The future of the UK’s voluntary carbon and nature markets: raising the bar for integrity and trust
The voluntary carbon market is no longer a fringe tool for corporate social responsibility. With growing pressure on businesses to decarbonise, the UK government is taking significant steps to formalise and elevate the standards of this fast-evolving space. A new consultation document offers a blueprint for a high-integrity, investor-ready voluntary market.
A turning point for the UK’s voluntary markets
Voluntary carbon and nature markets (VCNMs) enable businesses to generate and trade credits that typically represent a tonne of carbon reduced, avoided or removed, or a measurable increase in biodiversity or ecosystem services. In the UK, VCNMs sit separately to compliance markets established under regulatory frameworks, such as the UK Emissions Trading Scheme (UK ETS), but are equally fundamental to the government’s commitment to leveraging market-based mechanisms to achieve its Net Zero aims and mobilise finance flows for delivery of global and domestic climate targets.
The government has recognised that, in order to deliver on their potential financial and environmental benefits, there must be confidence among market participants in the integrity of VCNMs. Concerns about “hot air” credits which do not deliver promised environmental outcomes, inaccurate claims, and a lack of standardisation risk eroding confidence among market participants. In response to these concerns, and with a view to encouraging broader development and use of VCNMs, the government launched a landmark consultation in April 2025: “Voluntary Carbon and Nature Markets: Raising Integrity”. This consultation sets out a structured path to bring transparency, credibility, and legal certainty to VCNMs.
At the heart of the consultation are six “Integrity Principles” designed to guide good practice, build trust, and facilitate the development of coherent markets which operate under an effective transparency regime. These six principles are:
- Use credits in addition to ambitious actions within value chain
Credits should be additional to internal decarbonisation strategy, not a replacement for it. Their use should ensure no net increase in global emissions and cost savings made possible through VCNMs should be reinvested to support further climate action as part of a holistic climate approach.
Application to markets
The Voluntary Carbon Market Integrity (VCMI) Initiative’s Claims Code of Practice, a framework to help companies credibly communicate their use of credits, is suggested as the standard for international best practice in VCNMs.
- Use high-integrity credits
“High-integrity” voluntary credits should represent activity which is additional to that required by law. They should be generated through application of conservative baselines, independently validated and verified, accompanied by measures to accommodate for any reversal of the outcomes of related activities, and not double counted. Suppliers of credits should be subject to appropriate risk identification, disclosure, and reporting requirements.
Application to markets
The Integrity Council for the Voluntary Carbon Market’s (ICVCM) Core Carbon Principles and Assessment Framework, as a global benchmark for credit quality, are proposed as an appropriate baseline for high carbon credit integrity. These could be accompanied by carbon credit ratings assessments undertaken by carbon credit ratings agencies (CCRAs), which would assess project-level risk and integrity. Development of a further assurance framework for domestic VCNMs will be undertaken following the consultation, as well as work on a strong validation and verification body sector.
- Measure and disclose the planned use of credits as part of sustainability reporting
Where buyers of credits are not subject to other relevant requirements, their use of credits should be disclosed. This disclosure process should be transparent and the information publicly accessible. This is intended to help reduce buyer and investor risks and support the development of market-enhancing products and services, as well as protecting the reputation of climate-positive companies.
Application to markets
The UK government proposes to support enhanced voluntary disclosure by updating its existing Environmental Reporting Guidelines to reflect VCMI disclosure elements. It does not at this stage propose the development of a new VCNM disclosure framework.
- Plan ahead
Companies should integrate credit use into long-term Net Zero strategies by setting and disclosing interim and long-term targets, as well as their strategies for achieving those targets. Targets set by buyers of carbon credits should be quantified, independently verified, and science-aligned.
Application to markets
The UK government is seeking to explore the role of credits within transition plans and transition plan disclosures, in parallel with an upcoming consultation on transition plan approaches. At this stage, it is proposed that transition plans produced by buyers of credits include details of why credits were purchased, how they are intended to be used, quantities bought and retired or sold (as applicable), type of credits bought and intended to be bought, and the verification and certification of the credits.
- Make accurate green claims using appropriate terminology
Claims relating to the use of carbon and nature credits must align with these six principles and clearly reflect the overall environmental impact of an organisation or product, including by using accurate and appropriate terms.
Application to markets
Two options are proposed for steps that could be taken to raise market confidence by bringing more clarity to credit-related claims. The first option would be to develop official definitions for key terminology, which would then be set out in relevant regulations or guidelines and act as a basis for regulators to challenge claims. The second option would be for the government to commission the development of a standard for claims, to be set out in authoritative guidance which could be applied to both carbon and non-carbon nature markets.
- Co-operate with others to support the growth of high-integrity markets
Buyers of credits are encouraged to co-operate with other market actors at national and global level in order to promote standardisation, information sharing, equitable access, lower transaction costs, transparency, and interoperability.
Application to markets
Co-operation should be enhanced, including within and between UK regulators and policymakers, to develop interconnected investment standards across ecosystem services and to ensure effective governance for the use of credits. In and beyond the UK, the consultation anticipates work on global capacity building for both carbon and biodiversity markets, as well as the development of robust, secure registries with common features to support interoperability of and common data models for national and global VCNMs.
Together, these initiatives seek to foster constructive growth of VCNMs and to provide businesses with independent assurance that a credit traded in the VCNMs represents a real, additional, and durable benefit, and that corporate claims based on them are robust and trustworthy.
Legal, governance, and regulatory implications for VCNMs
Beyond the six integrity principles, the UK government’s consultation also addresses high-level legal, market governance, and regulatory topics relating to VCNMs, and the use of carbon and nature credits.
