As the COP 26 climate change conference begins in Glasgow, we are reminded that the general consensus of climate scientists is that serious action is necessary to limit rising global temperatures. The Scottish Government has announced a stream of plans for a net zero society by 2045. These include an ambitious woodland creation target rising from 12,000 hectares a year to 18,000 hectares a year by 2024 and a strategy to transition to renewable energy sources. The direction of travel for government policy is therefore pretty clear and farmers and landowners are well placed to play a vital role in achieving the net zero targets.

The Challenge
Agriculture is currently responsible for a significant portion of the country’s CO2 emissions. We are likely to see a loss of direct payment support for production in a post CAP world. It is also possible that we could see additional taxes or levies in the future for businesses that are net carbon emitters. Accordingly, there is going to be a need for farming business to change practices to move towards net zero for their own business and management uses.

Giving consideration now to an audit of current practices, and where improvement can be made, would be a worthwhile exercise.

The Opportunities
Equally, the sharp policy focus on net zero creates significant opportunities to develop new income streams. Farming is a sector that can take steps to capture carbon and lock it away for years as opposed to simply just cutting emissions.

Grant funding and public support payments in the future are surely going to be weighted towards activities that can deliver measurable environmental gains. By planting trees, restoring peatland, or adapting soil management plans, landowners can help both remove and reduce the amounts of carbon dioxide being released into the atmosphere.

The option of monetising carbon sequestration by selling carbon credits is already becoming a big talking point.

The carbon market is still underdeveloped at the moment, but most commentators are sure this will change. The carbon market is very much voluntary at present. The demand comes from companies who wish to bolster their net zero claims as part of their brand image – such companies can choose to buy carbon credits from an audited scheme to offset their own emissions. It could be that future rules will require certain businesses to offset some of their own carbon footprint by buying credits. A compulsory market like this will almost certainly push the price of carbon upwards.

Investors are already active in monetising carbon credits and various opportunities exist to sell the carbon credits that can be created from schemes such as new forestry planting and peatland restoration works.

Some Points to Think About
Some areas that might be of interest to farmers and land managers at this stage are:

• Consider organising a carbon audit of your business. There is some grant funding available for doing this work. This will help you identify the areas where you can make obvious gains by tweaking your current practices.

• Explore options on your land for tree planting. Look at land that is marginal or is of poor productive quality. Attractive grant schemes are available for planting. Get good advice and ignore the urge to plant trees anywhere and everywhere. The right type of tree planted in the right place, makes all the difference. Try to design your planting scheme so that it aligns with the Woodland Carbon Code. This means that you are more likely to be able to register for carbon credits for the scheme, which could be very valuable.

• Check whether you have any opportunity for peatland restoration projects on your land. Grant funding is also available for these schemes and those that comply with the Peatland Code can qualify for carbon credits too.

• Soil management. Look at ways to look after your soil health to lock in nutrients and carbon storage. Various methods such as reducing tillage, spreading compost, or growing cover crops between cash crops could be explored.

• Carefully consider any offer you receive to buy your carbon credits. As with any natural asset, you only get to sell carbon credits once. Make sure the terms are right and the time is right. It could make sense to wait for the market to mature and the price of carbon to increase before committing to a sale. Equally, depending on your own activities, you might want to keep some credits to offset against your own farming practices that you can’t mitigate any further. There is a lot to weigh up, so take proper advice, and don’t be rushed into making a decision.

As companies large and small increasingly pledge carbon neutrality, farmers and landowners should consider a range of carbon capture schemes, from woodland creation to peatland and soil management, to meet this demand and alleviate the upcoming loss of direct subsidy payments.

Should you wish to explore any of these ideas further, please contact us.