Playbook: adopting carbon markets & offsets integrity in 90 days – value pools & sector comparison

Executive summary

The UK has one of the most active carbon markets on the planet. Its compliance system—the UK Emissions Trading Scheme (ETS)—trades more than £75 billion in allowances each year and is underpinned by geological storage capacity exceeding 78 billion tonnes of carbon dioxide. On the voluntary side, demand for high‑quality removal credits has exploded even though supply remains tiny: verified credits issued under the Woodland Carbon Code (WCC) and Peatland Code total just over six million tonnes, while the UK’s voluntary market as a whole was valued at £1.58 billion in 2022 and is projected to reach £197–394 billion by 2050. At the global level, durable removal credits could represent a $1.2 trillion opportunity by 2050, yet analysts warn of a looming supply gap of 50 million tonnes of durable removals by 2030. For UK investors, the challenge is to capture these value pools while ensuring integrity and avoiding the pitfalls of low‑quality offsets.

This playbook provides a sector‑by‑sector map of where the value lies and a 90‑day adoption plan. It shows that the biggest value pools are not just in trading carbon itself but in the ancillary services that support integrity—insurance, ratings, digital monitoring and verification—and in developing projects that produce permanent removals. By following a structured approach and focusing on high‑quality credits, investors can accelerate decarbonisation and catalyse innovation across the UK economy.

Why this playbook matters

The UK’s legal mandate to cut greenhouse gas emissions by 78 % by 2035 drives unprecedented demand for credible carbon credits. Compliance markets such as the UK ETS create price signals and generate auction revenues (over £2.5 billion in 2024), but they cover only certain sectors and allow limited use of offsets. Companies with residual emissions therefore rely on voluntary markets to bridge the gap. The voluntary market is evolving fast: high‑integrity removal credits now fetch prices upwards of £25 per tonne and command premiums over avoidance credits, while low‑quality units trade for a fraction of that. However, supply is limited; long verification cycles mean buyers must plan years ahead, and more than 90 % of voluntary projects are dominated by a handful of early developers.

Understanding where the value pools lie—and who captures them—is essential for investors, corporates and project developers. Durable removals such as biochar, enhanced weathering, direct‑air capture and bioenergy with carbon capture and storage (BECCS) offer the largest long‑term opportunity but require significant capital. Nature‑based projects in forestry and peatlands deliver co‑benefits and earn premium prices, but the pipeline is limited and verification is slow. Soil carbon and regenerative agriculture are emerging, with potential to scale quickly if digital monitoring and verification (MRV) can reduce transaction costs. Ancillary services (ratings, insurance, registries and digital MRV platforms) capture 10–40 % of the $100 billion Article 6 value pool by enabling trust in carbon credits. This playbook equips you to navigate these segments and build a resilient offsets strategy.

Key concepts & market fundamentals

Carbon markets at a glance

Carbon markets put a price on greenhouse gas emissions. Compliance markets such as the UK ETS set a cap on emissions and issue tradable allowances; participants that emit more must buy allowances or invest in reduction. Voluntary markets allow organisations to purchase credits that represent emissions reductions or removals outside regulatory schemes. A credit is only credible if it meets three integrity criteria:

Additionality – the project would not occur without carbon finance. Projects using business‑as‑usual practices or already subsidised activities lack additionality.
Permanence – the carbon benefit must be long‑lasting. Nature‑based projects face risks such as fire, disease or changes in land use; engineered removals such as DAC or geological storage offer higher permanence but are more expensive.
Leakage – the project must not simply shift emissions elsewhere (e.g., conserving one forest while deforestation moves to another site).

Monitoring, reporting and verification (MRV) is the process of measuring carbon outcomes, verifying additionality and tracking credit issuance and retirement. Traditional MRV involves manual sampling, reports and periodic audits; it can take 5–10 years for a woodland project to convert pending issuance units into verified credits. Digital MRV uses satellites, drones and machine‑learning algorithms to track biomass growth and soil carbon in near real‑time; this can reduce verification costs and timelines, unlock smallholder projects and support novel credit types.

UK market fundamentals

UK ETS – Launched in 2021, the UK ETS covers power, industrial installations and aviation. The cap declines annually, and auction clearing prices ranged between £32.10 and £46.92 per tonne in 2024. Total auction revenues were £2.564 billion in 2024. The scheme allows a limited proportion of offsets and provides strong price signals for large emitters. Because UK allowances are tradeable, investors can speculate on future carbon prices, hedge exposures or finance low‑carbon projects.

