Woodland and Carbon Grants might actually pay

With Basic Payment Scheme (BPS) payments gradually being phased out and store cattle prices being so high, we are in discussions with many farmers about what to do with marginal land. This note briefly explains the grant assistance that might be available for planting woodland.

DEFRA and Forestry England both provide similar woodland planting grants. Both schemes provide help towards the planting costs plus a small maintenance grant of £200 per hectare over 10 years. We doubt whether a farmer could profit from these planting schemes, but they should cover all or most of the establishment costs. CSS is capped at £6,800 per hectare whereas Forestry England provide up to £8,500/ha, plus supplements for native woodlands and open access. There are merits for either scheme but they are closely balanced.

A landowner could achieve a good and regular income by selling the carbon that the newly planted woodland absorbs. A hectare of woodland could absorb nearly 400 tonnes of carbon over a 30 year period and a landowner is now able to trade and sell this a carbon credit. The price of this carbon is volatile as it’s traded in a seal bid process on the open market. The landowner can decide to sell credits for the carbon that has either already been absorbed by the woodland (£17-24/tonne) and/or can forward sell the carbon that will be absorbed by the growing trees in the future (£5-15/tonne). If an average price of £20/tonne is achieved, then over a 30 year period the carbon could be worth around £12,000 per hectare equivalent to £400 per hectare per year.

Unfortunately, there is some uncertainty with this whole process. On one hand, scientists and politicians believe that the price of carbon should be at least £70 per tonne in order to make a meaningful difference to climate change. However, the price of carbon has actually been falling recently from £24.11 at an auction in Feb 2020 to just £17.31 in October 2020. Perhaps Covid was a major factor but it’s a stark change compared to the reliable and predictable income that was derived from BPS.

We believe this is an interesting option that would suit marginal land.