Consultants lay out draft basics for a global voluntary biodiversity credit market

Published 11:30 on December 7, 2022  /  Last updated at 11:30 on December 7, 2022  /  Biodiversity  /  No Comments

A global biodiversity credit market could be based around a framework for determining biodiversity carrying capacity (BCC) and rules for who is able to trade various credit types, according to Paris-based consultants Carbone 4.

A global biodiversity credit market could be based around a framework for determining biodiversity carrying capacity (BCC) and rules for who is able to trade various credit types, according to Paris-based consultants Carbone 4.

In cooperation with the Museum of Natural History in Paris, Carbon 4 this week published a comprehensive set on basic principles, approaches, and rules for a biocredit market, commissioned by the Organization for Biodiversity Certificates, a recent initiative launched by nature-based project developers aDryada and Le Printemps des Terres.

The report outlines approaches for developing a methodology for assessing projects’ biodiversity gains, a certification process for credits, and a framework for how those credits can be traded – all fundamental issues that market proponents continue to grapple with in an attempt to build a credible market.

Carbone 4 “intends to propose a methodological framework for the development of a fair and operational financing mechanism to support the preservation, restoration, and sustainable use of ecosystems”, the report said, stressing that the authors hope to receive feedback from global stakeholders so the proposal can be refined further.

A STANDARD UNIT

The fundamental challenge of finding a standard unit to express the biodiversity gains achieved by a project, and turn that into credits in a simple and credible way, remains one of the core challenges as conservationists, financiers and others look to build a scalable biodiversity market.

Carbone 4 noted that one of the chief issues with biodiversity crediting is accurately and concisely measuring biodiversity gains from a project, because it is so complex.

“What we propose is to quantify the gain from these actions based on a consensus between experts. To do so, we will not consider biodiversity as such, but the Biodiversity Carrying Capacity of a given area, which is the capacity of the ecosystem to host and support species,” the report said.

Under that approach, an appointed expert group for each ecosystem type would develop a set of parameters for what determines a system’s BCC, and then assess and rank them to calculate individual areas’ Biodiversity Index.

The change in the index over the project’s lifetime would determine the number of biodiversity credits it would generate.

Carbone 4 proposed the market be separated into three main project type categories: restoration, preservation/conservation, and agriculture and forestry projects.

While individual methodologies would have to be developed within that overall approach, the framework would be applicable to all geographies, ecosystems, and types of activity, the consultants said, noting the system would improve over time as experts chimed in to fine tune the parameters.

LINK TO CARBON

According to the report, projects would have to go through a certification process before any credits could be issued, including early-stage third-party validation and later independent verification of the results.

Rather than drawing up a new structure, the consultants said the biodiversity market could look to the carbon market for guidance on certification processes, and noted that among the main risks to manage would be additionality, leakage, transparency, compliance with local international legislation, governance and stakeholder involvement, permanence, completeness, reporting quality, delivery capacity, and assessment of non-biodiversity impacts.

One detail the consultants did point out was that some credits should be held in a buffer reserve in case of reversal, such as through forest fires, similar to what is being done in the carbon market.

Some biodiversity project types, especially in forestry and agriculture, could have an even closer tie to the carbon market, the report said, since they have both biodiversity and climate benefits.

“It would be valuable to be able to incorporate the biodiversity mechanism into existing voluntary carbon market mechanisms, either by enabling projects to generate biodiversity certificates in addition to the carbon credits, or by allowing carbon credits to be rated based on their biodiversity impact,” it said.

That would help carbon projects with biodiversity benefits attract premium prices while also providing use cases for the new biodiversity mechanism, it said.

WHO CAN BUY WHAT FOR WHICH PURPOSES

Like a number of others involved in developing a biodiversity market, Carbone 4 took great care to try and avoid some of the issues carbon trading has received heavy criticism for.

It stressed that biocertificates should not be able to be used for offsetting purposes and that some sort of regulation, control, or accreditation system should be in place for intermediaries to ensure the money ended up funding projects rather than lining the pockets of brokers.

Carbone 4 identified three different types of certificates varying in their scope of action, and recommended guidelines for trading them, which would see some credits go into a globally traded market while others would remain local:

  • Reduction certificates from projects set up specifically to limit biodiversity harm or boost nature restoration related to a company’s own activities or that of its supply chain. These projects should be developed and implemented in cooperation with other stakeholders in the supply chain, and should only be tradable between entities within that supply-chain.
  • Local contribution certificates from projects designed to address biodiversity and nature issues in the region where a company is located, whether the company’s activities contribute to those or not. Such activities should be coordinated with local authorities to ensure they align with official goals, and should only be tradable between local actors.
  • Global contribution certificates from schemes seeking to contribute to global conservation and restoration priorities, for example at especially vulnerable biodiversity hotspots in regions where local actors are unlikely to adopt ambitious nature targets. To ensure they align with global goals, bodies such as the CBD, FAO, or IUCN could play a regulatory role in these projects, with credits eligible for global trade.

The consultants said there might be scope to distinguish even further between certificate types.

“The objective should be to find the right balance between distinction and standardisation,” Carbone 4 said.

The consultants will release an updated draft next year based on feedback on the initial proposal.

By Stian Reklev – stian@carbon-pulse.com

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