Written evidence submitted by the Woodland
Trust
The Woodland Trust welcomes the opportunity to respond
to this consultation. The Trust is the UK's leading woodland conservation
charity. We have three aims: to enable the creation of more native
woods and places rich in trees; to protect native woods, trees
and their wildlife for the future; to inspire everyone to enjoy
and value woods and trees. We own over a 1,000 sites and have
more than 300,000 members and supporters.
SUMMARY
- Significant barriers exist that prevent the creation
of new native woods and the planting of trees. Investing in woodland
creation and tree planting is a key component to achieving a low
carbon society as trees and woods remove carbon from the atmosphere
whilst enabling wildlife and people to adapt to the effects of
climate change. The Green Investment Bank (GIB) should therefore
be pivotal in alleviating the barriers facing those who wish to
invest in woodland creation.
- The Woodland Trust believes that there are compelling
economic, environmental and social reasons for funding woodland
creation. Creating new woods and planting trees is not a luxury
but essential if the UK is to tackle challenges such as climate
change mitigation and adaptation, wildlife loss, improving public
health - both physical and mental - and shaping places where people
want to live, work and spend their leisure time.
- There are a number of investment vehicles the
GIB could use to fund woodland creation and these include green
bonds, green ISAs and a green investment debt fund. By creating
these structures the GIB can provide the long term stability and
framework needed in order to direct finance into environmental
projects.
The significance of any barriers or "market
failures" requiring the establishment of a Green Investment
Bank, and any risks of not getting this done quickly
1. The Woodland Trust believes that there should
be at least twice as much native tree and woodland cover in the
UK because trees and woods bring so many benefits to society -
these include carbon abatement, supporting productive agriculture,
enhancing landscape amenity and improving water quality. Regrettably
significant barriers exist for those organisations and individuals
who may be considering investing in woodland creation as evidenced
by the fact that for all the images of a green and pleasant land
the UK is one of the least wooded countries in Europe and planting
rates with broadleaved species have halved in England in the last
six years. The nature of the investment - often high capital costs
that are repaid in the longer term with a low rate of return -
can dissuade investors as can the risk of land devaluation and
the initial cost of establishing and maintaining the trees. Sometimes
the beneficiaries of the expenditure are not always those delivering
the upfront investment - for example a private company planting
trees may find that the most significant health savings are made
by the NHS rather than inside their own organisation. Moreover,
the complex nature of the current support mechanisms can act as
a disincentive for investors and those prepared to plant trees
on their own estate. It is necessary to ensure that the private
sector is rewarded when their tree planting delivers on public
policy.
2. Moving forward the establishment of a GIB
could be crucial in fashioning the mechanisms that provide the
long term security and framework within which the barriers to
woodland creation can be removed or mitigated. In their report,
the Green Investment Bank Commission noted that the GIB should
operate in partnership with the private sector (rather than acting
in competition), invest in projects that cannot be funded by commercial
banks but have environmental significance, and act only when intervention
can accelerate market interest in green projects.[1]
Funding woodland creation meets all these criteria as the GIB
can provide the long term safety for those wishing to plant trees,
low interest loans or grant aid for projects which have genuine
ecosystem benefits and stimulate market interest in tree planting
and mass woodland creation.
3. At a time when there is recognition across
the political spectrum that there needs to be an increase in tree
planting rates - the Low Carbon Transition Plan[2]
and Read Report[3]
both detailed the benefits - it could be potentially disastrous
if the GIB was not empowered to fund tree planting projects. The
Read Report advocated planting 23,200 ha per year over the next
40 years as "this could, by 2050, be delivering, on an annual
basis, emissions abatement equivalent to 10% of total GHG emissions".[4]
Meanwhile the recently published Lawton Review demonstrated that
the UK must redouble its efforts if it is going to create fully
functional ecological networks.[5]
It is therefore important that woodland creation be funded through
the GIB as it is one crucial method for delivering on the aspiration
to restore and safeguard the ecosystems that sustain our quality
of life.
The objectives and roles the Green Investment
Bank should assume, the areas it should operate (and not operate)
in, and how its lending and investment decisions should balance
green benefits against financial risks
4. The Green Investment Bank should finance those
environmental projects that afford multiple environmental, social
and economic benefits but struggle to access finance from commercial
outlets due to the nature of the investment - often a low yield
investment that repays over a longer term than its competitors.
From the Trust's perspective tree planting fits this model as
it is perceived as an unattractive investment when compared to
other opportunities. Nevertheless it delivers a range of benefits
such as absorbing carbon from the atmosphere, aiding the management
of flooding and improving water quality and supporting productive
agriculture. Importantly there are a multitude of economic, environmental
and social benefits associated with woods and trees which are
outlined below:
THE COMMERCIAL
BENEFITS
- Acting as a cost effective tool for absorbing
carbon from the atmosphere. Mixed woodlands managed for multiple
objectives can deliver abatement at less than £25 per tonne
of CO2 (the Committee on Climate Change considers £100
per tonne to be good value and David Reid considers his figure
to be "pessimistic" as it does not include the co-benefits
woodland provides).[6]
- Aiding the management of flooding and improving
water quality. Research has shown that increasing tree cover in
urban areas by 10% reduces surface water run-off by almost 6%.[7]
- Supporting employment: the timber industry is
estimated to employ about 55,000 people in Great Britain.[8]
- Branding and market research opportunities.
