Policy paper

Introduction to the principles

Published 15 November 2024

Climate change and nature loss are existential challenges, and this decade is critical for action. To limit global temperature rises to 1.5 degrees, build resilience to current and future climate impacts and halt and reverse global biodiversity loss we need to at least peak global emissions by 2025 and reduce emissions by 43% on 2019 levels by 2030 as recognised by the Global Stocktake, protect forests and nature, empower communities to adapt to climate impacts and move climate finance spending from the billions to the trillions.

In 2023, $1.8 trillion was invested into low carbon sectors, globally. This figure will have to almost quadruple by the early 2030s to over $7 trillion every year to reach global net zero by 2050. The UK will likely need to more than double current capital investment levels in low-carbon sectors from £60 billion in 2023 to over £130 billion each year by the 2030s^{[footnote 1]} to achieve our mission of accelerating to net zero.

Raising integrity in carbon markets, to support the generation and trade of reduction and removal credits, would accelerate domestic and international efforts to tackle climate change and biodiversity loss, support increased overall ambition, and provide wider social and environmental co-benefits.

Nature sustains economies and livelihoods, and protecting and restoring nature is inseparable from addressing climate change. However the global biodiversity finance gap underpinning the Kunming-Montreal Global Biodiversity Framework^{[footnote 2]}, is estimated to be $700 billion per year^{[footnote 3]}.

The government therefore wants to maximise finance mobilisation from all possible sources towards achievement of our ambitious climate and nature goals. In this context, it supports action to unlock high integrity Voluntary Carbon and Nature Markets (VCNMs). These markets support the generation and trade of economic instruments representing environmental outcomes (‘credits’). Forecasts indicate that the size of these markets could reach tens of billions of dollars, globally, by the end of decade, with higher volumes possible, under the right conditions, in subsequent years. For these markets to better support the delivery of climate and environmental goals, it is critical that they are operated and used with integrity to ensure that they support a 1.5 degree-aligned, nature-positive transition.

This means, at a minimum, better ensuring that credits deliver their intended environmental outcomes, that buyers do not purchase and retire (‘use’) credits instead of undertaking the internal action needed to align with, and mitigate damage to, climate and environmental goals, and that any public environmental claims (‘claims’) made in relation to the use of credits are aligned with relevant information in sustainability reporting, accurate and avoid misleading stakeholders.

Clear integrity standards are crucial for strengthening voluntary markets to unlock scale. The UK government is supportive of the work of two market wide initiatives aiming to clarify minimum global quality thresholds and good practice for the supply and use of voluntary carbon credits: the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI). These initiatives have engaged a broad range of interests over several years, consulted publicly, and published outputs which have influenced actors to strengthen and disclose more of their practices. In 2023, the UK government and France co-launched the independent International Advisory Panel on Biodiversity Credits (IAPB), to help shape and scale-up the development of high-integrity biodiversity credit markets.

Domestically, the UK and its devolved governments support the British Standards Institution (BSI) to work with industry, academia, non-profits and expert bodies to deliver a suite of Nature Investment Standards covering the supply of units that create environmental benefits for use or trade for application in the UK. This includes overarching principles for all UK nature markets and market-specific standards that will support nature-based carbon removals, biodiversity uplift, and nutrient mitigation. This is building on international best practice, the experience gained through the established UK Woodland Carbon Code and UK Peatland Code, and the work of many world leading experts in the UK’s farming, environment and green finance sectors to support robust, efficient models for mobilising investment where it is needed.

The UK is also developing its approach to engineered removals through the Greenhouse Gas Removals (GGR) Standard, in collaboration with BSI to help bring forward the removals that will be required for the UK to meet net zero. BSI are designing technology specific methodologies which will define the requirements and procedures for the quantification, monitoring, reporting and verification of engineered removal carbon credits. BSI will work with stakeholders to ensure that credits generated under the standard reflect high integrity best practice across the marketplace and to facilitate UK GGR projects access to these markets.

The UK government sees a clear and appropriate role for the responsible use of high-integrity carbon and nature credits by companies or other organisations that wish to do so as part of their climate and nature strategies.

The UK government is issuing principles for voluntary carbon and nature markets integrity. These principles are voluntary, will support organisations engaged in discretionary action towards net zero and nature positive transitions, and should be followed by organisations that wish to align with them. They are intended to:

• qualify key elements of good practice, and provide confidence to organisations on the use of credits; to build trust amongst consumers, investors, and civil society that the use of credits reflects good practice
• respond to calls for policy clarity to support higher environmental and financial integrity and efficiency, better access to markets for developing countries, and in the UK, for farmers and land managers
• enable stakeholders and potentially UK regulators to monitor and act where good practice is not adhered to in the context of existing and future regulatory codes, as part of an effective transparency regime for the use of credits by UK organisations
• support coherence across voluntary carbon and nature markets, whilst reflecting the divergent maturity, scale and characteristics of the different environmental markets

See the Principles for voluntary carbon and nature market integrity

1. Bloomberg New Energy Finance ↩

2. Financing Nature: Closing the Global Biodiversity Financing Gap - Paulson Institute ↩

3. The Paulson Institute, The Nature Conservancy and Cornell estimate ↩