Climate change duties: statutory guidance for public bodies

Annex F: Land and nature-based projects

This annex provides further guidance and information on the approach to nature-based projects and reporting:

• land and nature-based projects: carbon insetting and offsetting
• external requirements to offset emissions
• offsetting international flights
• selling carbon credits from projects on publicly owned land
• reporting land and nature-based emissions and removals.

Definitions of carbon insetting, offsetting and carbon credits, including types of credits (emission reductions, removals and avoidance), as used in this guidance, are provided in the glossary.

Land and nature-based projects: carbon insetting and offsetting

The main focus of climate change mitigation action for Scottish public bodies should be action within Scotland to reduce greenhouse gas (GHG) emissions and increase nature-based carbon sinks. Public bodies should maximise opportunities to restore, enhance and increase nature-based carbon sinks on their landholdings. As well as contributing to emissions reduction targets, such actions are likely to have many wider benefits including increased flood and wildfire resilience, enhanced biodiversity and improved nature networks – helping bodies to meet the second climate change duty and, where applicable, the biodiversity duty.

Public bodies should have plans and demonstrable actions in place to reduce GHG emissions to as close to zero as possible, including land-based GHG emissions. Offsetting and carbon removal insetting projects must not be a replacement for emission reductions.

Offsetting should only be used as a last resort, where emissions reductions are not technically or economically feasible, and, in most cases, as an interim measure while solutions to emissions that bodies are currently unable to eliminate are developed. Offsetting and insetting should form part of organisational targets and transition plans aligned with Scotland’s statutory national emission reduction targets and the global goals of the Paris Agreement.

Public bodies can use nature-based carbon removal insetting projects and offsetting to achieve net zero by counterbalancing residual unavoidable emissions within scopes 1 and 2. Bodies are not expected to use any purchased offsets against residual emissions within scope 3; however they may choose to do so as part of their own net zero strategy.

The use of insetting and offsetting should be clearly laid out in the carbon management plan or equivalent, that is transparent as to:

• why and how insetting and offsetting are to be used as a tool on the route to net zero
• what proportion (%) and amount (tCO₂e) of emissions are to be inset or offset
• what type of insets and offsets are to be used and where they are sourced from
• which emissions sources or categories these are to cover
• how the insets and offsets will be appropriately accounted for to avoid double-counting (e.g. in the case of peatland credits which may also be part of the body’s land-based scope 1 emissions).

Public bodies with landholdings should maximise opportunities for nature-based insetting projects on their own land. On the route to organisational net zero carbon, investment in insetting projects should be prioritised ahead of the purchase of carbon offsets from elsewhere. Landowning public bodies should consider carefully the emissions-saving claims they make in relation to nature-based projects on their land, in line with good-practice carbon accounting and reporting principles. For example, peatland carbon credits produced on a public body’s own landholding cannot be used to counterbalance other emissions within their inventory as this would constitute double counting (as land-based emissions from degraded peatland, where relevant, should be reported as part of the public body’s land-based scope 1 emissions).

For some public bodies with larger landholdings, nature-based projects on their land may enable the removal and storage of more carbon than they emit through their operations, or that is required for insetting residual emissions as part of a Paris Agreement aligned transition plan. Public bodies with a nature-based carbon surplus beyond their own requirements to reach net zero should give careful consideration as to the most appropriate use for this surplus. Central government bodies could consider allocating (which could include selling or gifting) the surplus to other public bodies who are unable to reach net zero within their own boundary. Any surplus nature-based carbon allocated to other public bodies should be additional to what would have otherwise occurred, for example as demonstrated by passing an additionality test under a relevant carbon standard. Other bodies, including local authorities, should ensure that decisions made in relation to the end-use of such carbon savings or credits are transparent and equitable, and consistent with wider climate change duties.

Opportunities for insetting projects on a public body’s landholdings should be balanced with other local, regional and national priorities including food security, housing and energy. Care should be taken to promote, and not to harm, other objectives especially climate adaptation and nature recovery. Where possible, nature-based projects on the public estate should be designed to achieve multiple objectives in line with other relevant SG policy, including the Land Use Strategy, the Natural Capital Market Framework and the Scottish National Adaptation Plan.

