As the U.N. COP15 summit in Montreal aims to halt rapid destruction of nature and restore degraded lands, some experts have called for selling “biodiversity credits” to help pay for that monumental task.
The United Nations said the world is far short of the $384 billion needed annually by 2025 to protect nature. Biodiversity credits, proponents argue, can help close the gap.
The concept is based on carbon credits, where each unit represents a reduction of 1 tonne of greenhouse gas emissions, through efforts such as using renewable energy or planting trees.
When it comes to nature conservation, though, there is no single metric to measure progress. Few analysts agree on what credits should look like, how they should be used, or even whether they should be called credits. Some say the effort could backfire, for example by enabling companies to buy credits tied to one area to excuse destruction elsewhere.
“There are still a lot of unanswered questions. It’s almost too early to know where this is headed,” said analyst Jonathan Crook with Carbon Market Watch.
The most difficult question is how to value biodiversity, the variety of life from frogs and fungi to forests. The more species contained in an area, the “richer” its biodiversity.
How should the world price the value of a herd of deer, or bacteria in a forest’s soil? Why should markets trust those values, given that each area’s biodiversity is unique?
THE PRICE CHALLENGE
Convinced that biodiversity credits can direct much-needed funding toward conservation, several non-profits, companies and academics have proposed various methodologies.
Some do not even attempt to measure plants or animals, looking instead at costs of conserving an area through steps like hiring park rangers or running monitoring systems to prevent deforestation and poaching.
Another approach seeks to quantify biodiversity gains. UK-based non-profit Wallacea Trust considers at least five categories of animals in an area, like aquatic invertebrates, birds or butterflies. Each category is weighted based on how rare those species are in a country, then the abundance or biomass of these organisms is estimated. A “credit” is counted for every 1% increase in species richness and abundance, or avoided loss, per hectare.
Given nature’s complexity, multiple methodologies can exist, said Simon Morgan, founder of biodiversity credit company ValueNature. Relatively well-preserved areas may need only to value conservation costs, while areas needing restoration may want to quantify increases in species abundance or richness.
COMPANIES BUYING IN
With so many questions swirling around biodiversity credits, why would a company buy them?
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In some places including parts of Australia, the government forces companies to buy nature credits, funding preservation in one area to offset damage caused in another. European Union-based firms may also choose to do so as new rules force disclosure of their impacts on nature.
Aleksandra Holmlund, a Swedish University of Agricultural Sciences researcher attending the COP15 summit with the Biodiversity Credit Alliance industry group, criticized the idea of allowing companies to offset destruction elsewhere.
COP15 participants are mainly discussing “voluntary markets” run by the private sector rather than “compliance markets” trading government-mandated investments. But some doubted that voluntary credits would attract sufficient investment.
Martijn Wilder, chief executive of climate change-focused investment and consultancy firm Pollination, said governments must require companies to invest in biodiversity.
“Unless you actually are forcing a company do it, they’re not going to do it,” Wilder said.
The current draft of the COP15 deal also includes a reference to promoting financing schemes like “biodiversity offsets.”
PRIVATIZING NATURE
Outside the U.N. talks, the Biodiversity Credit Alliance and World Economic Forum (WEF) are holding separate discussions on how to implement a voluntary market.
The alliance, an informal group of about 10 market players, aims to officially launch next year, Holmlund said. It will also develop a means of peer-reviewing credit issuance to ensure they meet conservation claims.
Analysts told Reuters the market needed strict standards, noting the early free-for-all in carbon markets resulted in many low-quality projects.
“When you can point to many examples in a market of low quality or low standards, it creates distrust and it impacts the integrity of the overall market,” said Lucy Hargreaves, policy chief for carbon credit platform Patch.
Verra, operator of the world’s largest registry of carbon credits, said it will release its own standard for biodiversity credits next year.
A report last week co-authored by the U.N. Development Programme endorsed well-structured “biocredit” schemes and offered recommendations. But other experts warn biodiversity credits are an attempt by companies to “greenwash,” or make false claims of sustainability.
Green Finance Observatory director Frederic Hache told Reuters that biodiversity credits are no replacement for nations enforcing strict laws prohibiting nature’s destruction.
“These markets are reconceptualizing conservation based on short-term profitability criteria and privatizing it,” he said.
