Higher carbon credit prices could boost UK woodland creation, research finds

Without a commercial incentive to drive investment in afforestation, the UK risks falling short of net-zero targets.

This is according to a policy paper published by King’s College London, in collaboration with Imperial College Business School and Foresight Sustainable Forestry Company.

The paper suggests that integrating the UK’s Woodland Carbon Code (WCC) voluntary carbon credits into the UK Emissions Trading Scheme (UK-ETS) could unlock up to 26% more land for woodland creation, while permanently removing and storing up to 19 million tonnes of carbon emissions.

While afforestation is deemed as an effective and imperative solution to the climate crisis, modest prices for voluntary carbon credits have hindered this progress, preventing the UK from meeting its tree-planting targets.

In 2019, the UK Government committed to planting 30,000 hectares of woodland by March 2025, under the Environment Act. However, since then, the nation has fallen short, achieving less than half of the target.

The paper highlights that the core challenge resides in economics, with current prices of voluntary carbon credits making less than 60% of suitable land economically feasible for woodland creation, meaning where the land’s afforestation value exceeds its agricultural value.

This situation is particularly dire in England and Wales compared to Scotland.

The paper cautions that without a substantial commercial incentive to drive investment in afforestation, the UK risks falling short of both its tree planting and net-zero targets by 2050.

King’s College London’s professor of practice in net-zero asset management Dr Raúl Rosales said, “Afforestation has the power to be totally transformative when it comes to dealing with the current climate crisis, but its economic viability for investors is holding it back.”

“Admittance of the Woodland Carbon Code into the UK’s Emissions Trading Scheme would help resolve this issue almost overnight.”

The paper projects that incorporating the UK’s WCC voluntary carbon credits into the UK’s ETS could increase the price of individual forestry carbon credits by as much as 67%, offering a relatively fluid pathway to market for WCC credits.

This adjustment is anticipated to swiftly elevate WCC-issued carbon units to £47 initially, with a projected rise to £79 by 2030.

EU carbon removal framework

In related news, negotiators from the Council and the European Parliament have reached a provisional agreement on an EU-level certification framework for permanent carbon removals, carbon farming and carbon storage in products.

The voluntary framework aims to facilitate and expedite the deployment of high-quality carbon removal and soil emission reduction activities within the EU.

The regulation will feature an inclusive definition of carbon removals, aligned with the UN Intergovernmental Panel on Climate Change (IPCC), covering atmospheric or biogenic carbon removals.

It will encompass various carbon removal and emission reduction activities, categorised into four distinct types of units: permanent carbon removal, involving the storage of atmospheric or biogenic carbon for several centuries; and temporary carbon storage in long-lasting products, such as wood-based construction products.

It will also include temporary carbon storage from carbon farming, including activities like restoring forests; and soil emission reduction from carbon farming, comprising carbon and nitrous oxide.

Activities such as avoiding deforestation or renewable energy projects that do not lead to carbon removals or soil emission reductions are not within the scope of the regulation.

The new rules will apply to activities occurring within the EU. However, during the regulation’s review process, the Commission will explore the possibility of permitting geological carbon storage in neighbouring third countries, contingent upon these countries adhering to EU environmental and safety standards.