A carbon credit is a claim about a tonne.
This page is about what a UK company has to say about that claim when it puts it in a report, and about how much of the claim survives being looked at.
UK SRS S2 names four things and no more. The integrity bodies that sit behind the credits name considerably more, and they do not agree with each other.
What SRS Credit is, and what it is not.
SRS Credit is an independent reference on carbon credits in UK sustainability reporting.
It does not broker, value, trade, verify, rate, audit, register or advise on carbon credits, and it does not hold — or claim — authorisation from the Financial Conduct Authority or any other regulator.
Nothing on this page is financial, investment, legal, accounting or tax advice, and nothing here is a substitute for your auditor, your reporting accountant or your counsel.
Every figure is linked to the primary source it came from, named and dated. Where a question is genuinely unsettled — and several of the most important ones are — this page says so rather than resolving it for you.
The subject is narrow on purpose. Carbon credits touch climate policy, commodity markets, land use and corporate reporting all at once, and most pages about them cover all four badly.
This one covers the reporting question: what a credit is, what has to be disclosed about it, and what you would want to know before you relied on one. The standards that question is answered against are set out in full across the UK SRS standards.
An allowance is not a credit.
Two instruments, both measured in tonnes of CO2e, doing entirely different jobs.
One discharges a statutory obligation under a cap. The other is a voluntary purchase against a target a company set itself.
Getting them the wrong way round is the most common single error in a carbon disclosure, because the reporting treatment, the price reference and the assurance question all differ.
Six stages, and the last one destroys it.
A credit is not issued and then held like a share. It is issued so that it can be cancelled, and cancelling it is what makes the claim.
The stages below are the UK Woodland Carbon Code's own, because it is a UK standard with a published lifecycle you can read end to end — most international programmes follow the same shape under different names.
Woodland Carbon Code Standard v3.0, Scottish Forestry, January 2026
UK SRS S2, paragraph 36(e).
If a company has a net greenhouse gas emissions target and plans to use carbon credits to reach it, this is the UK SRS S2 paragraph that governs what it must say.
The UK text is word-for-word identical to IFRS S2's — the government considered adding a requirement to disclose credits purchased and retired in the period, and declined, preferring any change to come from the ISSB.
Work through the four items and the panel builds the disclosure skeleton the standard asks for.
A net target never travels alone.
Paragraph 36(c) requires that where a company discloses a net emissions target, it also discloses the associated gross target — and the application guidance is explicit that the net figure must not obscure the gross one.
That is the structural reason carbon credits appear in a climate disclosure standard at all: they are the difference between two numbers, and the standard insists both are visible.
Paragraph B71 then narrows the obligation in a way that surprises people. Only planned use must be disclosed; credits a company has already bought are optional, included only if they help a reader understand the target.
Ten principles, in three groups.
The Integrity Council for the Voluntary Carbon Market publishes the Core Carbon Principles, and they are the closest thing the voluntary market has to a common quality bar.
Note what the reporting standard does not do here. The ISSB identified permanence and additionality as the two essential quality features and then deliberately declined to require a company to disclose its own assessment of either, on the grounds that assessing them is complex.
So the standard asks for "any other factors necessary to understand credibility and integrity", and the substance sits in documents like this one instead. Carbon credit risk analysis unpacks that substance test by test.
The rejections are the interesting part.
Any body can publish principles. What tells you whether a screen has teeth is what it turns down.
In August 2024 the ICVCM ruled that eight renewable-energy methodologies could not carry the CCP label, because they were insufficiently rigorous on additionality — whether the project would have gone ahead anyway.
Those eight methodologies accounted for roughly 236 million unretired credits, about 32% of the voluntary market at the time.
Separately, Verra excluded five of its older REDD+ methodologies from assessment altogether. Those methodologies produced around a quarter of all credits retired in 2023, and they can never carry the label.
Methodology counts from the ICVCM assessment status table, category table updated 12 August 2026 (44 CCP-Approved methodologies; ICVCM's own pages disagree on the count, and 44 as at 12 Aug 2026 is the figure to cite). The 236 million / 32% figures are the ICVCM's own, published 6 August 2024, and describe the market at that date.
The claim is a separate question from the credit.
Buying a good credit does not by itself license a claim about it. The Voluntary Carbon Markets Integrity Initiative publishes a Claims Code that sets out what a company must do before it says anything at all.
Four foundational criteria come first — a published inventory, science-aligned near-term targets, demonstrated progress towards them, and policy advocacy consistent with Paris.
Only then do the tiers apply, and they are defined against remaining emissions rather than total emissions.
Three scales that look alike and disagree.
A handful of firms publish opinions on individual carbon projects, and by 2025 they had largely converged on an eight-point letter scale that reads like a credit rating.
The resemblance is doing a lot of work. These are opinions on whether a tonne is real, not on whether an issuer will repay, and independent analysis has found the same project rated high by one agency and low by another.
