72: Carbon Offsetting For Communities 3 -Ownership, Governance and Finance

How are these carbon offsetting schemes financed and governed, and who actually owns these projects?

The third and penultimate episode in our Community Carbon Offsetting mini series features many different voices and perspectives from the event held at the University of Strathclyde in March 2023. Consider this a deep dive into the world of nature based offsetting, guided expertly by your host, Professor Matt Hannon.

Episode Transcript:

[Music flourish] 

Matt:  Hello and welcome to Local Zero. I am your host for today, Professor Matt Hannon, and this episode forms the third in the mini-series all about community carbon offsetting. So if you haven’t listened to the series already, I’d recommend listening to the first two episodes as this is a bit of a deep dive. You’ll find them both in the podcast feed. So where do we start? Well, back in March 2023, we held a workshop at the University of Strathclyde in Glasgow on carbon offsetting for communities. This was funded by the Scottish Universities Insight Institute and Strathclyde Centre for Sustainability. The event focused on Scotland’s fast-growing, nature-based carbon offsetting market and what the potential implications might be for local communities. It also considered the potential role communities could play in shaping and governing this emergent market. So what do we mean by nature-based carbon offsetting? Well, here, landowners choose to invest in natural forms of carbon sequestration such as afforestation or peatland restoration to generate carbon credits for sale on the open market. These credits are bought up by organisations wanting to offset their own carbon emissions by funding reductions or avoidance elsewhere instead of cutting their own emissions. Now, in the first episode of this mini-series, we heard from Alastair McIntosh about the meaning of community and what role communities could potentially play in the booming nature-based carbon offsetting space. The second episode was a panel debate all about how we frame, evaluate and facilitate community benefit from these carbon offsetting schemes and today’s episode explores the state of the voluntary nature-based carbon offset market today. Specifically, we discuss how these projects are financed, who owns them and how they’re governed as well as how wider market and policy structures shape the form these projects take. Today’s episode, therefore, acts as an important precursor to our last episode in the mini-series which focuses much more on communities, exploring how these offset projects could positively or negatively impact communities as well as what actions could usefully be taken to ensure carbon offsetting supports community wealth-building rather than undermining it. 

So just before we get into the pod, a reminder that if you haven’t already subscribed to Local Zero, then please take two seconds to hit that button and don’t worry, it won’t just be my voice you hear today but from a wide variety of experts who were at the event. 

[Music flourish] 

Matt:  As with any new marketplace, the first question investors will always ask is how does the project generate money. When will these revenues come online? What are the risks associated with the projected levels of revenue and expenditure? Now without a solid business proposition, finance is unlikely to be forthcoming and the market will fail to take off. At the event and when we undertook our earlier field trip to the Central Highlands, we identified three things. The first is the financials of these projects are not entirely transparent and so it is unclear where key assumptions are being made such as the future of carbon credits or the extent to which land prices will appreciate over time. The second is that we find that project owners or landowners are targeting multiple sources of revenue generation and not just carbon credits. In short, these credits are not the primary source of revenue and, in some cases, account for a relatively minor revenue stream, potentially dwarfed by revenue generated through forestry, agriculture, tourism and also potential for biodiversity payments and credits, another marketplace that is starting to gain traction. These projects must, therefore, be designed to accommodate multiple revenue streams. Finally, different revenue streams will also come online at different times. For carbon credits, this will normally take upwards of five years and, as noted before, other revenue streams may be targeted that will have different time horizons; felling, monoculture, and commercial timber and to restore peatland, for example, may generate a quick but short-term revenue stream whilst ecotourism or sustainable agriculture may take longer to establish. Now, neatly summarising these points, we hear from Ian Callaghan, a climate finance expert. 

