Think of making money from green energy and thoughts inevitably turn to whirring turbines or roaring biomass boilers but there is a far more traditional form which until now has been largely ignored.
Farm-scale woodland obviously produces timber as a growing crop but it also significantly stores carbon in large quantities and this is expected to soon have a real value.
It is estimated the advance sales of carbon equivalents alone could support a fund capable of paying out £235 per hectare a year.
Bob Yuill, of co-operative parent body SAOS, has been instrumental in creating Scottish Farm Carbon (SFC) as a members’ co-operative capable of crystallising the value of woodland and managing carbon sales.
The buyers are likely to be large companies eager to offset their carbon emissions and could range from supermarkets to airlines.
Marks and Spencer is already involved in the market and, as others follow, values should increase with Mr Yuill setting a target of £15 per tonne of carbon once the market picks up momentum.
At this level an airline would need to purchase £19 worth of carbon to cover the emissions caused by carrying one passenger from London to New York return.
Trees have a powerful ability to store carbon with every tonne of wood produced drawing 1.5 tonnes of carbon dioxide from the atmosphere.
This is recognised as being a “good thing” in mitigating human-induced climate change but how can it be turned to financial advantage?
SAOS believes that as far as farm-scale woodland is concerned, it can only be done by following the co-operative route.
Very few individual operators would have sufficient scale to make the administrative effort worthwhile and in any event Scottish Farm Carbon is open only to woodland which is planted on land not currently used for cropping or grazing. The scheme is designed to complement farm income rather than compete for land use.
The co-operative approach will also help to reduce an individual member’s risk from events such as woodland fire where the carbon sold would literally go up in smoke.
“The market is not yet fully developed and it could be five years or more before the target price of £15 per tonne is reached,” said Mr Yuill.
Nonetheless SAOS believes that there will be a future in carbon marketing and the co-operative parent body has invested £60,000 so far in planning and development including designing a software system.
A further £50,000 has been budgeted for each of the next five years to cover start-up costs and until Scottish Farm Carbon becomes self-financing.
Mr Yuill said: “The sales of carbon will create a mutual fund owned by all members with the fund invested like an annuity to pay members up to £235 per hectare per annum for the management of their woodland. Members will own their woodland and therefore the proceeds from timber sales from thinning and clear felling.
“The fund will also be a form of assurance to offset carbon lost by wind blow or fire so individual members of Scottish Farm Carbon will not need to repay to cover the carbon loss.”
Scottish Farm Carbon is actively recruiting members now and areas of farm woodland planted since 2000 are eligible.
Obviously before the expected tonnage of carbon stored over the lifetime of the wood can be sold there has to be an estimate made.
Mr Yuill said: “The initial yield class will be conservatively set at least four points below the expected yield. For example a woodland with an expected yield class of 20 will initially be calculated at 16 until canopy cover is achieved and trunk girth measured.
“Using that information a surprisingly accurate actual yield class can be calculated. A carbon reserve will always be maintained to cover shortfalls.”
The £235 per hectare per annum example is calculated on a mix of commercial conifers growing at yield class 16 planted on a 50-year rotation with the carbon sold at £15 per tonne and with Scottish Farm Carbon’s administration costs already deducted. For the purposes of the example the mutual fund is expected to return 3.5% per annum.
“Other species mixes will produce different results with hardwoods maybe having a 100-year life span. An important part of the scheme is that the fund will pay the whole cost of re-planting at the end of the life of the plantation. Apart from the value of the carbon we want trees to be a commercial crop on the farm with timber being produced from areas which were previously unproductive,” added Mr Yuill.