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Carbon Credit Systems

Carbon credit systems are the rules, markets and standards used to price, trade, verify or claim greenhouse gas reductions, removals or emissions allowances.
The UK currently has two main carbon market routes: a regulated compliance system called the UK Emissions Trading Scheme, and a voluntary carbon market where businesses and organisations can buy credits from climate or nature based projects. The UK ETS is a cap and trade system for covered sectors such as power, heavy industry, aviation and, from 2026, domestic maritime. The voluntary market sits outside that legal mandate and includes UK standards such as the Woodland Carbon Code and Peatland Code. The key difference is that UK ETS allowances give covered businesses permission to emit within a regulated cap, while voluntary carbon credits usually represent a claimed reduction, avoidance or removal of emissions from a project.

The UK Has Two Main Carbon Market Routes

The UK Emissions Trading Scheme
This is the legally binding compliance system. The UK ETS applies to covered sectors and is designed to cap emissions while allowing regulated participants to trade allowances. The government says the scheme works on a cap and trade basis, where a cap is set on the total amount of greenhouse gases that can be emitted by sectors covered by the scheme. Participants receive or buy allowances, and one allowance permits the emission of one tonne of carbon dioxide equivalent.

The Voluntary Carbon Market

This sits outside the legal mandate. The voluntary carbon market allows businesses, organisations and sometimes individuals to buy carbon credits voluntarily. These credits may come from projects such as woodland creation, peatland restoration, renewable energy, methane reduction, soil carbon work or other emissions reduction and removal activities. The UK Government has published voluntary carbon and nature market integrity principles, including the principle that credits should be used in addition to ambitious action within value chains, not instead of reducing emissions directly. These two routes should not be mixed up. One is a regulated compliance system. The other is a voluntary credit and claims system.

The UK Emissions Trading Scheme

The UK Emissions Trading Scheme, often called the UK ETS, is the UK’s main regulated carbon pricing system.

 

It replaced the UK’s participation in the EU Emissions Trading System after Brexit. It applies to major emitting sectors, including power, heavy industry and aviation.

 

The system sets a cap on emissions from covered sectors and allows participants to trade allowances within that cap.
In simple terms:

  • A cap is set on emissions.
    Covered businesses need allowances for their emissions.
  • One allowance represents permission to emit one tonne of carbon dioxide equivalent.
  • Businesses that emit less may have surplus allowances.
  • Businesses that emit more need to buy or obtain enough allowances.
  • The cap is reduced over time to support emissions reduction.
  • The UK ETS is not a normal carbon credit marketplace for the public. It is a regulated system for specific sectors. 
  • It does not mean ordinary consumers are currently given personal carbon credits for shopping.

Expansion into domestic maritime

The UK ETS is also expanding. The UK ETS Authority confirmed that domestic maritime emissions will be added to the scheme from 2026. The government consultation material explains that this expansion follows earlier consultation and is intended to bring domestic maritime into the emissions trading system.

The Voluntary Carbon Market

The Voluntary Carbon Market, often shortened to VCM, is different from the UK ETS.
It allows businesses and organisations to buy credits voluntarily, usually to support climate strategies, offset residual emissions or make environmental claims. A voluntary carbon credit usually represents a claimed reduction, avoidance or removal of one tonne of carbon dioxide equivalent.
Voluntary credits may be generated by projects such as woodland creation, peatland restoration, renewable energy, methane capture, soil carbon, agroforestry or other emissions projects.
The UK Government has recognised a role for responsible voluntary use of high integrity carbon and nature credits, but it is also working on market integrity, governance and quality because voluntary markets can be confusing and vulnerable to weak claims. Its 2025 consultation on voluntary carbon and nature markets focuses on raising integrity and implementing the government’s six principles for these markets.
The key point is this: voluntary credits should not be treated as a shortcut. They should be used carefully, transparently and after real emissions reduction work.

Carbon Credits Are Not the Same as Carbon Allowances

The UK has established nature based standards that are especially relevant to farmers, landowners and rural communities.
The two most important for this page are:
  • Woodland Carbon Code
  • Peatland Code
These do not work like the UK ETS. They are voluntary standards for specific types of land based projects. They help create confidence that claimed carbon benefits from woodland creation or peatland restoration are measured and verified through recognised rules.