[Music flourish] 

Ian:  I’m involved in climate finance in various ways as an intermediary and advisor mainly in emerging markets actually and so it’s interesting to see all this in the Scottish context. What I was most struck by was the lack of transparency as to the economics of these projects. I think if you’re going to have discussions about how much public money goes in to get projects going and how much community money ends up coming out, then you really need to see how these projects are working, what sort of length the return periods are over and whether increases in land values are factored in at least as far as the investors are concerned because otherwise, I think you’re having a discussion about fairness, particularly on the community front and the public money front, which is happening in the dark. I think it would be great if we could see some kind of sample spreadsheets from some of these projects and just begin to understand how the economics fit together. 

Matt:  Now on the price of carbon credits, it was noted how not all credits are made equal in the eyes of those buying them and by extension, those investing in these schemes. The notion of charismatic carbon was highlighted whereby credits generated by some projects might fetch a higher price on the market than others. Because there is no set price for carbon in this voluntary market, we find that carbon credit price can be affected by various project characteristics such as where the project is located or the wider benefits a project may afford nature and its local communities. In short, some projects may attract a premium if they provide customers with that warm, fuzzy feeling associated with a perception that these credits are making a positive difference beyond pure carbon capture. Now to expand upon this a little bit more, we’ll first hear from Grant Moir, the Chief Executive of the Cairngorms National Park Authority, and then Pat Snowdon, the Head of Economics and the Woodland Carbon Code at Scottish Forestry. 

Grant:  One of the other areas that we’re looking at the moment, and this is more theoretical, is the work around Contracts for Difference. Are there other ways that we could set up the peatland work in Scotland to try and develop a different way of doing things that I suppose tries to work a lot like some of the renewable energy side of things that have been done over the years? We’ve been looking at different models around current potential funding models for peatland restoration in Scotland and looking at the current model, things like guaranteed floor price, government bias post-2050 carbon credits and then again, the Contracts for Difference side of things in terms of strike prices around how that all works. These are all just theoretical but, again, we’re looking at what the different options are and what could potentially work better than the current approaches that we have because ultimately, what we’re trying to do is scale and pace of peatland restoration and we need to up the scale and the pace of that work quite significantly to meet current targets but also to make future targets in terms of the 2030 and 2045 side of things. This is the Contract for Difference model. It’s the top-up private payments for carbon credits, so it depends on what the price of carbon credits gets to in terms of what the government will pay and then obviously, once you get over the strike price, then people start to pay back into the government side of things. It’s quite an interesting model. I know lots of different people are looking at this and it’s just one that we’re certainly interested in for the park in terms of whether there is an opportunity to look at these sorts of things and how we could potentially do that. I suppose one of the questions around something like this is how does that then flow back into what community benefits should come from this and how do you make sure that there’s still funding coming back in from the carbon side of things into communities? 

Pat:  In terms of selling carbon units, it could be to a wide range of organisations. There is the potential to stack with other types of credits like biodiversity credits in the future. That is very much a current topic of discussion. We have had people specifically say that nature and community do attract a premium in terms of the carbon price. I won’t dwell on this but the point here is that smaller schemes can benefit from an easier process for validation and verification and there is the opportunity for schemes to group together to reduce the costs as well. 

Matt:  Given some of the uncertainty and risk around revenue generation from these offsetting schemes, there was a call to ensure that further confidence was provided to the market in terms of the price these projects will be able to secure for carbon credits into the future, especially the rate and timing of return on investment. This would help to alleviate risk and attract external investment into these schemes. Some recommended market structures to resolve the situation include some of those borrowed from the energy market such as Contracts for Difference where there is a guaranteed strike price for carbon where the recipient would be topped up if the market price fell below this strike price but also they would have to pay back if it went above this strike price. As well as other solutions, these include a guaranteed floor price for carbon or guaranteed purchases at specific dates at the going market rate such as 2030, 2040 or 2050. Now to explain this a little bit more, we’re going to hear from Grant again. 

