Additionality shall be demonstrated through the tests set out below. Test 1 and Test 2 plus one of Test 3 or Test 4 must be passed to ensure additionality.
This requirement is only checked at validation.
The term additionality is used to mean the carbon sequestration over and above that which would have happened anyway in the absence of a given project or activity.
Buyers of carbon units want to know that their input has enabled more carbon sequestration than would otherwise have happened under existing legal, financial and business circumstances. Under the financial consideration, a project is only 'additional' if it requires carbon income to turn it from a project which is not financially viable/worthwhile (in its own right, or compared to an alternative non-woodland use) to one which is financially viable.
If wish to create woodland and use the carbon units against your business’ own emissions in the future, enter the price you would otherwise have to pay to buy carbon units on the open market. See examples of those who are 'growing their own'.
With the Woodland Carbon Code, wider benefits of woodland creation projects are ‘bundled’ with the carbon unit when they are sold. It may be possible to ‘stack’ credits generated from a woodland creation project (e.g. where payments are made/ credits generated for biodiversity, water, nitrate reduction), provided certain criteria are met and any claims made are clear and explicit.
At the time of validation, all expected income streams/credit sales should be included in the Woodland Carbon Code additionality assessment.
If further income streams/ credit sales are identified at a later date, evidence may be requested to show that the project was not aware of this income opportunity or had not entered into a separate agreement at the time of WCC validation. If Woodland Carbon Code projects are subsequently found not to meet any of the requirements above, the project and carbon units may be cancelled from the UK Land Carbon Registry.
Levels of woodland creation across the UK are generally low at present, and woodland creation targets of 30,000 hectares per year, to help meet the target to be Net Zero emissions by 2050, are challenging. Income from carbon sales will encourage some new landowners to plant, and other landowners might wish to create their own 'store' of carbon credits to use against their wider business' emissions.
The Woodland Carbon Code applies a project-based approach to assessing additionality. This guidance has been adapted from the CDM Tool for the Demonstration and Assessment of Additionality in A/R CDM Project Activities (Version 02) in order to take account of policy instruments operating in the UK.
There are four tests of additionality used within the Woodland Carbon Code:
- Legal test
- Contribution of carbon finance test
- Investment test
- Barrier test
Tests 1 (Legal) and 2 (Contribution of carbon finance) must both be passed. If Test 3 (Investment) is not passed, Test 4 (Barrier) may be used if there is good evidence for this.
In summary, Test 1 AND Test 2 plus ONE OF Test 3 or Test 4 must be passed to ensure additionality. See Flow Diagram (pdf) for clarification.
Woodland creation that is required by law is not additional, whether under legislation set by the EU, UK, devolved administrations or local government. A woodland creation project passes the legal test when there are no laws, statutes, regulations, court orders, environmental management agreements, planning decisions** or other legally binding agreements that require its implementation, or the implementation of measures that would achieve equivalent levels of sequestration or other greenhouse gas emissions reductions.
Compensatory planting to replace areas of woodland that are felled (e.g. for development or restoration of open habitats) or areas felled due to a Statutory Plant Health Notice are not additional.
**Woodland creation as a result of a planning condition under a Town and Country Planning Act may be eligible provided:
- There is a range of possible environmental solutions and woodland creation is not specifically required.
- The income from the developer/ planning condition doesn’t rule the project out under investment test 3
- The Town and Country Planning Act (1990), Section 106 Planning Obligation (for England and Wales)
- The Town and Country Planning Act (Scotland) 1997, Section 75 Planning Obligations
- The Planning Act (Northern Ireland) 2011, Section 121 Planning permission to include appropriate provision for trees
In order to show the significance of income from carbon units, projects shall demonstrate that income from the sale of carbon units, over the project lifetime, equates to at least 15% of the project’s planting and establishment costs up to and including year 10.
It is acceptable for the combined income streams for the project (e.g. grant, carbon and other income) to cover more than 100% of the planting and establishment costs to year 10. Wider project costs over the project duration are considered in Test 3. The planting and establishment costs are used to give a consistent comparison for projects of a given type.
Costs and revenues shall be based on current prices. Project Developers should use the WCC Cashflow Spreadsheet (xlsx.) to set out costs/income to meet Test 2. See the WCC Cashflow Guidance (pdf) for further information.
The purpose of the investment test is to demonstrate that over the project duration, without carbon finance, woodland creation is either:
- not the most economically or financially attractive option for that area of land (e.g. woodland creation is profitable, but less so than grazing or other likely non-woodland use) - For example the Net Present Value of woodland creation (without carbon income) could be positive, but it is less than the Net Present Value of the current/ baseline landuse, or
- not economically or financially viable on that land at all (e.g. woodland creation is not profitable) - For example, the Net Present Value of woodland creation (without carbon income) is negative, but adding carbon income moves the Net Present Value to nearer zero or positive).
The test involves evaluating all costs and revenues for the project duration (in contrast to Test 2 which only considers planting and establishment costs to year 10). Costs and revenues shall be based on current prices. Documentary evidence is required to confirm the costs and potential income set out.
Project Developers should use the WCC Cashflow Spreadsheet (xlsx) to set out costs/income over the project duration to meet Test 3. In general, native broadleaved schemes, where there is little or no income from the woodland once established, are much more likely to pass the investment test than productive conifer schemes, where there is future income from timber. However, most schemes contain a combination of productive and non-productive elements, and each scheme is judged on its own merits. See the WCC Cashflow Guidance (pdf) for further information.
If projects are registered after tree planting has started, then the project developer will have to supply evidence to confirm that carbon finance from selling carbon units or 'insetting' (creating your own carbon units) was considered necessary in the planning stages of the project (for example the inclusion in minutes of board meetings or planning documents, cashflow or emails).
If the Test (3) Carbon Investment is not passed, there may be cases where other barriers prevent a woodland creation project from taking place. These barriers could be economic, social or environmental. If these barriers prevent a project going ahead without carbon finance, this demonstrates additionality. Barriers could be:
- Prevailing practice
- Ecological condition
- Social condition or landuse practice
- Tenure/ownership/property rights
Projects should describe the barriers that exist and how they have been overcome through the project (for example through financial support, materials, training or technical support). Documentary evidence is required (national statistics, sectoral studies/surveys, market data, board meeting minutes, feasibility studies etc.).
Additionality will normally be assessed at the constituent project level, especially if carbon calculations and/or carbon sales are also carried out at that level. However, additionality can be assessed at project-group level provided similar funding models/arrangements (or similar barriers if this test is used) apply to all constituent projects.
Similar funding models/arrangements’ could be:
- All projects under the same land ownership.
- All projects have similar levels of carbon funding.
- All projects have similar types/sources of funding.
- The carbon is sold 'by the group' rather than by the constituent projects.