Carbon market in the UK: Establishing a reliable, self-regulated platform for carbon trading
The UK government's recent consultation, titled "Voluntary Carbon and Nature Markets: Raising Integrity," marks a significant stride towards formalising and enhancing the integrity of voluntary carbon and nature markets (VCNMs) in the UK. The consultation, which closed on 10 July 2025, proposes a policy and governance framework designed to ensure these markets deliver genuine environmental benefits and foster confidence among participants [1][2].
The consultation outlines a vision for a high-integrity, investor-ready voluntary market that complements compliance markets like the UK Emissions Trading Scheme, with the goal of supporting net zero ambitions by mobilising finance for global and domestic climate and biodiversity targets [1]. The UK is advocating for transparency, credibility, and legal certainty in carbon and nature credits, seeking to build trust and promote broader adoption of VCNMs [1][4].
Key developments following the consultation include the endorsement of the Integrity Council for the Voluntary Carbon Market's 2023 core carbon principles and assessment framework as a minimum quality requirement [1]. The first principle requires that credits should only be used in addition to ambitious actions within value chains [2]. The government is seeking feedback on its alternative proposals, either building on international initiatives to create an official definitions list or the development of a UK standard for claims relating to carbon credits [3].
Industry bodies, academics, and NGOs have responded to the consultation, expressing their views on various aspects. The World Federation of Exchanges (WFE) has praised the ambition to raise standards and suggested practical measures such as adopting a "climate-first" focus, defining legal rights for carbon and nature credits, removing VAT on carbon credit transactions, aligning legal, tax, accounting, and regulatory frameworks across government, allowing flexibility to accommodate innovation, and requiring transition plans under disclosure regimes [4].
Coalitions like the Natural Climate Solutions Alliance have highlighted the UK’s strong starting point and emphasized pragmatic, forward-looking policies that ensure voluntary carbon markets contribute to both net-zero and nature-positive outcomes [3]. However, they also expressed concerns about policy credibility and its real-world effectiveness for nature restoration and climate mitigation [2].
The consultation also seeks feedback on whether additional initiatives are needed to support global interoperability of carbon markets and whether further clarification around accounting and tax treatments of credits would be beneficial [1]. As the consultation's closing indicates detailed next steps are expected soon, the input from various stakeholders indicates a broad consensus on the importance of robust governance, legal clarity, and market incentives to make these markets effective tools for climate and nature goals [1][2][3][4].
This article is the second Insight in a UK-focused series on environmental marketplaces, which previously looked at emission trading schemes and will next focus on developments around nature markets. As these markets evolve, it is crucial for businesses to navigate the fast-changing sustainability regulations, a task our firm is well-equipped to handle.
References: [1] gov.uk, Voluntary Carbon and Nature Markets: Raising Integrity, 2025. [2] Carbon Brief, UK Government consults on voluntary carbon markets, 2025. [3] BusinessGreen, UK government consults on voluntary carbon markets, 2025. [4] World Federation of Exchanges, Response to the UK Government’s Voluntary Carbon Markets Consultation, 2025.
- The UK government's consultation on voluntary carbon and nature markets emphasizes the importance of a high-integrity, investor-ready market that could foster business by mobilizing finance for climate and biodiversity targets.
- The consultation proposes a policy and governance framework aimed at delivering genuine environmental benefits, ensuring transparency, credibility, and legal certainty in carbon and nature credits.
- The World Federation of Exchanges has praised the UK's efforts to raise standards in voluntary carbon markets and suggests practical measures such as adopting a "climate-first" focus and defining legal rights for carbon and nature credits.
- The Natural Climate Solutions Alliance highlights the UK’s strong starting point for voluntary carbon markets but expresses concerns about policy credibility and its real-world effectiveness for nature restoration and climate mitigation.
- As the consultation's closing indicates detailed next steps are expected soon, it is crucial for businesses to navigate the fast-changing sustainability regulations in the realm of environmental marketplaces, particularly voluntary carbon markets and nature markets, which are expected to play significant roles in supporting net-zero and nature-positive outcomes.