Consideration should be given to wider linked issues and policies. Partnership working, collaboration and area-based approaches will be important to achieve the highest quality outcomes, for example via landscape scale clusters of public and Scottish Crown Estate land. Projects should benefit local communities and contribute to a just transition. Guidance on delivering community benefits from land is published by the Scottish Land Commission.

Public bodies with coastal holdings should also consider the protection and restoration of blue carbon habitats such as saltmarsh and seagrass: blue carbon is the organic carbon captured and stored in marine and coastal habitats. With their ability to sequester and store carbon, to provide natural coastal protection, and to support complex biodiverse ecosystems, such habitats offer a small but important role in climate change mitigation, adaptation and resilience.

Adaptation and mitigation agendas should, where possible, be integrated, ensuring that climate risk assessments are included in carbon and GHG emissions assessments. Emissions from degraded or vulnerable nature-based carbon stores may affect the ability of public bodies, particularly those with larger landholdings, to reach net zero. Therefore targeted actions to restore any such degraded carbon stores, especially peatlands, may be required. Where these activities are also to be used for insetting purposes, care needs to be taken with the type of claims made linked to high-integrity carbon accounting and reporting practices as noted above.

When considering changes to land use on public land as part of insetting or offsetting activities, carbon leakage should be avoided, i.e. where actions taken on a public body’s landholdings displace carbon-generating activities elsewhere which then take place outside the reporting boundary.

If offsetting activity is to be undertaken as part of an organisation’s net zero transition plan, there is a strong preference for public money to benefit communities and high-integrity projects within Scotland, as opposed to investing in international offsets. Supporting high-integrity nature-based carbon reduction projects within Scotland can bring benefits to local economies and communities, enhance biodiversity and provide wider environmental benefits, in addition to contributing to progress towards Scotland’s statutory national emissions reduction targets.

As laid out in the GHG Protocol Land Sector and Removals Guidance (noting that this guidance, at time of writing, is in draft form and bodies should use the most current version), public bodies should ensure that any carbon credits obtained for offsetting purposes meet quality criteria including additionality, credible baselines, permanence and avoid leakage. Credits should be high-integrity and verified under Scottish Government supported carbon codes such as the Peatland Code, Woodland Carbon Code and any new codes which are assured under the emerging BSI Nature Market Programme Standards. Use of credits verified under these Codes can provide confidence that the GHG Protocol’s quality criteria will be met: for example, both the current SG supported Carbon Codes include tests of legal and financial additionality.

Offsetting by public bodies should only be used as a last resort. Scotland’s climate change legislation primarily relies on meeting the statutory national emissions reduction targets through domestic effort, with a limited ability to purchase international offsetting credits by the Scottish Government to be added to the net Scottish emissions account.

The Scottish Government has adopted the principle of climate justice internationally and recognises that mitigation activity and carbon offsetting projects must not cause loss and damage to communities or habitats overseas.

External requirements to offset emissions

Bodies may be asked, for example as part of funding conditions, to offset business travel and other emissions associated with research or other programmes. As noted, the preference is for emissions generated in Scotland to be offset within Scotland. Where it is not possible to source high integrity, verified credits directly attributable to Scottish projects, a reasonable approach would be to purchase UK-based credits. Any purchased credits should be from a government supported code such as the Woodland Carbon and Peatland Codes. Information as to how purchased credits should be included in the annual public bodies climate change duties report is provided towards the end of this annex.

Offsetting international flights

As noted above, bodies may find that a requirement to offset business travel, including international flights, is a condition of grant or research funding, in particular in the higher education sector. If a body chooses to offset international flights, whether business travel or other flights such as student travel, the country of departure should be taken as having national ownership of those emissions. For example, for a return flight from Scotland to the USA, the emissions from the outbound leg to the USA would be classed as Scottish emissions, and those from the return leg as USA emissions. Such Scottish emissions should be offset or inset within Scotland. The body may choose where to offset the non-domestic share, i.e. within Scotland or internationally.

Bodies who wish to offset the domestic share of international aviation emissions may do so using Peatland Code credits. Offsetting of any international aviation emissions is not, at the time of writing, permitted using Woodland Carbon Code credits due to differences in the way that the two codes have been established. Bodies could also, where feasible, consider nature-based carbon removals projects on their own lands, externally verified to an MRV standard equivalent to one of the SG supported carbon codes.

