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Destination net zero: taxation of voluntary carbon credits

Companies are increasingly turning to voluntary carbon credits to achieve their decarbonisation objectives on the path to ‘net zero’. Oliver Pendred and Andrew Hedges (Baker McKenzie) explain the use and taxation of such credits for UK companies.

As world leaders gather in Sharm el-Sheik Egypt for the 2022 United Nations Climate Change Conference known as COP27 attention is refocusing on the urgent need to reduce greenhouse gas (GHG) emissions and limit global warming. At COP26 last year many countries committed to achieve net zero GHG emissions by 2050 and the latest gathering intends to bring governments together to accelerate efforts to reach this target.

Multinational groups around the world across different industry sectors are setting voluntary objectives to reduce their carbon emissions and achieve net zero including more than four fifths of FTSE 100 companies. This is being pursued by eliminating emissions either by moving...

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