Factors Influencing Prices for Woodland Carbon

The forestry market has seen a record-breaking year, with average values more than double what they were three years ago and the total value of the forestry investment market reaching a new high, according to the latest UK Forest Market Report. 

The annual report, produced by Tilhill and John Clegg & Co, is now in its 23rd year and is regarded as the most comprehensive publicly available record of forestry transactions in the UK. This year it highlights that the sector is attracting unprecedented levels of interest from commercial forestry buyers and financial institutions. Some are experienced forestry investors, but others are new market entrants with multiple objectives – part financial and part related to Environmental, Social and Governance (ESG) considerations or natural capital outcomes. 

The report shows that in 2021 a total of £200.40m of forestry properties were traded, making it another record year for the sector. This year it includes a new section on the market for planting land, which shows an additional £53m worth of land suitable for afforestation transacted, plus £26m worth of natural capital land. 

Key findings: 

• 21% increase in forestry values from just under £16,000 per stocked hectare in 2020 to £19,300 per stocked hectare in 2021. However, the spread in prices paid is wide, with significant geographic and quality variations. 
• The total value of the forestry market was £200.40m in 2021 (just over the £200.18m in 2020), with 70 planting land deals also struck worth £53m. 
• 10,400ha (gross) of forestry traded in 2021 (67 forests), compared with 12,500ha in 2020. 
• Decrease in average size of a property sold from 206ha in 2020 to 155ha this year. 
• Scotland provided largest share of commercial forest market at 76% by value. 

Nature-based solutions, carbon and the long-term outlook for timber

CarbonStore’s David McCulloch contributed to the report with an in-depth look at the factors influencing prices for woodland carbon. David said:

“The woodland carbon market is a nascent but promising sector. It is overseen by a respected and trusted body, the Woodland Carbon Code, and it has witnessed steep growth in both the total value of woodland carbon transactions and the value of its individual units. Growth in demand for woodland-generated carbon credits is widely expected to increase further.”

“The strong level of interest in The UK Forest Market Report neatly illustrates how much attention the forestry sector is gathering. I was particularly encouraged by the number of questions about woodland carbon-related topics fielded during the Q&A session at the launch event. This is another fast-growing segment of the forestry market and I am sure that the opportunities presented by carbon-oriented funding, along with the new type of institutional investor which the carbon-related opportunity is attracting, were an important influence on the 45% year-on-year growth in the area of plantable land purchased during the year. It’s all nice confirmation that government policy, the Woodland Carbon Code, and the private sector are working together effectively and harmoniously to achieve a very positive outcome.”

The report also carries a guest contribution from Stuart Dobrijevic, asset manager for Abrdn, who writes about how the business is committing capital to ‘nature-based solutions’ which will help to tackle climate change. An Abrdn-managed fund has already bought an area of about 1,400 hectares in the Cairngorms National Park where large-scale native woodland creation and peatland restoration will take place. 

Meanwhile, Dan Ridley Ellis, Head of the Centre for Wood Science and Technology at Edinburgh Napier University, considers what the outlook is for the forests that are being planted now, suggesting how the possible uses of forests and forestry products may change in the decades ahead.

The UK Forest Market Report has been produced since 1988 and the data series now covers 23 years, incorporating 1,909 transactions which total some £1.6 billion and 299,000 stocked hectares (ha). Read full details in The UK Forest Market Report 2021.

For more information and to download the full report, visit the Tilhill website: https://www.tilhill.com/resource-hub/publications/the-uk-forest-market-report/