Analysis: COP15 debates whether biodiversity credits can put a value on nature

Verra Mobility

13/12/2022 10:00

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      Seen as way to boost investment in protecting nature
    

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      Concerns over rigour of market, valuation complexity
    

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      Role of governments in mandating action a COP15 focus
    

  
    By Jake Spring and Simon Jessop
       SAO PAULO, Dec 13 (Reuters) - 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?
    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.
 (Reporting by Jake Spring in Sao Paolo and Simon Jessop in
London; Additional reporting by Isla Binnie in Montreal; Editing
by Katy Daigle and David Gregorio)
 ((jake.spring@thomsonreuters.com; +55 61 99653-2429; Reuters
Messaging: jake.spring.thomsonreuters.com@reuters.net / Twitter:
https://twitter.com/jakespring))