Rethinking carbon offsetting: Why local government needs a radical new model

Carbon offsetting has long promised environmental benefits yet rarely delivers meaningful value to communities local to the projects that fund it. Ahead of the North East's first mayoral election in early 2024, Cundall approached then-candidate Kim McGuinness with a bold proposition: redesign offsetting so it creates real social, economic and environmental value for the region. We explored whether a place based carbon and nature marketplace—driven by social impact—could accelerate decarbonisation, attract private investment and support long term regeneration.Working through Net Zero North East England, McGuinness' team at the North East Combined Authority embraced the concept. Through close collaboration it has since become the UK's first Combined Authority led carbon and nature marketplace.The aim was to ensure that net zero delivery worked for communities and places, not just for carbon accounts.The idea arose from a challenge shared by councils nationwide after Defra, through its Local Investment in Natural Capital Programme, called for new ways to unlock green finance and nature markets. Councils face unavoidable residual emissions—from vehicle fleets, building systems, refrigerants and embedded procurement. Offsetting has traditionally been used to balance these emissions, but the question now is whether the current model is still fit for purpose.Confidence in voluntary carbon markets is declining. Research and parliamentary scrutiny have raised concerns about the credit integrity, including weak additionality, uncertain baselines, and overstated emissions-reduction claims. Peer reviewed studies have identified systematic over crediting in certain project types. For councils operating under statutory obligations of transparency, audit and value for money, these shortcomings present significant risk.The UK Parliament's POSTnote on carbon offsetting summarises the issue: the voluntary carbon market lacks regulation, making it difficult to assure credit quality. Poor quality offsets can inflate performance claims and substitute for genuine emissions reduction—creating reputational and audit risks for publicly funded organisations.For public authorities, these risks are very real. From the outset, we were clear that a new, high-integrity model was needed, with transparency and accountability at its core. The technical complexity of carbon crediting is well known. Determining whether a credited reduction is real, additional, accurately quantified, unique and durable is inherently challenging. Working with Net Zero North East England, and private sector partners, we developed a framework and governance model to manage these risks in line with local government responsibilities.Councils already use the term ‘offsetting' across several mechanisms, each requiring its own oversight. Planning led carbon funds can credibly support local decarbonisation where additionality and transparency are assured. Direct purchase of international credits carries the greatest reputational risk, given ongoing concerns about credit integrity. Insetting—investing in projects within local authority boundaries—offers stronger links to place and accountability, but still requires clear baselines, verification and claims discipline. In all cases, scrutiny expectations demand strong governance and evidence.By establishing local carbon and nature marketplaces, authorities can direct funding toward decarbonised growth while delivering wider co-benefits such as improved public health, employability and social mobility. The North East model is designed to maximise value for communities and the natural environment, with potential to support long-term viability of key community assets like swimming pools, leisure centres and libraries.The North East Carbon and Nature Marketplace was created to address these challenges. Instead of purchasing traditional credits, it channels resources into independently verified local carbon and nature projects. It addresses the integrity challenges set out in POSTnote 713—additionality, permanence, leakage, double counting and transparency—through local governance, due diligence and clear evidence standards.Crucially, the model shifts offsetting away from abstract ‘carbon neutrality' claims and towards mobilising private sector finance in support of public sector priorities. As a shared platform for councils, anchor institutions and businesses, it builds collaboration while ensuring social, economic and environmental benefits remain within the region.By linking carbon and nature investment to regeneration, skills and land use priorities, the Marketplace aligns decarbonisation with economic growth rather than treating them as competing aims. This helps attract private investment that directly supports regional objectives.From a public value perspective, the model can be applied in line with HM Treasury's Green Book principles, supporting robust appraisal, clear logic models and measurable outcomes alongside carbon performance. It also aligns with Local Government Association guidance, which emphasises strong governance, transparency and proportionality when councils address residual emissions and wider climate expenditure.The Marketplace Guide sets out how social value is embedded in project selection and how nature based investment—including Biodiversity Net Gain habitat banks—can sit alongside carbon projects. This allows councils and developers to meet multiple statutory requirements through a single transparent framework. Embedding similar models in local planning policy could bring decarbonisation, biodiversity recovery and regeneration together within regional growth strategies.By establishing local carbon and nature marketplaces, authorities can direct funding toward decarbonised growth while delivering wider co-benefits such as improved public health, employability and social mobility. The North East model is designed to maximise value for communities and the natural environment, with potential to support long-term viability of key community assets like swimming pools, leisure centres and libraries.For local government, the conclusion is clear. Offsetting can play a meaningful role in net zero delivery, but only when redefined around integrity, accountability and place. The North East's experience shows that a credible, locally governed model for decarbonised growth is achievable. Olli Jones is associate director, Cundall, and Ross Lowrie is head of clean energy and environment, The North East Combined Authority

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CLIMATE EMERGENCY

Rethinking carbon offsetting: Why local government needs a radical new model

By Olli Jones, Ross Lowrie | 05 May 2026

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