02 April 2026

Carbon and nature markets promise new income for farmers and private investment in nature recovery, but the infrastructure to make them work isn’t there yet. 

Carbon and nature markets are intended to create financial incentives for landowners and businesses to reduce emissions, sequester carbon or restore habitats. Farmers could see a potential new income stream; private investment could be channelled into nature recovery. But the gap between the promises and what’s actually happening on the ground remains wide. That’s because the infrastructure needed to make these markets work at scale, including consistent standards, clear rules and accessible tools, isn’t there yet. 

The UK government acknowledged as much in its consultation last year on raising integrity in voluntary carbon and nature markets, and has proposed a framework of voluntary principles and standards endorsements in response. The consultation response is still pending, however. 

Meanwhile, private sector reports have been documenting what these gaps mean in practice for farmers and food businesses. But given the urgency of the climate and nature crises, many are choosing to test best practice in real time, with three AFN Network+ funded projects working to close those gaps on the ground. Here’s a summary of what’s been happening.

Quick Take

• Carbon accounting for farmers is fragmented and hard to navigate. A lack of coordination between regulators and government means the UK’s carbon accounting landscape is riddled with inconsistent standards and reporting requirements, creating barriers particularly for smaller producers. These gaps, identified by Energy Systems Catapult, risk undermining both the national emissions picture and farmers’ ability to participate.
• Others are stepping in where government hasn’t. Lloyds Banking Group has mapped 5.1 million hectares of farmland to identify where nature and financial returns align. Farm Carbon Toolkit is decoding the voluntary carbon market for farmers.
• Existing market designs don’t work well for nature or for farmers. Oxford economist Alex Teytelboym argues that biodiversity depends on ecosystem interactions and can’t be reduced to standardised units the way carbon can, meaning current market mechanisms are a poor fit. Meanwhile, farmers face unfair competition from corporate entities already fluent in financial market systems. New approaches, such as auction-based models trialled for turtle dove habitat by the University of Oxford, RSPB and Defra, may offer a way forward.
• AFN-funded projects are exposing specific gaps in carbon accounting tools. Agroforestry systems can’t yet be properly captured in carbon calculators, and a scoping study by Better Food Traders suggests that standard tools may significantly overestimate Scope 3 emissions for local and organic food businesses: a research gap that urgently needs to be addressed.
• Who benefits from nature finance depends on who can access it. Research mapping regenerative farming practice across the UK has identified uneven geographic spread and knowledge gaps, with implications for which farmers can participate in emerging carbon and nature markets.

Deep dive

A lack of standardisation risks national goals

A report by technology and innovation network Energy Systems Catapult provides a comprehensive assessment of existing UK carbon accounting regulations and guidance. Published in 2024, it identifies seven major gaps, including a lack of coordination between regulators and government; absence of detailed methodologies and calculations guidance within existing regulations; and a lack of third-party verification requirements on disclosures and claims. While the report covers carbon accounting regulation across the economy, rather than farming specifically, the implications for agriculture are clear in that fragmented standards and inconsistent reporting requirements create barriers to entry for smaller producers who lack the resources to navigate what the report calls a ‘regulatory maze’.

Download the report here. 

Translating carbon schemes for farmers

Carbon and environmental impact CIC Farm Carbon Toolkit leads the way in translating complex accounting methods and guidance for a farmer and land manager audience. Its October 2025 report, Are carbon credits the UK’s next crop to harvest?, decodes the current voluntary carbon market and lays out clear information on carbon credit types, how to assess the quality of schemes and lists all schemes currently operating in the UK agricultural sector. It’s an invaluable and timely resource that should be more widely disseminated.

Read the report. 

Lloyds creates nature and farming baseline map

Meanwhile, Lloyds Banking Group’s 2025 Farming with Nature report mapped 5.1 million hectares of UK farmland using geospatial data, on-farm assessments and economic modelling, to pinpoint where nature impacts are high and resilience is low. It identifies specific geographic areas where regenerative practices, such as cover cropping or tree planting, can deliver the greatest environmental and financial benefits. Shouldering the burden of data collection, this report may help lower the barrier for farmers looking to access nature finance schemes, but it’s the kind of centralised mapping that could arguably be better employed as an open source government resource. 

Read the report. 