THE ENVIRONMENTAL
AND SOCIAL
BENEFITS
- Supporting productive agriculture including the
maintenance of healthy populations of pollinating insects (estimated
to be worth between £120-£200 million per year) and
providing on-farm energy generation.[9]
- Improving health outcomes as trees and woods
could save millions in healthcare costs. Around £110 billion
is spent each year in the UK on healthcare, equal to 8.5% of all
income. It has been estimated that if every household in England
had good access to quality green spaces such as woodland it could
save around £2.1 billion annually.[10]
- Reducing the radiant heat in urban areas and
providing shade and shelter.
The Green Investment Bank's investment priorities,
and whether and how the bank should support and foster areas where
the UK has emerging green technology strengths
5. The Trust believes that there is a compelling
business, environmental and social rationale for funding woodland
creation and tree planting. Once created the GIB will have the
advantage of being able to co-ordinate financing and provide the
long term security for environmental investments. For example
to double native tree and woodland cover across the UK in 50 years
there needs to be an average of 15,000 ha planted per annum and
this involves planting approximately 22 million trees. Assuming
that the average cost per established tree is £2 then the
bill per year is £44 million (£440 million by 2020 and
£2.2 billion by year 50). Given the wide range of benefits
increasing native woodland cover affords this is not an unreasonable
expense and would be a fraction of the £550 billion the Green
Investment Bank Commission estimated was needed between now and
2020 to deliver a low carbon economy.[11]
The funding and governance structures required
to create an effective and accountable body, including the role
of "green bonds"
6. The Green Investment Bank will need to be
independent from government, transparent and accountable if it
is going to imbue investors with a sense of confidence. In terms
of funding woodland creation there are a number of mechanisms
the Bank could consider using to stimulate investment. These include
the following points:
GOVERNMENT GRANTS
7. The report by the Commission suggested that
the GIB should act as the administrative arm for all low carbon
grants by merging organisations such as the Carbon Trust and Technology
Strategy Board within the competence of the Bank. Assuming the
GIB was to become the source for grant funding it is essential
that the recipients of these grants are environmental projects
such as native woodland creation where the motivation for the
investment may be to deliver on conservation objectives or ensure
other public benefits like civic amenity. Such grant funding is
justifiable because woods and trees deliver a range of benefits
such as alleviating flooding (and in the longer term perhaps reducing
insurance costs), carbon storage and improved public health. These
are all of commercial value but are not easily delivered by private
sector investment.
GREEN BONDS
(WOODLAND BONDS)
8. Green bonds are seen as a vehicle for tapping
into the longer term and lower risk investment market. Due to
the long term nature of any investment it is likely to appeal
to the institutional investors, and in particular UK Pension funds,
which by the very nature of these funds are long term investments
with averaging liabilities of 20 years or more. Their current
investment strategy is naturally driven into equities and long-term
bonds; and this structure fits well with a climate related product
and may appeal to insurance companies and investment/pension funds.
For green bonds to be attractive they may need to be rated by
an external agency and they will require a positive reason over
and above their green credentials to encourage investors to switch
to them. Bonds could be used to either fund a GIB, whereby the
GIB is the issuer of the bond for individual projects such as
woodland creation. In order for the Green Bonds to flourish there
is a need for all participants to make a return on the investment
as it is inadequate to simply label a bond as "green"
and expect mass investment. Indeed, green branding alone may only
have a limited appeal to a small minority of socially responsible
investors or ethical funds and therefore be unable to unlock the
capital needed. A green bond market should therefore reflect existing
bond markets so that potential investors feel comfortable with
it as an investment vehicle.
GREEN ISAS
(WOODLAND ISAS)
9. The Commission's report argued that the Government
could consider raising the personal allowances for Green ISAs
and using the inducement of additional tax credits and/or low
interest rates to stimulate investment. The GIB could manage these
Green ISAs and market the product for people who had an interest
in supporting woodland creation. As with the Green Bonds, part
of the profit made from the favourable taxation and interest rates
could be hypothecated into a particular tree planting project
and may generate funds for the National Tree Planting Campaign.
As mentioned above, the Read Report produced for the Forestry
Commission demonstrated that woodland creation is a cost effective
method of removing carbon.[12]
Given these carbon savings Green ISAs should support a woodland
creation drive as part of the carbon abatement strategy envisaged
by the Commission's report.
