The UK government has announced plans to consult on reforms to the voluntary carbon market (VCM) and emerging nature markets.
Climate Minister Kerry McCarthy stated that the government aims to establish regulations that address concerns about low-integrity carbon credit projects and encourage increased investment in the sector.
“Carbon and nature markets hold the potential to play an essential role in achieving our climate and environmental targets faster, raising climate finance, and supporting enhanced ambition,” McCarthy said. “The UK will soon consult on steps we could take to raise integrity in these markets so they realise more of their potential.”
She highlighted the government’s upcoming consultation on steps to enhance market integrity and realize this potential.
The announcement is likely to be welcomed by operators in the VCM and related biodiversity offset markets, who have been seeking greater clarity from the government on how it intends to stimulate investment in carbon removal projects.
Sebastien Cross, co-founder and Chief Innovation Officer at carbon credit ratings agency BeZero Carbon, said: “It is an immense relief for the industry to hear the UK Government’s intention to consult on the voluntary carbon market.”
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“Carbon markets play a critical role in funnelling private sector finance into climate action, so it’s essential we renew momentum and scale this burgeoning sector after two years of uncertainty. The Government must reignite progress not only to achieve our climate targets, but also to unlock the huge economic potential on offer. We look forward to introducing the role of project-level ratings and risk metrics into the conversation.”
The market has faced challenges due to scandals involving projects that failed to deliver promised emissions reductions and removals, as well as uncertainty about future corporate demand for carbon and nature credits.
Several players in the market have advocated for regulatory reforms to bolster market integrity and attract increased investment.
Proposed reforms include stricter regulations for carbon credit projects, integration between the VCM and regulated carbon markets like the UK’s Emissions Trading Scheme (ETS), and clearer guidelines for corporate net zero transition plans.
Additionally, the UK ETS Authority announced its intention to consult operators on a proposal to postpone the start of the second allocation period for the cap-and-trade scheme from 2026 to 2027. This change would align with the government’s plan to introduce a Carbon Border Adjustment Mechanism (CBAM) from 2027 onwards.
However, the government is also facing calls from some business groups to accelerate the launch of the CBAM to 2026 to avoid becoming a dumping ground for imported goods seeking to evade EU carbon levies.
