Funding is needed to reverse global biodiversity loss. A credits market has been touted as a solution, but environmental groups say ‘don’t be fooled’
.jpg)
An initiative in Brazil sells one jaguar credit for one year of “stewardship” of one hectare in the Pantanal wetland (Image: Cavan Images / Alamy)
Properly funding nature’s recovery on a global scale will require a staggering amount of money.
In 2021, The Nature Conservancy, an environmental non-profit, estimated that reversing the global decline of biodiversity would require between USD 722 billion and USD 967 billion per year by 2030.
The lion’s share of that is expected to come from public funding: redirected government subsidies, taxes and direct investment. But a substantial amount will likely need to come from the private sector.
That’s where biodiversity credits could come in.
These tradable certificates aim to direct money from individuals and companies toward activities that protect and restore nature.
The idea took off after COP15 – the 2022 United Nations nature summit in Montreal. As part of a historic agreement to reverse biodiversity loss, almost 200 countries pledged to collectively spend “at least USD 200 billion per year” by 2030 on efforts to conserve and restore nature worldwide.
The agreement, known as the Global Biodiversity Framework, proposed “innovative schemes” to help reach this funding target, including “biodiversity offsets and credits”.
This mention in a UN-level agreement sparked a wave of excitement. Since then, more than 50 organisations have set up nature credit schemes across the globe, including influential companies in the carbon market, like Verra and South Pole.
At the same time, environmental groups have come out in force to oppose the credits. More than 250 civil society organisations have signed an open letter labelling them “false solutions”, citing the “serious failings” of the carbon market before them.
How does it work?
Imagine you look after one hectare of forest. If, after one year, you can demonstrate a measurable increase in biodiversity on the land, you could sell credits representing those gains.
For example, Drumadoon farm on the Isle of Arran, west Scotland, is the site of a recently launched credit project. A series of interventions are planned at the 260-hectare site, including native tree planting, which is forecast to produce 70,000 nature credits over 10 years.
A single project can involve many organisations. Drumadoon includes a landowner, a credit scheme company, a rewilding charity, a project developer, a local community group and a carbon-trading platform.
The Doon cliff at Drumadoon on the Isle of Arran, west Scotland. A series of interventions are planned at Drumadoon farm to produce 70,000 nature credits over 10 years (Image: Scott Hortop Travel / Alamy)
Credits are not to be confused with biodiversity offsets or habitat banks. Though similar, these are types of environmental regulation that have been around since the 1970s. Examples include England’s biodiversity net gain and mitigation banks in the US. A company may be required to purchase offsets to compensate for any unavoidable ecological damage caused by a development, such as a mine or hydropower dam. The money pays for the restoration of a similar ecosystem elsewhere.
By contrast, biodiversity credits are part of an unregulated international market. Anyone can sell them and anyone can buy them – via online marketplaces, brokers or directly from the project developer.
Today, credits generally sell for anywhere between USD 2 and USD 415.
Putting nature into numbers
It is hoped that selling biodiversity outcomes as discrete units will be more appealing to large private investors, who want to be able to report quantifiable units of nature.
“If you can’t report in a quantitative way the returns of your investment, it’s pretty certain that money is going to stop flowing very soon,” says Edmund Pragnell, nature finance lead at CreditNature, a UK-based biodiversity credit scheme.
But what exactly counts as a discrete biodiversity unit?
Unlike with greenhouse gas emissions, which can be measured in tonnes, there is no single standardised metric that can account for nature’s complexity. Attempts to do so present a “monumental challenge”, according to a 2024 scientific review of biodiversity credit schemes.
This hasn’t stopped credit-issuing companies, many of which have opted to design their own methodology.
Some issue credits based on biodiversity gains. In other words, the landowner must prove that over time, certain metrics of ecological health have gone up, or remained constant. PlanVivo, for example, issue one credit per 1% of “biodiversity increase” per hectare, per year.
Other schemes reward management instead of outcomes. One jaguar credit from ERA represents the “stewardship” of one hectare of umbrella species habitat – in this case, Brazil’s Pantanal wetland – for a year.
“Because the market is voluntary, no one prevents you from interpreting nature differently,” says Simas Gradeckas, nature finance researcher and member of the International Advisory Panel on Biodiversity Credits (IAPB) measurement working group.
“That makes it difficult for buyers to understand what they’re buying.”
Stumbling blocks
Despite the excitement, business isn’t exactly booming.
The total value of credits sold as of September 2024 is estimated at between USD 325,000 and USD 1.87 million. For perspective, that’s 0.001% of the USD 200 billion a year that countries have pledged to raise by 2030.
The maze of options is one factor holding back would-be buyers. “They shouldn’t need to go through fifty-plus biodiversity credit schemes to choose which one to support,” says Gredackas. “The due diligence required is just too heavy.”
Investors don’t get out of bed unless they know they’re going to get their money back, and we need their money
- Edmund Pragnell, nature finance lead at CreditNature
Another is that the intended customers of nature credits – large corporations and financial institutions – see little return. So far, they are mainly used to support marketing and branding efforts, according to a 2024 survey of 16 nature credit companies by climate investment advisory firm Pollination.
