Climate
UK government wants to give ‘air coverʼ for responsible use of carbon credits
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June 2, 2025
The UK government wants support corporates using carbon credits to mitigate climate change, said Zoe Norgate, deputy director for international green finance and capability at the Department for Energy Security and Net Zero (DESNZ).
Speaking at the Association for Financial Markets in Europe (AFME) sustainability conference last month, Norgate said: “We absolutely believe that the corporate organisations should be prioritising direct emission reductions but — realising thereʼs a lot of things that canʼt be done in the short term — thereʼs also an appropriate role for credits alongside that.
“So we will be working with others to try and give that confidence and that air cover to corporates that want to responsibly use credits as part of their final strategies.”
The government is currently consulting on improving integrity in voluntary carbon and nature markets. Norgate said that as part of that process, she’d already had a “lot of really useful discussions with businesses” who had made “very clear asks”. They wanted clarity, incentives and encouragement or “at least air cover” to be able to buy credit with confidence, she added.
Building credibility
Frameworks such as the Integrity Council for the Voluntary Carbon Marketʼs (ICVCM) Core Carbon Principles (CCPs) and the work of the Voluntary Carbon Markets Initiative (VCMI) were important in driving international consensus, Norgate said.
The former validates the methodologies of projects issuing carbon credits while the latter works with corporates on the safe use of voluntary carbon credits (VCCs).
Part of the problem, she acknowledged, is that VCMs have had a “reputational” problem in recent years, which has restricted their growth.
According to Niccolo Pagani, director of EU regulatory engagement at Standard Chartered, the VCM market currently stands at $1.5 billion and in 2024 there were only around 1,500 projects issued. He agreed the market needed clear signals of support from the government if it was to grow.
AFME head of commodities Carlo De Giacomo said expanding the market was critical in reducing carbon in the atmosphere because government emissions trading schemes (ETSs) only accounted for 17% of global emissions. Carbon markets were therefore a necessity in order to hit the Paris Agreements target of limiting global warming to 1.5 degrees.
Carbon Credits
There are two types of carbon markets compliance and voluntary markets. Compliance markets comprise government-backed emissions trading schemes such as those of the European Union ETS and California’s Cap-and-Trade System. VCMs are schemes which allow corporates to purchase additional credits created through climate migration projects.
The UK and EU have announced they are working to link their respective ETSs.
Green claims
The EU Green Claims Directive could also harm carbon markets, Pagani explained, as the European Parliamentʼs current draft text was “extremely restrictive”, in both its definition of credits and its prescriptions on how they could be used. As currently drafted, it could prevent European-based corporates from investing in carbon reduction projects outside the economic bloc, he said.
Clarity on VCMs was needed from regulators and governments, he added, welcoming the April charter on the use of carbon credits by the French government and highlighting a German agreement on the use of “additional” credits. Both agreements permit the financing of carbon reduction projects in developing countries.
Meanwhile, Norgate at the DESNZ said carbon markets could provide debt-free finance for developing countries by enabling them to capitalise on their forests. She added that the UK was working with Singapore, Malaysia and Thailand to support access to carbon markets, boost capabilities and increase interoperability of carbon market standards.