The announcement of the UK plans to phase out fossil fuels by 2042, when they will be replaced by hydrocarbons, nuclear, renewable energy and carbon credits signals a new direction for Britain’s forests, parks and countryside. Carbon Credits are a new form of carbon credit that rewards Britain’s renewable energy sector for reforestation. The idea is to incentivise the renewable energy sector to plant high quality vegetation, which can absorb carbon dioxide (CO2) and in turn reduce global emissions of CO2.
Carbon Credits are financial assets issued by the government, which are traded on exchanges, i.e. on the London Financial Exchange. They are on sale in the US and Australia, where demand is particularly high, and in Germany, Denmark, Norway and a few others. If investors believe there will be demand for the credits, the government can issue more.
How does it work? It is possible for energy-intensive, carbon intensive industries to buy carbon credits. Investors in forest-fee carbon credit schemes buy these credits from the companies using renewable energy, which use a broad range of biomass fuels including wood and brush. Unlike other carbon credits, Forest-Fee Carbon credits have a long-term focus and are not tradable in a single transaction. “They are the solution for companies and organisations that use electricity but do not burn coal, oil or gas,” the company’s website says.
Currently there are two categories of Forest-Fee Carbon credits, including the core Forest-Fee Carbon credit and the Carbon Farming Credit, from which the UK government’s new scheme will be taken. The core Forest-Fee Carbon credits are the most valuable ones available now. The Carbon Farming Credit provides an additional benefit by paying a bonus by planting more woodland which will store more carbon than forestry would naturally absorb.
A number of companies have been working with Carbon Credits for years to help reduce their carbon footprint and produce financial returns. For example Amazon Ecom, an Amazon-based carbon offset company, and Preserve Biodiversity, run by Vice President of Recycling at Nissan, have paid to plant trees and planted millions of trees. Bluebell Greenhouse, which helps a coalition of environment groups fight the Atlantic salmon fishing industry, also gets a big chunk of its revenue from Treeplan, a carbon offset firm that it joined a few years ago.
While the small financial transactions may not seem to offer the same level of savings as having an offset, it is important to remember that the financialisation of carbon has had some unexpected benefits. Climate activists have called for carbon credits to be part of a system where companies – and also consumers – have skin in the game. “It incentivises forestry now and in the future and ensures that we have a legacy of productive forests as a renewable energy source for decades to come,” Dr Christian Schindler, co-founder of Bluebell Greenhouse, told the Guardian. He said his hope was that forest “firms will create the financial foundation for longer-term investment in even more improved forests.”
But critics have argued that some companies may simply be using the credit as a way to ensure that they don’t pay to build solar panels or wind turbines in forests, but rather to guarantee their carbon emissions. Ms. Coffey said “to encourage the UK’s forest sector to act with so much uncertainty around the future of climate change rules, we need clearer options to make the most of the GB sector’s excellent natural assets.”
There is a very robust system to ensure the quality of the forest stocks being allocated these credits. Every forest grows trees, which produce a different bio-carbon value. All forests are sited in geographically adapted “stabilised” zones of climatic activity. That means that even if every tree planted in the core section of every forest is carbon intensive, we can expect the whole forest to average forest’s carbon value.