海角视频

Introduction

The UK鈥檚 carbon market isn鈥檛 working 鈥� at least not in the way we need it to. As the urgency of mitigating the climate emergency grows, the systems meant to support it remain outdated, opaque and disconnected from the lived realities of communities and cities on the frontlines of climate action.

This project – part of 海角视频鈥檚 cross-practice collaboration dedicated to unpicking the built environment鈥檚 thorniest challenges, Urban C:Lab – is the outcome of extensive engagement and workshops with local government leaders, institutional investors, landowners, the UK Green Building Council (UKGBC) and systems thinkers, among many others. It set out to explore what a new model could look like – one that moves beyond carbon tunnel vision and offset accounting, and a toward collective, place-based approach to the transition, and its role within the built environment.

Voluntary carbon offsets dominate the landscape in the UK, for both public and private entities, with only power generation, specific energy intensive industries and aviation sectors being regulated by the UK Emissions Trading Scheme (ETS). However, these voluntary carbon offsets that real decarbonisation demands. in complex cases, increasing year by year, yet most schemes operate at a fraction of that cost. 鈥淭here鈥檚 no way there鈥檚 anything good being done with a $2 offset,鈥� one participant said.

The shortcomings of the voluntary carbon market are the s made real: everyone agrees carbon must be reduced, but with no shared system to coordinate effort or investment, responsibility is pushed elsewhere 鈥� offshore, down the value chain or onto future generations. The result is a fractured system 鈥� where well-intentioned companies buy their way to claims of neutrality at exaggeratedly low cost, while the public sector is left with the prospect of hard, underfunded work to drive much needed change. When public sector funding does exist 鈥� such as through 鈥� it鈥檚 routed through legal and policy tools not built for climate transformation. As part of the decarbonisation transition developers want clarity, councils want equity and outcomes for their constituents, and investors want impact to report to their stakeholders. However, the infrastructure to connect those needs simply doesn鈥檛 exist.

Economists have long recognised carbon as a textbook example of market failure (Stern, 2006) 鈥� a mispriced externality where polluters rarely bear the true cost of emissions. As Ramesh Deonarine of the Climate Change Committee noted in our conversation with him, a transition fund could act as a modern remedy: a new tool to correct market dynamics while avoiding the political volatility of taxation. It reframes the issue not as a cost to be minimised, but a public investment to be stewarded.

In the sections that follow, we share the insights gathered through this project 鈥� from local authorities, community energy groups, developers and investors 鈥� and outline routes forward to redesign the UK鈥檚 carbon market as a credible, just and catalytic tool for place-based climate transition.

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Stern, N. (2006). The Economics of Climate Change: The Stern Review. HM Treasury.

Aligning with the UKGBC

The UKGBC has been instrumental to the relationships we have formed and engaged with during this research project, particularly the public and private sector workshops we co-delivered in late 2024.

As such, the work we carried out aligns with the , which calls for a more credible, transparent and impact-oriented approach to carbon responsibility in the built environment. UKGBC鈥檚 Offsetting and Pricing guidance urges organisations to move beyond simplistic offsetting and instead adopt a holistic approach through the use of internal carbon pricing鈥� one that accounts for full life cycle emissions, prioritises in-sector reductions and ensures any residual emissions are addressed through high-quality, high-integrity mechanisms.

The approach we propose here complements that direction 鈥� advocating for localised carbon investment models that are co-governed, strategically aligned with net zero and rooted in social and environmental value. It echoes UKGBC鈥檚 emphasis on aligning with national carbon budgets, recognising co-benefits and ensuring that all climate action contributes meaningfully to the broader transition.

Insights from the private sector

Across the private sector, the willingness to engage in climate-positive offsetting and investment is growing, but the infrastructure to do so remains fractured. The developers, asset managers and landowners we spoke to expressed a clear appetite to invest in projects that deliver tangible, local carbon reduction, but what鈥檚 on offer is often too risky, too opaque or too limited to align with their ESG strategies or fiduciary duties.