They are not regulated in the UK. The ESG Ratings Order 2025 brings ESG ratings inside FCA authorisation from 29 June 2028, but only where a rating is likely to influence a decision on an investment specified in the Regulated Activities Order. Neither the Order nor the FCA's consultation addresses carbon credit ratings expressly, so whether that perimeter reaches them is an open question, not a stated exclusion.
This is the short version. Carbon credit ratings explained takes each agency's published methodology, the risk factors behind a score, and the perimeter question in full. Carbon credit risk analysis goes further still, taking additionality, baseline and over-crediting, permanence and leakage in depth, agency by agency.
Disclosed in one report, unstandardised in the other.
A company that plans to use carbon credits must describe that plan in its sustainability disclosures. What it must do with the same credits in its financial statements is not settled.
There is no IFRS Accounting Standard for carbon credits. IFRIC 3 was issued in 2004 and withdrawn the following year, and nothing replaced it.
This is a deliberately non-numeric panel. There is no score to give, because the honest answer is that it depends on why the credits are held and the choice is a policy judgement applied consistently.
What is settled
What is not
IFRIC Update, March 2025 · IASB work plan update, March 2026
A credit exists because a registry says it does.
IFRS S2 defines a carbon credit as an emissions unit issued by a carbon crediting programme, uniquely serialised, issued, tracked and cancelled by means of an electronic registry.
That definition is doing the work. Serialisation is what prevents the same tonne being sold twice, and cancellation in a registry is what turns a purchase into a retirement.
Voluntary today, consulted on for 2027.
UK SRS S1 and UK SRS S2 were published by the Department for Business and Trade on 25 February 2026, and they are available for voluntary use by any entity that chooses to apply them.
They are not mandatory. The government removed the effective-date clauses from the ISSB text precisely so that the timing sits with whoever decides to require them.
The route to a requirement runs through the Financial Conduct Authority. CP26/5 was published on 30 January 2026 and closed on 20 March 2026, and the FCA has said it intends to finalise rules in 2026, to come into force on 1 January 2027 for listed issuers.
Nothing in this page should be read as saying UK SRS is in force. It says the opposite, and it is worth being clear about because a good deal of published commentary is not.
The Policy and Implementation Committee discussed whether UK SRS S2 should go further than IFRS S2 and require disclosure of credits actually purchased and retired in the reporting period.
The government declined, on the stated preference that amendments should come from the ISSB rather than as UK-specific changes, and encouraged the ISSB to keep the use of carbon credits under review.
So a company applying UK SRS S2 today discloses its plan, not its purchases — unless it chooses to disclose more, which paragraph B71 expressly permits.
An inventory, a target, and the gap between them.
People search for a "carbon credit report" and a "carbon credit inventory" as though they were two names for the same document. They are not, and keeping them apart is most of the work.
The emissions inventory
- Measures what the company emitted, in Scopes 1, 2 and 3
- Carbon credits do not reduce it and do not appear in it
- Governed by the GHG Protocol and, for UK SECR filers, by the 2018 regulations
- This is the gross number that a net target must be shown against
The credit disclosure
- Describes credits the company plans to use against a net target
- Four required items, set out in UK SRS S2 paragraph 36(e)
- Sits in the sustainability disclosures, not in the inventory
- Credits already bought may be included, but are not required
The four items, as the standard words them
| Item | What must be disclosed | Practical reading |
|---|---|---|
| 36(e)(i) | The extent to which, and how, achieving the net target relies on carbon credits | A quantified share, not a sentence saying credits "may" be used |
| 36(e)(ii) | Which third-party scheme or schemes will verify or certify the credits | Name the programme — VCS, Gold Standard, Woodland Carbon Code, and so on |
| 36(e)(iii) | The type of credit: nature-based or technological removal, and reduction or removal | Two independent axes, both required, commonly conflated |
| 36(e)(iv) | Any other factors necessary to understand credibility and integrity | Permanence is the standard's own named example; additionality is the obvious companion |
UK SRS S2 Climate-related Disclosures, paragraph 36(e), DBT, February 2026
Two schemes, priced by auction and futures — not by this page.
There is no official live carbon price, in the UK or the EU. What exists are auction results, futures settlements published by exchanges, and periodic averages published by governments for statutory purposes.
SRS Credit does not track or quote a carbon price, current or historical, for either market. These are compliance-market allowances, not voluntary carbon credits (see Two markets, above) — for how quality, not price, is assessed in the voluntary market, see carbon credit ratings explained.
Three UK ETS changes worth knowing about
Estimates that UK–EU linkage will take effect in 2028 or 2029 circulate widely and are attributed to a European Parliament research briefing, which describes them as estimates rather than policy.
No government on either side has committed to a date, and this page does not repeat one.
The ones that actually get asked.
IFRS S2 defines it as an emissions unit issued by a carbon crediting programme, representing an emission reduction or removal of greenhouse gases, uniquely serialised, issued, tracked and cancelled by means of an electronic registry.
The registry half of that definition matters as much as the tonne half. Without serialisation and cancellation there is nothing to stop the same reduction being sold more than once.
