Developing Peatland Carbon Metrics and Financial Modelling to Inform the Pilot Phase UK Peatland Code Report to Defra for Project NR0165 30th June 2015 Final Report Submitted to Defra 30th June 2015 for project NR0165 Developing Peatland Carbon Metrics and Financial Modelling to Inform the Pilot Phase UK Peatland Code. Editors and Authors: Mary-Ann Smyth (Crichton Carbon Centre) Emily Taylor (Crichton Carbon Centre) Richard Birnie (LandForm Research) Rebekka Artz (James Hutton Institute) Chris Evans (Centre for Ecology & Hydrology) Alan Gray (Centre for Ecology & Hydrology) Andrew Moxey (Pareto Consulting) Stephen Prior (Forest Carbon Ltd.) Nick Littlewood (Littlewood Ecology) Ian Dickie (eftec) Mike Bonaventura (Crichton Carbon Centre) Suggested Citation: Smyth, M.A., Taylor, E.S., Birnie, R.V., Artz, R.R.E., Dickie, I., Evans, C., Gray, A., Moxey, A., Prior, S., Littlewood, N. and Bonaventura, M. (2015) Developing Peatland Carbon Metrics and Financial Modelling to Inform the Pilot Phase UK Peatland Code. Report to Defra for Project NR0165, Crichton Carbon Centre, Dumfries. Contents Executive Summary .......................................................................................................... v Glossary ........................................................................................................................... ii Section 1: UK Metric for Peatland Restoration .................................................................. 1 1.1 Summary ..................................................................................................................................... 1 1.2 Assessing Peatland Condition ..................................................................................................... 2 1.2.1 Previous Approach to Assessing Peatland Condition and Greenhouse Gas Emissions ... 3 1.2.2 Developing the Approach to Assessing Peatland Code Condition Categories ................ 5 1.2.2.1 Consideration of indicators of peatland condition .............................................. 5 1.2.2.2 Categories of Eroded Blanket Bogs ..................................................................... 8 1.2.2.3 Categories of Artificially Drained Blanket Bogs ................................................. 11 1.2.3 Peatland Code Condition Categories: Summary ........................................................... 12 1.2.4 Peatland Code Condition Categories: Field Protocol..................................................... 13 1.2.4.1 Desk Based Assessment of Aerial Images .......................................................... 13 1.2.4.2 Field Survey ....................................................................................................... 13 1.2.4.3 Confirmation of Site Condition .......................................................................... 13 1.2.4.4 Calculating Emission Savings ............................................................................. 14 1.2.5 Testing of the Field Protocol .......................................................................................... 14 1.3 Emission Factors ....................................................................................................................... 14 1.3.1 Data Review ................................................................................................................... 14 1.3.2 Statistical Analysis ......................................................................................................... 15 1.3.3 Condition Categories ..................................................................................................... 17 1.3.4 Summary and Descriptive Statistics .............................................................................. 18 1.4 Future Work to Support the Code ............................................................................................ 20 1.5 References ................................................................................................................................ 21 Appendix 1.1 Field Protocol Development: Field Testing ............................................................... 22 Section 2: Economic Assessment of the Peatland Code: Project Finances, Market Potential and Factors Influencing Enrolment .................................................................................. 29 2.1 Introduction .............................................................................................................................. 29 2.2 Carbon market overview .......................................................................................................... 32 2.2.1 Assumptions & background ........................................................................................... 32 2.2.2 Statutory market and peatlands .................................................................................... 35 2.2.3 Voluntary carbon market .............................................................................................. 36 2.2.4 Voluntary market and peatlands ................................................................................... 37 i 2.2.5 UK domestic voluntary carbon standard: Woodland Carbon Code .............................. 38 2.2.6 Conclusions .................................................................................................................... 40 2.3 Research and Scenarios ............................................................................................................ 40 2.3.1 Demand ......................................................................................................................... 40 2.3.1.1 Buyer attitudes, interest and level of understanding ....................................... 41 2.3.1.2 Opportunities for peat carbon .......................................................................... 42 2.3.2 Liquidity ......................................................................................................................... 44 2.3.3 Supply ............................................................................................................................ 46 2.3.4 How much peatland restoration can the Peatland Code deliver? ................................ 47 2.3.5 Three hypothetical restoration scenarios ..................................................................... 64 2.4 Conclusions & recommendations ............................................................................................. 69 2.5 References ................................................................................................................................ 71 Appendix 2.1: Domestic policy interaction with carbon markets .................................................. 74 Appendix 2.2: Global voluntary carbon market data ..................................................................... 78 Appendix 2.3: The Peatland Code Project Financial Feasibility Tool .............................................. 82 Appendix 2.4: Approaches to estimating price responsiveness .................................................... 84 Appendix 2.5: Overview of private costs and benefits of restoration ............................................ 90 Appendix 2.5.1 Initial assessment questions with indicative values ...................................... 97 Section 3: Quantifying the potential biodiversity benefits of peatland restoration projects under the Peatland Code .............................................................................................. 100 3.1 Summary ................................................................................................................................. 100 3.2 Objectives ............................................................................................................................... 101 3.3 Background ............................................................................................................................. 101 3.4 Review of UK Peatland Biodiversity ........................................................................................ 101 3.4.1 Background .................................................................................................................. 101 3.4.1.1 Review Outline ................................................................................................ 101 3.4.1.2 Importance of Peatland Biodiversity ............................................................... 101 3.4.1.3 Assessing Peatland Restoration ....................................................................... 102 3.4.2 Towards a Biodiversity Metric for Peatland Restoration ............................................ 103 3.4.2.1 Plant or Animal? .............................................................................................. 103 3.4.2.2 Species Richness in Peatland ........................................................................... 103 3.4.2.3 Selecting Suitable Taxa .................................................................................... 104 3.4.3 Assessment of Key Species Groups ............................................................................. 104 3.4.3.1 Breeding Birds ................................................................................................. 104 3.4.3.2 Aquatic Invertebrates ...................................................................................... 106 3.4.3.3 Odonata (Dragonflies and Damselflies) Adults...............................................