Comment by Dr. Danial Sturge, Carbon Policy Practice Manager at Energy Systems Catapult. 

Regulation in response to crises is not new. The Clean Air Act 1956 was introduced after London’s Great Smog in 1952, and the 2008 Global Financial Crisis led to sweeping changes in financial oversight. While climate change may not produce immediate dramatic effects, its long‐term consequences are equally serious.

Today, the UK has a chance to improve the regulation of greenhouse gas emissions by refining how we measure, report, verify, and account for them across supply chains and the wider economy. Although some regulation exists, it remains fragmented and inconsistent, which undermines trust and increases administrative burdens for companies of all sizes.

At Energy Systems Catapult we have spent several years seeking to address this challenge. In 2021 we advocated for an economy‐wide Carbon Regulator, and our subsequent research has explored how government can make this a reality by identifying key gaps that need to be filled.

Recently, government announced changes to ensure regulators and regulation support growth. This sits at the heart of our proposal for a Carbon Regulator and our previous reports explain how it can:

• Support growth and innovation.
• Reduce the administrative burden for companies.
• Increase investor confidence.
• Provide clarity about emissions reductions.
• Enhance the UK’s leadership in global climate policy.

Our policy briefing expands on these and brings together nearly three years of work.

Figure 1 summarises the core functions of a Carbon Regulator and their impact on three groups: producers of emissions data, users of this data, and government and regulators.

So, what might a Carbon Regulator look like?

In our final report, we recommend that the Audit, Reporting and Governance Authority (ARGA – currently the Financial Reporting Council) be given the role of economy‐wide Carbon Regulator for three key reasons:

• ARGA already has expertise in reporting and auditing that can be adapted for carbon accounting and verification.
• It monitors and engages with companies across all sectors and the UK’s devolved nations.
• Expanding ARGA’s responsibilities is more cost‐effective than creating a new independent body.

Figure 2 illustrates how ARGA’s current responsibilities align with the proposed functions of a Carbon Regulator. Now is the time to integrate these functions into ARGA’s remit under the Audit Reform and Corporate Governance Bill.

Our research suggests that the Carbon Regulator should focus on three main priorities:

• Carbon accounting providers: Ensure these providers meet robust standards of professionalism and accuracy while using standardised methods. This should be supported by developing professional qualifications for carbon accountants in collaboration with industry bodies.
• In‐house reporting: Require firms subject to mandatory sustainability reporting or making carbon claims to adhere to the same standards as external providers, ensuring their in‐house practices are proportionate.
• Emissions mapping: Develop a consistent method for mapping emissions across the economy, for example, by creating standardised emissions factors in partnership with businesses to balance accuracy with reduced administrative burdens.

Regulation need not be complex nor restrictive. With clarity and a level playing field, innovation can flourish, investment risks can be lowered, and confidence among businesses and consumers can be strengthened.