UK Government consultation on the Integrity of Voluntary Carbon and Nature Markets

On 17 April 2025, the Department for Energy Security and Net Zero (“DESNZ”) launched a consultation on how to operationalise its six Principles for Voluntary Carbon and Nature Market (“VCNM”) Integrity. Introduced at COP29, the Principles aim to position the UK as a hub for high-integrity carbon and nature finance. The UK government recognises the role of robust voluntary markets as crucial to mobilising private capital for decarbonisation and nature recovery, particularly in hard-to-abate sectors or sectors that undervalue biodiversity. The consultation signals a more interventionist approach to shaping voluntary markets, with proposals pertaining to standard setting, disclosure, legal clarity, and international cooperation. This comes as other countries, such as France, have announced their support for high integrity voluntary carbon markets. 

The VCNM framework comprises two interrelated areas: 

1. Voluntary Carbon Markets (“VCMs”), which generate credits representing a tonne of CO₂ or other greenhouse gas reduced or removed from the atmosphere, for example through energy efficient technology or engineered or nature-based greenhouse gas removals; and 
    
2. Voluntary Nature Markets (“VNMs”), which encompass payments for activities that deliver environmental outcomes through nature-based activities (including biodiversity and ecosystem services), with each credit representing a measured increase in biodiversity or ecosystem service, for example through nutrient mitigation and nature-based carbon sequestration.

The consultation proposes practical measures to implement each Principle and invites views by 10 July 2025. The key points for each are summarised below.

Principle 1: Use credits in addition to ambitious actions within value chain

The government proposes endorsing the Voluntary Carbon Market Integrity Initiative (“VCMI”) Claims Code of Practice, as representative of international best practice. It also seeks views on the VCMI’s Beta Scope 3 Claim, with the final Scope 3 Action Code of Practice published on 30 April 2025 after the consultation was launched, recognising the challenges around Scope 3 (indirect emissions) target setting.

Acknowledging that most organisations are not yet able to meet the requirements of the VCMI Claims Code, the government is consulting on an additional broader interim claim or standard that would provide recognition to organisations taking interim steps to meet best practice, in order to avoid inaction by organisations and to support a transition to VCMI Claims.

The government is also consulting on ‘insetting’, where organisations fund interventions to directly reduce and remove Scope 3 greenhouse gas emissions within their value chain, instead of purchasing credits on the VCM, in particular on standardisation of insetting approaches.

Principle 2: Use high integrity credits

The Government proposes endorsing the Integrity Council for the Voluntary Carbon Market (“ICVCM”)’s Core Carbon Principles (“CCPs”) and Assessment Framework as a minimum benchmark for VCM credit quality. These tools assess carbon crediting programmes (standard setting organisations that register environmental activities and issue credits, sometimes referred to as “schemes” in UK markets) and methodologies (the parameters and operations required for the calculation of environmental outcomes from a project during its lifetime). However, the ICVCM does not provide project-level assurance. Therefore, the government sees a complementary role for carbon credit ratings agencies (“CCRAs”) to provide project-level assurance.

The consultation also covers: 

• The proposed endorsement of the British Standards Institution’s Nature Investment Standards for UK nature crediting programmes;
• Capacity barriers faced by validation and verification bodies (“VBBs”); and
• Mitigating carbon leakage risks as carbon markets expand.

Principle 3: Measure and disclose the planned use of credits as part of sustainability reporting

Rather than establishing a new disclosure regime, the government proposes strengthening existing Environmental Reporting Guidelines (ERGs) to reflect VCMI’s disclosure elements and align with broader sustainability disclosure frameworks. This approach seeks to balance improved transparency with regulatory efficiency, recognising that mandatory reporting requirements are already expanding under the International Sustainability Standards Board and Transition Plan Taskforce’s (“TPT”) frameworks for example.

Principle 4: Plan ahead

We expect that the government will shortly consult on mandating UK-regulated financial institutions and FTSE 100 companies to implement credible 1.5°C-aligned transition plans. This will include guidance on the role of voluntary carbon and nature credits in such plans, drawing on the TPT recommendations. Integrating VCNMs into transition planning could drive demand for high-integrity credits, although the consultation correctly acknowledges the need for further clarity. 

Principle 5: Make accurate green claims using appropriate technology

In order to increase clarity for climate-related claims, the consultation explores two regulatory options: 

1. Developing official definitions for key terms (for example, “carbon neutral” or “net zero”); or 
2. Developing a claims standard with independent assurance requirements.

It also asks whether users should be permitted to make “net emissions” claims (where credits are retired to offset emissions within a value chain), or “contribution” claims (where credits are retired to support global emissions reductions without offsetting specific emissions). This reflects growing international trends shifting from offsetting toward contribution-based climate action. 

Principle 6: Co-operate with others to support the growth of high-integrity markets

The final Principle underscores the importance of international VCNM alignment. In connection with this, the government requests views on:

• Supporting interoperable market infrastructure, including registries with shared data standards;
• Clarifying the legal status of credits in the UK and promoting international consistency;
• The accounting treatment of credits, noting continuing discussions by international accounting standard setters; 
• The potential need for a dedicated regulator for VCNMs; and
• A cross-regulatory working group to coordinate market oversight.

In parallel, a joint HM Treasury and HMRC working group is reviewing the tax treatment of carbon and nature credits, which remains a long-standing source of uncertainty for market participants.

Cross-cutting enablers

The consultation ends by recognising the UK’s role in enabling domestic project developers to access international carbon credit markets, through the Paris Agreement Crediting Mechanism (PACM), under Article 6.4 of the Paris Agreement. To achieve this, the UK would need to establish appropriate governance arrangements, such as appointing a Designated National Authority for the PACM. Furthermore, the government is also exploring how to stimulate demand for high-quality engineered removals, which remain indispensable components of long-term net zero strategies.

Next steps

Interested parties are invited to provide views by 11.59pm on 10 July 2025. DESNZ’s proposals signal an important step toward embedding integrity and coherence in the UK’s VCNMs. While many proposed measures remain exploratory, their ambition reflects a more extensive regulatory shift: from soft guidance to structured, credible market rules.