Last week, the UK Government published a report outlining a consultation titled Voluntary Carbon and
Nature Markets: Raising Integrity, which outlined principles for carbon credit integrity.
The move marks the UK’s broader ambition in becoming a climate finance hub, and raises questions around what is being done globally to address carbon credits and standardise the carbon market?
Many countries have passed regulations to establish a carbon market, often in collaboration with carbon and nature credit registries such as Verra and Gold Standard. These partnerships aim to verify carbon offsets, ensuring they are working towards what
has been outlined in the Paris Agreement.
Article 6 of the Paris Agreement sets out how countries can collaborate to reduce greenhouse gas emissions, and includes provisions of carbon market mechanisms. Articles 6.2 and 6.4 state that parties can use international trading of emissions allowances
to reduce emissions to reach targets, and establish accounting rules for the framework of carbon emissions – effectively providing an outline for the carbon market.
Europe
In 2023, the EU, proposed the Green Claims Directive, which prohibits environmental claims based only on carbon credit schemes. However, verified and disclosed carbon credits can be used. The EU also published a Carbon Removal Certification Framework
that establishes different certified carbon units.
The UK Government
commented: “Currently these markets are not realising their full potential, with a lack of clarity among businesses and organisations on how they can be used, and some poor practice impacting their effectiveness in delivering meaningful climate action and
economic growth. In response, the UK is establishing a global framework to build trust and confidence in carbon and nature credit trading, with a set of principles to guide and support businesses on how to use carbon credits that provide environmental benefits.
“This includes making clear what a good credit is, ensuring they are delivering environmental benefits and encouraging businesses to fully disclose what they are being used for in annual sustainability reporting. These markets are estimated to be worth up
to $250 billion by 2050 for carbon markets, and $69 billion for nature markets, under the right conditions.”
The consultation is based on six integrity principles:
- Users should only employ carbon and nature credits in addition to ambitious climate action within value chains.
- Suppliers should use high integrity credits and ensure that they have environmental benefits.
- Carbon credits should be measured and disclosed as part of sustainability reporting.
- Users should consider how voluntary carbon and nature credits contribute to transition plans and align with the 1.5̊ C goal of the Paris Agreement.
- Green claims should be accurate in terms of overall environmental impact and use appropriate terminology.
- Suppliers should collaborate with others to support the growth of high-integrity markets.
Australia
In July 2024, Australia put the Climate Active Initiative and Climate Active Neutral Standard into force, tocertify carbon neutrality claims and manage acceptable carbon credits and certified carbon emissions reductions.
Asia
In Asia, Bhutan, Cambodia, China, India, Indonesia, Malaysia, Pakistan, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam, have all established rules related to carbon credits or on carbon market structure, outlining requirements for carbon
trading. While some countries, such as Vietnam and Thailand, have established guidelines for how carbon trading should operate, other nations, such as South Korea and Taiwan, have implemented carbon taxes and carbon pricing guidelines to control their emissions
and provide a layer of transparency.
Singapore had its
first ever carbon credit auction earlier this year, attracting S$1.3 billion in in bids. The country has also signed agreements to buy carbon credits in Bhutan, Ghana, Papua News Guinea, and Peru.
China’s
national carbon trading scheme has been operating since 2021, and as part of its mandatory emission trading system (ETS) has been working to reduce emissions. The ETS guidelines were updated in 2024, expanding the list of industries classified as key emitters,
and widening the span of emissions under jurisdiction by the ETS.
The Americas
In the Americas, Argentina, The Bahamas, Brazil, Chile, Colombia, Costa Rica, Ecuador, Honduras, Panama, Paraguay, and Peru have adopted national policies or strategies that outline the use of voluntary carbon credits.
In the USA, California passed the Voluntary Carbon Market Disclosures Business Regulation Act in 2024, that states requirements for businesses that purchase carbon offsets.
Africa
Eight countries in Africa have put guidelines in force to manage carbon credits: Benin, Egypt, Ghana, Kenya, Rwanda, Uganda, Zambia, and Zimbabwe.
In May 2024, Kenya passed the Climate Change (Amendment) Act, which defines compliance principles for voluntary carbon markets and provided a framework for future carbon market projects.
Data on carbon-related regulation was sourced from Gold Standard’s Carbon Market Regulations Tracker.
