(Bloomberg) -- The UK must better regulate voluntary carbon markets to ensure that companies don’t use credits as a substitute for curbing emissions, according to the government’s climate watchdog. 

Politicians should provide a clear definition of what a net-zero business is and tell firms to disclose their reliance on carbon offsets in order to increase transparency, the independent Climate Change Committee said in a report Thursday. 

“There is a clear need for government to make standards stronger and point businesses towards an approach that prioritizes real emissions reduction ahead of offsetting,” Chris Stark, chief executive of the committee, said in a statement.

The UK is seeking to achieve net-zero carbon emissions by the middle of the century, but an unprecedented energy crisis -- which could to greater reliance on coal due to soaring natural gas prices -- is posing a challenge to that goal. 

Carbon offsets, or credits, allow companies to pollute at home in exchange for investing in greener projects elsewhere. Voluntary markets, where participants aren’t bound by legal mandates, can attract investment in clean innovation and accelerate emissions cuts. 

While such markets have grown in scale in recent years, the effectiveness of credits is contested, according to the CCC. Critics have questioned the accuracy of offsets and whether they actually curb climate change.

Government action should encourage companies to directly reduce their emissions and rely on offsets as a last resort, the panel said in its report. Without stronger guidance, “there is a real risk that voluntary carbon markets slow progress towards net zero or damage other priorities such as climate adaptation and biodiversity.”  

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