Industry experts have welcomed the UK government’s decision to open a consultation on the establishment of a global framework to build trust and confidence in carbon and nature credit trading.
The proposal includes a set of principles to guide and support businesses on how to use carbon credits, 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.
Voluntary standards developed by the Voluntary Carbon Markets Initiative (VCMI) feature as part of the proposal, with the government suggesting they are adopted as best practice for use by companies active in the voluntary carbon market. It also seeks views on guidance from VCMI, designed for companies and policymakers, to help tackle corporate Scope 3 greenhouse gas emissions.
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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.
“This is an opportunity to deliver on the climate crisis and drive investment and growth in the UK as part of our Plan for Change.”
The consultation will be live for 12 weeks, seeking responses from industry organisations and the public.
Carbon credits are tradable units that represent the reduction or removal of greenhouse gas emissions from the atmosphere. One credit typically represents one metric tonne of CO2 or its equivalent, and companies or individuals purchase these credits from project developers who have generated them through activities like reforestation, cleaner energy or other emission reduction projects.
Despite being estimated to be worth up to $250bn by 2050 for carbon markets, and $69bn for nature markets, under the right conditions, the government said 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.
Underpinning integrity
The process now underway “will define the standards required to underpin the integrity of these markets and scale them up”, said VCMI, significantly enhancing their contribution to global climate and nature goals, and increasing the flow of finance for climate action.
“Most companies’ emissions are generated by activities outside their core operations and across their wider value chains – their Scope 3 emissions. However, despite the importance of these emissions, most firms are falling behind on their Scope 3 targets and global emissions continue to grow. Closing this Scope 3 emissions gap is key to meeting global climate goals,” added VCMI executive director, Mark Kenber.
“When facing barriers to decarbonisation, companies should be encouraged to invest and take responsibility for their excess emissions. Acknowledging this isn’t about giving companies opportunities to do less, but more, and the UK government is right to explore options for driving further action.”
Diane Crowe, group sustainability director at circular economy specialist, Reconomy, agreed: “It is encouraging to see the government announce measures that will build trust and confidence in voluntary carbon and nature markets. Strengthening these markets will not only drive green investment and growth, but will also help cement the UK’s position as a global leader in sustainable finance.
“This announcement follows a recent speech from Steve Reed, the environment secretary, in which he doubled down on the government’s commitment to accelerating the transition to a circular economy.
“Greater clarity and regulatory certainty can materially help businesses lower their carbon footprint and cut costs by closing circularity gaps, reducing waste and keeping resources in circulation. Following the General Election last year, we launched a 10-point regulatory framework calling for a more consistent and joined-up approach to circular economy policy. Together, these announcements create momentum and build confidence among businesses, which is essential to helping the UK transition to a low-carbon, circular economy that drives long-term economic growth.”
