Peatland restoration has become one of the most significant natural capital opportunities in Scotland, sitting at the intersection of climate policy, environmental stewardship and private investment. As governments and businesses seek credible pathways to achieving net zero commitments, increasing attention is being focused on Scotland's peatlands and the critical role they play in carbon storage and sequestration.
Scotland possesses a remarkable peatland resource. Covering almost two million hectares, Scottish peatlands account for approximately two-thirds of all peatland habitat in the United Kingdom. These landscapes represent one of the country's most important natural carbon stores, holding an estimated 1.6 billion tonnes of carbon accumulated over thousands of years. However, decades of drainage, overgrazing, commercial forestry, peat extraction and other land management practices have left a substantial proportion of this resource in a degraded condition. Current estimates suggest that nearly three-quarters of Scotland's peatlands are damaged. Rather than acting as carbon sinks, degraded peatlands can become significant sources of greenhouse gas emissions.
The restoration of these habitats is therefore recognised as one of the most cost-effective measures available to help tackle climate change. Healthy peatlands actively sequester carbon, improve biodiversity, enhance water quality, reduce flood risk and increase resilience to drought and wildfire. Consequently, peatland restoration forms a key component of both Scotland's and the UK's net zero strategies.
Alongside public funding, the development of private investment mechanisms has become increasingly important in accelerating restoration at scale. Central to this market is the Peatland Code, a voluntary certification standard launched in 2015 and administered by the IUCN UK Peatland Programme. The Code provides a rigorous framework for measuring, verifying and registering the carbon benefits generated by eligible peatland restoration projects. By creating independently verified carbon units, it enables businesses and investors to support restoration activities while meeting environmental objectives.
As a result, the Peatland Code has become a cornerstone of the UK's developing natural capital market. For farmers, crofters and landowners, Peatland Carbon Units can provide flexibility. Units may be sold to generate an additional income stream from restored peatland, helping to diversify rural businesses. Alternatively, units can be retained and used to help offset a business's own emissions in future, providing an asset that may become increasingly valuable as net zero requirements continue to develop. Of course, a combination of these approaches can also be pursued. The Peatland Code can also deliver verified carbon units more quickly than many Woodland Carbon Code projects – with first verified units typically becoming available at the initial verification stage around years five or six.
However, the success of any peatland restoration project depends upon more than ecological outcomes. Projects frequently involve complex legal and commercial arrangements between landowners, funders, project developers, carbon purchasers, agricultural tenants, crofters, shareholders in common grazings and other stakeholders. Funding arrangements, long-term management obligations and the ownership and sale of carbon units all require careful consideration.
Projects on common grazings or tenanted croft land will also almost certainly require additional consent from the Crofting Commission and/or Scottish Land Court. Existing agricultural, sporting, forestry and renewable energy interests may also need to be considered.
At Brodies, we have developed significant experience advising clients on the legal arrangements that support peatland restoration projects. As interest in natural capital continues to grow, careful planning and well-structured agreements will be crucial to ensure projects are capable of generating long-term environmental and commercial value.
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