Domestic carbon credits take precedence for UK companies in their pursuit of a carbon-neutral future
UK Businesses Embrace Carbon Credits for Net Zero Goals
A new wave of confidence is sweeping through UK businesses as they strive to meet their net zero targets, with 92% of senior decision-makers expressing optimism that their organisations will achieve this goal. The majority of these targets are focused on the more pressing deadline of 2030, with 33% aiming for this milestone, followed closely by 2040 (19%).
However, understanding around carbon credits remains a significant challenge, with 30% of respondents citing a lack of understanding as the leading obstacle to buying these credits. This lack of knowledge is concerning, as 73% of UK organisations are planning to offset their hard-to-abate emissions using carbon credits.
The preference for UK-based carbon credits is driven by several key factors. These include trust in adherence to rigorous standards such as ISO-14064 for monitoring, reporting, and verification, ease of regulatory alignment, and increased confidence in the credibility and traceability of carbon removals within the UK's jurisdiction. UK-based credits benefit from strong institutional frameworks, transparent registries, and alignment with UK government and corporate net-zero commitments, making them a popular choice for local businesses aiming to meet regulatory and voluntary climate goals.
Institutional investors, such as Temasek, play a critical role in supporting carbon market development by providing catalytic capital to early-stage innovative companies that scale advanced carbon removal technologies. For example, Temasek Trust’s Catalytic Capital for Climate and Health (C3H) led an $11.6 million Series A funding round for Equatic, a company pioneering seawater electrolysis technology for carbon dioxide removal and green hydrogen production. This investment helps scale Equatic’s first commercial 100-kilotonne carbon removal facility, supports commercialisation, and advances technology and manufacturing development.
Despite the potential of carbon credits, fewer than half of the respondents understood the distinction between removal and avoidance credits. This lack of understanding is further highlighted by the SBTi's recent rowback on the use of carbon credits. Nevertheless, anticipation for Article 6 carbon credits to take off in 2025 persists, and there is potential for the voluntary and compliance credit markets to converge.
It's worth noting that pension funds, insurance companies, and sovereign wealth funds have not been as active as tech giants like Microsoft, Google, and Amazon in committing to buying large volumes of carbon credits to offset emissions. Gustave Loriot-Bosreup, founder of Compass Insights, stated that pension funds tend to invest in carbon credits as a by-product as part of their wider forestry strategy.
However, 64% of senior decision-makers say their companies have already bought carbon credits, and 86% of organisations have net zero targets in place, with the most common approach aiming for net zero by 2035. Furthermore, 76% of senior decision-makers would be more likely to buy carbon credits if they were UK-based.
In conclusion, UK businesses are increasingly turning to carbon credits as a means to meet their net zero targets. The preference for UK-based credits is driven by the strong verification standards, regulatory trust, and local market alignment they offer. Institutional investors like Temasek play a crucial role in supporting carbon market development by providing funding and validation to scale innovative carbon removal technologies and develop robust carbon markets, thereby catalyzing market growth and supporting net-zero transitions. Despite some misunderstandings around carbon credits, the market is expected to grow, with the potential for the voluntary and compliance credit markets to converge in the future.
[1] Temasek Trust. (2021). Temasek Trust’s Catalytic Capital for Climate and Health (C3H) invests in Equatic to scale carbon dioxide removal and green hydrogen production. Retrieved from https://www.temasek.com.sg/media-centre/press-releases/2021/temasek-trusts-catalytic-capital-for-climate-and-health-c3h-invests-in-equatic-to-scale-carbon-dioxide-removal-and-green-hydrogen-production
[2] Equatic. (2021). Equatic raises $11.6 million Series A funding round. Retrieved from https://www.equatic.co/press-releases/equatic-raises-11-6-million-series-a-funding-round
[3] Carbon Pulse. (2021). Temasek leads $11.6m funding round for Equatic seawater electrolysis project. Retrieved from https://www.carbonpulse.com/news/article/temasek-leads-11-6m-funding-round-for-equatic-seawater-electrolysis-project
[4] Green Carbon. (2021). Temasek invests in Equatic to accelerate carbon dioxide removal and green hydrogen production. Retrieved from https://www.greencarbon.com/news/temasek-invests-in-equatic-to-accelerate-carbon-dioxide-removal-and-green-hydrogen-production
[5] Green Queen. (2021). Temasek backs Equatic, a Singapore-based CO2 removal startup, to scale up green hydrogen production. Retrieved from https://www.greenqueen.com.hk/temasek-backs-equatic-singapore-based-co2-removal-startup-scale-up-green-hydrogen-production/
- In the quest for net zero goals, environmental science plays a crucial role in understanding and implementing carbon credit strategies in UK businesses.
- The increasing investment in carbon removal technologies, such as seawater electrolysis, by institutional financiers like Temasek, could help businesses address climate-change challenges through non-avoidance carbon credits.
- As the carbon market evolves, businesses and investors might find opportunities in the convergence of voluntary and compliance carbon credit markets, fostering growth in environmental-science-related business ventures.