Existing nature recovery schemes don’t work for farmers or nature

In a webinar given to AFN members, Oxford University Professor Alex Teytelboym set out a new approach to financing nature recovery and explained why existing schemes are not sufficient. While a tonne of carbon is equal regardless of location, with carbon markets subsequently based around one standardised price, Teytelboym pointed out how the concept is flawed when monetising nature recovery. Biodiversity depends on interaction within an ecosystem, so replacing one unit is not possible without also replacing its interlocking parts. Current market mechanisms designed around standardised tradeable units are a poor fit.

One alternative is the combinatorial auction model developed by the University of Oxford with DotEcon and EnTrade, alongside RSPB and Defra for turtle dove habitat conservation. Under this method, farmers bid for contracts to provide suitable habitat: a mechanism designed to allocate funding cost-effectively by letting farmers compete on price. Winning bids offered a combination of scrub, water access and adjacent food plots, and therefore delivered the most ecological value. 

Webinar chair Emily Norton (former AFN policy champion), also noted how farmers face unfair competition from corporate entities already used to working within financial market systems. 

Read the briefing or watch the webinar. 

AFN funded projects tackling barriers to carbon and nature accounting 

Bringing agroforestry into carbon accounting

In response to the growing need for farmers and businesses to monitor and report their carbon, the AgForC project, with funding from AFN, has looked into how agroforestry systems can be added into existing carbon calculation tools. Agroforestry has been widely recognised as a practice that enhances carbon sequestration, improves soil health, and provides economic benefits. But its inherent complexity, and position on the fringes of mainstream agriculture, means there is little standardisation for quantifying its carbon and nature benefits. The project looked at the free-to-use Cool Farm Platform, bringing together practitioners, academics and computer modelling specialists to identify how agroforestry could be included within an existing module. A key finding was consensus on the need for flexible model inputs and agroforestry system definitions, which account for the complexity and variability of agroforestry designs. Overall, this project has highlighted the demand for an agroforestry carbon accounting module, which may accelerate as agroforestry policy continues to change within the UK.

Read more.

Sustainable food businesses face unique accounting challenges

Carbon literacy can be an obstacle for climate action journeys even for large businesses with fully staffed sustainability teams. But for smaller retailers that prioritise locally-grown or organic food, the challenges are manifold. Ethical retail network Better Food Traders set out to address this, with funding from AFN, and to better understand how these businesses contribute to net zero. To do this, they worked with an SME food retailer to calculate a baseline year of carbon emissions associated with their operations, as well as compiling knowledge from 32 other small businesses, five sustainability consultants and analysis of carbon frameworks. The project found that currently available tools are not sufficient for local food businesses to produce a reliable footprint. As project lead Hattie Hammond puts it: “We’ve found out that most carbon calculations grossly overestimate the Scope 3 emissions associated with domestic, organic food, thus revealing a research gap that urgently needs to be addressed.”

Read more.

Who benefits from nature finance depends on access

Two AFN-funded projects have mapped regenerative farming practices across the UK, and found an unequal geographic spread and significant gaps in both research and practice. And this has implications for which farmers are able to access nature-based finance. Richard Francksen used systematic mapping to summarise 33,000 articles into research ‘heatmaps’. Some practices, such as intercropping and reduced tillage receive substantial attention, while others, like livestock integration and under-sowing, remain under-explored. Samuel Eze took a different approach, combining postcode data with online survey answers to map where regenerative practices are actually being adopted in the UK. The picture is similarly uneven. If knowledge and adoption of regenerative practices are unevenly distributed, so too will be farmers’ ability to participate in emerging carbon and nature markets.

Read more.

The evidence from the past year or so tells a consistent story: carbon and nature markets hold real promise for farmer incomes and environmental recovery, but the standards, tools and market designs needed to deliver on that promise remain fragmented, inconsistent and, in some cases, poorly suited to the people they’re supposed to serve. 

The government’s consultation was a welcome acknowledgement of these problems, but until there’s tangible action on standardisation, accessibility and regulatory coordination, it’s organisations like Farm Carbon Toolkit, and AFN-funded projects like those featured here, that are doing the practical work of closing the gaps.

If you’re working on carbon or nature accounting in a farming or food business context, we’d love to hear from you. Please get in touch.