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Damien Tupinier

Answers to guide the market

To provide guidance for the establishment of a biodiversity credit market that is efficient, transparent and equitable, this document was formulated by BCA with inputs from the following organizations: UNEP FI, UNDP, WEF, WBCSD, IIED, NatureFinance, South Pole, McKinsey. 

As the biodiversity credit market is in the early stages of its development, answers shouldn’t be seen as the “final word” and are likely to evolve as the market evolves. New questions will also inevitably arise and the working group will reconvene to consult on answers to new questions, as well as update existing answers and the level of confidence that can be attributed to them, as and when the need arises.

Updated as of 22 May, 2024

Issues around supply and demand

What’s the actual or expected price per unit?

The market has not converged around a single unit. Pilot schemes differ in the credit unit, project length, area per credit, and underlying methodology, and the prices (where available) vary accordingly. For most existing schemes, pricing data is not yet available. An existing informal registry indicates that CarbonZ has three credit types on offer, which vary from $200-$700 per unit, although the underlying units differ as well (Bloom Labs, 2022). Another developer, Botanic Gardens Conservation International, offers a credit worth $500k per unit, while on the opposite side of the spectrum, Savimbo offers credits at $5 per unit.

Level of confidence: Low

What is the expected pricing structure for carbon with biodiversity benefits versus a biodiversity credit?

Carbon credits with biodiversity benefits can currently be verified according to Verra’s Climate, Community & Biodiversity (CCB) Standards. Credits certified by the CCB Standard receive a premium of about 30% the price of the credit. This is based on buyer willingness-to-pay, not the cost to deliver those non-carbon benefits. 

Biodiversity credits, on the other hand, would operate with a cost-plus pricing structure—in other words, based on the cost to implement the underlying activities plus a potential premium based on buyer willingness-to-pay.

Level of confidence: Medium

Can a carbon credit and a biodiversity credit be issued from the same parcel of land?

Yes, if additionality criteria are met, as set out by the emerging standards. Initial claims guidance (soon to be released from the World Economic Forum and McKinsey & Company) will advise on how such stacked credits can support claims.

Level of confidence: Low

Who is expected to buy a biodiversity credit and why?

A range of actors might be interested in purchasing biodiversity credits, but they will likely be interested in different features. Many organizations with nature-related mandates or targets might find biodiversity credits an attractive vehicle to deliver verified outcomes. 

  • Environmental charities or non-governmental organizations
  • Donors 
  • Governments
  • Development banks
  • Other public entities
  • Investors 
  • Individuals 

Finally, the private sector is an important source of demand. Corporates and financial institutions may use biodiversity credits to preserve access to key inputs and ecosystem services, demonstrate their commitment to global frameworks like the GBF, ensure alignment with various types of regulatory requirements, or to maintain their “social license” to operate. Forthcoming works from  BCA and the World Economic Forum will provide more clarity on this topic

Level of confidence: Medium

Much of biodiversity is in the global south and/or stewarded by Indigenous Peoples and local communities who may not have secure land tenure. How will the risks of land dispossession be managed?

Indigenous Peoples’ territories contain 80% of the world’s remaining biodiversity. Ensuring IPs and LCs (Indigenous Peoples and Local Communities) are engaged in the biodiversity credit market is critical both to the success of the market and the achievement of global targets like those included in the GBF. 

A major advantage of biodiversity credits for IPs and LCs is that this market, if co-designed appropriately with IPs and LCs, could valorise their stewardship of lands and seas as well as their traditional knowledge. At the same time, IPs particularly face many challenges in realizing their rights and risk being dispossessed by nature-related markets. A recent BCA discussion paper argues that it is imperative that investors engage with IPs and LCs in the emerging biodiversity credit market and ensure their rights are fully respected. For example, practitioners suggest that if a community is living in a highly strategic area for biodiversity conservation, but it has no formal land title, a key milestone of a conservation project in this area could be securing long term use rights of that land by communities. Many proponents believe that transparency of both land tenure arrangements and funding flows can give the sort of assurance to investors that has frightened some away from fully embracing the voluntary carbon market.

There are considerable examples of safeguards for working with IPs and LCs and the BCA paper covers how to move from a risk-based approach towards transforming the playing field, ensuring that IPs and LCs are at the forefront of developing biodiversity credit schemes, and are assured of benefiting from them, both in terms of what more can be done currently by investors today and what systematic changes are necessary at scale. Many stakeholders believe that if the market for biodiversity credits is not designed according to this intent, it should not be pursued at all.

Level of confidence: Medium

How will topics like additionality, permanence, and risk of leakage be managed?

The biodiversity credit market benefits from decades of experience of learnings within the voluntary carbon markets as well as in biodiversity offset compliance markets. Therefore, the biodiversity credit market is able to benefit from a strong starting point in terms of designing to address these topics. Practically, these topics are being addressed by the various standards which are in development for biodiversity credits. Both the Verra Nature Framework and PlanVivo Biodiversity Standard (PV Nature) for example were recently open for a first round of public consultation and addressed each issue in turn.

Level of confidence: Medium

Market infrastructure

How many working examples of biodiversity credit schemes are already on the market? How many are expected?

