WFE Targets Key Reforms to Build Trust and Scale Global Carbon and Nature Markets

The World Federation of Exchanges (WFE), the global association for exchanges and clearing houses, has urged the UK Government to remove Value Added Tax (VAT) on carbon credit transactions and officially classify them as financial instruments. The call is part of a broader push to develop transparent, credible, and globally aligned carbon and nature markets.

In its submission to the UK Government’s consultation on Voluntary Carbon and Nature Markets, the WFE welcomed efforts to build market integrity but highlighted key policy gaps that could hinder the sector’s growth. The Federation argued that carbon and nature markets can play a transformative role in the global climate transition but require a clear legal framework, tax neutrality, and investor protections similar to those in established financial markets.

“Carbon and nature markets hold enormous potential to accelerate the transition to a sustainable economy, but they will only succeed with the same legal clarity and investor protections found in mature financial markets,” said Nandini Sukumar, CEO of the WFE. “We urge the UK to remove

VAT on carbon credits and recognise them as financial instruments to unlock market participation and innovation.”

The WFE outlined several key recommendations in its response, including:

• Taking a “climate-first” approach by prioritising the more developed carbon credit market over the still-maturing nature credits.
• Defining clear legal rights for both carbon and nature credits to provide certainty for market participants.
• Applying a zero VAT rate to carbon credit transactions to reduce costs and encourage trading.
• Coordinating legal, tax, accounting, and regulatory systems across government to support market growth.
• Remaining flexible on international standards to adapt to rapid changes and emerging innovations.
• Requiring UK companies subject to the Task Force on Climate-related Financial Disclosures (TCFD) and future Sustainability Disclosure Requirements (SDR) to publish credible transition plans.
• Supporting the UK’s involvement in the Paris Agreement’s Article 6 carbon credit mechanisms to deepen market liquidity.

The WFE emphasised the importance of harmonising global standards and product definitions to ensure interoperability between markets, particularly as nature-related regulations continue to evolve.

Exchanges, according to the WFE, are well-placed to support these markets by offering transparent, secure infrastructure, better price discovery, and improved investor protection. The Federation said these elements are crucial in building trust and scaling voluntary carbon and nature markets globally.

The consultation response reflects growing international efforts to standardise voluntary carbon markets and align them with global climate goals.

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