Grant:  In essence, is there something that we can do to raise the value of carbon associated with it being done in a national park but also being done in a way that benefits other things other than just straight carbon? Things are being done that also have significant biodiversity benefits, maybe management benefits or maybe community benefits and accrediting any of those schemes or individual projects to actually say that this has, for want of a better word, the National Park stamp that this is a good scheme and, thus, it’s worth more than a standard scheme. Again, we’re just looking at these things at the moment and seeing whether that works, whether it is actually true, whether there is a premium value in the market and how we could actually set that up across not just one national park but you were doing that across all the national parks, would you start to get a bigger market around some of those things?  

Matt:  Central to any revenue is the question of who is buying what you’re trying to sell. In the context of carbon credits, things get a little bit more complicated in so far as the integrity of the seller of credits is only as strong as the integrity of the customer. The main concern here is that credits are sold to customers who are not making a concerted effort to cut their in-house emissions. Buyer integrity standards are being actively explored by government in a bid to ensure that only customers who are making significant strides towards cutting their own emissions are permitted to buy these voluntary credits. In lieu of these, some programmes are implementing their own checks such as the Cairngorms National Park Authority’s partnership with investors, Palladium and Santander, on peatland restoration. Together, they have their own ethical charter in place which serves to screen the types of customers who might buy their credits so that they avoid selling to companies who are not serious about reducing their carbon emissions and, thus, might be accused of green-washing. We’re going to hear from Grant again on this issue. 

Grant:  With the peatland project and doing work with Palladium and Santander on a peatland restoration site in the Cairngorms, one of the key things for me is we’ve got an ethical charter in place around all this work. We’re only partnering with organisations that have made a public commitment to reaching net-zero emissions and have signed up to a credible initiative to deliver on that commitment. Also, we’re not partnering with any organisations with a history of lobbying against climate action and also, we’re not partnering with any organisations with a history of environmental damage or any organisation with a primary source of income from fossil fuel. There are some specific things around the ethical charter that we’re following to try and make sure that with some of those things around the accusations of green-washing, we’re doing the right things with the right people. That key thing for me is that the offsetting side of things should only be for those parts of an organisation or work that cannot be reduced by other means. I think that’s one of the clear things about that pathway to net zero which is that your pathway to net zero can’t be that you say, ‘We’ll offset all our carbon.’ It’s got to be reducing and then what’s left over, you can potentially look at offsetting in the short term and also in the long term, hopefully, you can then reduce that as well. 

Matt:  Now there is also a concern about those customers buying carbon credits being located many thousands of miles away from where they are emitting carbon. It’s not dissimilar to discarding waste into your bin at home and ending up in a landfill tens of miles away that you never see. This can serve to disconnect us from the impact of our emissions and dilute our sense of responsibility for these. This excellent point was made by Dr Jill Robbie, Senior Lecturer in Private Law, at the University of Glasgow. 

Jill:  When we’re thinking about who is buying carbon units as well, it’s important to think about the power these organisations have in order to enforce a particular land use through carbon trading. This decision-making power could be very far away from the particular location of the carbon project and the local community. So, at the moment, non-UK companies can buy carbon units but it’s only to offset their UK emissions. If we allow the enforcement of these land-use agreements by non-UK companies, you can see that the location of power is getting further away from the local community. This situation becomes even more exaggerated and risky if the UK carbon market is linked with the global market which allows non-UK companies to offset their emissions for non-UK-based emissions. 

