Nature campaigners have called for taxpayers to take stakes in forest and peatland projects designed to store carbon, to avoid all the profits from carbon credits going to private investors.
A report from the Revive Coalition, an umbrella group for Scottish land reform and conservation charities, says carbon credits also need to be used much more effectively to bolster demand and help the UK meet its net zero targets.
It argues that current policies are failing to restore nature quickly enough: it notes that upland areas are so heavily degraded by overgrazing and deforestation that Scotland is one of the most nature-depleted countries in the world.
It said the UK’s carbon market, which is heavily focused on voluntary and privately owned projects, needs to be better regulated and should also involve the UK’s state-owned banks, so profits can be shared fairly with the public.
Big companies, investment houses and pension funds use carbon credits, which pay for each tonne of CO2, which is stored by a forest or peat moor, to offset their own emissions and also to sell to investors.
This market helped propel a surge in land prices in the Scottish uplands and Highlands, with big firms such as BrewDog, Standard Life, Gresham House and Aviva buying estates to plant forests as carbon investments or to offset their own carbon emissions.
That has recently stalled, with investors unsure whether this market is financially attractive enough compared with other investments. Some believe that carbon offsetting projects in the UK are too small for major investors.
Only 124,000 hectares (306,000 acres) of land in the UK is taken up with woodlands and peatland registered with the woodland and peatland codes (with 103,300 ha of that in Scotland) – a fraction of the UK’s land mass.
Helen Armstrong, the report’s author, argues that these failures can be addressed by much greater public investment and by tougher regulations that push private companies into using nature-friendly carbon sequestration to reduce their emissions.
She recommends that:
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Government-owned banks such as the Scottish National Investment Bank should invest in carbon projects, including on public land.
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It becomes mandatory for all large and medium-sized companies to have audited carbon reduction targets to avoid green washing.
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All carbon offsetting projects must register with the official schemes, the Woodland carbon code and the Peatland carbon code.
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A new land tax is set up that is reduced if the land is managed to protect the climate and promote nature recovery.
Her proposals chime with recommendations from the Scottish Land Commission, which published research this week on “shared governance” schemes involving land use in other countries.
These include Danish laws that say local communities must be offered 20% of the shares of windfarms; the co-ownership of the grid and renewable energy projects by German local councils; and the co-design of forestry policy in Finland involving local communities.
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“The people who degraded the land in the first place are the same people who are going to benefit from selling carbon credits. The money just circulates amongst landowners, and isn’t coming back to the people of Scotland,” she said.
Scottish government ministers claimed in 2023 they could raise £2bn for nature and woodland restoration projects in loans and shares from private firms and wealthy people by partnering with investment companies, but that, too, stalled.
The government recently cut the budget for forestry grants by 41% and has also cut the money it gives the Scottish Land Fund, which subsides community buyouts of rural estates, from £10m to £7.1m. Both measures are expected to hurt demand for nature restoration schemes.
Ministers hope to reinvigorate private sector spending by publishing a new framework for private natural capital investments that aims to ensure local communities benefit from carbon sequestration projects.
That framework proposes a pilot scheme to test how private and public money can be used at the same time in a peatland restoration project; a new biodiversity test for planning decisions, and seeing whether the UK’s carbon trading scheme for large energy users can be adapted to include woodland and peatland projects.