They could also consider, for the non-domestic share, the purchase of high integrity, verified international credits from an accredited scheme such as the Gold Standard.

Selling carbon credits from projects on publicly owned land

Landowning public bodies may be in a position to generate investment in nature-based projects through the sale of carbon credits. Any such projects should be included in the body’s carbon management, climate change or equivalent plans, and contribute to key outcomes that the public body has identified. Such outcomes are likely to go beyond carbon and could include adaptation, flood risk management and biodiversity. Any credits intended for sale should be high-integrity and verified through one of the government supported codes.

Bodies should consider carefully:

• whether the sale of credits is appropriate to their function, objectives and legal basis or constitution
• whether the nature-based project supported by carbon finance would be considered additional, corporately in terms of any potential legal drivers that influence the body’s objectives or functions and therefore how it is required to manage its land (e.g. legal obligations to reduce land-based emissions) and also at the project level in relation to whether the project passes the additionality tests of the code in question
• their own organisational carbon footprint and how the sale of any carbon credits may impact on their ability to achieve their own net zero targets
• wider benefits and outcomes the investment can be used to help deliver
• what additional considerations may be required, for example, who the carbon credits are being sold to and for what purpose (e.g. that the credits are to be used for offsetting residual emissions only or as part of a transitional plan). Bodies should be careful to ensure that the intended use of the credits avoids any accusations of ‘greenwashing’ and potential reputational damage.

It is for individual bodies to make such decisions, taking their own legal advice where necessary.

Carbon credits verified through the Woodland Carbon and Peatland Codes can be used to offset emissions generated in the UK. However, there is a strong preference for credits arising from publicly-owned and Scottish Crown Estate land in Scotland to be used only to offset emissions generated within Scotland. Bodies should assure themselves that the buyer intends to use the credits against emissions generated by their operations within Scotland only.

The design of the arrangements for checking and auditing that only emissions from activity in Scotland are being offset by carbon credits issued from public land is for individual public bodies to determine. Bodies could, for example, take a risk-based approach such as requiring information and a statement of assurance from each buyer. This could be backed up by an audit process drawing on a sample-based approach as an alternative to the need to audit every purchaser. However, it would be a matter for individual bodies to ensure they comply with legal and financial duties and Scottish Public Finance Manual guidance. Further guidance on demand-side issues and engagement with buyers of nature-based credits, including carbon, is included in the Natural Capital Market Framework.

Responsible private investment for natural capital projects on the public estate has the potential to play an important role contributing to land use policy delivery and value for money in public expenditure. Public bodies considering private investment for natural capital projects should ensure that their projects and financing arrangements are aligned with relevant Scottish Government policy, notably the vision for high-integrity markets for natural capital as set out in the Principles for Responsible Investment in Natural Capital and the Natural Capital Market Framework. This includes ensuring that projects deliver integrated land use and community benefits, contributing to a just transition. The overall goal should be to ensure that any engagement by public bodies with private finance for natural capital is responsible and of high integrity.

Reporting land and nature-based emissions and removals

Land-based emissions should be accounted for and reported on in line with the principles of the GHG Protocol Land Sector and Removals Guidance. In doing so, public bodies should follow the GHG Protocol principles of relevance, transparency, accuracy, completeness, consistency, conservativeness and permanence when compiling an inventory that includes land use activities and or nature-based removals.

Before adding land-based emissions to their inventory, it is important that bodies set a boundary in relation to their land and land use activities. The boundary should reflect the nature of the public body, its estate and functions, noting the GHG Protocol principles of relevance and completeness, etc. For example, a public body with large landholdings or land management functions is likely to find including land-based emissions is appropriate, whereas a small body with an administrative function and landholdings restricted to areas around office buildings would not. The Land Sector and Removals Guidance provides further details.

Key to reporting insetting activities is the need to have an organisational inventory of land-based emissions and carbon capture. If carbon reductions are to be reported and the benefit claimed, such as through woodland creation, then other land-based emissions must also be included, such as losses from change of land use or from degraded peatland. Carrying out an inventory assessment of the condition of existing carbon stores will enable restoration activities to be prioritised to the most degraded or vulnerable areas. Such an inventory should be regularly refreshed to take account of changing environmental conditions, the impact of nature-based projects and land use changes.

