Climate Change: Nature-based Solutions (STC Report)

Lord Roborough Excerpts

Thursday 9th February 2023 Grand Committee

[Lord Roborough (Con)]

My Lords, I declare my registered interests as a co-founder of a natural capital trading platform—one of many seeking to address some of the issues raised in this report—as a developer of natural capital projects to sequester carbon, as an investor in natural capital-related businesses, and as a land and forest owner. I thank the noble Baroness, Lady Brown, and the committee for this excellent report and debate.

I congratulate the Government on the Woodland Carbon Code and the Peatland Code, which are world-leading certification standards. The later edition of the woodland carbon guarantee scheme was a masterstroke in creating confidence in future value. These schemes are uniquely high quality in the strength of the data, the strict qualification requirements and the conservative assumptions. The world has very few reliable certification standards. The Verra avoiding deforestation standard, REDD+, has been attacked by the Guardian for its limited reliability. The New Zealand scheme has led to the blanket planting of radiata pine, although at least this is admissible in its emissions trading scheme’s underpinning values. These codes already place the UK in pole position in this emerging industry. Many of the issues addressed in this excellent report are solvable by private capital, with government support needed in critical areas. In turn, that should lead to much lower financial calls on the Government to enable these outcomes.

High-credibility standards, which private capital is willing to invest in, are critical. The woodland and peatland carbon codes are done, but we await the soil and blue carbon codes, as well as helping to quantify the co-benefits. The crucial question of how to measure and value these co-benefits is raised very effectively in the report. For market acceptance, consistency with the Integrity Council for the Voluntary Carbon Market’s principles and assessment framework, due during Q1 2023, will be necessary.

The second point where the industry needs government help is in creating profit incentives. The Woodland Carbon Code and the Peatland Code are voluntary standards with limited tangible value. The industry needs improvement in the standing of these units and to see the creation of market demand for other aspects of natural capital, such as biodiversity, water management, cultural heritage, education, public access and visual impact.

We can bring down the cost and increase the transparency of delivering nature outcomes over time by creating that profit incentive, drawing entrepreneurial talent and capital. Even at this early stage of development, and without clarity around market structures, a plethora of start-up and established companies is improving the cost-effective baselining, monitoring, measuring, managing and analysing of these projects. Most of these use innovative hardware and/or software to create scalable and cost-deflationary solutions.

In ELMS, there is progress on many of these fronts, but three questions are unanswered for landowners. First, do the resulting goods belong to the landowner? When the Government fund actions such as afforestation, peatland restoration or natural habitat restoration, will these benefits belong to the Government or to the landowner? Only one entity can claim them.

Secondly, will the additionality qualification remain intact, even with government funding under ELMS? Expert buyers require that the scheme has the additionality of the units they are buying in order to go ahead. If the Government have financially incentivised the scheme, additionality may be compromised.

Finally, will the tax treatment of these assets be disadvantaged when focused on natural capital, rather than on agriculture or forestry?

I turn to some of the specific points in the report. There is a statement that commercial forestry carbon calculations are dependent on the use of harvested wood, but that is not the case under the Woodland Carbon Code. The code calculations assume that commercial forestry is clearfelled at maturity and the carbon lost, which means that only the average standing carbon over multiple rotations is recognised. Productive forestry captures carbon more rapidly than broadleaves and creates jobs for decades into the future, but it is handicapped in carbon forecasts by this clearfelling assumption. The primary use of hardwoods remains firewood. Are the Government’s calculations based on the code assumptions, or do they use a different methodology for carbon capture within a new forest?

Different industries have different opportunities to eliminate carbon, making a blanket 10% cap unreasonable. Usage discrimination through market pricing that incorporates all methodologies of reaching net zero is likely to provide the most efficient solution for allocating these off-sets to the appropriate sector. It is more than two years since the Taskforce on Scaling Voluntary Carbon Markets issued its final report. Have the Government considered its recommendations?

The report raises two other points that I will address briefly. UK forestry standard schemes are handicapped by a limited menu of tree species, as highlighted by the report; I believe there are around 60, when there are 3,000 to 4,000 species globally. Our narrow palette brings greater biological and climate risk, and largely references species reintroduced since the last ice age. I agree with the report that work needs to be done to extend this.

In response to the comments on planting into 30 centimetres of organic matter peat,, and I would like the Forestry Commission to stipulate methods of planting depending on soil types and conditions. Mounding is too widely used in the industry, and I would like to see techniques that are less disruptive to soil condition encouraged to minimise carbon emissions during planting and establishment. I would also like the Forestry Commission to look further at its yield class tables, which place caps at yield class 24 on Sitka spruce, for example, which can achieve well into the 30s. I believe that Ireland has already made that step.