Many interviewees shared a common frustration: the current system of voluntary carbon offsets lacks transparency and credibility. 鈥淎s investors, we always want to know where these carbon contributions are going,鈥� said Laura Thrower (Royal London Asset Management) 鈥�-and would like to see greater transparency over this across the board鈥�. Even when internal carbon pricing or transition funds exist, there is little clarity around where the money could be deployed locally, and even less trust that it will result in measurable impact.

This lack of confidence is exacerbated by reputational risk. Few institutional investors are willing to associate their portfolios with carbon credits of questionable value or unclear provenance. As Kyle Gray from the Crown Estate noted, their decision to focus on abatement over offsetting was driven in part by the volatility and uncertainty of the market. 鈥淚t just wasn鈥檛 straightforward,鈥� he said. 鈥淲hat was more clear was putting our efforts into reducing carbon directly.鈥�

Despite this, most private sector actors aren鈥檛 standing still. Several developers and asset managers are experimenting with internal transition funds, carbon levies on development or ESG-linked investment allocations. But they are doing so without a coordinated delivery framework, which means good intentions often stall at the point of execution.

Many also raised the challenge of ambiguity in expectations. Should they be funding removals? Community-scale prevention? Enabling infrastructure? 鈥淲e鈥檇 love to invest in local retrofit,鈥� said one developer, 鈥渂ut there鈥檚 no mechanism 鈥� no way to know if it would count.鈥�

Despite growing interest in ESG and net zero commitments, many investors still treat carbon offsets as a compliance expense 鈥� a necessary cost to mitigate reputational risk, rather than a strategic investment. This mindset limits the potential of carbon finance to drive innovation and systemic change. Reframing carbon spending as a channel for measurable long-term value could unlock more ambitious and enduring forms of engagement.

Regulatory change is making this more urgent. With frameworks like TCFD, TNFD, and CSRD pushing toward more rigorous sustainability disclosure, vague claims won鈥檛 be enough. Richard Twinn of 海角视频 said, 鈥淚t鈥檚 not about spending more on the same thing 鈥� it鈥檚 about spending on something better.鈥� During the workshop, there was clear consensus that 鈥榖etter鈥� means systems that actually reduce carbon emissions while also valuing nature, supporting social equity and creating the foundations for long-term decarbonisation.

The current system lacks what many interviewees referred to as an 鈥渋nterface鈥�; a transparent, accountable and flexible framework that connects private capital to place-based carbon action. This is not about charity, nor about simply paying for compliance. It鈥檚 about being able to demonstrate real impact; in carbon, in community benefit and in alignment with national net zero pathways.

To effectively address complex challenges like Scope 3 emissions, forming coalitions of industry partners is essential. Collaborative initiatives, such as the Carbon Pricing Leadership Coalition, bring together businesses across sectors to develop shared standards, pool resources and co-invest in decarbonisation projects. These alliances enable companies to collectively tackle emissions that span their supply chains, fostering a unified approach to achieving net zero targets. As Amanda Blanc, CEO of Aviva plc said in stated in , 鈥淎viva is also part of a wider system responding to climate change, so we cannot achieve our ambition in isolation鈥�.

In the built environment, this work is particularly urgent 鈥� not only because of the scale of our Scope 3 emissions, but because this is where our expertise lies. Our industry carries responsibility across material supply chains, construction practices and long-term impacts on communities. The buildings we shape affect healthy, equity and daily life, not just carbon metrics. We may not be able to measure every outcome precisely, but that can鈥檛 be an excuse for inaction. If we know where our influence lies, we have a duty to act and to build the structures that make it easier for others to do the same.

The bottom line? The private sector is ready to move. What鈥檚 missing is an ecosystem that makes climate investment credible, legible and catalytic 鈥� one that goes beyond narrow offsetting and instead allows for portfolios of action aligned to real transition goals.