Voluntary market – The UK’s voluntary market comprises projects validated under the Woodland Carbon Code and Peatland Code, along with emerging soil and engineered removal standards. The market was valued at £1.58 billion in 2022 and could reach £197–394 billion by 2050. Prices vary widely: lower‑quality avoidance credits can sell for under £3.94 per tonne, whereas high‑integrity removal credits exceed £78. Pending issuance units under the WCC have seen their average price more than double from £11.01 (2020) to £26.85 (2024), with Peatland Code units averaging £25.04. Yet the supply of verified credits is extremely small—just over six million tonnes have been issued or retired—and dominated by a few large developers. Lengthy verification cycles and complex land‑management practices restrict the flow of credits, though a pipeline could expand supply to 19 million tonnes over the next century.

Global context – Internationally, companies are pausing credit purchases due to uncertainty around quality and regulation. Analysts predict that high‑integrity durable removal credits (including biochar, enhanced weathering, BECCS and DAC) could become a $1.2 trillion market by 2050. At the same time, a shortage of about 50 million tonnes of durable removals may emerge by 2030, raising prices and rewarding early adopters. Under Article 6 of the Paris Agreement, countries can trade credits; the global value pool is estimated at $100 billion by 2030, with 10–40 % of value accruing to ancillary services like ratings, insurance, registries and digital MRV.

Mapping value pools across sectors

Understanding where carbon value is generated—and who captures it—allows investors to allocate capital effectively. In the UK, value pools exist across compliance allowances, nature‑based removals, agricultural soil carbon, engineered removals and ancillary services.

Energy and heavy industry (compliance allowances)

The UK ETS creates a substantial value pool through its tradable allowances. Clearing prices at auctions hovered around £32–47 per tonne in 2024, and total trading volume exceeds £75 billion per year. Emitters can profit from allowances when the price rises, or they can invest in low‑carbon technologies to sell surplus allowances. Investors can access this market via exchange‑traded futures or by providing finance for carbon capture and storage projects that generate UK allowances.

Forestry and peatland (nature‑based removals)

Forestry and peatland projects generate ex‑ante (pending issuance) and ex‑post credits under the Woodland Carbon Code and Peatland Code. Prices for pending issuance units have climbed from £11 to nearly £27 per tonne, reflecting the UK’s high integrity standards and co‑benefits such as biodiversity and recreation. However, supply is limited—only about 6 million credits have been issued or retired—and the pipeline for the next century totals 19 million tonnes. Projects also face long verification cycles (5–10 years) and require expertise in forestry management and community engagement. Early movers can capture scarcity premiums and build relationships with landowners.

Agriculture and soil carbon

Soil carbon projects reward farmers for adopting regenerative practices such as reduced tillage, cover cropping and agroforestry. Few UK programmes exist today, but the voluntary market is maturing. The Farm Carbon Toolkit estimates that removal credits represent less than 10 % of credits sold because rigorous monitoring and verification make them expensive. Digital MRV platforms can reduce these costs by using remote sensing and machine learning to estimate soil carbon changes. Value arises from producing high‑integrity credits, enhancing soil health and improving crop yields; corporates may fund projects via insetting contracts or purchase soil credits to offset residual emissions.

Engineered removals & industrial decarbonisation

Engineered removals—including biochar, enhanced weathering, direct‑air capture (DAC) and BECCS—deliver permanent carbon storage and command high prices. Durable removal credits can cost more than £78 per tonne and often exceed £100 per tonne due to limited supply and high capital costs. Analysts project that the durable removals market could be worth $1.2 trillion by 2050, yet there may be a 50 Mt shortage by 2030. Early adopters have secured long‑term offtake agreements to support project financing. Investment opportunities range from funding UK biochar facilities and enhanced weathering trials to participating in international DAC ventures.

Ancillary services and digital infrastructure

As carbon markets mature, ancillary services capture a growing share of value. Advisory firms, ratings agencies, insurers and registries provide assurance and risk management. The Article 6 market alone could generate $10 billion+ in ancillary revenues. Digital MRV platforms use satellite imagery and artificial intelligence to monitor projects and issue credits quickly, lowering transaction costs and expanding supply. UK‑based start‑ups provide political risk insurance for international credits and data services for project developers. Investors can invest directly in these businesses or partner with them to de‑risk their own portfolios.