They are different instruments. A UK ETS allowance is created under a cap-and-trade scheme established by the Greenhouse Gas Emissions Trading Scheme Order 2020, and it is surrendered to discharge a statutory obligation — operators submit a verified emissions report by 31 March and surrender allowances by 30 April.
A carbon credit, in the standard's definition, is issued by a carbon crediting programme and used against a voluntary target.
Being precise about the limit of this answer: no UK regulator or standard-setter has published a statement that ETS allowances fall outside paragraph 36(e). The distinction above follows from the definition rather than from a ruling, and it is the reading generally applied.
Four items, under paragraph 36(e): the extent to which and how the net target relies on credits; which third-party scheme will verify or certify them; the type of credit, meaning both whether the offset is nature-based or a technological removal and whether it is achieved by reduction or by removal; and any other factors needed to understand credibility and integrity, with permanence given as the example.
That is the whole requirement. The standard does not require a company to disclose its own assessment of permanence or additionality, which the ISSB explained by saying that assessing them is complex.
No. Paragraph B71 states that an entity is required to disclose only its planned use of carbon credits, though it may also include information about credits already purchased where that helps a reader understand the target.
The UK considered making purchase and retirement disclosure mandatory and decided against it in February 2026.
There is no dedicated IFRS Accounting Standard. IFRIC 3 Emission Rights was issued in 2004 and withdrawn shortly afterwards because of the accounting mismatches it created, and nothing replaced it.
In practice entities apply existing standards according to why the credits are held — IAS 38 for credits held for own use, IAS 2 where they are held for sale in the ordinary course of business, IAS 20 for allowances granted below fair value by government, and IAS 37 for the obligation once emissions exceed allowances held.
Anyone telling you carbon credits simply "are" intangible assets is overstating the position. The classification follows the business purpose and is a policy choice that must be applied consistently.
Not imminently. Pollutant Pricing Mechanisms sit on the IASB's reserve list and have not been activated; a March 2026 staff paper records that the IASB does not currently have capacity to add a new project to its work plan.
The IFRS Interpretations Committee looked at a related question in March 2025 and expressly declined to consider carbon credits separately from that research.
Not at present. The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 was made on 15 December 2025 and requires FCA authorisation for in-scope ESG ratings providers from 29 June 2028.
The regulated activity is defined by reference to ratings likely to influence a decision to make an investment specified in Part 3 of the Regulated Activities Order. Neither the Order nor the FCA's consultation on the regime addresses carbon credit ratings expressly, so whether that perimeter reaches carbon credit ratings is an open question rather than a stated exclusion.
Carbon credit ratings explained sets out the agencies, the scales and the risk factors in detail.
Ten principles in three groups. Governance covers effective governance, tracking, transparency and robust independent third-party validation and verification. Emissions Impact covers additionality, permanence, robust quantification, and no double counting. Sustainable Development covers sustainable development benefits and safeguards, and contribution toward net zero transition.
The Council assesses crediting programmes first and their methodologies second, so a credit only carries the CCP label if both its programme and its methodology have passed.
Two UK codes: the Woodland Carbon Code, launched in 2011 and delivered by Scottish Forestry on behalf of the four UK governments, and the Peatland Code, launched in 2015 and operated by the IUCN UK National Committee.
Both are recorded in the UK Land Carbon Registry, which is managed by S&P Global. The Woodland Carbon Code applied to the ICVCM for CCP eligibility in August 2025 and the application was still in review at the last published status.
The VCMI Claims Code of Practice sets three tiers against remaining emissions: Carbon Integrity Silver at 10% or more and under 50%, Gold at 50% or more and under 100%, and Platinum at 100% or more.
All three require four foundational criteria to be met first, and the current version requires the credits themselves to be CCP-labelled or Article 6.4 credits, with interim alternatives available until 1 January 2027.
Older summaries of the Claims Code quote 20% and 60% thresholds. Those are from the June 2023 first edition and were superseded.
Everything above, traceable.
Every figure on this page links to the document it came from. Where a figure could not be traced to a primary source, it is not on the page.
The rest of the reporting question.
This page is deliberately about disclosure and nothing else. Four references cover the ground either side of it.
Carbon credit ratings explained
BeZero, Sylvera and Calyx Global: what each agency assesses, how the AAA–D scales work, and the risk factors behind a score.
Carbon credit risk analysis
Additionality, baseline and over-crediting, permanence and leakage, in depth — and how BeZero, Calyx Global and Sylvera each assess them.
Carbon credits in sustainability reporting
The gross-accounting rule, the UK SRS S2 disclosure, CSRD, and the CMA Green Claims Code on the marketing claim that follows.
Sustainability Reporting Standards
UK SRS compliance requirements, implementation timelines and the reporting standards themselves.
Carbon reporting software
A reviewed comparison of the platforms that hold the inventory this disclosure sits on top of.
Carbon neutral consultants
Carbon neutral consultants, and the ESOS and SECR obligations that run alongside voluntary reporting.