UK Government Voluntary Carbon and Nature Markets policy consolidates action on nature and climate, but risks compromising urgent mitigation of climate change and preventing and repairing nature loss, say ONZ researchers

Researchers from the Leverhulme Centre for Nature Recovery, Oxford Net Zero and Oxford Sustainable Finance Group have submitted feedback to the UK Government’s ‘Voluntary Carbon and Nature Markets: Raising Integrity’ consultation, coordinated by the Department for Energy Security and Net Zero (DESNZ). The consultation seeks to “clarify and test the UK Government’s proposed policy and governance framework for helping to ensure the integrity of Voluntary Carbon and Nature Market credits and the use of credits”.

The researchers, who are also part of the Environmental Change Institute (ECI), Smith School of Enterprise and Environment (SSEE) and Department of Biology, welcome government engagement on this issue, in particular the cross-cutting approach that clearly interlinks nature and climate – contemporary crises that are too often treated in isolation. In this respect, the proposed policy and governance framework is promising and forward-thinking. The proposal correctly highlights that addressing challenges related to both climate and nature demands collaborative governance, long-term thinking, and inclusive participation – in addition to technical carbon and biodiversity metrics. This comprehensive approach should be used to frame Voluntary Carbon and Nature Market (VCNM) policies.

However, the researchers share three core concerns about issues that undermine the credibility of the proposed policy and potentially hinder its effectiveness in achieving the aims of restoring and protecting our natural world, and for reducing greenhouse gas emissions to limit global warning to within 1.5^oC.

1. Voluntary Carbon and Nature Markets risk greenwashing and puts companies at litigation risk

Proposed UK Government endorsement of the Voluntary Carbon Market Integrity initiative (VCMI) as best-practice for carbon-credit use puts companies at risk of litigation for greenwashing claims of ‘offsetting’ or ‘compensating’ for their emissions. This is because the VCMI Scope 3 Code of Practice treats the purchase of carbon credits as equivalent to GHG emissions. Recent litigation examples include class action won against airline KLM by the Amsterdam District Court[i], and a settlement reached by Parents for Climate against Energy Australia[ii]. In these cases, both companies over-claimed the climate impacts of offsetting schemes, a risk that the UK Government’s proposed framework would compound.

2. Credits on the Voluntary Carbon and Nature Market are not equivalent to emissions reductions in companies’ value chains, and evidence demonstrates that credits may not deliver desired carbon reduction and nature protection.

By endorsing VCMI, the proposed policy frames supply-chain emissions as something that can be cancelled through credits. Voluntary carbon market (VCM) credits have no obvious link to supply chains which means that supply risk is not managed and will be passed on to investors and governments. Reliance upon VCM credits delays addressing systemic issues and places risk on other actors.

A range of evidence exists to suggest that VCNMs do not meet their aims of 1) reducing greenhouse gas emissions from the atmosphere, 2) supporting nature recovery, or 3) providing permanent carbon storage solutions[iii]:

1. Little to no additionality from credits[iv]
2. Over-crediting[v]
3. Issues with avoidance credits as compensation tool[vi]
4. Lack of permanence and dominance of avoidance projects[vii]
5. For nature-based and forestry credits, challenges with albedo (how much light is reflected by the Earth’s surface) and other biophysical feedbacks[viii].

3. Tackling the nature and climate crises with VCN credits overlooks the deeper, systemic causes of climate change and ecological degradation, and the challenges of mitigating their impacts.

The UK Government’s proposed policy rightly acknowledges the challenges of addressing Scope 3 emissions, preventing nature loss, and financing nature recovery and protection. However, these are systematic issues that a VCNM alone cannot solve.

• Addressing Scope 3 emissions requires companies to be incentivised and rewarded for contributions they are making towards long-term systemic changes deep in their supply chains, including inter-alia, collective efforts to finance carbon dioxide removal & low-carbon product and manufacturing technologies; or, policy advocacy and lobbying to remove policy barriers and create opportunities to decarbonise supply chains.
• Tackling nature crises requires fixing policy and power imbalances, including concentrated land ownership that excludes local and indigenous voices and contributes to inequitable decision-making. Systemic changes need to be led by the local level with support from government, for collaborative, place-based solutions and benefits that are supported and sustained by communities and other actors to be realised.
• Private finance can help fill the nature-finance gap, but it is not a panacea. Blended finance and market-based instruments can complement public funding by mobilising additional capital without imposing direct tax burdens on citizens. However, to unlock private financing, the government must establish robust data governance frameworks, have transparent tracking and disclosure of project outcomes, and reduce information asymmetries that currently inhibit market confidence. This includes clear standards for MRV, open-access registries, and mechanisms for auditing financial and socio-ecological performance across both public and private actors.

