you as more details are released.
Nitrate Offset Credits will mean developers funding the creation of habitat such as wetlands, meadows and woodland.
Our register of buyers and sellers will enable the sale between landowners and developers. Developers will bid to use these improvements to offset nitrate contamination from their developments. Landowners listing improvements will receive a payment from the highest bidding developer to put them into place. The developer can then use them to help attain planning permission.
Although nitrate offsetting is not in place yet other than in pilot schemes, you can register your interest with us now to take advantage of these opportunities as soon as they become available.
Sale of Environmental Credits
We will advertise your projects or Carbon units to prospective purchasers through the farming press, on our website and through offering them to our register of interested purchasers. All our Woodland Carbon Units and Peatland Carbon Units are registered on the IHS Markit Trading Platform. All our Soil, Peat and Woodland Carbon Units are displayed on our website here.
What payment can you expect?
Woodland Carbon Units
The most recent Woodland Carbon Guarantee auction, at the time of writing, closed on 1st August 2021 and averaged £20.32 per unit among winning bids. Auction results so far have ranged from £17.31 to £24.11 per unit. This was not on the open market however and as a relatively young market with increasing demand, the prices are expected to increase. PIUs have been changing hands on the open market at between £7-12 and WCUs at over £20.
Based on a WCU at £20, a new native woodland of 25 acres capturing 140 tonnes of CO2 equivalent per acre by 2055 this could represent circa £51 per acre per annum in addition to planting grants and the BPS.
Peatland Carbon Units
The market for PCUs usually matches prices for WCUs.
Soil Carbon Units
There is less assurance surrounding SCUs at present due to no code at the time of writing. As such, a purchaser may buy credits at their own risk. Once a code is established then a SCU should in theory be worth the same as a PCU or WCU however it is likely that WCUs are seen as the go-to ‘safer’ option both in terms of visible publicity in tree planting and permanence and quality of the unit. That said, soil carbon has huge potential in that land’s productive agricultural capacity can be retained to a far greater extent than when used for woodland creation, and there would be far more units that can be purchased from soil than tree planting in the UK. They in principle should match other carbon units if an appropriate code is introduced by the government.
The biodiversity value is calculated using the DEFRA biodiversity metrics. DEFRA have proposed an outline tariff of £9,000 to £15,000 per biodiversity unit hoping to make it attractive to sellers by determining not to use compensatory or income foregone models of remuneration. However it will depend on a case by case basis. An example of a high paying habit would be a hectare of arable used to create gorse scrub producing 6.4 units, subject to a variety of factors. This could potentially make up a payment of £96,000 or £1,295/acre per annum for 30 years. Putting one hectare of modified grassland into lowland meadow would yield a net 9.03 units in optimal conditions (distance, within a formally identified area etc.) This would result in £135,450 or £1,827/acre per annum for 30 years.
As projects in this category are still in the pilot stage there are fewer examples on what can be gained from putting land forward. Based on the test sites from the pilot in the Solent, credits are being offered by local councils for between £3,000-3,500/Nitrate credit for the cessation of certain farming practice (such as reducing stocking density) for the agreed period. Proactive interventions such as creating wetlands may be worth more. Looking at three sites containing 3,633 credits (some of which have already been sold) across 78.5 ha with each credit representing 1kg/nitrates per year if all are sold this represents 46.28 credits/ha or £138,840/ha to the landowner over the lifetime of the agreement. If an 80-year project is assumed this would result in £1,735.50/ha pa.
It should be made clear that this example is based on the local council purchasing land themselves and setting a price that developers in the region must pay. As such it is not an open market value of a nitrate offset but gives an estimate of what land previously used for grazing may provide when taken out of production. In this case agricultural activity ceased, however methods of lessening the intensity (such as reducing stocking density) will also produce credits, albeit a lesser amount.
It is difficult to suggest that this council’s approach and what they have been involved with sets a UK wide market rate because, as we find with the Water Abstraction market, which involves a similar number of market catchment areas, prices vary considerably. However, this is still a useful comparable to take into account when the Government expands the pilot to other catchment areas.