The UK’s carbon credit economy is generating around £1.2 billion a year and supporting more than 11,000 jobs, with insurance emerging as a core pillar of that ecosystem, according to a new report from the City of London Corporation and the UK Carbon Markets Forum.
The study, “Seizing the UK’s Carbon Credit Opportunity: Measuring Value to Enable Action”, said the UK is already the world's leading hub for carbon market services, including insurance, but warned that this position is not guaranteed without clearer and more coordinated government backing.
The report valued the global carbon credit market at about US$1.4 billion, with potential to grow between US$15.8 billion and US$267.9 billion by 2050, depending on policy and demand. It identified five near-term demand drivers, including rapid growth in AI and data centres, aviation compliance under CORSIA Phase 2, country-level trading under the Paris Agreement, corporate net-zero guidance from the Science Based Targets initiative, and the integration of carbon credits into compliance markets, such as the UK and EU emissions trading schemes.
The report also highlighted insurance as one of the UK's strongest competitive advantages in carbon markets.
It said the UK is the world's leading carbon insurance market, with more than £380 million in insured carbon value in 2025 and global premiums in this niche projected to reach £30 billion by 2050.
Covers already being written in London span underperformance and delivery risk on carbon projects, political and legal risks, and protection against counterparties failing to deliver credits as contracted. As investors, corporates and project developers seek to de-risk their positions, London's specialty market is developing wordings tailored to carbon credit integrity, permanence and regulatory change.
With the global carbon credit market projected to grow by up to 190 times by 2050, the report suggested demand for risk transfer solutions will increase alongside transaction volumes.
Key growth drivers such as AI-related energy demand, aviation obligations and the potential inclusion of credits in more compliance schemes all point to a larger, more regulated and more closely examined market, the report said.
That trajectory implied rising demand for products that backstop corporate claims, protect balance sheets from invalidated or under-delivering credits, and respond to political and regulatory shifts in both host and buyer jurisdictions. It also raised questions about accumulation risk, contract certainty and how carbon exposures correlate with climate-related physical and transition risks already on carriers' books.
Although much of the professional services activity is clustered in London, the report stressed that the economic footprint of carbon markets extends across the UK. Only 1.5% of UK nature‑based carbon projects are located in the South East, with most projects – and much of the associated land‑use and climate risk – in rural and regional areas.
Between 2023 and 2025, an estimated US$3.5 billion was invested into UK carbon projects and businesses, including woodland and peatland schemes now protecting more than 100,000 hectares of landscape. These projects, often underpinned by carbon finance, are said to generate around £500 million a year in wider ecosystem services such as flood protection, biodiversity gains and improved air quality.
Restored ecosystems can reduce long‑term physical risk, but nature‑based carbon projects also bring exposures around permanence, verification, wildfire, disease and changing methodologies – many of which are now feeding into specialist carbon project and credit insurance products.
The report sets out six priority actions for government, several of which address issues closely watched by insurers. It calls for greater clarity on how UK businesses can use credits within regulated or endorsed frameworks, and for a recognised quality threshold to give long‑term confidence in “high‑integrity” credits.
It also urges policymakers to help protect credible corporate claims, reducing greenwashing and litigation risk, and to use the UK’s international influence to promote robust standards and build capacity in emerging markets.
“As demand grows for high integrity carbon credits, including from energy-intensive emerging technologies, the question is how markets channel this capital at scale," said Dame Clara Furse, chair of the UK Carbon Markets Forum. "The UK already has a sophisticated financial and professional services ecosystem that is well placed to support carbon markets growth. This report shows that with the right policy framework, the UK can lead in scaling markets that deliver real climate impact and long term economic value.”