Insights from the public sector

If the private sector is cautious but willing, local government is active but constrained. Across the UK, councils are already managing carbon tax contributions, coordinating climate programmes and embedding net zero targets into planning systems. But they are doing so through mechanisms that were not built for this purpose, and with nowhere near the capacity or agency they need.

Section 106, for instance, was never designed to handle climate finance. Yet, it remains the primary vehicle for collecting and distributing carbon tax payments from new developments. While it has enabled some important work (from solar panel installations to heat network expansions) it also places an enormous administrative burden on councils, without offering the tools needed to manage risk, ensure transparency or coordinate public-private and additional investment at scale.

Westminster City Council is a good example. Their climate team has begun to reframe their carbon fund as a broader transition mechanism 鈥� one capable of supporting high-impact retrofit and infrastructure work. But as Alex Downes (Green Funding Manager, WCC) noted, the underlying legal and planning framework remains limiting: 鈥淚t gives us some funding, but not the structure or clarity to use it effectively鈥�, he said.

He also noted that part of the challenge for local authorities is that their climate ambitions often intersect with emissions they do not directly control. Scope 3 emissions, such as those from leased buildings, construction materials, or contracted services, can dwarf operational emissions and depend heavily on other actors. This raises a critical question: how can public institutions drive whole-system decarbonisation when their levers are so distributed; across private developers, supply chains, energy systems and national regulators?

There are promising investment models emerging. HACT, a charity working to retrofit housing in partnership with housing associations, generates part of project funds through the sale of carbon credits, which are . This transparent data-driven approach links them directly to wellbeing gains, health outcomes and household cost savings. These projects report benefits of over 拢600 per year per home in non-carbon value, yet the market driven cost of the offsets are too low to pay off the full project costs. This kind of hyperlocal, evidence-driven approach shows what鈥檚 possible when measurement expands beyond just tonnes.

Even where funding exists, the delivery context is complex. Councils must weigh carbon savings against political mandates, housing quality, energy poverty, and equity. This makes narrow carbon accounting, like tonne-for-tonne equivalence, impractical. In practice, many councils already make strategic trade-offs, prioritising total system value over strict cost-per-tonne efficiency. But this is done quietly, and often without the protection of formal policy backing.

There is also the issue of scale and variability. From our conversations with local authorities, many are faced with the challenge of receiving millions in carbon funds at irregular intervals, without the sufficient staffing or digital systems to manage them as investment platforms. There is no standardised pipeline for decarbonisation projects, no shared reporting framework and no national fund-matching infrastructure. And without those things, it becomes difficult to manage and spend funds efficiently and invest in consequential projects, but also it becomes difficult to make the case for scaling up capacity.

The irony is that councils are doing exactly what the principles of net zero demand: investing in place-based, system-wide change. What they lack is legitimacy in the eyes of institutional investors, and support from central government. Alex Downes described their team as 鈥渃limate fund managers by default 鈥� but with none of the support that would imply.鈥�

Despite this, innovation is happening. Councils in Bristol and London are piloting new carbon pricing models. Some, like in the case of Westminster, are looking to build and fine tune an already trialled model. Some are developing in-house retrofit pipelines or partnering with community energy groups to co-design low-carbon infrastructure. But these efforts remain the exception, not the rule. Without a unifying framework, they struggle to attract scale or replication.

There鈥檚 also a deeper systemic imbalance at play. In many cases, councils are being asked to fill gaps left by central government and, increasingly, by the private sector. As one interviewee put it, 鈥淭he private sector is moving in to fund schools and council services because we can鈥檛 鈥� and while it鈥檚 helpful, that鈥檚 not how the system should work.鈥�

If we are serious about building a just transition, local authorities cannot be expected to deliver it alone, or through systems not designed for it. They need enabling infrastructure: clear policy levers, legal flexibility, trusted governance models and platforms to partner with capital at scale.

The public sector has already shown it is a willing participant in the ecosystem. Now it needs to be empowered to collaborate and combine efforts with private stakeholders.

