Source · Select Committees · Environmental Audit Committee
Recommendation 33
33
Accepted
Ensure robust regulation and integrity for UK nature markets, preventing offshoring degradation and financial risks.
Conclusion
Nature and biodiversity are highly location specific and a market which trades in biodiversity credits must account for this. The UK Government should ensure that the UK market has integrity and strong regulation that minimises the risk of the UK market offshoring its nature degradation. Care should be taken to ensure that credits traded through the UK market do not support market practices which put financial stability at risk. (Recommendation, Paragraph 168)
Government Response Summary
The government agrees on the need for market integrity and outlines existing actions like BNG metrics and BSI Nature Investment Standards. It also commits to exploring options to strengthen regulatory oversight, market rules, assurance frameworks, and financial resilience through the VCNM consultation.
Government Response
Accepted
HM Government
Accepted
We agree that biodiversity is inherently location-specific and that any markets for biodiversity credits should reflect this. This is why developer obligations under the BNG scheme in England are calculated on the basis of a metric that recognises the value of mitigating impacts on or near the impact site where feasible. We are also supporting the development of robust domestic standards to support investment from sectors not covered by BNG through the British Standards Institution’s Nature Investment Standards programme. A biodiversity standard is in development and will be designed to ensure that credits reflect UK-specific ecological conditions and deliver genuine, measurable and lasting outcomes. This approach aligns with international frameworks for biodiversity credits such as the International Advisory Panel on Biodiversity Credits, which the UK co-sponsored with France, and explicitly rejects international biodiversity offsetting – ensuring that compensation remains “local-to-local” and “like-for-like.” To safeguard market integrity and reduce the risk of offshoring environmental harm, we are strengthening governance and exploring options to clarify and strengthen the regulatory oversight of these markets through the Voluntary Carbon and Nature Markets (VCNM) consultation. This includes testing models for oversight that clarify regulatory responsibilities and enhance coordination between environmental, financial and consumer regulators. The consultation also explores the introduction of market rules and an assurance framework to support high-integrity crediting schemes, backed by independent verification. We are also focused on ensuring that the growth of UK nature markets does not pose risks to financial resilience. Proposals under the VCNM consultation aim to improve transparency and accountability through the promotion of strengthened disclosures and test how transition planning can help.