We welcomed the opportunity to respond to this consultation and strongly support the UK becoming a global hub for VCNMs, leveraging its existing green policies, experience in environmental markets, and the strength of UK-based financial and related professional services. There is a clear and appropriate role for the responsible use of voluntary carbon and nature credits. Confidence in the integrity of these markets is essential to unlocking their full potential.
Highlights include:
- Scaling VCNMs: The UK has significant potential to scale the growth of VCNMs. To seize this opportunity, carbon and nature markets should be recognised as a distinct and emerging asset class, and the government must provide legal, accounting, tax, and regulatory certainty.
- Whole-of-Government Approach: The UK must adopt a whole-of-government approach to ensure that its legal, accounting, taxation, and prudential frameworks are consistent and aligned with promoting the UK as a global hub for VCNMs.
- Focus on Carbon Markets: TheCityUK encourages the government to focus on scaling carbon markets first, as they are more developed and have more potential to deliver economies of scale in a shorter timeframe.
- Legal Status: The legal status of carbon credits in the UK is currently unclear. Certainty on the legal nature of verified carbon credits is critical to scaling the market and a clear legal status would enable property rights to be recognised, upheld and enforced.
- International Alignment: We support the government's proposals to recognise the VCMI's Claims Code of Practice as representative of international best practice and endorse the ICVCM's Core Carbon Principles. However, it will be important for the government to engage with other jurisdictions to mitigate the risk of market fragmentation and support the development of an internationally aligned and standardised global market. This is crucial for scaling high-integrity VCNMs that can fill the investment gap for climate change mitigation and nature recovery across regions and economic sectors.
- Scaling nature markets: Nature markets are an important mechanism to mobilise private finance to mitigate global biodiversity loss. The UK is well-positioned to play a major role in both domestic and global nature markets. However, several barriers currently hinder private sector participation, including regulatory uncertainty, complex measurement, reporting and verification (MRV) processes, and concerns over greenwashing. Action from government is needed to provide policy and regulatory certainty, scale MRV methodologies and support capacity building.
- Collaboration: The UK government must work with other jurisdictions, international organisations, and the private sector to strengthen the coherence of VCNMs across markets, increasing trust and confidence, attracting greater private investment and enhancing the role of these markets in achieving the objectives of the Paris Agreement and the Global Biodiversity Framework.
- Article 6: We encourage the UK government to put in place the arrangements to enable UK project developers to have access to Article 6.4 markets. The UK has an important role to play in influencing the development of the market and it is important to ensure that the UK - as a leading centre for green and sustainable finance - participates in this mechanism.