Beyond Technology: Promoting Peatlands in the UK's Carbon Capture Portfolio
By Mark Adams
In this blog post, our Principal Biodiversity Economist, Mark Adams, examines the recent £9.4 billion allocation for carbon capture projects, highlighting how nature-based solutions offer complementary pathways to Net Zero, and promoting the inclusion of peatland restoration, alongside woodland, within the Emissions Trading System.
Last Wednesday (11 June 2025), the Chancellor announced the latest spending review, including £9.4 billion for carbon capture projects. Engineered removals may play an important role in reaching Net Zero by 2050, but today these technologies are still in an early-development stage and may prove costly. By contrast nature-based solutions are both affordable and are ready to be deployed rapidly at scale. Furthermore, nature-based solutions can provide a host of co-benefits including improved air and water quality, flood prevention, and improved health reducing burdens on the NHS.
Despite this, funding for nature is purely voluntary through markets such as the Woodland Carbon Code and Peatland Code. The Department for Energy Security and Net Zero (DESNZ) has proposed rectifying this by incorporating woodland carbon alongside engineered removals in the Emissions Trading System (ETS). In this “cap and trade” market, emitters receive free allowances up to a cap. If companies wish to emit more than their individual cap they must trade allowances (i.e. pay someone else to emit less).
Incorporating removals adds a new way to generate allowances: companies that fail to meet their cap can either pay other companies to emit less or can pay for the equivalent amount of carbon to be sequestered (i.e. removed and stored). ETS is a compliance market, meaning it is backed by a regulatory mandate, and can achieve significantly higher prices than even high-integrity voluntary markets.
Yet while DESNZ has embraced incorporating woodlands into ETS it has thus far rejected incorporating peatland. This is due to the dual nature of peat habitats which in good condition are a carbon sink but in poor condition rerelease that carbon to the atmosphere. Restoring peatlands to good condition halts those emissions and over time peat will start sequestering carbon again. However, measuring this sequestration is difficult and so, in contrast to woodland, landowners are currently compensated for the reduction in emissions rather than removals.
Paying for avoided emissions may violate best practices with some standards excluding peatland removal as an option for offsetting unavoidable emissions. Yet while this remains a crucial principle for voluntary markets, it should not be a barrier to inclusion in ETS which already allows polluters to trade allowances by emitting below the cap. Peatland can be incorporated into ETS with allowances up to 100% of current emissions and be permitted to trade allowances by reducing their emissions. Government could also set a lower cap, and in the future may have enough evidence to integrate sequestration.
In a new Signpost JNCC argues for just this approach. Bringing peatland into ETS would permit higher payments for peatland restoration, giving government an affordable and readily available solution to reaching Net Zero. It would place up to 20 million tonnes of carbon dioxide (CO2) reductions on the table, not including the long-term potential for sequestration.
You can find out more in Our Science Signpost, 'Accelerating private investment in peatland restoration'.