- Senior Associate
Globally, climate change is high on the political agenda and is a key factor driving a surge in investment into the restoration of natural resources. In the rural landscape there are two main natural capital schemes which are piquing the interest of investors, these are the Woodland Carbon Code and the Peatland Code. The Woodland Carbon Code focuses on the restoration and creation of forests and woodland while the Peatland Code is to enable the restoration of degraded peatland across the UK.
Across the UK, peatlands form around 10% of the land area and are the largest expanse of semi natural habitat. Peatlands in their natural state sequester and store carbon as well as providing biodiversity and flood prevention benefits. However, around 80% of peatlands in the UK are in a degraded form which causes the emission of carbon dioxide and significantly contributes to the level of greenhouse gases emitted annually.
The UK Peatland Strategy has set a target of two million hectares of peatland being in good condition under restoration, or being sustainably managed by 2040. The Scottish Government announced a £250 million funding package over a ten year period in 2020 for the restoration of peatland, acknowledging that it sees restoring peatland as key to achieving the ambitious net zero target by 2045. However, it is recognised that public funding alone won’t be sufficient to achieve the level of restoration required.
The Peatland Code is a voluntary certification standard which enables restoration projects to obtain funding through natural capital. It allows landowners to tap into the carbon buyer’s market, particularly, those driven by corporate social responsibility.
A landowner, or project manager, proposes the restoration of an area of peatland for a clearly defined period, this must be a minimum of 30 years. If a project is proposed for a period of more than 55 years then additional evidence needs to be provided to ensure that the period of the project shall not exceed the complete loss of the peatland within the project area. The intention to implement a restoration project is registered in the Peatland Code Registry which is a public register of all proposed and ongoing restoration projects and is accessible online. The site is surveyed using the Peatland Field Protocol which allows for the creation of the restoration plan together with the calculation of the potential greenhouse gas emissions reduction.
The project must meet the requirements of the ‘Additionally’ tests set out in the Peatland Code. The project cannot be one for which there is a legal requirement for restoration. It must also be a project which would not have been financially viable or worthwhile if not for the Peatland Code, carbon finance is required to fund at least 15% of the project costs.
Once a plan has been prepared the project must be validated by an independent body which reviews the restoration plan and visits the site. Once satisfied that the requirements of the Peatland Code have been met a validation statement is issued and this is added to the Peatland Code Registry, with the status of the project updated to validated. The validation statement will expire three years after it has been issued, during which time the restoration plan must be implemented. If required, changes to the plan and requests to extend the time period for completion can be made to the validating body.
The completion of the restoration of the peatland is the ‘Start Date’ of the project and at this point the verification process can begin.
Verification starts at ‘Year One’ which is, as it suggests, within the first year of the Start Date of the project. Again, the independent body evaluates the project against the restoration plan and if the Peatland Code requirements are met the project status will be updated to verified in the Peatland Code Registry. Verification is an ongoing process and will take place at Year Five and then every ten years thereafter for the duration of the project. The purpose of this ongoing verification process is to ensure that the actual reduction in greenhouse gas emissions matches those in the restoration plan.
The ongoing verification also provides assurance to carbon buyers that the project they have invested into is delivering climate change benefits that are measureable.
For the landowner, the ability to sell the carbon units can provide an additional source of income. Although it should be noted that if the carbon units are sold then the landowner cannot use the restoration project to offset their own emissions.
Secondly, the increasing trend for corporate social responsibility is boosting the value of some rural land which perhaps would have previously have had a limited market.
For the carbon buyer the Peatland Code provides assurance that the investment into peatland restoration produces a real reduction in greenhouse gases.
Perhaps, more importantly, the benefit to the natural world is a net carbon sink, which can improve biodiversity, contribute to flood prevention and enhance water quality.
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