What鈥檚 already happening 鈥� and what we鈥檙e learning

While a fully formed system for carbon investment doesn鈥檛 yet exist, the pieces are already in motion. Across the UK, various initiatives are exploring how to move beyond traditional offsets toward more place-based, justice-aligned, and coordinated approaches.

In the West Midlands, the Net Zero Neighbourhoods programme is pioneering an area-based approach to decarbonisation. Run by Energy Capital and the West Midlands Combined Authority, the programme delivers integrated retrofit, heating and local infrastructure upgrades at the neighbourhood scale. Crucially, it鈥檚 not just about emissions 鈥� it’s about health, fuel poverty and local economic regeneration. The challenge? It requires significant coordination and upfront investment. Without long-term funding structures and cross-sector buy-in, such programmes risk remaining pilots rather than policy.

Meanwhile, on the national and corporate front, proposals like the , championed by Arup and others, aim to create pooled, transparent platforms that guide businesses toward high-quality, verifiable carbon projects. The fund would act as a shared vehicle for responsible investment in decarbonisation. But even this model, while promising, depends on governance clarity and public sector alignment to avoid reproducing the flaws of existing voluntary markets.

At a systems level, initiatives like are working to address one of the core challenges we have encountered in our research: how to assess the future impact of climate investments in a way that鈥檚 credible, transparent and decision-useful. Rather than rely on historic carbon accounting, it provides a shared methodology for forward-looking greenhouse gas impact estimation – using unit impact and projected scale, across direct and indirect emissions. Its work reflects a shift already underway: from carbon as a passive footprint, to carbon as an active design variable.

These early efforts are promising not just for what they achieve, but for what they reveal: that impact multiplies when funding is pooled and aligned to a shared strategy, that local delivery requires local legitimacy, and long-term certainty, and that the biggest missing link isn鈥檛 intent, but infrastructure.

A way forward

As Amy Brooke (Independent, formerly Key Carbon) put it, 鈥淚 don鈥檛 think in any other industry you鈥檙e seeing such a scale of mobilisation鈥� We are revaluing nature & the communities that look after to an extent that I鈥檓 not sure we鈥檝e ever seen on this planet before.鈥� This is the context for the work ahead: a global economy rewiring itself in real time. Carbon finance is not peripheral to that transformation 鈥� it is a core enabler of what comes next.

We are no longer debating whether the carbon market is adequate, we are debating what can come next. This isn鈥檛 about one lever or policy fix, it鈥檚 about designing a new carbon investment ecosystem 鈥� one that reflects the complexity of decarbonisation, the diversity of actors involved and the reality that climate transition is a commons challenge.

Next, we outline four moves that could support that shift.

Building the commons infrastructure

This isn鈥檛 just about project finance. It鈥檚 about building the infrastructure that lets people work together on shared challenges. Carbon is a commons issue. Our current tools treat it like a voluntary commodity. That misalignment is not technical 鈥� it鈥檚 conceptual.

To close the gap, we need frameworks that value co-benefits, systems that make public action investable and platforms that let diverse actors participate in a shared mission.

We see it in local pilots, in community energy schemes, in emerging funds and collaborative planning models. But now we need to scale and stitch those threads into a system: one that enables trust, builds equity and reflects the reality that no sector 鈥� public, private, or civic 鈥� can do this alone.

鈥淲e鈥檙e asked to prove impact with numbers, such as CO2 saved 鈥� but often the real value is what you see three years later, when a community takes the work further鈥�, said Dave Fuller (Repowering London). Engagement with everyone across the sector for the last couple years has filled us with renewed hope that the appetite for working together to enable change is there, where previously there had been scepticism 鈥� and that we are open to exploring together.

To continue exploring this with us please reach out. An immense thank you to clients and collaborators who took the time to attend our workshops, engage with us and answer our myriad questions 鈥� contributing their invaluable experience and knowledge to this exploration.