Wood Mackenzie highlights the importance of valuing natural carbon sinks
Natural carbon sinks absorb 18 gigatonnes annually but remain undervalued
Forests and oceans remove roughly 40 per cent of human carbon emissions each year. However, a new Wood Mackenzie report argues that carbon markets and climate policy still fail to value that service properly. The report says these natural systems are under growing pressure even as most compliance markets price emissions, not the degradation of the ecosystems that remove them.
Wood Mackenzie's August 2026 report, titled Nature capital: the unpriced carbon, frames natural sinks as essential but undercompensated climate infrastructure. According to the analysis, oceans absorbed about 12 gigatonnes of CO2 in 2025 and forests about six gigatonnes. Together they offset roughly 18 gigatonnes of the 48 gigatonnes emitted globally from human activities. Consequently, net emissions fell to about 30 gigatonnes.
The same analysis highlights a stark gap between nature's role and the scale of engineered removals. Direct air capture and bioenergy with carbon capture and storage contributed only 0.08 gigatonnes in 2025. That figure sits far below the annual uptake from oceans alone.
Carbon pricing mechanisms overlook economic value of natural systems
The core claim is that current carbon pricing mechanisms largely overlook the economic value of natural sinks. Wood Mackenzie argues that most compliance-market carbon prices, ranging from roughly US$5 to US$90 per tonne of CO2, are too low to reflect the cost of sink degradation. Moreover, these prices fail to generate enough finance to protect these systems.
That creates what the report calls a structural blind spot. Policy tends to treat forests and oceans as free absorptive infrastructure while placing the cost burden mainly on emissions. The report warns that without stronger pricing, more nature-focused finance, and policy intervention, natural absorptive capacity will keep weakening.
The report lands in a broader policy debate about how to account for natural capital in climate finance. International climate models and policy discussions increasingly recognize that land-use and ocean sinks shape the pace of decarbonization. Nevertheless, they remain difficult to monetize in a consistent way. The OECD has also noted that assumptions about natural sinks can materially affect carbon-price pathways in long-term policy models.
Wood Mackenzie has been actively tracking carbon markets in 2026, including policy shifts affecting offsets and compliance systems. In its wider market outlook, the firm has forecast major growth in carbon offsets and carbon capture toward 2050. At the same time, it warns that current frameworks may not sufficiently reward the maintenance of natural sinks.
UK businesses face rising compliance costs if natural sinks degrade
For UK businesses, the significance of this research extends beyond environmental accounting. If forests, soils, wetlands, and oceans lose their ability to absorb carbon, the world would need far more expensive mitigation elsewhere. That would translate directly into higher carbon prices across compliance markets, including the UK Emissions Trading Scheme.
The UK ETS currently covers energy-intensive industries, power generation, and aviation. Prices in the scheme have ranged between £30 and £80 per tonne over the past two years. However, if natural absorptive capacity declines, emissions reductions would need to accelerate faster than planned. Consequently, carbon prices could rise sharply to drive the additional abatement required.
For manufacturing businesses, higher carbon prices feed through to energy costs, production expenses, and supply chain tariffs. Companies with significant Scope 1 and Scope 2 emissions would face larger compliance bills. In addition, businesses competing for public sector contracts under Procurement Policy Note 06/21 would need to demonstrate carbon reductions at potentially greater cost.
There are also implications for nature-based offset projects. Many UK businesses purchase carbon credits linked to forestry, peatland restoration, or marine conservation. If natural sinks become less reliable or slower to regenerate, the quality and permanence of these credits may come under greater scrutiny. Buyers would need more robust verification and longer-term monitoring to ensure offsets deliver the stated carbon benefit.
Furthermore, supply chains that depend on natural resources face physical risks. Forestry businesses, agricultural suppliers, and seafood producers all rely on healthy ecosystems. If these systems degrade, input costs rise and availability becomes less predictable. Businesses with exposure to these sectors should consider how sink degradation might affect operational resilience.
The policy implication is clear. Carbon markets may need to evolve from simply pricing pollution to also valuing the preservation of natural sinks. That could mean stronger incentives for conservation, better integration of ecosystem services into climate finance, and more explicit treatment of sink protection in national and international climate policy. UK businesses should monitor how these changes unfold, particularly if new compliance obligations or reporting standards emerge.