“Most of them don’t see a direct commercial benefit yet,” says Gredackas.
One solution is integrating nature credits into existing products to create demand. Around 20 companies have started selling combined carbon and biodiversity credits, or selling both as a package. It’s a practice known as “bundling” or “stacking”.
CreditNature also allows limited secondary trading of credits in the hope it will stimulate interest by allowing them to be sold at a profit. “Investors don’t get out of bed unless they know they’re going to get their money back, and we need their money,” explains Pragnell.
Offsets
One widely discussed potential use for biodiversity credits is as offsets, similar to the government schemes used in the UK and US but market based. This means organisations could purchase credits to compensate for destruction of nature that they deem unavoidable.
“That’s where we see the most interest from buyers,” says Hannah Simmons, CEO of ERA, a carbon and nature credit project developer in Brazil.
It’s a hotly contested issue. Critics point to the well-documented problems with carbon offsets, whose claimed climate benefits are often found to have been exaggerated. Dialogue Earth recently reported on the sale of carbon credits from “phantom” rice cultivation projects that did not exist.
Challenges facing regulatory biodiversity offset schemes also offer a warning, says Hannah Wauchope, lecturer in ecology and conservation at the University of Edinburgh. Outcomes claimed by offset projects frequently aren’t borne out when follow-up investigations are carried out on the ground, explains Wauchope, who co-authored the aforementioned 2024 scientific review of credit schemes.
Trying to replicate this in an unregulated, international market where profit is the primary motive is “more risky”, she says. “There are much higher uncertainties and much more potential for abuse of the system.”
Despite this, some influential groups back the idea.
The IAPB, a UK and France-backed initiative, lists “local compensation of biodiversity impacts” as an acceptable use for credits in its Framework for High-Integrity Biodiversity Credit Markets, but specifies this must be local-to-local and like-for-like.
High integrity
The framework, launched at last year’s COP16 nature summit in Colombia, was written by the IAPB, Biodiversity Credit Alliance (BCA) and the World Economic Forum. It is intended as a guide for the biodiversity credit market that sets out standards for how companies in the sector should operate. The rules focus on transparency and verification of outcomes; equity and fairness for people; and good governance.
It’s part of a wider effort by advocates of biodiversity credits to learn from the mistakes of the carbon market, following accusations of land-grabbing and violating the rights of Indigenous peoples.
To this end, the BCA has set up a communities advisory panel made up of 40 members from Indigenous peoples and local communities worldwide. In 2024, the panel published recommendations for companies entering the market. For example, market actors should only proceed with projects if free, prior and informed consent is granted by Indigenous communities that might be affected.
The International Institute for Environment and Development, a UK think-thank, has suggested integrating traditional and cultural knowledge into credit methodologies through collaboration with Indigenous peoples. It also proposed that companies donate a percentage of a project’s revenue to communities or support Indigenous peoples to strengthen their land tenure rights.
A strategic tool
Governments are showing an interest.
In May 2024, Scotland commissioned CreditNature to develop a voluntary biodiversity credit mechanism for the country. In July this year, the European Commission published a ‘Roadmap towards nature credits’, in which it announced the creation of a new EU expert group and plans to launch pilot nature credit projects over the next two years.
Biodiversity credits are “a strategic tool in the nature finance toolbox,” says Gredackas.
He adds that governments are taking “inspiration” from the metrics and methodologies used by private companies to develop their own statutory biodiversity offset schemes. “These are experimentation grounds for the compliance markets that are being spun up. You can’t play around too much on the compliance side, because the stakes are too high.”
This idea of paying for nature is not new
- Hannah Wauchope, University of Edinburgh
The Nature Conservancy has proposed a hybrid approach. It says governments could issue “strategic biodiversity certificates” that are linked to the 23 UN targets agreed to in the Global Biodiversity Framework. Companies would buy credits from pre-approved projects as a voluntary “contribution” to the host country’s biodiversity goals.
Canada-based think-thank IISD has suggested that countries negotiating debt-for-nature swaps could offer biodiversity credits to attract funding from private investors and philanthropists.
Not so new?
Many environmental groups remain unconvinced.
Greenpeace and Survival International are among the civil society organisations to have signed the public statement expressing their opposition.
WWF has refused to endorse voluntary biodiversity credits without clear safeguards against offsetting, secondary trading, abuse of Indigenous rights, and more. Friends of the Earth called the European Commission’s nature credit plan released last month a “roadmap to greenwashing”.
Campaign for Nature, the group behind the 30×30 campaign to protect 30% of earth by 2030, has warned that “inflated” claims of the potential scale and rapid growth of credit markets discourage governments from increasing public spending.
“There’s a lot of hype […] about this being the new thing that’s going to solve conservation. This is really just an iteration of something that’s been going on for a long time. This idea of paying for nature is not new,” says Wauchope, of the University of Edinburgh.
“Biodiversity credits are not really that different from carbon credits.”
Author: Joe Coroneo-Seaman
This article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence. Read the original article.
.jpg)
