Guidance from the Forestry Commission on Woodland Carbon Guarantee
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The Forestry Commission has published advice and guidance for
customers applying for the Woodland Carbon Guarantee. Applies to:
England (see guidance for Wales, Scotland, and Northern Ireland)
Contents What is on offer? What are the benefits? Find out if you
are eligible How to apply How it works Terms and conditions Find
out more about eligibility Control of...Request free trial
The Forestry Commission has published advice and guidance for customers applying for the Woodland Carbon Guarantee. Applies to: England (see guidance for Wales, Scotland, and Northern Ireland) Contents
The Woodland Carbon Guarantee (WCaG) is a £50 million scheme that aims to help accelerate woodland planting rates and develop the domestic market for woodland carbon for the permanent removal of carbon dioxide from the atmosphere. It is an objective in the 25 Year Environment Plan and was announced in the autumn 2018 Budget. The Woodland Carbon Guarantee provides you with the option to sell your captured carbon in the form of verified carbon credits, called Woodland Carbon Units (WCUs), to the government for a guaranteed price every 5 or 10 years up to 2055/56. This provides an additional long-term income from your woodland. If you prefer, you can still choose to sell the credits on the open market rather than to the government. WCUs are generated through verification checks carried out under the Woodland Carbon Code, which assess how the woodland has grown and therefore how much carbon dioxide has been captured. What is on offer? Unlike most existing woodland creation support mechanisms the WCaG is not a grant or a fund and it does not contribute towards the cost of planning, establishment or early maintenance. Woodland creation projects accepted into the Woodland Carbon Guarantee have the option to sell WCUs to the government every 5 or 10 years up to 2055/56. The government will buy the WCUs for an agreed guaranteed price that is index-linked for the life of the contract. You can still choose to sell the carbon credits on the open market at any time. Find out more about the funding on offer in our Woodland Carbon Guarantee leaflet (PDF, 849KB, 4 pages) and in the more in-depth guide to Getting Started with the Woodland Carbon Guarantee (PDF, 509KB, 7 pages). What are the benefits? The open market price for carbon credits from domestic forests is currently low, meaning that woodland creation projects aimed at long-term carbon sequestration are often unviable, particularly when compared to other land uses and in areas of higher land value. The Woodland Carbon Guarantee provides long term certainty for participants. It provides landowners with a guaranteed price for the carbon credits, set at the level required to make the investment worthwhile. The guaranteed price, coupled with the index-linking can significantly reduce the financial risk associated with the long-term investment. Currently, profits arising from the commercial occupation of woodlands are not chargeable to Income Tax & Corporation Tax and the value attributable to trees is exempt from Capital Gains Tax. The sale of voluntary carbon credits is not currently chargeable to VAT. However, you should always seek professional independent advice based on their specific circumstances before making any long-term investment decisions. Find out if you are eligible The WCaG is open to land managers who are owner occupiers, tenants, landlords and licensors, as long as they have control of the land and all the activities needed to meet the obligations of the WCaG for the full duration of the contract. The WCaG application cannot include land:
In order to apply for the Woodland Carbon Guarantee, woodland creation projects will need to be registered with and managed under the Woodland Carbon Code. For further information see the section on Eligibility Criteria How to apply The Woodland Carbon Guarantee is currently open for applications Applications for the fourth auction are now open. Submit your application by 23:59 on 9 July 2021, the fourth auction will take place between 26 July to 1 August 2021. In order to apply you must first register your project with the Woodland Carbon Code. If you have registered for the Woodland Carbon Code and meet the other eligibility requirements, please complete the Woodland Carbon Guarantee application form and return it to: wcag@forestrycommission.gov.uk
Woodland Carbon Guarantee You can get further advice on WCaG or help completing the application form from the Forestry Commission by emailing wcag@forestrycommission.gov.uk or by calling our WCaG enquiry line: 0300 067 4822. How it works There are 5 stages to the Woodland Carbon Guarantee process. Please see Getting Started with the Woodland Carbon Guarantee (PDF, 509KB, 7 pages) for further information. 1 - Pre-application The WCaG is restricted to new woodlands and the best time to start thinking about incorporating carbon income into a project is during the early planning stage. The WCaG process allows for the design of the woodland to be modified after an application has been approved, so it is not necessary to wait until all of the planning and EIA processes are complete before applying for the WCaG. In fact, applying early for WCaG can be helpful to understand whether a project will be financially viable before committing time and effort to the detailed design processes. Before applying for WCaG, you will need to:
