Government-backed initiatives have contributed to the appeal of timber investments as an attractive investment option for companies, NGOs and individuals alike. The UK Forestry Commission has made progressive efforts in employing new sequestration and conservation initiatives as well as financial incentives to stimulate new forestry creation and conservation as well as to encourage sustainable timber projects.
Forestry Investments and Carbon Sequestration
Forestry investments in the UK are receiving a boost from the government’s emissions offsetting policy. The UK government plans to reduce the nation’s greenhouse gas (GHG) emissions by 34 per cent from the 1990 levels by year 2020. By 2050, the goal is that emission levels will be 80 per cent less than what they were over two decades ago. The UK Forestry Commission estimates that there are 8,000 hectares of trees planted each year in the UK. It further suggests that if forestry investments plant 15,000 additional hectares each year, then by 2050, these trees, combined with the ones planted since 1990, can sequester as much as 10 per cent of GHG emissions. This might not seem like a lot, but is still a significant amount that will help the UK meet its emission reduction targets. The UK Forestry Commission launched the Woodland Carbon Code in July of 2011 to provide a “consistent national approach, as well as clarity and transparency to potential investors about just what their money should buy them.” The Code spells out the design and management requirements for UK-based forestry investments, which can aid investors in choosing reliable and validated offset projects to invest in.
Forestry Restoration Initiatives
Besides encouraging forestry investments as a way to meet its GHG emission reduction targets, the UK government has also undertaken efforts that can support forestry investments aiming at restoring degraded forestland. The Forestry Commission’s goal is to prevent environmental damage that is the by-product of massive deforestation – water contamination, reduced land productivity and rural energy issues and biodiversity challenges. The latest of these large-scale initiatives is the cooperation between the UK and the Indian government to exchange expertise and improve the management of restoration projects in both countries. The first phase of the initiative was recently completed and provides an overview of UK’s forest restoration activities and the way they contribute to biodiversity. What this means for investors is that government transparency will help them gain a much better perspective on the current investment environment and identify opportunities they can take part in. England’s Kiedler, the nation’s largest man-made forest, for example, used to be a timber-producing forest, which has now been converted into a biodiversity area providing benefits for the local economy, tourism and wildlife. The UK’s forest restoration expertise has historically shown impressive results. According to the Forestry Commission, at the beginning of the 20th century only about 5 per cent of UK’s land was covered with trees. Today, this figure has more than doubled, reaching 13 per cent. While the government’s commitment to supporting forest preservation and biodiversity continues to evolve, so will opportunities for forestry investments.
Timber Production and Woodfuel
The latest national statistics on UK wood production and trade seem optimistic for timber investments. The Forestry Commission estimates that timber harvest, production and deliveries to UK industries have increased between 2009 and 2010. For example, in 2010, 9.7 million green tons of softwood and 0.5 million green tons of hardwood were harvested in the UK. The country’s total roundwood deliveries for the year were estimated at 9.9 million green tons, an increase of about 12 per cent from the amount delivered in 2009. In addition, 3.1 million cubic meters of sawnwood and 3,4 cubic meters of woodbased panels have been produced, an increase of 7 per cent and 11 per cent respectively from the production figures for 2009.
Woodfuel has seen one of the biggest leaps in consumption over the past years. Figures show that from 2005 to 2009, woodfuel deliveries jumped from 100 thousand green tons to 650 thousand green tons. These numbers will likely increase in the coming years with the newly implemented government initiatives.
To encourage timber investments within in the country, and woodfuel production in particular, the UK Forestry Commission launched the Woodfuel Implementation Plan on 29 June 2011, outlining that the Commission will: encourage the use of woodfuel for more efficient heating systems; assist rural businesses in expanding the local woodfuel industry; and provide subsidiaries for road development so that timber from thinning is easily transported to the market.
In addition, the Renewable Heat Incentive (RHI) implemented by the government in March of 2011 provides financial support to commercial, public and, as of August 2011, domestic renewable heat projects, including woodfuel technologies and installations. Under RHI, the woodfuel installation owner will be receiving continuous income from the government for 20 years after the initial setup, making the use of woodfuel commercially more attractive than fossil fuels. When we add to this the increasing prices of oil and other imported fuels, it is easy to determine why domestic timber has now become one of the most efficient and cost-effective energy sources. These factors are likely to increase demand for domestic timber in the future, which in turn will bring higher revenues for timber investments.
Government Grants
There are a number of grants available for the development of timber investments across the UK.
- Woodland Improvement Grant (WIG) provides funding for forestry investments to support the benefits that these projects deliver to the public – biodiversity, scientific advancements and accessibility to the public. Therefore, some of the funds under WIG are the Woodland Biodiversity Action Plan, Woodland Sites of Special Scientific Interest (SSSI) Condition Improvement and Woodland Public Access.
- Woodfuel WIG is a new grant, which supports the sustainable production of woodfuel and other timber products. It is designed to fund the development of roads and infrastructure that are essential for harvesting and transporting timber out of the forest.
- At local level, the Scotland Rural Development Programme (SRDP) provides grants for timber investments, which grants can be used towards buying equipment to harvest and process woodchip or pellets.