Woodland Carbon Guarantee (WCaG) – Delivering Long Term Income Security from Woodland Creation
The mechanism for ensuring new woodland creation maximises grant and carbon income can be complex. It spans appropriate woodland planning and registration with the Woodland Carbon Code, submission into the Woodland Carbon auction and the securing of a carbon contract, alongside identifying and securing the most appropriate grant funding for woodland establishment and maintenance.
The below sets out these processes alongside how Brown & Co can assist in delivery.
WCaG Scheme Mechanism
The Woodland Carbon Guarantee (WCaG), launched in November 2019 has a £50 million budget to stimulate carbon capture through new woodland creation as part of the Governments 25-year Environmental Plan.
The scheme is based around the government purchase of future woodland carbon sequestration over the next 35 years, secured through reverse auctions held every 6-months, each with a £10 million allocation.
In a single-shot, sealed bid process, landowners pitch into the auction at a price they require to incentivise the land use change for their particular business or situation. Bids are based on a value for future Carbon Units (Pending Issuance Units), the sequestration of 1 tonne of carbon dioxide equivalent.
Following success in the auction and the planting of the project, the woodland is initially Validated (within 3 years) by the Soil Association or OF&Gs to confirm it has been established to the contracted specifications, and subsequently Verified every 5 or 10 years. It’s at these 5 or 10 year intervals that the carbon sequestered is confirmed and then purchased and paid for under the WCaG contract.
As the largest WCaG Project Developer, Brown & Co are able to minimise Verification costs through the grouping of projects held under the Brown & Co IHS Markit registration, maximising net income to landowner.
The process of entering the WCaG scheme is complex, involving registration with various bodies and platforms. At the core of this is the Woodland Carbon Code (WCC), the assurance standard which underpins the WCaG, requiring initial project layout, draft plans and projected carbon sequestration calculations.
Registration with IHS Markit, a global carbon database registry, can be completed under a pre-authorised Brown & Co master account, vastly reducing processing and auction entry times.
With the 4th auction commencing 26th July 2021, full registration and entry to the scheme is required by 9th July.
Whilst the WCaG carbon auctions are limited to new woodland planting only, it is possible, at the moment, to register any woodland planted within the past 2 years with the WCC, enabling the generation of carbon units for sale on the voluntary market over the next 100 years. This window closes very soon, a change in legislation from the 1st July 2021 will restrict registration to new plantings only.
Potential Woodland Carbon Income
WCaG income is largely dependent on the sequestration potential of your woodland, which is influenced by a multitude of factors including yield class, stocking density, species mix, management and soil type. By incorporating carbon income thinking into the early planning stages of woodland design, Brown & Co have averaged 10+ tonnes of sequestration/ha/year across our native predominantly broadleaf projects.
Auction carbon price also determines income potential. This is primarily limited by scheme uptake and a pre-determined, undisclosed ceiling price set by the Forestry Commission for each auction. Having achieved the highest carbon price offers in the first 3 auctions, Brown & Co are well positioned to continue this trend through close links to Forestry Commission, analysis of woodland carbon market and strong understanding of variations to auction structure.
Carbon prices are very likely to rise considerably, the index linked auction contract price can be considered a safety net, giving landowners and project developers the flexibility to seek greater income opportunities on the voluntary market as it develops with associated unit price rises, with latest projections being carbon at over £50/tonne within a few years. This would more than double income.
Grant Funding Support
The WCaG is fully compatible with the full suite of grant funding available to contribute towards the cost of woodland design planning, planting stock, planting contractors and tree protection. Brown & Co have extensive experience in securing these funding streams, working with landowners and the Forestry Commission to maximise funding through:
- Woodland Creation Planning Grant (Countryside Stewardship)
- Woodland Creation & Maintenance Grant (Countryside Stewardship)
- England Woodland Creation Offer (Nature for Climate Fund)
- Woodland Tree Health Grant
Ongoing maintenance payments worth £200/ha/yr. for 10 years are also available through Countryside Stewardship.
The new English Woodland Creation Offer (EWCO) has just been launched. The scheme will fund the full capital cost of establishment at a 100% intervention rate capped at £8,500/ha, a significant increase on the existing Countryside Stewardship Woodland Creation Grant. The scheme is much more joined up with other public good initiatives, available in addition to the core grant are stackable, bolt on payments for delivery of social and ecosystem services each worth between £400 and £2,800/ha up to £8,000/ha.
In addition to this, where the capital cost of woodland establishment is funded through one of the above grant schemes, Basic Payment Scheme income can continue to be claimed on the woodland area, providing it was used with entitlements to claim under the Single Payments Scheme in 2008.
In our experience, carbon income is rarely the primary catalyst for land use change, but instead the final push factor, with ulterior benefits such as:
- Farm diversification – Future timber income from thinning & Clear felling
- Rural tourism – Woodland based holiday accommodation, educational access
- Improving farm business efficiency – Taking less productive areas out of cropping
- Amenity – Providing game cover for sporting enhancement
- Biodiversity gain - through habitat creation and connectivity
In addition to this we have seen landowners view the scheme as a means of initial entry into the carbon market, with the added incentive around potential for significant uplifts in carbon market prices and associated income.
WCaG Scheme Updates
The WCaG has demonstrated relative success in generating woodland planting interest, with accepted bids and contracts offered increasing from 18 projects in the 1st auction, to 27 in the 2nd and 31 in the 3rd. Whilst increased scheme uptake has eroded average prices somewhat, the impact has been mitigated through several auction design changes, most notably a 75% budget ring-fence for 'predominantly native woodland' projects.
Brown & Co Track Record
Since the scheme was launched in November 2019, Brown & Co have entered native broadleaf woodland projects between 3 & 30 hectares in size with a combined carbon value of £2.7 million over the next 35 years where the government auction price is maintained. In all 3 auctions to date, Brown & Co have achieved offers for the highest contract prices, significantly above auction averages.
"I was recommended Brown and Co to run my WCaG process last year. I was struck by their professionalism and deep knowledge of the space, which was further enhanced by a successful bid in the auction."
Will A, Norfolk farmer
For further information on the WCaG please contact William.Higgins@brown-co.com or Greg.Beeton@brown.co.com