Voluntary Carbon and Nature Markets as a Tool for Sustainable Development

In the lead up to COP30, Brazil proposed a global coalition to integrate carbon markets, aiming to harmonise standards and accelerate decarbonisation: the Open Coalition on Compliance Carbon Markets. The commitment has received the endorsement of 18 countries including the United Kingdom and the European Union. Following COP30, attention has turned to how voluntary carbon markets are being used alongside compliance regimes, and to the development of consistent, high-integrity standards across trading systems.

Regulatory landscape

Credits represent measurable environmental outcomes and are used by organisations voluntarily to support climate and nature goals. Voluntary credits include:

• Voluntary Carbon Markets (VCMs): Trade credits for the purpose of carbon offsetting. Organisations buy credits representing verified reductions or removals of greenhouse gases (e.g. reforestation, carbon capture).
• Voluntary Nature Markets (VNMs): Trade credits for the purpose of channelling investment into nature positive outcomes (e.g. biodiversity, nutrient mitigation).

Voluntary carbon and nature markets (VCNMs) complement regulatory mechanisms such as the UK Emissions Trading Scheme (UK ETS). These markets are increasingly being used to support net zero targets and biodiversity commitments.

Article 6 of the Paris Agreement provides the framework for multilateral cooperation on carbon trading. At COP29 in Baku, negotiators finalised key guidance to operationalise Article 6.4 of the Paris Agreement, establishing the framework for the first UN-regulated global carbon market: the Paris Agreement Crediting Mechanism (PACM).

Green finance

Whilst VCNMs are voluntary, they are already attracting private investors and other project stakeholders. They direct private capital towards environmental projects, such as reforestation, peatland restoration and ecosystem recovery – that may not otherwise be funded.

These markets create additional income streams for landowners and businesses while providing a route for organisations to support climate and nature objectives. By enabling the trade of credits linked to carbon removal and biodiversity outcomes, VCNMs create financial incentives for conservation and restoration activity.

VCNMs are also expected to play a growing role in climate finance, particularly in emerging markets and developing economies, where new price signals can help bring low-carbon and nature-positive projects forward.

Where we are seeing pressure in practice

For many organisations, the challenge is not a lack of interest in voluntary carbon or nature markets, but uncertainty around how credits can be used safely. Clients are grappling with questions around credit quality, verification standards, disclosure expectations and how voluntary claims will be viewed by regulators, investors and the public. This is particularly acute where credits sit alongside transition plans, ESG reporting or public sustainability statements.

In practice, the challenge for many UK developers is not access to credits, but confidence in integrity and claims risk.

As scrutiny increases – from investors, regulators and campaign groups – the focus has shifted away from volume and towards defensibility. Projects supported by recognised standards, clear governance arrangements and transparent reporting are better placed to attract investment and withstand challenge.

Financial and operational benefits

• Lower financing costs – Projects that meet recognised integrity and disclosure standards may benefit from more favourable financing terms, including access to green loans or sustainability-linked finance.
• Operational efficiency – Investment in sustainable practices can reduce operating costs over time through improved energy and resource efficiency.
• Access to a wider investor base – Institutional investors, including pension funds, continue to prioritise Environmental, Social and Governance (ESG) factors.
• New commercial activity – Demand for low-carbon technologies, land-based solutions and nature-positive projects continues to grow.

UK government consultation

The UK government consultation builds on the principles for VCNM integrity launched at COP29 in November 2024. It sought views on how those principles should be applied across markets at different stages of maturity.

The consultation also addressed expected standards for buyer and supplier conduct and how these might be reflected in guidance, policy and, potentially, regulation, supported by market structures capable of supporting high-integrity practice.

The six integrity principles include:

1. Use credits in addition to internal emissions reductions
2. Use high-integrity credits aligned with recognised standards
3. Measure and disclose credit use
4. Plan ahead through transition planning
5. Make accurate, evidence-based green claims
6. Support the development of high-integrity markets

What comes next

The direction of travel for VCNMs is towards greater standardisation, clearer disclosure and closer alignment with compliance regimes. Initiatives such as the Integrity Council for the Voluntary Carbon Market continue to raise expectations around verification and governance.

Regulatory developments are intended to support credible carbon removal and biodiversity outcomes, while ensuring voluntary markets support, rather than replace, direct emissions reductions.

How we can help

We advise clients on the use of voluntary and mandatory carbon and nature credits in the context of live projects and transactions. Our work includes advising on the structuring and governance of credit arrangements, investor and lender scrutiny during due diligence, and the management of green claims and greenwashing risk under UK and EU frameworks.

We support clients at the point where voluntary markets intersect with funding decisions, reporting obligations and public-facing commitments, helping ensure that credit use is credible, defensible and aligned with wider commercial and regulatory expectations.

Contact Bhiku and Georgia and Sushma