In July last year, Mohammed Barkindo, the Secretary-General of OPeC, declared that Greta Thunberg and other young campaigners were the "greatest threat" to the fossil fuel industry.
Such is the impact of the teen climate activist, whose media presence is credited with raising global public awareness about climate change and its potential eﬀects. She joins others inﬂuencing the climate debate, such as Extinction rebellion, David Attenborough, the rise of ﬂygskam – ﬂight shame – and Government zeroemissions targets.
In January, the McKinsey consultancy warned ﬁnancial markets could face upheaval if the risks of climate change are not taken seriously. By 2030, an estimated 105 countries representing 90% of global GDP are likely to suﬀer extreme physical changes including increased drought, ﬂooding and rising temperatures with potentially serious economic consequences (Financial Times,January 16, 2020).
One tangible eﬀect of this growing awareness hasbeen a sharp increase in individuals and businesses of all sizes oﬀsetting carbon emissions, usually by investing in carbon reducing projects in developing countries, from improving domestic cooking facilities to tree planting.
Many airlines, including British Airways and EasyJet, have started oﬀering voluntary carbon oﬀsetting to their passengers while Shell allows customers the opportunity to “drive carbon neutral” with carbon credits from conservation projects in Peru, Indonesia, the USA and the UK.
Climate Care, a ﬁrm that provides programmes enabling large organisations to oﬀset residual carbon emissions, has reportedly seen the amount of carbon oﬀset increase from 2 million to 20 million tonnes over the past 18 months.
Firms are under increasing pressure from both consumers and shareholders to take responsibility not only for their direct emissions but also for what are called Scope 3 emissions – those produced as a consequence of the products or services they provide, including emissions resulting from goods and services delivered through an outside supplier.
However, a major beneﬁt of oﬀsetting in the UK is that projects are designed in accordance with strict environmental standards and monitored by Scottish Forestry and Forestry England, and any concerned investors need not travel far to review oﬀsetting projects.
Rather than investing purely in overseas projects, several Galbraith clients are looking at how their landholdings in Scotland can help oﬀset Scope 3 emissions in the future. One of the most eﬃcient ways to use land for long-term carbon capture is to plant trees. This is recognised by the Scottish Government whose ambitious climate change mitigation strategy involves increasing woodland cover by 180,000 hectares by 2032.
Although woodland ownership may be unfamiliar territory to some ﬁrms, woodlands can provide a valuable asset for businesses looking to oﬀset their carbon emissions, creating a new driver other than traditional forestry investment. With shareholders focusing increasingly on environmental performance almost as much as ﬁnancial returns, demonstrating a real and veriﬁable commitment to the environment is becoming a priority.
John Davies, head of sustainability at Derwent London, the property development and investment group, explains:
As part of our netzero carbon journey we are looking at developing a clear, robust and transparent carbon oﬀset strategy to help us remove the remaining balance of Scope 3 emissions we cannot manage out of our business activities. In doing this we want to ensure that we are supporting projects and initiatives which deliver tangible carbon and social beneﬁts across the UK.
In the UK, the Woodland Carbon Code (WCC) – administered by the Scottish Government agency Scottish Forestry – sets out the design and management requirements for voluntary carbon sequestration, allowing tree planting projects to be registered and independently veriﬁed.
Veriﬁed woodland carbon units are one type of ‘credit’ that an organisation can use to voluntarily oﬀset emissions associated with its activities, products, services and buildings under current UK government guidance on demonstrating carbon neutrality. However, these units cannot be used in international carbon reduction mechanisms, such as the EU Emissions Trading System (WCC, 2018). Other standards for quantifying carbon sequestration projects include the veriﬁed carbon standard developed by the Climate Group and International Emissions Trading Association.
Using the WCC woodland carbon calculator, native woodland is more carbon eﬃcient than productive conifers. This is because a “clear-fell cap” is applied to reﬂect the long-term average carbon stock over several whole rotations where a woodland is repeatedly clear-felled and restocked with consequent peaks and troughs in carbon storage. Emissions from forestry operations are also taken into account.
Although the market for WCC carbon units is still developing, this model has in principle created a new incentive for native woodland and rewilding projects, making previously unproductive woodlands ﬁnancially productive simply by trees absorbing carbon from the atmosphere and growing bigger as a result.
Native woodlands have an additional reputational beneﬁt for some ﬁrms as they provide the opportunity to convey a wider story about issues such as biodiversity and public engagement.
Although funding for woodland creation has not been conﬁrmed beyond the Forestry Grant Scheme deadline of December 31, 2020, it seemslikely funding will be found, given the considerable political support for planting trees to mitigate climate change. This will provide theincentive needed to maintain the current levelof interest in planting new woodlands of all types. It remains to be seen whether carbon sequestration will become a signiﬁcant new driver for tree planting in the future.