British businesses and organisations will be better supported to trade carbon credits as part of a renewed drive by the UK Government to establish the country as a global hub for green finance, in the hope of driving growth and investment while also tackling the climate crisis.

With that aim in mind, the government has launched a consultation over its plans to strengthen voluntary carbon and nature markets, which can help leverage the finance needed to address the climate emergency, whilst diversifying revenue streams for UK organisations.

According to the government, these plans will strengthen the UK’s position in the green finance sector and will hopefully unlock private finance for climate change that can back businesses as they make the clean energy transition.

Working through these carbon and nature markets, businesses can reduce their emissions by investing in tradable ‘carbon credits’, units which represent the reduction or removal of greenhouse gas emissions from the atmosphere.

One credit typically represents one metric tonne of CO2 or its equivalent, with companies able to purchase credits from project developers generating them through activities like reforestation, clean energy, deploying electric vehicles, or other emission reduction schemes. 

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.

However, a lack of clear guidance and inconsistent practices around their use is undermining the effectiveness of these carbon markets in driving meaningful climate action, with the government claiming it has received widespread calls for greater clarity on how businesses can incorporate them into their net-zero strategies.

“Businesses need clarity and confidence to invest in voluntary carbon and nature markets that help meet global climate goals,” said Mark Kenber, executive director of the Voluntary Carbon Markets Integrity Initiative.

“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.” 

Under the government’s proposals, the UK will establish a global framework to build trust and confidence in carbon and nature credit trading, including a set of principles to guide businesses on how to use carbon credits most effectively.

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That will mean making clear what a carbon credit is, ensuring businesses are delivering environmental benefits through their use, and encouraging full disclosure of carbon credits in annual sustainability reporting.

By increasing confidence in these markets, which are predicted to be worth a combined £319 billion by 2050, the government aims to see that British businesses are well-positioned to seize economic opportunities and new revenue streams in line with the wider push to net-zero.

“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,” said Kerry McCarthy, UK climate minister.

“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.”