Legal certainty
The government recognises that increased certainty in the legal classification of credits could increase confidence in their development as an investible asset class and that variation in the legal treatment of carbon credits between jurisdictions may introduce legal risks and uncertainties to market participants. For project developers, clear legal recognition of tradeable carbon credits could provide a stronger foundation for financing, collateralisation, and securitisation. For buyers, it could reduce the risk of ownership disputes or credit reversals.
In 2023, the Law Commission recognised the prevailing view that voluntary carbon credits can be structured as a form of intangible property and recommended that legislation be adopted in the UK to confirm the possibility of a category of personal property that could accommodate the unique features of digital assets (potentially including voluntary carbon credits). To that end, the Property (Digital Assets etc.) Bill was introduced to Parliament in September 2024. However, while the Bill gives effect to the recommendation of the Law Commission, it does not specify that voluntary carbon credits fall within this new category of personal property. The government is therefore inviting views on whether there is more it should do in this respect.
At international level, the government recognises the work being done on harmonisation of legal definitions of carbon credits by the International Institute for the Unification of Private Law (UNIDROIT) and sees this harmonisation as key to VCNM development.
Market governance
With robust governance fundamental to the development of high-integrity VCNMs, a set of functional requirements for an effective governance framework is proposed, including:
- policy mechanisms setting out market rules, as well as high-integrity standards for organisations operating within the market;
- robust assurance mechanisms to enable demonstration of compliance on both supply and demand sides of the market, and accreditation of independent market evaluators to appropriate national or internationally recognised standards; and
- appropriate oversight by environmental, financial, advertising, and consumer regulators across the carbon and nature project lifecycle through to sustainability reporting, with a collaborative and cost-efficient regulatory framework to be developed by a cross-regulatory working group reflecting the scope and activities of regulators across these sectors.
The tax and accounting treatment of voluntary carbon and nature credits in the UK remains under development, with government and industry representatives working on the identification of appropriate solutions.
Access to markets: the role of greenhouse gas removals in high-integrity carbon credit markets
Acknowledging the need for effective access to markets for potential suppliers of carbon and/or nature credits, as well as the requirement for consistent, ongoing demand, the government intends to provide additional support to project developers. This will include support for rapid technology development for engineered greenhouse gas removals (GGRs) and low carbon projects.
Engineered GGRs are highlighted in the consultation as an essential element of a high-integrity voluntary market, given their potential to provide high-integrity permanent removal credits and their role in offsetting residual emissions that cannot feasibly be abated. However, despite their significant potential, engineered GGRs make up only a small proportion of the voluntary market, something which may be ascribed to a relatively small number of buyers and a need to increase demand for removals credits within a reliable negative emissions market.
The government’s 2023 update on business model design for GGRs[1] noted that voluntary carbon markets represent a key demand channel for negative emissions and that voluntary markets will play an increasingly central role in driving investment into GGR technologies. The update further confirmed that the UK government’s business model for GGRs will follow the contract for difference model, with payments determined by the difference between a “Strike Price” (reflecting the cost of producing negative emissions) and a “Reference Price” (reflecting the market value of the negative emissions credits).
However, noting that the relative immaturity of the negative emissions market is likely to result in increased exposure to unpredictable pricing in the near term, pricing for early GGR business models is likely to be structured around a Reference Price based on the relevant developer’s Actual Sales Price plus a Price Discovery Incentive. This Price Discovery Incentive is intended to encourage developers to seek maximum sales prices in the market available to them. Detailed pricing formulae remain under development, but the government has indicated an intention to transition to a market benchmark price once the negative emissions market reaches a sufficient level of maturity.
The government’s parallel consultations demonstrate a clear policy intention to link GGR deployment with the evolution of voluntary carbon markets. GGRs, especially engineered approaches such as Direct Air Capture and Bioenergy with Carbon Capture and Storage (BECCS), are explicitly acknowledged as key contributors to the supply of high-integrity carbon credits under the voluntary market framework. The VCNM consultation emphasises the role of GGRs in generating credits aligned with the Core Carbon Principles, while the GGR business model update identifies voluntary carbon markets (along with the UK ETS) as a future avenue for unlocking demand and investment. Together, these efforts signal a cohesive strategy based on clear co-benefits – building trust and legal certainty in voluntary markets to facilitate the commercial viability of emerging GGR technologies and accelerate Net Zero delivery.
Implications for market participants
Organisations seeking to participate in VCNMs should consider:
- Due diligence requirements: The need for thorough assessment of carbon and nature credit quality and project integrity.
- Contractual considerations: Understanding the legal implications of carbon and nature credit purchase agreements and associated rights.
- Disclosure obligations: Requirements for transparent reporting on carbon and nature credit usage and environmental claims.
- Regulatory considerations: Once available, new cross-cutting regulations dealing with matters such as market oversight, claims guidance, and international alignment must be understood and complied with.
Final thoughts
The UK’s voluntary carbon and nature markets are entering a new era, where trust,integrity, and transparency will define value. Future legal and regulatory standards, both domestic and international, will likely influence how market participants assess risk, structure contracts, and manage regulatory exposure. For businesses seeking to operate in the VCNMs, the bar is rising but the opportunities to participate in a maturing and cohesive market are only set to increase.
The UK government’s consultation “Voluntary Carbon and Nature Markets: Raising Integrity” closes on 10 July 2025.
[1] Greenhouse Gas Removals Update on the design of the Greenhouse Gas Removals (GGR) Business Model and Power Bioenergy with Carbon Capture and Storage (Power BECCS) Business Model