There are working examples of biodiversity credits emerging via voluntary market project developers and methodologies, as well as  jurisdictional schemes. These offerings variously cover species, ecosystem and habitat credits

Project developers starting to offer credits in the voluntary space include: Savimbo, CreditNature, ValueNature, Replanet, Terrasos, Ekos, South Pole, Environment Bank, Wilderlands, CarbonZ and Orsa Besparingsskog (forest coop). 

Circa 30 governments have jurisdictional biodiversity offset schemes and a handful of these operate crediting schemes for net gain, for example England’s Biodiversity Net Gain and Australia Nature Repair Bill (for further definition of net gain, see CSBI 2015, IUCN 2017 or BBOP resources). A smaller number, including Aotearoa New Zealand, are undergoing public review for jurisdictional schemes involving credits for restoration not linked to compensation for developments.

BloombergNEF (via Compensate, 2023) estimated that the footprint of eight of the most developed existing biodiversity crediting schemes covers more than 800,000 hectares with $8 million in funding so far pledged. The latest (2023) IPR Forecast Policy Scenario (FPS) suggests the market could reach $8 billion annually by 2030 and over $40 billion by 2050, though accurate estimates are limited by lack of a common definition and framework. 

Level of confidence: Low

Are biodiversity credits expected to be traded locally? Internationally?

Currently there are no secondary markets established for biodiversity credits. So far, the frontrunner biodiversity crediting programs are focused on mainly domestic markets. As there is no formal framework for international trading of biodiversity credits today and many countries maintain concerns about introducing this approach for biodiversity given the different values of biodiversity worldwide are not substitutable. 

However, if the major source of demand (finance) for biodiversity credits is expected to come from the global north, and the major biodiversity resources are in the global south, there would need to be a significant international market for biodiversity credits for the market to scale globally.

Level of confidence: Low

The voluntary carbon market has been criticized and faced considerable scrutiny recently. How could confidence or credibility be established in the biodiversity credit market?

The biodiversity credit market benefits from the considerable experience of the voluntary carbon market. The vast majority of actors in the VCM have been well-intentioned but governance principles were not established rapidly enough. This market is already able to learn from the introduction of safeguards, integrity principles, assessment frameworks and other measures such as grievance handling and redress procedures recently introduced to the VCM. Biodiversity credit markets are being built on the theory of change that price stability and scaling can only be realized by starting with market integrity: many actors are now working to put in place governance and transparency mechanisms. For example, the UN-backed Biodiversity Credit Alliance (BCA) exists to provide guidance for the establishment of a credible and scalable market that stands up to the scrutiny of multiple stakeholders. Key among them are Indigenous Peoples and Local Communities at the frontline of the biodiversity crisis. CAP (Communities Advisory Panel) currently helps to guide the work of BCA. BCA is working to ensure strong foundations and principles exist and can be applied by all market participants going forward. The Integrity Council for Voluntary Carbon Markets is a good approach that can be looked to and possibly emulated at some point.

Level of confidence: Medium

Principles behind biodiversity credits

How do biodiversity credits differ from payments for ecosystem services?

Payments for ecosystem services (PES) occur when the beneficiaries or users of an ecosystem service make payments to the providers of that service. In practice, this may take the form of a series of payments in return for receiving a flow of benefits or ecosystem services. The basic idea is that whoever provides a service should be paid for doing so (CIFOR, 2014). 

The use of biodiversity credits potentially brings more flexibility and diversity into the exchange, and allows for additional actors to participate by allowing for the accounting of various values and services of all aspects of biodiversity. In short, purchasers of biodiversity credits may not be end users or direct beneficiaries of specific ecosystem services, but may wish to contribute to their protection.

Level of confidence: High

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. 

Level of confidence: Low

How is a biodiversity credit different from a carbon credit for nature-based solutions?

Nature-based solutions carbon credits have been in the market for some time, and in most cases positive impacts to biodiversity are considered a “co-benefit” that is in addition to the climate impact.  For the time being, these biodiversity benefits remain unquantified, while they are often considered “premium” carbon credits and are typically sold at a higher price (Compensate Foundation, 2023).

Level of confidence: High

Are biodiversity credits tradable and how are they retired?

Biodiversity credits are not currently traded in any secondary market (NatureFinance, 2023). While biodiversity offset units in the compliance market can be retired, the application of this concept in the voluntary biodiversity credit market remains unclear (NSW Government, 2023).  

Level of confidence: Low

How are the biodiversity outcomes associated with credits measured?

While still under discussion, many currently proposed biodiversity crediting methodologies use measurements and indicators that revolve around 1) species, ecosystems, level of threat, the significance of the biodiversity, etc.; 2) the size of area in question; and 3) time period over which impact is achieved. 

Level of confidence: Medium

What is a biodiversity credit?

The concept of biodiversity credits is still being defined, as this is a nascent market. The BCA definition is “A biodiversity credit is a certificate that represents a measured and evidence-based unit of positive biodiversity outcome that is durable and additional to what would have otherwise occurred” (BCA, 2024). There are a number of emerging schemes, which stipulate that a biodiversity credit is a financial instrument that supports the conservation of nature, and includes some aspect of a conservation activity or outcome, over a certain area, during a certain time period (Pollination, 2023).

Level of confidence: High