The UK Government has launched plans to strengthen voluntary carbon and nature markets which can help leverage the finance needed to address climate action while diversifying revenue streams.

These markets support the trading of carbon credits, whereby a business can reduce its emissions, says the UK Government, by investing in environmentally friendly projects such as deploying electric vehicles, reducing deforestation, removing carbon dioxide through carbon dioxide or planting trees.

Currently these markets are not realising their full potential so there has been widespread calls from business for greater clarity in how to use these markets as part of their plans to reach net zero.

In response, the UK is establishing a global framework to build trust and confidence in carbon and nature credit trading, with a set of principles to guide and support businesses on how to use carbon credits that provide environmental benefits. This includes making clear what a good credit is, ensuring they are delivering environmental benefits and encouraging businesses to fully disclose what they are being used for in annual sustainability reporting.

These markets are estimated to be worth up to $250bn by 2050 for carbon markets, and $69bn for nature markets, under the right conditions. By increasing confidence in these markets, British businesses – including farmers and land managers – will be better positioned to seize the economic rewards by creating new revenue streams and investment opportunities.

The UK Government says that these plans will strengthen the UK as the green finance capital of the world – leading the way in a new growth market, unlocking private finance for climate change and backing businesses on the clean energy transition.