Woodland Carbon Code

The Woodland Carbon Code is the UK’s voluntary carbon standard for woodland creation projects.
GOV.UK describes the Woodland Carbon Code as a scheme for buyers and landowners, providing information about how companies can use woodland carbon units and how landowners can take part. It is linked to woodland creation and carbon units from validated and verified projects.
For landowners, the Woodland Carbon Code can offer a route to generate carbon units from woodland creation. For buyers, it provides a UK based standard for supporting woodland carbon projects.
However, farmers and landowners need to understand the long term obligations. Woodland creation is not a small decision. It can affect land use, future farming, tenancy, inheritance, food production and landscape management.

Woodland Carbon Code: simple explanation

  • What it covers: Woodland creation
  • Who it involves: Landowners, project developers, buyers
  • What it creates: Woodland carbon units
  • Why it matters: UK based woodland carbon claims need recognised rules and verification

Peatland Code

The Peatland Code is a UK voluntary certification standard for peatland restoration projects.
The IUCN UK Peatland Programme describes the Peatland Code as a voluntary certification standard for UK peatland restoration projects. It says the code provides a science backed framework for generating independently verified carbon credits from peatland restoration and aims to ensure projects deliver real, measurable climate benefits.
The Peatland Code is important because peatlands can store large amounts of carbon, but damaged peatlands can release emissions. Restoration can therefore have climate, biodiversity and water management benefits when done properly.
The Peatland Code has also continued to develop. The IUCN UK Peatland Programme launched Peatland Code Version 2.1 in November 2024 to update the standard.
The key point is this: voluntary credits should not be treated as a shortcut. They should be used carefully, transparently and after real emissions reduction work.

Peatland Code: simple explanation

  • What it covers: Peatland restoration
  • Who it involves: Landowners, restoration projects, buyers
  • What it creates: Independently verified peatland carbon credits
  • Why it matters: Peatland restoration can support carbon, biodiversity and water benefits

Carbon Credits Versus Carbon Allowances

This is one of the most important parts of the page. People often use the words credit and allowance as if they mean the same thing. They do not.

Carbon allowances

Carbon allowances are used in compliance systems such as the UK ETS. They are permissions to emit within a regulated cap. Covered businesses need enough allowances to match their emissions.

Carbon credits

Carbon credits usually come from projects that claim to reduce, avoid or remove emissions. They are often used in voluntary markets by businesses or organisations that want to support climate claims.

Personal carbon allowances

Personal carbon allowances are a separate policy idea where individuals would have a carbon budget for certain activities. This is not currently the same as the UK ETS or the voluntary carbon market.

What Current Carbon Credit Systems Mean for Farmers

Farmers and landowners are being drawn into carbon markets because they control land, soil, trees, hedgerows, peat, grassland and biodiversity.
Carbon systems may offer new income, but they also create serious questions.
A farmer may be offered money for woodland creation, peatland restoration, soil carbon, hedgerows, agroforestry or changes in land management. That may sound attractive, especially when farm margins are tight and support schemes are changing.
But farmers need to ask:
  • Who owns the carbon benefit?
  • Who owns the claim?
  • Can the farm still use the same benefit for its own reporting?
  • How long does the agreement last?
  • Does it restrict food production?
  • Does it affect tenancy, inheritance or future sale?
  • Who pays for verification and monitoring?
  • What happens if carbon is lost through fire, flood, drought or disease?
  • What happens if carbon is lost through fire, flood, drought or disease?
The Welsh Government’s woodland carbon guide says interest is growing in selling woodland carbon units as a potential income stream for farmers and landowners, but it also highlights that land managers should consider key issues before entering this rapidly changing marketplace.
For BFFD, the concern is that carbon systems should not push farmers into long contracts without full understanding. New income can be useful, but not if it transfers control, weakens food production or creates future claims problems.

What Current Carbon Credit Systems Mean for Consumers

Most consumers do not interact directly with the UK ETS or voluntary carbon markets.
However, these systems can still affect consumers indirectly.
A food business may buy voluntary credits and describe a product as carbon neutral. A retailer may use carbon accounting in its supply chain. A farm may change land use because carbon payments make more sense financially than food production. A product may carry a climate claim that sounds positive but hides weak provenance, long supply chains or poor food transparency.
For the public, the important lesson is this:
  • A carbon claim is not the same as food quality.
  • A carbon credit is not the same as local food.
  • A carbon neutral label does not automatically mean a product is affordable, nutritious, British, seasonal or fair to producers.

