Australia’s total biodiversity finance market could hit $94 bln by 2050, report finds

Published 03:45 on December 5, 2022  /  Last updated at 05:45 on December 5, 2022  /  Biodiversity  /  No Comments

Total spending on biodiversity in Australia could rise rapidly to A$137 billion ($94 bln) by mid-century, carrying with it significant risks and opportunities for major industries such as construction, mining, and tourism, a report from consultants PwC has found.

Total spending on biodiversity in Australia could rise rapidly to A$137 billion ($94 bln) by mid-century, carrying with it significant risks and opportunities for major industries such as construction, mining, and tourism, a report from consultants PwC has found.

Australia is home to about 10% of the world’s species, but biodiversity loss is happening at an alarming rate, sparking the Labor government back in August to roll out plans for a nationally regulated voluntary biodiversity credit market.

“A biodiversity market could help unlock finance by connecting landholders engaging in biodiversity restoration and management with those willing to pay for these activities,” said PwC’s report, released Monday.

Counting all sources of finance – private investments, sustainable commodities, NGOs, government spending, and existing market-based mechanism transactions – PwC estimated that total spending on biodiversity in 2050 could reach A$137 bln, up from just A$9.9 bln currently.

Private investments in biodiversity, conservation, and natural capital would make up the lion’s share of that, at A$78 bln, according to PwC.

Conservation NGOs and environmental charities could attract around A$11 bln in 2050, while government spending could rise to A$8.5 bln, it said.

Existing environmental markets would be able to contribute up to around A$35 bln, including A$24 bln from forest carbon projects, A$9 bln from the existing regional biodiversity offset markets, and some A$1.6 bln from environmental trading.

However, PwC stressed that an emerging market awarding biodiversity certificates for nature positive outcomes should not go down the path of offsetting.

“Offset schemes attempt to balance habitat destruction with gains elsewhere, which poses increased risk to an effective biodiversity market,” the report said.

By contrast, biodiversity stewardship certificates (that are not used for offsetting) can be sold on the private market to companies wanting to invest in nature and enhance their environmental credentials,” PwC added.

“This would be particularly attractive to tourism operators, for example, along the Great Barrier Reef, where businesses are directly and tangibly impacted by biodiversity decline.”

At the same time, the report warned against potential double counting involving forest carbon projects earning credits both for climate and biodiversity purposes.

RISKS AND OPPORTUNITIES

The report identified six sectors that would likely be particularly involved in financial flows from an Australian voluntary biodiversity market: agriculture, construction, forestry, energy, mining and resources, and tourism.

Agriculture and forestry would stand to benefit from such a market, as they would be financially incentivised to better manage their biodiversity risks.

“Producers and agri-businesses that develop and implement sustainable and/or regenerative agricultural practices, which draw on and support biodiversity and ecosystem services, will be in a stronger position to deliver greater food security for the nation, while ensuring economic resilience and nature-positive outcomes,” said the report.

For construction as well as the energy, mining, and resources sectors – both having significant and rising impacts on nature – a biodiversity market would impose on these industries an expectation to better manage their biodiversity risks.

For example, the International Energy Agency is expecting global demand for minerals to increase 30- or 40-fold by 2040, with the rising risk that involves for biodiversity.

“Companies constructing solar, onshore and offshore wind assets will be encouraged to minimise and/or avoid impacts in both the design, construction, operation and end of life,” the report said.

“A biodiversity market mechanism may support companies to avoid development in areas of high biodiversity value, reducing their risk of litigation, regulatory intervention, and reputational damage.”

For tourism, meanwhile, a biodiversity market would bring the opportunity to invest extensively in an issue that the industry relies heavily on, said PwC.

The consultants urged the government to engage with stakeholders, and particularly recognise the role First Peoples play as stewards of nature when further developing Australia’s biodiversity credit framework.

It also stressed that such a market should not replace broader environmental conservation frameworks and regulations.

By Stian Reklev – stian@carbon-pulse.com

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