Unlocking the potential of the UK’s carbon and nature markets

Read time: 5 mins  Added: 23/06/25

Lloyds colleagues

The UK’s climate leadership ambitions come at a critical juncture. As global sentiment around carbon markets swing between hope and scrutiny, there’s a renewed sense of urgency, and opportunity, to get it right.

It was against this backdrop that Lloyds Corporate & Institutional and Lloyds Corporate Markets recently co-hosted the UK Carbon and Nature Markets event with BeZero – an independent, risk-based, project level carbon ratings agency for the voluntary carbon market.

The event coincided with the UK Government’s period of consultation on the implementation of high-level principles for voluntary carbon and nature markets. It brought together the leading voices shaping the future of carbon markets in the UK: market infrastructure, investors, project developers, corporate buyers and policymakers were all represented.

Through the afternoon, four key themes shone through above the others.

1. Learn from supply-side progress and apply it to demand

There was unanimous agreement: supply-side mechanisms are maturing, but the real bottleneck is demand.

So how do we incentivise action from buyers?
 

  • Credible projects with certainty of delivery: Corporate buyer panellists illustrated their rationale; carbon removals are essential to their net zero plan, but the economics need to stack up. High-integrity credits must come with a clearer use case and reduced reputational risk.
  • Make the process straightforward: Complex deals and documentation, along with questions over when the buyer pays adds to the challenges for corporates. Standardisation and forward-financing will help to mitigate this.

Offtakes are the enabler, demand-side policy, therefore, is the missing link and credits should be treated like infrastructure assets, with the same long-term certainty and financial instruments we apply to other markets.

Speaking on one of the panels, Emily Martin drove home the commercial reality as the challenge isn’t a lack of capital:

We’ve got plenty of projects waiting to be financed. But we need offtakes in place - we need the buyers. We are ready to deploy capital, but the developers don’t have a way of repaying that debt without long-term demand certainty.

Emily Martin Head of Voluntary Carbon and Nature Markets, Lloyds Corporate & Institutional

This aligns closely with the vision laid out in BeZero’s latest report, From Risk to Reward: Making the UK the Carbon Markets Capital of the World, which highlights the need to unlock demand through policy, ratings, and financial infrastructure.

2. The role of government: reducing policy risk, building confidence

Another panel member emphasised that the UK government’s consultation on voluntary carbon and nature markets, which seeks to clarify and test the UK Government’s proposed policy and governance framework for ensuring the integrity of carbon credits, is a genuine request for feedback, not a done deal. The goal is to clarify market rules and reduce policy risk, which is currently a major barrier to investment.

The discussion explored how government guarantees could de-risk the market just as they did in wind energy, exactly the kind of demand-side certainty that, as noted earlier, enabled infrastructure-scale financing in other sectors.

The consultation aims to address these gaps by offering clearer guidance on claims, accounting treatment, and potentially codifying high-integrity standards (like carbon ratings and CCPs) into official frameworks.

The panel agreed that feedback must focus on demand-side confidence, including:

  • Clear, consistent guidance on claims and disclosures
  • Integration of ratings and standards into reporting frameworks
  • Public signals that de-risk participation for buyers and financiers
  • Mechanisms to provide revenue certainty, such as offtake guarantees

This echoes one of BeZero’s report’s recommendations for the UK government to back a robust claims framework for corporate buyers. 

3. Making carbon a CFO issue

How do you get CFOs buy-in? Make carbon strategy visible on the balance sheet.

One of the biggest opportunities is reframing voluntary carbon as a financial issue. Businesses won’t scale action until carbon is understood as an investable line item. 

Fundamentally, buyers want three things: clear net zero standards, policy support, and a business rationale - both financial and reputational.

Gaby Carden Head of Voluntary Carbon and Nature Markets, Lloyds Corporate Markets

Transition plans are one route forward. The panellists agreed that offsetting strategies will only become mainstream if they’re embedded in broader business planning, not seen as an optional add-on.

4. The integrity imperative

Integrity was the word that echoed across every conversation. Without high integrity, trust erodes. And without trust, the market stalls. This is where the likes of independent carbon credit rating agencies and trusted banking partners are becoming foundational.

This isn’t about driving prices up, it's about rewarding quality. Especially in a market still navigating volatility, buyers are prioritising assurance over speculation.

Lloyds is here to help guide businesses through the UK’s carbon and nature market via its lending activities into carbon removal projects and introducing offtake opportunities, advising clients on appropriate carbon offset strategies that fit with transition plans, and procuring portfolios of high integrity carbon credits.

Calls to action

Post the UK consultation, the four calls to action that became clear were to:

  1. Educate finance and procurement teams – make carbon a strategic, not symbolic, conversation.
  2. Champion ratings and transparency tools – integrity is the foundation of trust.
  3. Invest in offtakes – offtakes create the certainty developers and financiers need.
  4. Be pragmatic, not purist – better to act now with integrity than wait for perfection.

Final thought from the event: Can the UK become the leading hub for carbon markets?

There was a lot of optimism in the room from the industry leaders that the UK can. It’s believed we have the right people, the right companies, the right policies, as well as a strong ecosystem of project developers, buyers, standard setters and financiers.

The UK has the potential to lead and help drive the carbon markets, if it seizes the moment: £1bn in tax, 135,000 jobs created and £10bn a year in private capital.

The blueprint is there. The real question is whether we choose to act on it.

Jargon Buster

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