This article first appeared in The Scottish Farmer.

Scotland has set the ambitious target of achieving net zero by 2045, in recognition of the climate emergency, with an interim target to reduce greenhouse gas emissions by 75% by 2030 and 90% by 2040. If we don’t take action, we can expect to see more biodiversity loss and extreme weather patterns, including both catastrophic flooding and severe drought.

The Climate Change Committee reported last month that delays in drafting the Climate Change Plan means that it is unlikely the 2030 interim target will be met, however, there is a path to Scotland’s post 2030 targets. 

Renewable energy opportunities

Scottish farmers have historically developed (or leased land for the development of) onshore wind farms, solar PV farms, and more recently battery energy storage system projects to generate renewable energy and help balance the national grid.

The lack of subsidy support in the form of Feed in Tariffs or Renewable Obligations Certificates is resulting in onshore wind farm projects becoming ever larger. This is to achieve the necessary economies of scale to be financially sustainable, and with larger scale projects come additional complexities with obtaining planning consent and grid offers.  It is therefore more challenging for farmers and local community groups to develop their own projects.

Community shared ownership is an attractive alternative to communities developing their own projects and is in addition to any community benefit fund. It enables communities to develop a sustainable income stream over which they have control, creates strong partnerships, and builds resilience in the local area.

The Onshore Wind Sector deal, signed in September 2023, includes a requirement for all developers to engage with communities, “at the earliest possible opportunity” to develop and agree on plans to share the economic returns.

Crossdykes Wind Farm, a recent project we advised on, is an example of successful community shared ownership in a subsidy-free windfarm. The local community acquired a 5% shareholding with part of the community benefit fund being used as security.  Although the shareholding was below the 10% suggested by the Scottish Government’s Good Practice Guide, 5% was appropriate based on the level of the investment.

Carbon credits

The soils and plants that make up our landscape play a major role in capturing and storing carbon from the atmosphere.  We can lock up more carbon by creating more woodlands and restoring eroding peat bogs.

The Climate Change Committee reported last month that Scotland needs to double its woodland creation rate and triple its peatland restoration rate in order to achieve its 2030 target.

The Woodland Carbon Code and Peatland Code provide a framework for measuring and monitoring the carbon benefits of new woodland and peatland restoration projects in the UK.

Every 5-10 years the progress of projects is independently verified and a ‘carbon credit’ is issued for every tonne of carbon dioxide equivalent that has been successfully captured or avoided.  Once verified, Pending Issuance Units (PIUs) are issued.  These are converted over time to Woodland Carbon Units (WCUs) or Peatland Carbon Units (PCUs).

There is still an element of uncertainty for landowners and developers undertaking woodland or peatland projects as HMRC has still to clarify the tax treatment of transactions involving PIUs and WCUs. 

These schemes can run for decades so ensuring you have the correct structure in place from the outset is essential to maximise tax reliefs and succession planning. It’s likely that more carbon offset schemes will arise and clear guidance from HMRC on the tax treatment of such schemes will become essential. Due to the long-term nature of these schemes, tax rules could change significantly between inception and sale.

Get in touch

To find out more about any of the topics in this article, get in touch with our specialist Rural and Energy, Infrastructure & Sustainability teams.