Matt:  So now we turn to finance and investment for these voluntary nature-based carbon offsetting schemes. We’ve explored how these projects generate revenue but as with any project, capital investment is necessary to get these nature-based schemes off the ground and generating income. The afforestation of moorland or the restoration of peatland is expensive and takes time. They demand significant amounts of patient capital to bankroll the project in the expectation that a good few years down the line, the project will start generating revenue. So, where might this capital finance come from and why? An oft-cited report from the Green Finance Institute called the Finance Gap for UK Nature highlights that Scotland faces a finance gap to restore its natural capital of between £15-27 billion over the next ten years. This gap represents the shortfall between the costs of delivering this natural restoration versus the money that’s been committed and planned going forward primarily from public spending. The discussion at the event then turned to the assumption from policymakers and others that private-sector investment from institutional investors like banks and pension funds will be absolutely critical to filling this finance gap and kickstarting the carbon offset market. By extension, this assumes that public and citizen finance will be insufficient or simply unattractive to those leading the projects. Now this logic is captured perfectly by NatureScot, Scotland’s nature agency, who announced in 2023 a partnership with private finance investors that could mobilise £2 billion into landscape-scale restoration of native woodland. This example was examined in Episode 2 of the mini-series in more detail. Whilst many at the event contested such a central role for private investment, the follow-on question was what role should public investment play alongside private investment. There are already huge sums of public money being invested in Scottish natural capital projects such as through Scotland’s Forestry Grant Scheme and Peatland Action. If much of this is flowing into privately owned projects to support their revenue generation, then what is the appropriate role of public finance? The issue here is that public funds raised through taxation via the general public can be used to support privately owned natural capital projects such as woodland or peatland restoration which could then generate and profit from the sale of carbon credits. Furthermore, it remains to be seen how much of this revenue is returned to the public purse via taxation and also how much is channelled directly into the local community. We now hear from Mark Reed, Professor of Rural Entrepreneurship at Scotland’s Rural College in reaction to a question from Ian Black, Professor of Sustainability at Strathclyde Business School, about the appropriate role public subsidy and finance could play. 

Ian:  I’m Ian Black. I’m a professor practising in the Business School at Strathclyde University. Mark, I just wanted to interrogate a couple of the assumptions and also the paradigms sitting underneath this approach. First of all, there’s the assumption that we need private money and that carbon offsetting markets will reduce carbon. These are essential assumptions that fit under the incredibly detailed work you’ve then done. The paradigm from which the solutions come is that the existing economic system will provide the solutions for the problems that the current economic system has produced; so the current economic system is the reason we have the climate breakdown. I wanted to proceed on this because I think it’s really important for the Scottish Government’s perspective... I enjoy the fact that you’re smiling and you know that you’re going to come in and take my legs away from me with your answer. 

Mark:  Not at all. 

Ian:  Let’s go back to the figure of £44 billion worth of private capital. How sure are we that we actually do need... I think it’s £9 billion in Scotland - that those figures are absolutely rigorous and have high integrity before we go and ask companies to invest that have a long track record of not being trustworthy in delivering what they say they will? How sure are we about that £9 billion because everything else runs from there? 

Mark:  I think you’re right to question that figure. For me, I think that this probably has more political significance than it does scientific integrity. As with all economics, there are huge assumptions that have to be made. I think the message that has been communicated alongside that work from the Green Finance Institute is that there is a gap and that it is big. Exactly how big that gap is is another matter. For me, the key thing is that we use public money responsibly and where we do have public money, that is used to address market failures. Those could be in terms of the habitats, land uses or ecosystem services for which there are no existing markets. There is no market for those things. It could be for existing markets but in locations where it is too expensive perhaps for the market to deliver those benefits but where there may be multiple other public goods from that work. I think we need to target what limited funding we have for market failures. 

Matt:  If we’re not careful, we will see public funding going towards landowners or investors from projects that do not necessarily provide substantive or long-term benefit to the wider public. This could then further entrench Scotland’s already abnormally high concentration of land in the hands of the few. We hear more from Jill Robbie on this. 

Jill:  This can be particularly problematic when landowners and developers are provided with public funding as additional support in order to generate the carbon units which are additional than private sources of income. This is squaring a circle in a sense. When there was a discussion of government guarantees for buying back carbon units, again, you’re just providing more public financing for ways in which there can be income generated and funnelled to private landowners. These factors can combine to make land even more expensive for local communities to purchase land and the risk is that we create a further concentration of landownership in Scotland. 