Source:
netzeroclimate.org
1) https://www.loyensloeff.com/insights/news–events/news/breaking-court-judgment-in-first-dutch-greenwashing-class-action—marketing-claims-klm-are-considered-to-be-misleading/

[ii] https://www.theguardian.com/australia-news/2025/may/19/energy-australia-apologises-to-400000-customers-and-settles-greenwashing-legal-action

[iii] Becker et al. (2024). Addressing the Scope 3 Challenge – A workshop briefing from researchers working on corporate climate action and governance.  https://netzeroclimate.org/wp-content/uploads/2024/09/Oxford-Net-Zero_Grantham-Institute-Imperial_SBTi-Workshop-paper.pdf

[iv] Bjørn, A., Lloyd, S. M., Brander, M., & Matthews, H. D. (2022). ‘Renewable energy certificates threaten the integrity of corporate science-based targets’. Nature Climate Change, 12(6), 539-546.; Naik, G. (2021). Problematic corporate purchases of clean energy credits threaten net zero goals. Available at: https://www.spglobal.com/esg/insights/problematic-corporate-purchases-of-clean-energy-credits-threaten-net-zero-goals; Offset Guide (no date). Frequently Asked Questions: Green Power Purchasing Claims and Greenhouse Gas Accounting. Available at: https://offsetguide.org/green-power-faq/; Langer, L., Brander, M., Lloyd, S. M., Keles, D., Matthews, H. D., & Bjørn, A. (2023). ‘Does the purchase of voluntary renewable energy certificates lead to emission reductions? A review of studies quantifying the impact’. SSRN. http://dx.doi.org/10.2139/ssrn.4636218

[v] Haya, B. and Dorosz, M. (2023). Recommendations to the GHG Protocol Survey Responses on Market-based Accounting Approaches. Available at: https://gspp.berkeley.edu/assets/uploads/page/Comments_to_GHG_Protocol_from_Berkeley_Carbon_Trading_Project.pdf ; Gill-Wiehl, A., Kammen, D. and Haya, B. (2023). Cooking the books: 13 Pervasive over-crediting from cookstoves offset methodologies. https://doi.org/10.21203/rs.3.rs-2606020/v1; Pande, R. (2024). ‘Can the market in voluntary carbon credits help reduce global emissions in line with Paris Agreement targets?’. Science, 384 (6696). https://doi.org/10.1126/science.adp5223.

[vi] Axelsson, K., Wagner, A., Johnstone, I., Allen, M., Caldecott, B., Eyre, N., Fankhauser, S., Hale, T., Hepburn, C., Hickey, C., Khosla, R., Lezak, S., Mitchell-Larson, E., Malhi, Y., Seddon, N., Smith, and Smith, S.M. (2024). Oxford Principles for Net Zero Aligned Carbon Offsetting (revised 2024). Available at: https://www.smithschool.ox.ac.uk/sites/default/files/2024-02/Oxford-Principles-for-Net-Zero-Aligned-Carbon-Offsetting-revised-2024.pdf

[vii] Smith, S. M., Geden, O., Gidden, M. J., Lamb, W. F., Nemet, G. F., Minx, J. C., Buck, H., Burke, J., Cox, E., Edwards, M. R., Fuss, S., Johnstone, I., Müller-Hansen, F., Pongratz, J., Probst, B. S., Roe, S., Schenuit, F., Schulte, I., Vaughan, N. E. (eds.) (2024). The State of Carbon Dioxide Removal – 2nd Edition. https://doi.org/10.17605/OSF.IO/F85QJ.

[viii] Hasler, N., Williams, C.A., Denney, V.C., Ellis, P.W., Shrestha, S., Terasaki Hart, D.E., Wolff, N.H., Yeo, S., Crowther, T.W., Werden, L.K. and Cook-Patton, S.C. (2024). ‘Accounting for albedo change to identify climate-positive tree cover restoration.’ Nature Communications, 15 (2275). https://doi.org/10.1038/s41467-024-46577-1