UK Government to Guide Responsible Carbon Market Engagement
The UK government has set out its position on voluntary carbon and nature markets. It recognises a role for high-quality credits, but only when companies use them alongside direct emissions cuts. This matters because firms that rely on offsetting without reducing their own carbon footprint face growing scrutiny from regulators, investors and customers.
The Department for Energy Security and Net Zero ran a consultation from 17 April to 10 July 2025. The exercise sought views on how to raise standards across the market, improve governance and clarify when companies can credibly use carbon credits. The government has now responded. It plans to publish detailed guidance in spring 2027 for organisations that want to participate in these markets responsibly.
This guidance builds on six voluntary principles published in November 2024. Those principles were designed to give businesses and investors confidence that credit purchases reflect genuine environmental benefit. The updated policy makes clear that credits should complement, not replace, efforts to cut emissions within a company's operations and supply chain.
Consultation findings and government response
The consultation attracted responses from businesses, project developers, civil society groups and investors. Many wanted clearer rules on due diligence, disclosure and the relationship between credit purchases and internal reduction targets. Concerns about greenwashing were widespread. Respondents also highlighted risks around additionality, permanence and double counting.
Additionality means the project would not have happened without carbon finance. Permanence refers to how long the carbon stays locked away. Double counting occurs when the same reduction is claimed by more than one party. These issues have undermined confidence in voluntary markets for years.
The government acknowledged these problems. Its response emphasises independent validation, transparent reporting and credible environmental outcomes. It also points to the Integrity Council for the Voluntary Carbon Market's Core Carbon Principles and Assessment Framework as a relevant benchmark. Paris Agreement crediting mechanisms are mentioned as another reference point for high-quality credits.
However, the government stopped short of creating a UK-only claims regime. Instead, it intends to work with emerging international approaches. This avoids fragmenting an already complex market, but it also means businesses will need to track multiple standards and frameworks.
What the six principles cover
The principles published in November 2024 apply to both suppliers and buyers. For suppliers, they require independent verification of carbon reductions and credible evidence that projects deliver real environmental benefits. They also call for safeguards against social and environmental harm.
For buyers, the principles set expectations around project selection, claims and transparency. Companies must assess the quality and limitations of individual credits, not just rely on programme-level standards. This distinction is important. A crediting programme may have robust methodology, but a specific project within that programme could still fail to deliver the claimed reductions.
The government also expects buyers to communicate claims carefully. This means being clear about what credits represent, how they fit into a broader climate strategy and what progress the company is making on direct emissions cuts. Vague or misleading claims carry reputational and regulatory risk.
Moreover, the principles encourage collaboration. Buyers should work with other market participants to improve transparency and interoperability. This includes sharing information, supporting standardisation and backing efforts to improve market access for smaller projects and developing countries.
Planned actions and timeline
The government has outlined several strands of work. First, it will publish guidance in spring 2027 to support organisations through different stages of market participation. This will cover choosing credits, integrating them into climate strategies and making public claims. The guidance aims to reduce uncertainty and help firms avoid greenwashing allegations.
Second, the government intends to clarify its position on international quality benchmarks. It will support market infrastructure, project developers and land managers. It also plans to help developing countries access carbon finance for mitigation and nature restoration projects.
Third, it will identify circumstances where carbon credits can make a useful contribution to climate and nature strategies. Nevertheless, the priority remains direct emissions cuts. Credits should only be used when companies have credible reduction targets aligned with climate science.
Fourth, the government is considering incentives for organisations that follow the forthcoming guidance. Details have not been published, but this could include recognition in public procurement or other policy measures. Conversely, firms that ignore the guidance may face greater scrutiny.
Fifth, the government plans to strengthen legal clarity and international consistency. It has proposed a UK Carbon and Nature Markets Regulator Forum to improve oversight and coordination. This body would bring together regulators, industry and civil society to address governance gaps.
Finally, the government will continue working with stakeholders on insetting, environmental data and supply chain resilience. Insetting refers to climate or nature interventions within a company's value chain, rather than unrelated offset projects. This approach is generally seen as more credible because it links directly to a firm's operations.
Commercial implications for UK businesses
These developments affect firms in several ways. First, companies that use carbon credits to support net zero claims will face higher expectations. They must demonstrate that credits are high quality, independently verified and additional to direct emissions reductions. This requires better due diligence and disclosure.
Second, businesses that supply public sector customers should note that procurement policy increasingly favours firms with credible climate strategies. Carbon reporting under PPN 06/21 already requires suppliers to publish reduction targets and report emissions. The government's position on voluntary markets reinforces this direction of travel. Credits alone will not satisfy tender requirements.
Third, firms that make carbon neutrality or net zero claims must ensure those statements can withstand scrutiny. Regulators, including the Competition and Markets Authority, have warned against misleading environmental claims. The government's guidance will likely become a reference point for assessing whether claims are credible.
Fourth, businesses involved in project development, land management or nature restoration may find new finance opportunities. However, access to carbon markets will depend on meeting higher standards for verification, safeguards and transparency. Projects that cannot demonstrate additionality or permanence will struggle to attract buyers.