GREEN INVESTMENT
DEBT FUND
10. Any profits from the Green Investment Bank
could be re-invested into a green investment debt fund as laid
out by the Commission report. Woodland creation could be funded
by low interest loans from this fund as it may enable those who
struggle to access the finance from commercial banks to do so
and bring woodlands into management for projects such as renewable
energy production. Any additional surpluses could also be re-invested
into conservation projects that are not commercially viable but
are of environmental and social value.[13]
LEVY ON
ENERGY BILLS
11. Another method for raising funds suggested
by the Commission was an additional levy on electricity bills.
Consumers already pay environmental levies on their energy and
so any additional charges should demonstrate direct and tangible
benefits. Tree planting would be an ideal investment opportunity
for this type of funding stream as the energy companies or the
GIB could show how the additional expense was delivering benefits
for the consumer in terms of creating woodland that offers ecosystem
benefits like improved air quality and scenic green space for
the public to enjoy.
CLIMATE LEVIES
European Emissions Trading Scheme and the Renewables
Obligation
12. There are a range of climate change levies
that may be used to capitalise woodland creation projects. These
include the European Union Emissions Trading Scheme (EU ETS) and
the Renewables Obligation. Given the low cost and high carbon
return of trees and woodland - alongside the other ecosystems
benefits - there is a strong case that businesses should be able
to use woodland creation as a mechanism for claiming permits under
the ETS (it would need to be additional to existing woodland creation
in the UK). Woodfuel and biomass production could also be counted
under the Renewables Obligation as a means of bringing woods into
management or financing new creation.
The Kyoto protocol
13. The Kyoto protocol gives each signatory a
target for limiting or reducing emissions expressed as levels
of allowed emissions or "assigned amounts". Signatories
to the protocol can also generate credits for activities that
absorb carbon from the atmosphere such as woodland creation. At
present the Government includes grant-funded woodland creation
in its UK greenhouse gas reporting meaning that private investors
are unable to use domestic forestry as a carbon offset. By retiring
its claim to the Assigned Amount Units (AAUs) for domestic forestry
the Government will help stimulate the type of private sector
investment needed to deliver on the aim of the UK Low Carbon Transition
Plan to create an additional 10,000 hectares per year for the
next fifteen years in order that those growing trees could remove
up to 50 million tonnes of carbon dioxide between now and 2050.[14]
Sale of government assets, the public estate and
regulatory powers
14. The Commission recommended that the sale
of government assets might be used to capitalise the bank. Whilst
the Coalition government appear to have rejected this as an option,
there is logic to reinvesting the sale of public land - such as
some parts of the Forestry Commission estate which deliver limited
public benefit at present - into woodland creation, restoration
and protection as this may stimulate a drive of activity in the
private sector that will deliver on public policy.
15 October 2010
1 The Green Investment Bank Commission, Unlocking
investment to deliver Britain's low carbon future (2010),
pp. 14-15. Back
2
Department for Energy and Climate Change, The UK low carbon
transition plan: national strategy for climate and energy
(2009). Back
3
Sir David Read on behalf of the Forestry Commission, Combating
climate change a role of UK forests: An assessment of the potential
of the UK's trees and woodlands to mitigate and adapt to climate
change (2009). Back
4
Ibid, p IX. Back
5
A report chaired by Sir John Lawton, Making Space for Nature:
A review of England's Wildlife Sites and Ecological Network (2010). Back
6
Sir David Read on behalf of the Forestry Commission, Combating
climate change a role of UK forests, p. IX. Back
7
Sustainable Cities, Using green infrastructure to alleviate
flood risk (2006), at: http://www.cabe.org.uk/sustainable-places/advice/green-infrastructure-and-flood-risk
Back
8
Woodland Trust, Making Woodland Count (2009). Back
9
DEFRA, Farming Link April 2009: Honeybees in crisis (2009).
Back
10
Woodland Trust, Greening the Concrete Jungle (2010). It
is also worth reading the foreword from the Rt Hon. Caroline Spelman
in the Natural Environment White Paper where she offers a figure
for the health savings that accrue from a health natural environment:
Defra, An invitation to shape the Nature of England (July
2010) at: http://ww2.defra.gov.uk/2010/07/27/caroline-spelman-speech-white-paper/
Back
11
For an estimate of the investment required to achieve a low carbon
economy see Unlocking investment to deliver Britain's low carbon
future (2010), p. xiii. Back
12
Read, Combating climate change a role of UK forests, p.
ix. Back
13
Green Investment Bank Commission, Unlocking investment to deliver
Britain's low carbon future, p. 15. The Commission suggested
operating a separate fund on non-commercial terms for projects
that may be unable to secure private funding. Woods and trees
act as carbon sinks, however, projects that support their creation
and protection may struggle to secure private financing. Therefore
the Bank could plug the funding gap and recuperate the investment
as land values increase. Back
14
Department for Energy and Climate Change, The UK low carbon
transition plan. Back
| 
