A French-based environmental company has started piloting a biodiversity credit methodology for nature conservation and restoration projects in Mexico, with the first results expected by the end of October, Carbon Pulse has learned.

Nat5, created last year by the Franco-Mexican ecological engineering company Ases, will test the methodology at three sites in the Mexican states of Durango, Oaxaca, and Chihuahua.

“Pilot projects will focus on habitat conservation, restoration of degraded areas, and monitoring of animal species population,” Guillermo Hinojos, CEO of Nat5, told Carbon Pulse.

“An initial piloting phase was carried out in smaller degraded areas in Spain, with the non-profit Life Terra Foundation, and France. Now we’re seeking to apply our model to larger and more complex ecosystems.”

According to Hinojos, pilots in Mexico will run over approximately six months within areas of more than 100,000 hectares, and will see the collaboration of local researchers.

“They have a deep knowledge of those areas and lots of data to share with us, which will prove critical to ensure that the whole process is solid and well-informed,” he said.

ELIGIBLE ACTIVITIES

Under the methodology, approved by the certifier Bureau Veritas, one unit represents the conservation or restoration of a 100 sq. metres area for one year, with payments made at the end of each year.

Eligible activities will include forest management, regenerative agriculture, urban forests, and water flow restoration, and biodiversity gains will be measured through combining bioacoustics and satellite imagery technologies with on-the-ground observation.

“In situ monitoring will be carried out every year and satellite monitoring every three months, and will be crucial to make sure that we have a full understanding of how the environmental conditions are evolving, in terms of both ecosystem and species health and abundance,” Hinojos said.

“We will take into account a number of factors, including species richness, species diversity, the ratio of observed diversity to the maximum expected diversity, fragmentation of natural habitats, landscape dimension and connectivity, and species and ecosystem vulnerability to climate change.”

Among the eligibility criteria set out by Nat5, projects must demonstrate local communities’ engagement to generate biodiversity credits, and the project area must be vulnerable to degradation or perturbation if not conserved.

Project developers should also design and implement strategies to manage invasive species within the project area, or remove them if needed.

“Before the project starts generating credits, we will assess the biodiversity intactness of the area to determine how well preserved it is. If it’s above a certain level, it needs conservation; if it’s below, it needs restoration,” Alejandra Verde, methodology developer at Nat5, told Carbon Pulse.

“To assess restoration projects, we will carefully evaluate the evolution of the landscape to see if it’s less fragmented after the implementation period, if it has less isolated patches, and if these are more connected,” she added.

PRICE FORECAST

While Nat5 has yet to start verifying biodiversity credits, Hinojos expects prices to vary depending on the location of the project area that generates units.

“Based on preliminary forecasts, prices might stand at around $20-30 per unit for projects in Latin America, while they could be higher in Europe. But obviously, it will depend on project developers; we will not set the price.”

Early biodiversity credit initiatives so far have yielded erratic prices, reflecting the diverse nature of each unit.

“Market demand factors will be key to determining price levels. For now, we’ve seen a lot of interest from suppliers, including Life Terra. Our priority at the moment is to ensure the methodology is robust enough to attract buyers,” Hinojos said.

While attention to the voluntary biodiversity credit market has ramped up after the 2022 Kunming-Montreal Global Biodiversity Framework (GBF), which carved out a role for nature-based solutions to help bridge the biodiversity financing gap, most companies are still reluctant to translate their interest into transactions.

Many carbon developers set sight on the nascent market but have not yet the confidence to foray into the biodiversity space, with some stressing the need for more robust information on the reference price of biodiversity credits.

By Sergio Colombo – sergio@carbon-pulse.com

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