What’s working

Premium pricing for high‑quality credits – Prices for Woodland Carbon Code and Peatland Code units have more than doubled since 2020, and high‑integrity removal credits trade at £25–78 per tonne. Buyers are willing to pay more for projects with robust additionality, permanence and co‑benefits.
Policy and infrastructure support – The UK ETS provides clear price signals and generates billions in auction revenues. Nature‑based standards like the WCC and PC are globally respected, and the government is exploring integration of carbon removals into compliance markets, creating demand certainty.
Emerging pipeline of removal projects – Although supply is small, new projects are entering the pipeline. Investment interest in biochar, BECCS and enhanced weathering is rising as analysts project large value pools.
Digital MRV innovation – Start‑ups and registries are deploying satellite and AI‑based monitoring, reducing verification costs and timelines. These platforms can unlock soil carbon and smallholder forestry projects that were previously uneconomic.
Ancillary service growth – Firms offering insurance, risk advisory and rating services are capturing part of the Article 6 value pool. Their services improve trust and liquidity in the market, enabling more transactions.

What isn’t working

Supply constraints – Verified credits from the WCC and PC total just over 6 million tonnes, while demand from UK corporates could be orders of magnitude higher. Long verification cycles (up to a decade) slow the flow of credits.
Market concentration and lack of diversity – Only 55 out of 168 project developers have ever issued or retired credits, with two developers accounting for 61 % of issuance and the top 20 accounting for 92 %. This concentration limits innovation and competition.
Price fragmentation and quality risk – Prices range from under £4 to over £78. Low prices often indicate poor additionality or permanence; investors who buy cheap credits risk reputational damage and may face tighter disclosure rules.
High capital intensity of engineered removals – Projects like BECCS or DAC require tens to hundreds of millions of pounds. Financing remains scarce, and many investors are hesitant due to policy uncertainty and long development timelines.
Data and transparency gaps – Project developers can spend up to 60 % of their time managing duplicative data requests, while buyers often spend more than a year conducting due diligence. Without standardised data, investors struggle to compare projects.

A 90‑day adoption playbook

This framework helps UK investors and corporates build a high‑integrity offsets portfolio within three months.

Align with the mitigation hierarchy (week 1) – Start by calculating your baseline emissions and setting science‑aligned reduction targets. Credits should complement, not replace, internal decarbonisation. Clarify whether you are subject to UK ETS compliance or voluntarily offsetting residual emissions.
Map your sector’s value pools (week 2) – Identify which segments are most relevant to your operations. For power and heavy industry, consider purchasing UK ETS allowances and investing in CCS or industrial efficiency. For consumer goods or professional services, nature‑based credits may deliver brand co‑benefits. Agricultural businesses should explore soil carbon programmes. Assess the size, price range and supply constraints for each segment, drawing on the data above.
Set an internal carbon price and budget (week 3) – Use price ranges from high‑integrity credits (£25–78 per tonne) and UK ETS prices (£32–47) to set an internal carbon price that reflects the true cost of emissions. Allocate a budget for offsets and ancillary services, including due diligence, MRV and insurance.
Conduct due diligence and select suppliers (weeks 3–5) – Engage with project developers and brokers to review project documentation. Verify additionality, permanence and leakage; insist on third‑party certifications such as the WCC, PC or reputable international standards. Prefer developers using digital MRV for transparency and speed. Diversify across credit types to spread risk.
Negotiate offtake agreements and manage risk (weeks 5–7) – For removal projects, long‑term offtake agreements provide developers with revenue certainty and secure supply for buyers. Include clauses on delivery schedules, price adjustments, and replacement credits in case of reversal. Purchase insurance to protect against invalidation or reversal; ancillary services such as political risk insurance can safeguard international projects.
Build digital infrastructure (weeks 6–8) – Implement or subscribe to digital MRV platforms to monitor your credit portfolio. Integrate data flows from registries into your environmental management systems. This will streamline reporting for sustainability disclosures and upcoming UK policies.
Retire and report (weeks 8–12) – Once credits are issued, retire them in recognised registries and record serial numbers. Report the retirement publicly, explaining how credits align with your mitigation hierarchy. Monitor policy developments such as the UK government’s consideration of integrating removals into compliance schemes and the evolution of Article 6 rules. Use lessons learned to refine your strategy for subsequent cycles.