What the Wood Mackenzie analysis covers
- Gross global human-caused emissions reached an estimated 48 gigatonnes of CO2 in 2025, with natural sinks absorbing roughly 18 gigatonnes or about 40 per cent of the total.
- Oceans absorbed approximately 12 gigatonnes of CO2 in 2025, while forests absorbed around six gigatonnes, together reducing net emissions to about 30 gigatonnes.
- Engineered carbon removal technologies, including direct air capture and bioenergy with carbon capture and storage, contributed only 0.08 gigatonnes in 2025.
- Typical carbon prices in many compliance markets range from US$5 to US$90 per tonne of CO2, which the report considers insufficient to reflect the cost of sink degradation.
- The report argues that current carbon pricing frameworks treat natural sinks as free infrastructure, creating a structural gap in how climate policy values these systems.
- Without stronger pricing signals and dedicated finance for conservation, natural absorptive capacity is expected to decline further, increasing the cost of mitigation elsewhere.
How this changes the carbon market conversation
The Wood Mackenzie report shifts the carbon market conversation from emissions alone to the systems that make deep decarbonization possible. UK businesses engaged in carbon reporting and net zero programs should consider how their strategies account for natural capital. Most current plans focus on reducing direct emissions or purchasing offsets. However, if natural sinks weaken, both approaches become more expensive and less effective.
For companies developing net zero roadmaps, this research suggests that relying solely on future carbon removals carries growing risk. Natural sinks are not static. Their capacity depends on land management, ocean health, and climate stability. Businesses should therefore assess the permanence and additionality of any nature-based credits they purchase. They should also evaluate whether their supply chains depend on ecosystems that may face degradation.
There are also opportunities. Businesses that invest early in nature restoration projects may benefit from stronger policy support and higher credit values in future. The UK government has signalled interest in expanding nature-based solutions through the England Woodland Creation Offer and peatland restoration grants. Companies that align with these initiatives could secure access to high-quality credits while supporting broader environmental goals.
In addition, businesses with land holdings or rural supply chains can explore direct engagement with conservation finance. This might include habitat restoration, soil carbon sequestration, or agroforestry schemes. These activities can generate co-benefits such as biodiversity gains, flood mitigation, and improved water quality. They also position businesses ahead of potential regulatory changes that reward sink protection.
For procurement teams, this research underlines the importance of assessing supplier environmental performance beyond emissions alone. Suppliers that manage land sustainably or invest in ecosystem health may prove more resilient in the long term. Sustainable procurement strategies should consider how natural capital risks and opportunities flow through the value chain.
UK businesses should also watch for developments in carbon market regulation. If policymakers adopt the Wood Mackenzie analysis, future compliance schemes may include explicit provisions for sink protection. That could take the form of mandatory contributions to conservation funds, stricter offset eligibility criteria, or new reporting requirements for nature-related risks. Early preparation will reduce compliance costs and operational disruption.
Where to find further information and guidance
The full Wood Mackenzie report, Nature capital: the unpriced carbon, provides detailed analysis of natural sink capacity and carbon market gaps. Businesses seeking authoritative guidance on carbon pricing and natural capital should consult the Department for Energy Security and Net Zero, which oversees UK climate policy and emissions trading. The department publishes regular updates on the UK Emissions Trading Scheme and carbon market developments.
For information on nature-based solutions and conservation finance, the Environment Agency offers guidance on habitat restoration, peatland recovery, and biodiversity net gain. The agency also administers several grant schemes for land management that support carbon sequestration. Businesses interested in ESG compliance and carbon reporting can access technical resources and practical tools to improve their environmental performance and meet regulatory requirements.
The Institute of Environmental Management and Assessment provides professional standards and training for environmental practitioners working on carbon management and natural capital. IEMA members can access technical guidance on integrating natural capital into corporate sustainability strategies. Additionally, the government's guidance on Procurement Policy Note 06/21 explains how carbon reduction plans are assessed in public sector tenders, which is essential reading for suppliers to central government and the wider public sector.