Current Rules in Simple Terms

The current UK picture can be explained simply:
The UK ETS is a regulated cap and trade system for covered sectors. It uses allowances, not normal voluntary credits.
The voluntary carbon market allows businesses and organisations to buy credits voluntarily, but credits should support real action, not replace emissions reduction.
The Woodland Carbon Code provides a UK standard for woodland creation carbon units.
The Peatland Code provides a UK standard for peatland restoration carbon credits.
The UK Government is working to raise integrity in voluntary carbon and nature markets through principles, consultation and market quality work.
Farmers and landowners should take advice before entering carbon schemes.
Consumers should treat carbon claims as one part of the story, not the whole truth about a product.

Further Government Documentation

GOV.UK: UK ETS scope expansion to domestic maritime
GOV.UK: UK voluntary carbon and nature market integrity principles
GOV.UK: Voluntary carbon and nature markets consultation
GOV.UK: Woodland Carbon Code for buyers and landowners
IUCN UK Peatland Programme: Peatland Code
Welsh Government: Woodland carbon guide for farmers and landowners

How This Connects to BFFD

BFFD is not a carbon credit seller, broker, adviser or registry.
BFFD talks about carbon credit systems because they are increasingly connected to food, farming, land use, claims and consumer trust.

If carbon systems affect what land is used for, how farmers are paid, what food businesses claim and how consumers understand products, then they belong in the wider food and farming knowledge conversation.

BFFD’s position is simple:
  • Food should not become harder to understand because of carbon markets.
  • Farmers should not be pressured into carbon deals they do not fully understand.
  • Consumers should not be misled by vague carbon neutral claims.
  • Land should not be valued only as a carbon asset.
  • Food production, local supply, affordability and provenance still matter.
BFFD is being built to help people understand food, farming and local supply with clearer links between producers, products, place and trust.

Current Carbon Credit System clarifications

  • The UK ETS is not a public carbon credit shop
  • It is a regulated system for covered sectors, not a normal marketplace for household consumers.
  • Carbon credits are not the same as UK ETS allowances
  • Allowances permit emissions within a regulated cap. Credits usually represent claimed reductions or removals from projects.
  • Voluntary carbon credits are not always equal
  • Quality varies by project, standard, verification, permanence, additionality and claim.
  • They are not the same as every global offset sold online.
  • UK woodland and peatland credits are specific land based systems

Where to Purchase Carbon Credits

Carbon credits can be purchased through carbon marketplaces, brokers, project developers, consultants, carbon standards, registries and specialist providers. The right route depends on whether you are an individual, a business, a farmer, a landowner, a food company or an organisation looking to make a public climate claim.
The most important point is this: do not buy carbon credits simply because a website sells them. Check the standard, the project, the registry, the retirement process and the claim you are allowed to make afterwards.
Carbon credits are often sold through three broad routes.

LEARN MORE ABOUT CARBON CREDITS

PURCHASE OF CARBON CREDITS

CARBON FINANCING

CARBON CREDIT PRICE

PURCHASE OF CARBON CREDITS

CARBON FINANCING

THE CARBON CREDIT SYSTEM

Carbon Certifications to look out for

helpful links

FAQ

What are the current carbon credit systems in the UK?
The UK has a regulated compliance system called the UK Emissions Trading Scheme and a voluntary carbon market where businesses and organisations can buy credits from carbon or nature based projects. UK land based standards include the Woodland Carbon Code and Peatland Code.
The UK ETS is a regulated cap and trade system for covered sectors such as power, heavy industry and aviation. It sets a cap on emissions and requires participants to hold allowances for their emissions.
No. The UK ETS uses allowances in a regulated compliance market. Voluntary carbon credits are usually project based units bought outside that legal mandate.
The voluntary carbon market allows businesses and organisations to buy credits voluntarily, often to support climate strategies or offset residual emissions. Credits should be used in addition to real emissions reductions, not as a replacement for them.
The Woodland Carbon Code is the UK’s voluntary carbon standard for woodland creation projects. It provides information for buyers and landowners on woodland carbon units and project participation.
The Peatland Code is a UK voluntary certification standard for peatland restoration projects. It provides a framework for generating independently verified carbon credits from peatland restoration.
Some farmers and landowners may be able to create credits through eligible woodland, peatland, soil carbon or other land based projects. They should take advice before entering agreements because contracts can affect land use, carbon ownership and future claims.
BFFD cares because carbon systems can affect land use, farming income, food production, food prices and consumer trust. BFFD believes food should remain understandable, practical and connected to real producers.

Understand Carbon Before It Shapes Food

Carbon financing is becoming part of the conversation around farming, land and food. BFFD is being built to help people understand food, farming and local supply with clearer links between producers, products, place and trust.

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