The developing market for woodland carbon

David McCulloch, the head of Carbon Store UK, says that over the last year the free hand of the market has worked its creative magic across woodland carbon. Growth is creating opportunity which is attracting new entrants who offer better services and improved products.

Mr McCulloch says that “For forestry investors, these are encouraging developments. The sale of a Pending Issuance Unit (PIU) which is, in effect, a promise to capture a tonne of carbon, entails various risks which the growth of demand, the rise in prices, and the launch of new products are all helping to mitigate.”

Concerns about the impacts of global climate change, along with legislation, are key elements driving companies’ environmental efforts, which are combining to generate growing demand for PIUs.

The last 12 months have seen particularly strong levels of small-scale demand, for example for orders below 1,500 PIUs. Mr McCulloch says that this “Seems likely to expand over the next 2 years as more companies become engaged. Large companies take time to design, coordinate and implement their net zero strategies and, with the market for woodland carbon relatively immature, understanding the feasibility and practicality of the various options takes time.”

Better ways to minimise or mitigate risks are also emerging for the owners of woodland carbon projects. Insurance policies, which offer both buyers and sellers of PIUs protection from the financial consequences of fallen or damaged trees are now becoming available.

Mr McCulloch says “Until recently, carbon-related insurance was only available if it was purchased in conjunction with timber insurance. From January 2023 onwards, it will be available to the ‘buyers of forward-purchased carbon removal credits (i.e., PIUs) against under-delivery’ with a ‘broader vision to create a portfolio of insurance products across the carbon markets ecosystem’ (i.e., to offer insurance to the sellers of PIUs as well).”

Carbon Store UK is also working to developing an online platform through which project developers can market PIUs and Woodland Carbon Units (WCUs) which are available for sale.

Mr McCulloch says that this will simplify and standardise the process for selling PIUs and WCUs which is likely to reduce transaction costs – it will improve the information availability of projects from which PIUs and WCUs are available for sale and therefore make it easier for companies to buy PIUs and WCUs – and it will channel corporate demand through one single portal, as opposed to company representatives having to speak to various different Project Developers.

Read the full article here

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