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How is a biodiversity credit different from a biodiversity offset? / Can biodiversity credits be used to compensate for negative impacts on biodiversity?

Broadly speaking, a “biodiversity credit” is an instrument that can potentially be used in a variety of ways, while an “offset” points specifically to the use of a unit to either meet regulatory requirements or to make claims (to the public or specific stakeholders) about what an organization, project or product has achieved in terms of environmental performance. Traditionally, the term biodiversity offset was used in a limited context as a mechanism to address negative residual impacts on biodiversity caused by development projects, determined by use of the biodiversity mitigation hierarchy, with offsets being the final step subsequent to the avoidance, minimization, and restoration steps (CSBI, 2015). 

While still under debate, many proponents of biodiversity credits suggest that they should not be used to compensate for “direct like for like” negative impacts on biodiversity i.e. not as traditionally-conceived offsets (BCA, 2023). This question also relates to the relevant use case, as for example, it is not currently foreseen that all use of biodiversity credits would be “beyond value chain”. In the BCA issue paper on demand we highlight many use cases for biodiversity credits that do relate to compensating for negative impacts, but not through attempted direct like for like offset approach.

However, there remains a risk of confusion with terminology, as sometimes the term “biodiversity credits” is used interchangeably with “biodiversity offsets” in compliance markets (which are intended to address negative impacts) as well as in voluntary markets.  Consistency of messaging by key stakeholders is important. There is an active discussion on appropriate terminology, also considering that credits vary widely in different use cases. Some suggest “habitat banking” or “offset banking” for the compliance market, and “voluntary biodiversity credits”’ for the voluntary market.