Fast‑moving segments to watch

Engineered removals scale‑up – Biochar, enhanced weathering and BECCS projects are moving from pilots to commercial scale. Early investors may lock in supply and price discounts ahead of the expected shortage.
Soil carbon and regenerative agriculture – Novel soil protocols and digital MRV are emerging, offering farmers new revenue streams and buyers more supply. Watch for pilot programmes that bundle agronomy services with credit issuance.
Digital MRV and data standards – Start‑ups and registries are building unified data frameworks to reduce due diligence time and improve comparability. Adoption of these tools could unlock smaller projects and increase liquidity.
Ancillary services expansion – Insurers, rating agencies and brokers are scaling to serve a larger voluntary market. The UK’s financial sector may capture a significant share of the $10 billion+ Article 6 ancillary service opportunity.
Policy convergence and Article 6 integration – International cooperation under Article 6 may create new trading opportunities for UK businesses. Monitor developments around the Carbon Removal Certification Framework and potential integration of removals into the UK ETS.

Action checklist for UK adopters

Establish internal decarbonisation targets and define which emissions will be offset.
Map value pools relevant to your sector and choose a diversified mix of credit types.
Set an internal carbon price based on high‑integrity credit costs and ETS prices.
Allocate budget for offsets, due diligence, MRV and insurance.
Engage with credible project developers and require robust certification and digital MRV.
Negotiate long‑term offtake agreements with clear risk management clauses.
Implement digital infrastructure to monitor and report on credit performance.
Retire credits transparently and communicate the impact to stakeholders.
Stay informed about policy changes and emerging standards (e.g., Article 6, CRCF).

FAQ

What types of carbon credits exist? Credits fall into two broad categories: avoidance (emissions reductions that prevent additional emissions, such as renewable energy or efficient cookstoves) and removal (projects that take CO₂ out of the atmosphere and store it, such as forestry, soil carbon, biochar, BECCS or DAC). Removal credits generally command higher prices due to greater permanence and scarcity.

How does the UK ETS differ from the voluntary market? The UK ETS is a compliance system with a fixed cap and tradable allowances. Prices are set through auctions and secondary trading, and only a small percentage of offsets can be used for compliance. The voluntary market is unregulated, allowing companies to purchase credits from approved projects to meet their own net‑zero goals. Quality varies widely, so buyers must conduct due diligence.

Why are removal credits more expensive than avoidance credits? Removal credits involve projects that physically remove CO₂ from the atmosphere and store it for long periods. They require significant capital and monitoring to ensure permanence, and supply is limited—removal credits represent less than 10 % of credits sold. In contrast, avoidance credits often result from cheaper renewable or efficiency projects and face greater additionality risk.

What is Article 6 and why does it matter? Article 6 of the Paris Agreement allows countries to transfer emissions reductions across borders. The global value pool could reach $100 billion by 2030, with 10–40 % going to ancillary services. For UK investors, this opens opportunities in providing finance, insurance and data services to projects worldwide.

How can digital MRV reduce risk? Digital MRV uses satellites, remote sensors and artificial intelligence to measure carbon outcomes more frequently and accurately than manual methods. It reduces verification costs and timelines, enables small projects to participate and provides continuous data for buyers and regulators. By adopting digital MRV, investors can gain confidence in credit integrity and free up capital for more projects.

Sources

McKinsey & Company. (2024). The state of carbon credits: Durable removals market outlook. McKinsey Sustainability.
McKinsey & Company. (2024). Carbon removal market sizing: A $1.2 trillion opportunity by 2050. McKinsey Sustainability.
International Emissions Trading Association. (2024). Article 6 market outlook: Value pools and ancillary services. IETA.
UK Emissions Trading Scheme Authority. (2024). UK ETS annual report: Trading volumes and allowance retirement data. UK Government.
UK Voluntary Carbon Market Association. (2024). State of the UK voluntary carbon market: Valuations and price analysis. UKVMA.
Woodland Carbon Code & Peatland Code. (2024). Pending issuance unit price trends 2020–2024. UK Land Carbon Registry.
UK ETS Authority. (2024). Auction clearing prices and revenue report 2024. UK Government.
UK Land Carbon Registry. (2024). Verified credits under Woodland and Peatland codes: Developer activity analysis. UK Government.
Farm Carbon Toolkit. (2024). Removal credits in the UK voluntary market: Market share and verification requirements. FCT.
UK Forestry Commission. (2024). Pending issuance units supply projections: Century-scale outlook. UK Government.