Fifth, companies with complex supply chains need to consider Scope 3 emissions. These are indirect emissions from suppliers, transport and product use. They often account for the majority of a company's carbon footprint. The government's position suggests that credits cannot substitute for supply chain engagement and reduction efforts.
Sixth, reputational risk remains significant. Firms that purchase low-quality credits or make exaggerated claims face criticism from NGOs, media and investors. This can affect brand value, customer loyalty and access to finance. Consequently, businesses should treat carbon credit purchases as part of a broader climate strategy, not a shortcut to net zero.
What businesses need to know
- The government will publish detailed guidance on voluntary carbon and nature markets in spring 2027, following a consultation that closed in July 2025.
- Six voluntary principles published in November 2024 already set expectations for suppliers and buyers, emphasising independent verification and transparent reporting.
- Credits must complement direct emissions reductions within a company's operations and value chain, not replace them.
- The government recognises the Integrity Council for the Voluntary Carbon Market's Core Carbon Principles and Paris Agreement crediting mechanisms as relevant benchmarks for high-quality credits.
- Companies should assess individual projects, not just rely on programme-level standards, and communicate claims carefully to avoid greenwashing allegations.
- The government plans to establish a UK Carbon and Nature Markets Regulator Forum to improve oversight and coordination across the market.
- Firms that follow the forthcoming guidance may benefit from incentives, while those that ignore it will face greater scrutiny from regulators and investors.
Why carbon credit quality matters for compliance and tenders
Voluntary carbon markets have grown rapidly in recent years. However, persistent questions about quality have undermined confidence. Issues include whether projects deliver the claimed reductions, whether those reductions would have happened anyway and whether the carbon remains stored long term.
These concerns affect businesses directly. Companies that purchase low-quality credits may find their climate commitments are not credible. This exposes them to regulatory action, reputational damage and exclusion from tenders. Public sector procurement increasingly requires suppliers to demonstrate progress on emissions reduction, not just credit purchases.
Furthermore, investors are paying closer attention. Asset managers and pension funds want to understand how portfolio companies are addressing climate risk. Relying on offsetting without cutting emissions raises questions about long-term strategy and resilience. Firms that can show measurable progress on direct reductions alongside high-quality credit purchases are better positioned.
The government's approach also reflects international trends. Regulators in the EU, US and other jurisdictions are tightening rules on environmental claims. The UK's guidance will align with these efforts, but it will not eliminate the need for businesses to track multiple frameworks and standards. Consequently, firms need robust internal processes for assessing credits, documenting decisions and reporting outcomes.
Additionally, the focus on project-level assessment is significant. A crediting programme may have strong governance and methodology, but individual projects can still fail. For example, a forestry project may be vulnerable to fire, disease or illegal logging. A renewable energy project may not be additional if the installation would have proceeded anyway. Buyers must therefore look beyond programme accreditation and assess specific risks.
Finally, the government's emphasis on insetting and value chain engagement points to a broader shift. Companies are expected to reduce emissions where they occur, not just purchase credits from unrelated projects. This means working with suppliers, investing in low-carbon technology and redesigning products and services. Credits may support these efforts, but they cannot substitute for them.
Practical steps for businesses considering carbon credits
Businesses should start by establishing credible reduction targets. These should be aligned with climate science, typically meaning a pathway consistent with limiting warming to 1.5 degrees. Targets should cover Scope 1, 2 and relevant Scope 3 emissions. Only after setting targets should firms consider using credits to support residual or hard-to-abate emissions.
Next, companies should assess individual projects carefully. This means reviewing verification reports, understanding project risks and checking for safeguards against social or environmental harm. Independent ratings and due diligence tools can help, but businesses should not rely on them exclusively. Direct engagement with project developers is often necessary.
Firms should also be transparent about how credits fit into their climate strategy. This includes disclosing the volume of credits purchased, the types of projects supported and how this relates to direct emissions reductions. Transparency reduces greenwashing risk and builds trust with stakeholders.
In addition, businesses should monitor developments in market standards. The Integrity Council for the Voluntary Carbon Market continues to refine its framework. Paris Agreement mechanisms are evolving. The UK government's spring 2027 guidance will add another reference point. Staying informed helps firms make better purchasing decisions and adjust strategies as expectations change.
Moreover, companies should consider carbon reporting and compliance support to ensure they meet regulatory requirements. This includes preparing for potential incentives linked to the government's forthcoming guidance, as well as managing risks associated with non-compliance or reputational damage.
Finally, businesses should engage with industry bodies, peer networks and training resources to build internal capability. Understanding carbon markets, verification standards and climate science requires expertise. Investing in skills development reduces reliance on external advisors and improves decision-making.
Further information and resources
The Department for Energy Security and Net Zero published the consultation response on voluntary carbon and nature markets in early 2025. This document sets out the government's position and planned actions through to 2027.
The Integrity Council for the Voluntary Carbon Market provides the Core Carbon Principles and Assessment Framework, which the UK government recognises as a relevant benchmark for high-quality credits.
Businesses seeking guidance on carbon reporting, reduction targets and compliance can review resources from the UK's net zero strategy, which outlines the government's broader approach to emissions reduction across the economy.
Firms should also monitor updates from the Competition and Markets Authority on environmental claims guidance, which sets expectations for how businesses communicate sustainability commitments to avoid misleading consumers.