COP29: UK Launches Carbon Market Integrity Priciples

The UK Government unveiled its “Principles for Voluntary Carbon and Nature Market Integrity” at COP29 last week, setting a framework to support high-integrity voluntary carbon markets (VCMs) and strengthen the private sector’s role in climate action.

The 29th Conference of the Parties to the UN Framework Convention on Climate Change (COP29) began on November 11 at the Baku Olympic Stadium and will continue until November 22.

The principles focus on using carbon credits to complement internal emission reductions, ensuring credit quality, transparent reporting, proactive planning, accurate environmental claims, and collaboration to build a trustworthy, efficient market.

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Public Consultation and Alignment with Global Standards

The principles, backed by a public consultation planned for early 2025, aim to boost market integrity by providing clear guidelines on claims transparency, biodiversity integration, and reporting standards. The UK’s approach aligns with the VCMI Claims Code, reinforcing the importance of voluntary carbon markets in meeting climate goals at home and worldwide.

UK’s Commitment to Climate Finance

Minister for Climate Change Kerry McCarthy will officially launch the principles during COP29, a move highlighting the UK’s commitment to global climate finance initiatives. The initiative positions the UK alongside other leading economies, such as the United States and the G7, which have recognized the critical role of private sector-driven carbon markets. By establishing high-integrity principles, the UK aims to draw additional climate financing, with voluntary carbon markets potentially channeling $50 billion in private sector funds by 2030.

“Companies and investors need clear signals that ambitious climate action through VCMs is encouraged and endorsed by policymakers,” said Mark Kenber, executive director of the Voluntary Carbon Markets Integrity Initiative (VCMI). “The UK Government’s principles align closely with the VCMI Claims Code, creating a robust framework for transparent and impactful carbon market participation.” Kenber added that while these guidelines are essential, additional incentives will be crucial to encourage the private sector to confidently engage in carbon credits during this decisive decade.

VCMs: A Key Lever for Climate Finance

VCMs are viewed as a significant lever in the climate finance ecosystem, particularly for developing innovative projects. The UK Principles aim to mitigate issues such as misleading “carbon neutral” claims and emphasise mandatory sustainability reporting and project-level disclosures. Usha Rao-Monari, chair of the VCMI steering committee and former under-secretary-general of the UN Development Programme, highlighted the importance of unlocking private sector funds. “The climate crisis is here and disproportionately impacts society’s most vulnerable,” she said. “The UK’s announcement is an essential step in tapping this finance potential, supporting the UK’s promise to lead on climate action.”

Progress on Climate Finance Gaps

The UK’s move comes as global stakeholders at COP29 focus on bridging climate finance gaps, highlighted by Finance Day, which featured new insights from the Independent High-Level Expert Group on Climate Finance. Allegra Ianiri, research analyst at MainStreet Partners, noted the progress in setting quantitative goals for the New Collective Quantified Goal on Climate Finance (NCQG), a central issue at COP29. “While challenges remain, recent guidelines from the Expert Group offer hope for meaningful progress,” Ianiri said. She highlighted that over 100 jurisdictions have introduced policies to bolster climate finance since 2020, reflecting the private sector’s growing role in green transformation.

Industrial Transition and Private Sector Acceleration

Private sector engagement is indeed accelerating. A recent call by the Industrial Transition Accelerator (ITA), supported by 50 global business leaders and 700 financial institutions, urged policymakers to implement measures that stimulate demand for green products. The ITA estimates that these measures could unlock up to $1 trillion in green investments by 2030, driving the development of over 500 sustainable industrial facilities across key sectors, including steel, aluminium, and aviation.

NZAOA Targets and COP29 Initiatives

The VCMI has welcomed the UK’s commitment to high-integrity carbon markets and the inclusion of VCMI’s Scope 3 Claim (currently in beta) in the consultation process. This claim, designed to tackle emissions across supply chains, will allow companies to take more significant action on Scope 3 emissions, which have proven challenging to address.

Cross-sector initiatives at COP29, such as the Business, Investment, and Philanthropy Platform, are also amplifying private sector contributions, reinforcing collaborative approaches to climate finance. At COP29, UK energy secretary Ed Miliband announced UK-led funding to help climate-vulnerable nations transition to clean energy. The support focuses on developing low-carbon technologies in areas like energy storage, zero-emission generators, and clean transportation, alongside innovations to decarbonise industries such as steel, cement, and chemicals.

Energy Transition Investment Outlook

KPMG International has indicated strong interest in energy transition investments, with 72% of 1,400 global senior executives anticipating growth in this sector over the next few years. According to the findings, energy efficiency, including electrification, is the top focus for investors over the next two years (36%), followed closely by renewable and low-carbon energy (34%).

Mike Hayes, KPMG’s global head of renewable energy, emphasised the importance of stable policies to support this growth: “Without a supportive regulatory framework, we risk holding back progress. Policies like renewables subsidies, carbon pricing, and clean energy mandates don’t just support change; they accelerate it.”

Despite ongoing regulatory uncertainties, most executives (94%) are tackling risks by partnering to pool resources, share expertise, and spread investment costs. Doubling the global rate of progress on energy efficiency could reduce energy costs by one-third and deliver 50% of global CO2 reductions by 2030, according to Hayes.

About KPMG International

KPMG International is a global network of professional firms providing audit, tax, and advisory services. The organization supports private and public sector entities in achieving sustainable business practices through strategic guidance and innovative solutions. For more information, visit KPMG International.