The scope and level of detail included in such a land and emissions inventory should be appropriate to the scale and nature of the organisation’s landholdings. It is acceptable for an organisation to take a phased approach to their land-based emissions reporting, such that specific land parcels are added year-on-year as data become available. If a phased approach is taken, there should be a clearly defined timescale for the inclusion of all relevant land and land-based emissions. If a land parcel is added to the reporting, both emissions and reductions from that land should be reported, and should be included thereafter. When introducing a piece of land, and the related emissions, to the annual PBCCD report for the first time, bodies should ensure that a note is included in the relevant table or tables to explain the increase or decrease in emissions.

Carbon reductions from nature-based insetting projects should be verified using an MRV (measurement, reporting and verification) equivalent to a government supported carbon code. Bodies may choose to verify insetting projects externally through one of the Scottish Government supported carbon codes, however, there is no requirement to do so, assuming that any carbon reductions are intended for internal use. Carbon credits intended for sale or transfer to another body should be verified and issued externally through one of the codes. The methodologies used to calculate any carbon emissions reductions or carbon stored should be robust, transparent and independently audited, whether these are for internal use or external sale or transfer.

Emissions that arise within Scotland’s territorial boundary should be inset or offset within Scotland. Scope 1, scope 2 and certain scope 3 emissions (e.g. from water supply and wastewater treatment, waste, staff commuting and homeworking, domestic business travel, and upstream and downstream leased assets) are likely to occur within Scotland’s territorial boundary.

Any purchased or “gifted” offsets should be high-integrity and from projects verified under Scottish Government supported carbon codes such as the Woodland Carbon Code, Peatland Code or other such government-supported codes which may be developed in the future. Offsets must be retired when the carbon benefit is claimed.

Verified nature-based carbon offsets or insets from projects within Scotland can be expected to contribute to national statutory emissions reduction targets, by increasing the size of carbon sinks. Such offsets and carbon removal (e.g. woodland) insets can therefore be included in the carbon accounting section (Part 3) of the PBCCD report, to counterbalance organisational emissions that arise within Scotland’s territorial boundary.

[i.e. Such offsets and carbon removal insets are acceptable to credit against a public body’s relevant scope 1, 2 and 3 emissions as reported annually in Part 3 of the PBCCDR. Emission reduction insetting projects such as peatland restoration should be reported under land-based scope 1 emissions, and should result in lower direct emissions from the source than before the restoration work took place].

Occasionally an unplanned, destructive event may cause damage on a public body’s landholdings such that carbon is released, for example a wildfire destroying an area of woodland. The GHG emissions from such events should be estimated and included in the annual report under land-based scope 1 emissions.

Public bodies may sell or otherwise allocate (e.g. “gift”) carbon from projects on their landholdings, surplus to their own operational requirements to reach net zero, to other organisations, either other public bodies, private investors or other end-users of the credits. Such carbon reductions or credits must not be included in the originating body’s own corporate carbon account, as this would constitute double-counting. Reference to carbon allocated or credits sold to others should be included in the PBCCD reports as supporting information only. Carbon credits issued for sale under Scottish Government supported carbon codes must also be able to demonstrate additionality in line with the codes.

International offsets used by public bodies – excluding Scottish Ministers (reporting as Scottish Government and the Executive Agencies) - do not contribute to progress to Scotland’s statutory national emissions reduction targets. Scottish Ministers may credit purchased carbon units to the net Scottish emissions account, but only if regulations are first made under sections 13 and 13A of the 2009 Act. If and when such regulations are made, further guidance on reporting international offsets will be provided. Until then, any international credits purchased by public bodies must not be included in the annual PBCCD reports as credits against organisational scope 1, 2 and 3 emissions that arise within Scotland. References to such international credits should only be included as supporting information.

Direct air capture with carbon storage (DACCS) and other negative emissions technologies (NETs) are not, at time of writing, accounted for in the national GHG inventory, i.e. they are not classed as “Scottish removals” as defined in the Climate Change (Scotland) Act 2009 ^[43], and do not count towards national emissions reduction targets. There is provision within the 2009 Act for this to be changed in the future, if appropriate. Until such a change is made, engineered emissions removals from NETs should not be included in the annual PBCCD reports as credits against organisational scope 1, 2 and 3 emissions that arise within Scotland. Reference to such removals should only be included as supporting information. Further guidance will be provided in due course if this position changes.