Don’t rush into carbon credit deals
RUSHING in to ‘loosely worded’ carbon credit deals could cost land managers financially in the long-run.
Legal firm, Lindsays, has warned that the rising tide of Scottish landowners keen to capitalise on carbon credit trading risk being ‘blindsided’ by quick deals which will ultimately mean others reap greater benefits than them.
The Edinburgh-headquartered firm has identified loopholes in deals where firms are using tree planting and peatland restoration to help achieve net-zero, including long term obligations for landowners ‘for generations to come’ and risks to investors from non-compliance with the silvicultural management requirements.
Senior associate in the rural team at Lindsays, Tim Macdonald, said: “There’s a lot of pressure on agriculture to reduce emissions and to diversify incomes, so it can be tempting to jump quickly at opportunities to trade certain land-based activities which sequester carbon in exchange for incentives from those looking to offset their own emissions.
“What’s becoming increasingly clear to us, though, is that patience is required when putting agreements in place,” said Mr Macdonald. “Selling land or carbon units too quickly in the life of the project could allow someone else to reap the benefit of higher values, so you will need insightful guidance on the best time to sell – or the details you would be best advised putting in place to protect your longerterm interests.
“For example, landowners must enter into a Carbon Unit Agreement with buyers, exposing them to onerous obligations, which could tie them and their successors to managing land as forestry to the exclusion of other development for in excess of 100 years.”
Lindsays are also encouraging landowners not to overlook the potential of peatlands in diversifying their businesses, and the use of traditional grazing ground, with land prices remaining high.
“Though grant funding for peatland restoration is available across the UK, it’s private capital that’s turning many landowners’ thoughts to the ground beneath their feet,” said Mr Macdonald. “They’re looking to exploit the dual financial and climate benefits made possible by peatland restoration.
“Though the carbon market is in its early days in Scotland, there’s significant appetite from investors, including corporations looking to offset their carbon footprint.
“As well as offering opportunities to sell carbon units, peatland restoration will increase the value of the land itself. And, of course, there are environmental benefits to pursue, including improved water quality, flood management and biodiversity as well as carbon sequestration.”
According to NatureScot, more than 20% of Scotland is covered by peat, 80% of which is damaged – leading the Scottish Government to devote £250m to peatland restoration up to 2030.
While peatland restoration is neither quick nor technically simple, that government support, a developing financial market with strong corporate interest, and a tried and tested mechanism for benchmarking standards and financial returns – the Peatland Code – makes it an attractive option for estate owners and land managers.