In 2022, the Kunming-Montreal Global Biodiversity Framework recognised biodiversity credits as one of the ways to finance a global deal for nature. Since then, there’s been a flurry of activity as governments, businesses, and project hosts prepare for market development.
- Colombia and Australia pioneered the sale of voluntary biodiversity credits not long after COP15.
- The European market sold its first domestic credits in the Spring/Summer of 2023.
- The UK is in the process of establishing its standards and governance.
Leaning on the experience of environmental markets experts, Stefanie Kaiser and Forest Carbon, this article will unpack everything from what biodiversity credits are, to why this market is emerging, to how it’s being regulated.
With biodiversity loss increasing globally, and billions (yes, billions) of dollars of investment required per year to halt it, it’s truly a billion-dollar question. Should we be putting a price on nature? We’ll let you decide.
What are biodiversity credits, and how do they work?
Biodiversity credits are similar to carbon credits. Where a carbon credit represents a tonne of carbon dioxide (or the equivalent amount of any other greenhouse gas) sequestered, reduced, or avoided, a biodiversity credit represents net positive biodiversity gains. Think of improved habitats, increased connectivity, a greater number and variety of wildlife, and more space for biodiversity to thrive.
One of the main reasons these credits are being created is to stimulate a voluntary market, through which private finance can flow. Simply put, someone (a business or individual) pays a project host (typically a landowner or farmer) to set aside a piece of land for biodiversity uplift or avoided loss. In turn, the investment can be used by the business or individual to demonstrate that they are supporting nature-positive action.
On why we’re trying to measure biodiversity alongside or beyond carbon, Kaiser explains: “There are two reasons for this. Firstly, corporate buyers and investors are increasingly expected to disclose their nature-related impact. Secondly, nature-based carbon projects have faced a lot of criticism over their quality.”
The biodiversity market, as Kaiser will explain later in this article, has had the benefit of learning from the carbon market. Corporates and investors believe biodiversity credits will be of higher integrity and quality.
How do you measure a unit of biodiversity?
As you might imagine, quantifying a unit of biodiversity isn’t simple. Value could be measured based on any number of factors, like a habitat’s size, its distinctiveness, the diversity or rarity of the species on the site, local ecological importance, connectivity, etc.. This makes creating a methodology that allows one type of biodiversity uplift to be compared to another tricky.
There are currently several proposed and developing methodologies, metrics and units in circulation across the different markets. The graphic below, which shows the steps outlined in Verra’s framework (still under development), illustrates how involved this process could be.
An example framework for measuring biodiversity
Verra is a well-known nonprofit that operates standards in environmental and social markets.
Frameworks like this are aiming to:
- Be applicable across different types of biodiversity, and for terrestrial, marine, and freshwater realms.
- Allow for comparability across projects, and the flexibility to account for a project’s local ecological and social context.
- Achieve a balance between rigour, to ensure high-integrity credits, and accessibility to promote broad participation, including by Indigenous Peoples and local communities.
This framework would issue credits on a per-hectare basis and is exploring credits for uplift (improving an area’s biodiversity) as well as stewardship.
“Indigenous Peoples, local communities, and other stewards have effectively conserved nature for decades but risk exclusion or restricted financial opportunities from biodiversity frameworks crediting uplift from a baseline.”SD VISta Nature Framework v0.1 for Public Consultation
Stewardship credits would reward areas that have historically been well-managed.
Why is the biodiversity market emerging?
For the last 70 years, public finance (NGOs, governments, etc.) has driven nature conservation and restoration. The benefit of this was that nature didn’t need to be a commodity – money could flow into these projects without its ‘return on investment’ being scrutinised.
Unfortunately, public funding can only do so much. “It wasn’t enough,” says Kaiser. “These emerging private markets are an attempt to make nature investible. I know some people will cringe at that, but in doing so we can unlock the potential of private finance.”
Whether we like it or not, the private sector manages trillions of dollars of investable capital, which means it holds the power to have a major impact on nature’s future. With the clock ticking on our window to avoid the worst climate impacts, many see this as a crucial step towards hitting science-based targets.
As for why businesses are engaging with the market, it’s increasing pressure from stakeholders like investors, employees, regulators and customers that’s pushing them to address their dependencies and impact on nature. Whenever you feel hopeless or powerless, remember this. Your actions are making a difference.
What else has influenced this market?
This movement has had the benefit of being able to observe the voluntary carbon market (VCM), says Kaiser.
On the VCM, carbon credits are traded based on the carbon tonnage removed or avoided by a certain activity. This can be nature-based – typically woodland creation or peatland restoration – or tech-based, for example through renewable energy projects or methane capture. It’s called ‘voluntary’ because it’s a market that the private sector chooses to trade on, rather than the compliance market which it must engage with.
“The VCM has delivered millions of dollars to nature restoration around the world. It has created jobs and raised the profile of nature in the public consciousness. In any market, there are bad actors but in my 17 years of experience, I’ve only come across people acting in good faith. The VCM has done a lot of good. In recent years, however, it has also come under scrutiny. Certain carbon traders have been exposed for inadequate or dishonest behaviour. This has damaged the reputation of the market, drying up much-needed finance as businesses hesitate to align their climate action with anything that might be called out for greenwashing. Accountability and quality assurance are therefore vital to voluntary nature markets. The emerging biodiversity market must learn from this.”Stephen Prior, Forest Carbon
What do critics say about selling biodiversity?
Of course, a lot of people are critical of putting a price on nature, and feel everything from disappointment to outrage that capitalists will only value it when there’s profit to be made or an asset to be quantified in financial terms.
George Monbiot of the Guardian believes it’s morally wrong and counterproductive: “Still more deluded is the expectation that we can defend the living world through the mindset that’s destroying it. The notions that nature exists to serve us; that its value consists of the instrumental benefits we can extract; that this value can be measured in cash terms; and that what can’t be measured does not matter, have proved lethal to the rest of life on Earth.”
Others are concerned that the methodologies in development are too “...simplistic, mechanistic and crude…” to represent the value of an ecosystem truly.
Another major concern is the land grabbing/removal of local and Indigenous People, as investors begin to see land as a valuable asset. “Land grabbing and external pressure on indigenous peoples’ lands has become a widespread reality…due to large-scale development projects, the establishment of National Parks, conservation areas or game reserves, agro-investment projects, biofuel production, logging or extractive activities. Climate change mitigation and adaptation as well as green growth plans can also badly impact on indigenous peoples’ rights to land and natural resources.”
So, should we be selling biodiversity? Let’s get curious.
The topic is complex, nuanced, divisive and, for many, emotionally charged. Ultimately, it’s up to you to decide. All we urge is that you remain curious; keep asking questions, keep reading, engage in debate, and listen when other opinions are shared.
To help you on your way, here are resources for further learning:
- To meet global targets to reverse biodiversity loss by 2030, the world needs to understand how populations are changing. This air quality filter has been accidentally collecting data…
- Read more about the critiques of putting a price on nature here and here.
- Watch activist and fundraiser Dan Pallotta make an argument that nonprofits and good causes should be allowed to make money. He talks specifically about charities but this thinking could apply to voluntary nature markets too.
- Read the UK government’s proposed framework for ‘scaling up private investment in nature recovery and sustainable farming’ (released March 2023).
- Read how biodiversity might be measured in Scotland.
- Stay curious!
Featured image by Presetbase via Unsplash