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Jeremy's Blog 3rd December 2021: Forestry

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 3rd December 2021.

With strong commodity prices (and their input costs), one established trend has been the growing strength of commercial forestry with harvested timber’s uses from construction to biomass now having more value as part of reducing carbon emissions in the wider economy. Economics and policies make this a different market from farm woodlands or from using standing trees to sequester carbon or offset phosphates.

This major land use change, locking land into trees and timber production indefinitely, plays to a different mindset, time horizon and scale of activity than are natural to farming. Confidence in strong timber prices, perhaps already factoring in expectations of growth in values yet to be seen, is now an increasingly competitive bidder for land in areas of lower farmland values. While commercial forestry has followed the end of tenancies in west Scotland, it is now happening by land purchase. That is largely an investor market, now attracting funds and offering an exit route for some retiring farmers.

Rising plantation prices have been analysed to imply rising land values, perhaps often of the order of £5–6,000 per acre. While foresters grumble that much of England is out of reach, forestry’s chequebook now reaches further to buy farms in, say, mid-Wales and Aberdeenshire for planting. Those purchases are reawakening old antagonisms as farmers see hard-won and hard-held land change leave farming, suspicious that this is funded by public policy over carbon and feeling echoes of 1980s pension fund forestry investment.

Forestry has indeed been used for commercial offsetting – the Californian fires saw some of that go up in smoke – but that is now challenged by the requirement for “additionality”. Variously defined, “additionality” rules out accepting environmental improvements that would happen anyway as available for offsetting. That focuses new money where it can drive real change. The failure of many offsetting schemes to offset securely is leading investors, lenders, verifiers and auditors to tread more carefully. Where commercial forestry is seen to be viable in its own right, it would not count for, say, biodiversity gain or carbon offsetting.

There are other markets for trees to give the century-long assurance for carbon or phosphate offsetting, accepting possibly reduced opportunities for harvesting. Commercial forestry now derives economic value in the marketplace from the hope of supplying a lower carbon economy, not from the relatively small sums payable now for carbon sequestration. They might be icing on forestry’s cake but could yet prove to frustrate its timber production purpose.

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