2 - Application Once you are satisfied that a project is viable and worth pursuing, you will need to register it with the Woodland Carbon Code. You can do this through the Woodland Carbon Code website. It is also worth considering if you want a project developer, who is experienced in carbon projects and who will already have an account on the Registry, to help you through this process. A developer may also be able to group your project with other landowners to save money on validation and verification costs. See a list of project developers. Once you have calculated how much carbon your woodland will produce and registered it with the Woodland Carbon Code, you can submit a Woodland Carbon Guarantee application form. 3 - Auction Once your application has been accepted, you will be invited to participate in an online auction, which is used to agree the price at which the WCUs will be sold to the government. This approach aims to deliver value-for-money for government while establishing carbon prices that will provide you with sufficient incentive to make your woodland creation project financially viable. The auction will operate on a simple single-shot, sealed bid process, although the design of the auction may change over time. The Forestry Commission will communicate details of the auction process to applicants ahead of each auction. You will be asked to provide your best offer of the price that you require in order to make your woodland creation project viable and worthwhile. Bids will be in Pounds Sterling per Woodland Carbon Unit (£/tCO2). Lower bids are more likely to be successful. The fourth auction will take place from 26 July to 1 August 2021, the application deadline is 23:59 on 9 July 2021. Further details about the fourth auction, including the average successful bid price from previous auctions are contained in the Guide to the fourth auction (PDF, 235KB, 4 pages). For successful bids, the price agreed at auction will be index-linked on an annual basis based on the Consumer Price Index 12-month rate in April of each year, as published by the Office of National Statistics. Index-linking will commence from the Woodland Carbon Code start date, which is the last date that trees are planted for the project. Auctions will initially be held on a national basis approximately every 6 months for 4 or 5 years, depending on the rate of uptake and therefore available funds. If the project is successful at the auction then a conditional 30-35 year contract is offered. An example of the sample participant contract (PDF, 400KB, 13 pages) is available for you to view. 4 - Validation Once you have a conditional offer of a contract after the auction, you can begin to plant your woodland and have it validated under the WCC. It is important not to start planting your woodland (or carrying out any other on-site work) before you have a conditional offer of a contract as this would invalidate your WCaG application. All contracts are conditional at this point on securing validation under the WCC. At the point when your woodland is validated under the WCC, it is possible to adjust the number of WCUs that can be sold to government under the Woodland Carbon Guarantee – provided that this is on the basis of a change in the woodland design plan (for example as a result of the environmental impact assessment). Any request for a change in the maximum number of WCUs must be made in writing and agreed in writing by the Forestry Commission. The maximum permitted increase in WCUs is 10% above the quantity requested on the application form and entered into the auction; there is no maximum permitted decrease. Once the project has been validated by the WCC, the Forestry Commission will issue the final WCaG contract. 5 - Verification and sale of carbon As your woodland grows, it will be verified every 5 or 10 years through the WCC to confirm the amount of carbon that has been sequestered and therefore the number of WCUs delivered. You then have the option to sell the verified credits to the government for the guaranteed price or to sell them privately on the open market. WCaG contracts will only cover carbon sequestered for the first 30-35 years of the woodland’s life. The actual contract length will be determined by the starting year with all contracts ending in 2055/6. WCUs produced after 2055/6 can be sold privately but will not be purchased by the government under the Woodland Carbon Guarantee. You cannot sell more WCUs to the government at each verification point than the number set out in the contract, except where specifically agreed upon in writing by the government. If the number of verified units drops below 80% of the level set out in the contract then the government reserves the right to cancel the contract for any future units. Terms and conditions For a full copy of the terms and conditions, please see the sample participant contract (PDF, 400KB, 13 pages). Find out more about eligibilityEligible land The WCaG is open to land managers who are owner occupiers, tenants, landlords and licensors, as long as they have control of all the land and all the activities needed to meet the obligations of the WCaG for the full duration of the contract. Ineligible land Your WCaG application cannot include land:
Woodland Carbon Code The Woodland Carbon Code (WCC) is the voluntary standard for woodland carbon projects in the UK. In order to apply for the WCaG, woodland creation projects will need to be registered with and managed under the WCC. Further information on the WCC is available on the Woodland Carbon Code website. WCC projects can be grouped for the purposes of validation and verification and in certain circumstances, carbon can be accounted for at the group level, rather than individual project level. WCaG applications are welcomed either from individual WCC projects or from groups of projects. If a WCC project group has accounted for carbon sequestration at the individual project level, then the group manager or individual landowners will need to apply to the WCaG at the individual project level. Each project will need to be submitted separately into the WCaG auction and each successful project will be covered by a separate WCaG contract. It is not necessary for all projects within the WCC group to apply for the WCaG. If a WCC project group has accounted for carbon sequestration at the group level, then the group manager can apply to the WCaG on behalf of the whole group. In this scenario the group itself is included as a single submission to the auction and, if successful, will be covered by a single WCaG contract. WCaG projects will need to meet the WCC additionality requirements. Checks will be carried out on all projects to assess whether payments under the Woodland Carbon Guarantee are necessary in order for projects to proceed. Other eligibility Woodland Carbon Guarantee applications may be made alongside applications for other existing grants (for example, Countryside Stewardship, the Woodland Carbon Fund or the HS2 Woodland Fund) provided that the agreement was signed after 29 October 2018. In addition, applications can only be submitted for projects registered with the WCC after 29 October 2018. However, in all cases, projects will not be eligible for the Guarantee if planting or other on-site work commenced prior to the offer of a Guarantee contract after a successful bid in an auction. Control of land or woodland Applicants must have control of all of the land and activities needed to meet the requirements of the WCaG Scheme for the full duration of the contract period. If an applicant does not have full control of the land and all such activities then they must obtain the written consent of all other parties who have management control of the land for the entire period of the agreement. In circumstances where the land ownership or control is not straightforward, applicants are advised to seek advice from the Forestry Commission before proceeding with an application. Tenants Tenants applying for a contract must have:
Tenants must have the agreement of their landlord or the landowner before they apply. The applicant must ensure that entering into a contract will not breach the conditions of their tenancy. If an applicant is a tenant under the Agricultural Holdings Act 1986, Agricultural Tenancies Act 1995 (a Farm Business Tenancy) or equivalent, it is their responsibility to check that in entering into a WCaG contract they do not breach the terms of their tenancy. If a landlord undertakes to take over a contract from a tenant once the tenancy has ended, the landlord must be eligible to do so. For example, they must not be an ineligible public body. Landowners Provided landowners can if necessary demonstrate that they have sufficient management control over the land, they can apply for the WCaG on their land. Where there is a tenant on the land in question that land must either come back under the direct control of the landowner or they must show that the tenant has given written agreement to the application. Under these circumstances it will be the responsibility of the landowner to make sure that their tenant does not breach the terms of the contract. Partnerships Business partnerships can apply for the WCaG. All partners in the farm business, or their agents, must sign the application form. One person can be authorised to act as their representative provided they have sufficient written authority from the other partners. Licensors If a licensor applies for a WCaG contract, it is the applicant’s responsibility to ensure that the licensee does not breach the terms of the WCaG contract. Applicants must ensure that the licensee is aware of the requirements of the contract, as relevant to the license, and include these in the license agreement. Public sector bodies Public sector bodies are not eligible to apply. Tenants of land owned by public bodies If the land is owned by a public body, any tenant wishing to apply for WCaG will need to check that the land is eligible for the WCaG. |