British businesses and organisations will be better supported to trade carbon credits as part of work to establish the UK as the global hub for green finance.
The UK Government has launched plans to strengthen voluntary carbon and nature markets which it says can help leverage the finance needed to address the scale of the climate emergency whilst diversifying revenue streams for British businesses.
These markets support the trading of carbon credits, where a business can reduce their emissions by investing in environmentally friendly projects such as deploying electric vehicles, reducing deforestation, removing carbon dioxide through carbon dioxide or planting trees.
Currently these markets are not realising their full potential, the UK Government said, 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. There have been widespread calls from businesses and organisations for greater clarity in how to use these markets as part of their plans to reach net zero.
In response, the UK is establishing a global framework which aims 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. By increasing confidence in these markets, British businesses – including farmers and land managers – will be well positioned to seize the economic rewards by creating new revenue streams and investment opportunities, said the UK Government.
The UK has seen £43.7 billion of private investment into clean energy industries since July, said the UK Government. Recent figures from the CBI shows that the net zero economy grew three times faster than the economy as a whole last year, with employment in the sector up by over 10%.
Climate Minister Kerry McCarthy said:
“Building up trust in carbon and nature markets is crucial to their success in driving meaningful climate action and real, lasting change for the environment.
“The UK is determined to spearhead global efforts to raise integrity in these markets so they can channel the finance needed to tackle the climate crisis and speed up the global clean energy transition.
“These principles will cement the UK as the global hub for green finance and carbon markets.”
Nature Minister Mary Creagh said:
“Nature underpins everything. Voluntary carbon and nature markets will be an important tool to crowd in private finance to protect our precious peatlands, important habitats and rare species.
“It is why increasing trust in these markets will ensure that they benefit both people and our planet, ensuring money flows towards genuine environmental improvement projects and creates new sources of finance for farmers and land managers in the UK.”
Carbon credits are tradable units that represent the reduction or removal of greenhouse gases emissions from the atmosphere. One credit typically represents one metric tonne of CO2 or its equivalent. Companies or individuals purchase these credits from project developers who have generated them through activities like reforestation, cleaner energy, or other emission reduction projects. By buying the credits, they are financing projects that would not otherwise happen, in addition to steps that they are taking to reduce their own emissions.
Mark Kenber, Executive Director, Voluntary Carbon Markets Integrity Initiative (VCMI), said:
“Businesses need clarity and confidence to invest in voluntary carbon and nature markets that help meet global climate goals. This consultation from the UK Government plays a vital role in delivering this.
“VCMI welcomes the proposal to recognise our Claims Code as international best practice, as well as the global leadership shown by the UK’s proposal to incentivise greater action by companies to address their unabated Scope 3 emissions through the inclusion of our forthcoming Scope 3 Action Code of Practice. The Code of Practice will enable companies to go further, faster and with integrity on climate action.”
The consultation will be live for 12 weeks, seeking responses from industry organisations and the public.