[Music flourish] 

Matt:  Now we turn to governance and ownership of these carbon offset projects. How we finance a project has a direct bearing on who owns it and, by extension, how it is governed. In short, the type and level of investment a project secures shapes who controls it and who absorbs both the risks and rewards associated with that project. Today, a common approach to the governance of these offset projects is via two types of arms-length entity which are separate legal entities to those investing in the offset project or who own the land the project resides on. These are, firstly, Special Purpose Vehicles. These are companies set up to directly manage and own a specific project. This may often include the ownership or lease of the land where the offset takes place. These will likely be established so that different investors can own a specific share or stake in the operations of that company likely with some degree of limited liability to manage the risks posed to investors. The money generated from that SPV’s project, such as via the sale of carbon credits, is allocated between the shareholders or investors of that SPV. Now the second type of entity sits above these project-specific Special Purpose Vehicles. These are the investors who own a share in that vehicle. A common theme for offsetting at the moment is for one of these shareholders to be a charitable organisation that is partly responsible for governing that Special Purpose Vehicle and is also able to capture a share of the profits they generate. In Scotland, these bodies are often incorporated as Scottish Charitable Incorporated Organisations or SCIOs for short. These are a unique legal form of Scottish charity and are able to enter into contracts, employ staff, incur debt, own property and sue and be sued. They also often exist before the offset project is established. They’re already there and by extension, they have a broader remit that focuses on generating local environmental, economic and social benefits. Finally, they will also be governed by a Board of Trustees that represents key interests from across these different areas and, no doubt, the local community. Now the logic of establishing a project-specific Special Purpose Vehicle, which is partly owned by a charitable body, is three-fold. Firstly, it can blend public and private finance. As a charity, they can draw down grants and social impact investments that a private company may not be able to. Secondly, they can work to support, connect and scale existing projects within the region to achieve landscape scale. In effect, they act as the glue between different stakeholders and landowners to bundle up much smaller offset projects into something that can actually affect real major landscape change. Finally, these charitable organisations act as the party responsible for holding and distributing funds from these projects to local beneficiaries via what is often termed Community Benefit Funds. These funds are generated via the profits from these offset projects. We’re going to talk more about these funds in the last episode. At the event, we heard about two examples of this arrangement. The first was the Flow Country Green Finance Initiative which aims to restore peatland in the far Northwest of Scotland. We also heard about the Cairngorms Trust which operates alongside the Cairngorms National Park Authority. We’re now going to hear more about the Flow Country Green Finance Initiative from Dr Renée Kerkvliet-Hermans from the IUCN UK Peatland Programme. 

Renée:  It’s a really interesting project because it’s a locally-led initiative to really raise money to restore peatlands at scale. It’s combining different landowners and trying to do it at a landscape scale. They’re using a new model which still blends public and private finance but it’s setting up a Scottish Charitable Incorporated Organisation. That organisation is there to hold the contracts with the different landowners and they can then scale existing projects within the region. The aims of that project are really to support community development goals, create high-quality jobs, carbon investments, ecosystem services and support circular business models. There’s also an element of community benefit you have in this project. 

Matt:  We’ve spoken about finance and investment. We’ve talked about governance and ownership and now we turn to policy and regulation. Ultimately, markets are shaped by policy and regulation. There has been a recent push towards implementing a raft of new market codes, guidelines and principles in a bid to ensure that this nature-based voluntary carbon offset market operates more sustainably and more ethically. In many respects, the market has developed quicker than these regulations and guidelines and there is still work ongoing to devise, test and implement these regulatory structures. In broad terms, we can consider these regulatory innovations to fall into two categories. The first are carbon codes and the second are investment principles. Beginning with the first, carbon codes; these focus on different ecosystems, for example, woodland, peatland and grassland and constitute internationally-recognised quality assurance standards for these voluntary carbon offset projects. Their purpose, ultimately, is to provide rigid guidelines for the generation of high-integrity and independently verified carbon credits that buyers and sellers alike can trade with confidence on the open market. Its purpose really is to underpin market trust and confidence. Two of the most well-known examples in the UK are the Woodland Carbon Code and the Peatland Carbon Code. We’ll now hear more about the former from Pat Snowdon again on the UK’s Woodland Carbon Code specifically about why the scheme emerged and what its core design principles are. 

Pat:  What is the Woodland Carbon Code is a question a lot of people will ask. It is UK government-backed. It’s a domestic voluntary carbon standard and so it’s only for generating credits within the UK for organisations within the UK to offset their emissions within the UK. It’s very tightly bound as a domestic thing which removes it from these various discussions that are going on internationally about what you can and can’t do with carbon credits. Its whole purpose, and the same with the Peatland Code, is market trust. Fifteen or twenty years ago, there were some forestry schemes that were criticised quite heavily because there was a lack of standards applied and there was pressure put on the Forestry Commission at that time to come up with a standard which led to the birth of the Woodland Carbon Code. We started working on it in 2007 and it took four years to launch it in 2011. It’s continued to develop since then and it will continue to do so. It’s a very dynamic environment. 

Matt:  The structure these carbon codes assume will have a tremendous bearing on the types of projects we see emerge and the extent to which these are sensitive to issues beyond pure carbon capture. For example, the Woodland Carbon Code includes two principles that clearly step beyond carbon. Firstly, projects should be of high environmental quality and secondly, the projects should be socially responsible and, where possible, offer benefits to the local community. Now for a scheme to be able to generate carbon credits, all projects should initially be able to show that any environmental and social impacts on the land area concerned are likely to be positive. Verification of the project, which is crucial to actually generating the carbon credit, relies on evidence confirming the environmental and social benefits have been delivered. Examples might include biodiversity and habitat creation, improvements in health and well-being, benefits for farming, local employment and educational opportunities. To help investors chart and evidence these impacts, the Woodland’s Benefit Tool has been produced to provide a score across wildlife, water, economy and the community out of five. We’ll hear more now from Pat on the purpose and value of this tool. 

Pat:  What are the main components if you want to do some carbon standards? Well, particularly for nature-based solutions, you need sound science and that’s critical; otherwise, people won’t trust that it will do what it says on the tin. Permanence is an important issue. It’s something that nature-based solutions have to look at quite carefully. We’re in quite a strong position in the UK in terms of legislation because forestry is a permanent change in land use but we also apply buffers and conservative estimates to how we calculate the carbon emissions; basically, if a project can claim in the region of about 60% of predicted carbon sequestration. So there’s quite a wide safety net built into it. Additionality is a vital issue as well. You have to be able to show that the carbon standard is driving additional action towards climate change targets rather than just giving carbon credits to projects that would have happened anyway. This really lies at the centre of all the current debates about integrity in carbon markets. It’s independently validated and verified as Renée mentioned for the Peatland Code and we also have the same carbon registry which provides transparency on the use of carbon credits and avoids double counting.  

Matt:  Sitting above these carbon codes are investment principles. These don’t focus on any one ecosystem such as woodland or peatland and are generally broader than carbon offsetting too and offer high-integrity investment principles for all natural capital investment. They’re considerate of the balance of ecosystem functions that a parcel of land supports such as water quality management, flood risk management, resilient supply of crops and carbon or biodiversity outcomes. In effect, these principles will lay out some rules of the game for natural capital markets and by extension, carbon offsetting. Examples include the UK Government’s Nature Investment Standards Programme which is being led by DEFRA (Department for Environment, Food & Rural Affairs) and the British Standards Institute. There is also the offset-specific Integrity Council for Voluntary Carbon Markets or ICVCM for short which has produced the Core Carbon Principles (CCPs) which outline a set of new threshold standards for high-quality carbon credits. Closer to home are the Scottish Government’s Interim Principles for Responsible Investment in Natural Capital. These present a values-led, high-integrity market for responsible investment in natural capital that helps deliver policy goals for economic transformation, climate change and biodiversity. At the same time, these are designed to provide community benefits that support a just transition. We now hear from Kate Dowen, Head of Sustainable Nature Finance at Scottish Government, about these principles in more detail. 

Kate:  Last year, our Minister for Environment and Land Reform announced our Interim Principles for Responsible Investment in Natural Capital. This is our first attempt at setting out our minimum level of expectations for the market to develop. We’ve got an aspiration to establish these principles with further guidance around them, potentially depending on wider legislative timelines with a bit more teeth. We did a stakeholder engagement event on these principles with the Scottish Nature Finance Pioneers group last year and the kind of feedback that we got was that they all looked good on paper but how are you going to put these into practice? Where is the guidance going to come from? What are the expectations with more detail? How can you strengthen these so that they are generally followed? Getting into the principles in a little bit more detail, the first one is around investment delivering integrated land use. This is about how we can make sure that investment isn’t just having a sole carbon focus. This is also linked to the work that Scottish Government is doing around a well-being economy and also quite linked to the fact that these investments should really respond to local circumstances, so there’s not a one-size-fits-all approach. The second and third I’ll take together. This is investment that delivers public, private and community benefit and demonstrates engagement and collaboration. Between Highlands and Islands Enterprise and the Land Commission, lots of work has gone into developing some draft guidance. Some draft guidance on community benefits has just been out for consultation. I think it’s really valuable to look at that and reflect on that a little bit more. It links to that discussion and debate we were just having with Grant about what constitutes the community benefit, what the circumstances are locally and what direct benefit looks like. Is it important for that community to have some sort of local wealth fund or is it more important to have local housing, jobs or wider provisions like local infrastructure such as schools, GP services and things like that? There’s the principle around investment that’s ethical and values-led. This is linked to the principles of the UN PRI and the Principles for Responsible Investment. That’s the kind of guidance that we have there at the moment. We need to do more work to think about how we can expand that and then investment that’s of high environmental integrity. That’s investment that uses these government-backed codes that we have that are really rigorous, evidence-based and have really high integrity but also buyers of these carbon units or environmental outcomes doing that with their own Paris-aligned decarbonisation plans in place. Finally, investment that supports diverse and productive land ownership. This is about all of the questions around whether land ownership is actually necessary and promoting models where you potentially don’t need to further all of the issues around land acquisition and you could potentially work with existing landowners or look at different models. 

Matt:  It is important to note that many of these market and investment principles are still in development whilst others are purely voluntary guidelines such as the Integrity Council for Voluntary Carbon Market Framework. In time, these could well become formal regulations that are mandated by governments and/or the certification bodies that govern the carbon codes, i.e. non-compliance means that carbon credits will not be forthcoming to the investor or landowner. Either way, there are a number of open questions about how these principles ought to evolve into the future to ensure a high-integrity market and one that can benefit local communities. To explain a little bit more, we hear from Professor Mark Reed about some of these open questions. 

Mark:  Finally, we need some core principles to bring consistency across all of these mechanisms and markets and where possible, I think it would be useful if these were built on international initiatives like the International Council for Voluntary Carbon Markets or ICVCM so that we’ve got a certain level of consistency with global voluntary markets. I think if you look at ICVCM’s consultation, the answer to that is going to be, to an extent, that not all of the recommendations will apply in the UK or at least if we try and apply them, they will fundamentally undermine our existing markets. Here’s my first attempt to think about the kinds of principles we might want to shape ecosystem markets in the UK based on an analysis of UK and existing markets and principles proposed by international bodies like ICVCM and a whole load of others. You can see, just in this screenshot, the level of detail that you’ve got here and we’re just going to look at that left-hand column in terms of those plain English principles, I hope, in each of these different categories just now. This builds on a load of really great work going on at the moment. The Scottish Government has already published its own interim principles. DEFRA will be shortly publishing some of its own principles. The BXI initiative that I’ve been talking to you about is leading a process now to prioritise the most important of these principles that need to be adopted ideally across UK markets. How can high-integrity, socially just ecosystem markets deliver transformational benefits to local communities and other local rights users? How might this go beyond community wealth funds to facilitate strategic development that sustains vibrant rural communities long into the future? How can policies, codes, standards and market infrastructure be designed to ensure communities are protected and derive significant benefits? How can communities engage with and shape ecosystem markets and the emerging policies and other mechanisms that govern these markets? To conclude, taken together, the emerging framework that I’ve described here could, in theory, be used to design and help us to operate high-integrity ecosystem markets in the UK. Looking across what’s happening internationally, we are at the cutting edge of a lot of this stuff in the UK and I think a lot of people are looking at what we’re doing internationally as well. Especially as we think about this together in the next couple of days, my hope is that as we develop and scale these markets, communities aren’t just not left behind but they are front and centre in our attempts to responsibly build and scale these markets. 

Matt:  Now whilst much of the focus is on carbon codes and natural capital investment principles, much of what dictates who can access the voluntary nature-based carbon offset market is bound up in questions of land reform. If one cannot gain access to land, then one is at a natural disadvantage in accessing this emergent and potentially lucrative market. Policy examples relating to land reform include questions of how we tax land, legislation that can give communities first refusal to acquire land, public interest tests that determine who is eligible to purchase large landholdings and also land management protocols that dictate how landowners should or should not manage their land. Who better to hear from about the priorities for land reform, including the role of the community in nature-based carbon offsetting, than Alastair McIntosh? 

Alastair:  I’m Alastair McIntosh. I’m an independent scholar and writer on climate change, community, spirituality and the things that give deeper meaning to life. My reason for being here is that carbon offsetting is an entirely new dynamic that is landing on Scotland and is creating new apparent value out of the land of Scotland at a time when the priorities of many of us, and certainly the priorities of the new Scottish Parliament at the beginning of this millennium, was land reform so that we didn’t just rewild but we also repeopled. The problem with creating new forms of value in the land is that if there is no community agency and communities lose control over their own place because of inflating capital values and hopes of return, that disempowers communities. I am here today to see what voice policymakers can ensure that communities are given. Do policymakers really understand communities in rural areas that are primarily affected? Will they champion that cause and ensure that it is properly integrated with our land reform agenda? There are two main types of community. There are communities of interest; for example, a local shooting club, a bird-watching group, landowners and venture capitalists who have a common interest in what can happen in a given place. There is then a much wider, overarching community of place such as a community council or a community land trust where these things are democratically accountable to the principal stakeholders as the people who live in or around about that area. Community takes us very deep into what it means to be a human being. We talk of soil, soul and society. Soil; our relationship with nature. Soul; our relationship with what it means to be most deeply human. Society; our relationship with one another. The community is not just another word for society. Community is about an integrated approach to living such as we see well-expressed in the 17 United Nations’ Sustainable Development Goals which form part of Scotland’s National Performance Framework. We’re kind of partly there. We’re theoretically there in terms of policy dynamics and to me, the importance of this two-day conference is to carry us further. The fundamental question is do communities have control? Do they have agency in what is happening on the land in which they live and for which they have historic and current responsibilities? 

[Music flourish] 

Matt:  I hope you’ve enjoyed that deep dive into the world of carbon offsetting and hearing from some of the foremost experts on this fascinating topic. You’ve been listening to Local Zero and if you enjoyed this episode, please share it with friends and colleagues and stay tuned for more episodes taken from this conference. Please remember to check out our website, LocalZeroPod.com, where you can listen to the back catalogue and search for episodes by keywords or topics. You will also find the other episodes that are part of this mini-series on community carbon offsetting but until then, bye for now. 

[Music flourish] 

Produced by  

BESPOKEN MEDIA 

Transcribed by 

PODTRANSCRIBE