WEF principles on biodiversity market challenge area-based credits

Published 14:26 on January 15, 2023  /  Last updated at 06:46 on January 20, 2023  /  Biodiversity  /  No Comments

The fledgling practice of issuing voluntary biodiversity credits based on the area protected by a project is among the elements scrutinised in a draft set of integrity and governance principles for the market released by the World Economic Forum.

This story has been updated to clarify that existing methodologies include elements beyond area size, even though the credits are expressed in terms of area protected.

The fledgling practice of issuing voluntary biodiversity credits based on the area protected by a project is among the elements scrutinised in a draft set of integrity and governance principles for the market released by the World Economic Forum.

Most of the early-mover biodiversity credit types that already exist are issued and offered to the market as area-based units where potential buyers can purchase credits that each account for a specified number of square meters or hectares that are being protected for a defined number of years.

But basing crediting simply on the activities involved, such as protecting a certain number of hectares of nature or controlling a specified number of invasive species, does not guarantee the biodiversity outcomes of a project, WEF argued in the report, released Friday.

“Overall, measuring biodiversity outcomes (e.g. increases in species populations, improvements in habitat condition and extent etc.) are the most important types of measurements,” the report argued.

“[W]hile the measuring of activities can provide a milestone indicator it is inadequate as a standalone measurement and should always be linked to a related outcome.”

The report comes as participants in the market are trying out different approaches to see what works, even as the basic fundamentals of how voluntary biodiversity crediting should function are being discussed and shaped.

Colombia’s Terrasos, global project developer South Pole, and GreenCollar Group in Australia are all producing area-based credits, although despite the credits themselves are being expressed in terms of the size of the area of nature protected, other elements too play part in their generation.

For example, GreenCollar says other indicators as well are part of its NaturePlus methodology, which it has yet to make public, while the number of Terrasos credits that get issued are based on ecosystem threat, connectivity, preservation and restoration actions, and project duration in addition to area size.

“This methodology seeks to differentiate conservation projects according to their technical characteristics and value them based on the intervening ecosystem conservation status, as well as the relationship between preservation and restoration activities to be carried out. The more threatened the ecosystem, the greater the number of credits that the project will be able to issue,” the Terrasos methodology says.

WEF’s proposed principles and market guidelines for biodiversity MRV stand in contrast to that of the Australian government’s proposed scheme, which intends to issue a single credit to any registered project, regardless of the project’s scope.

“Where ongoing effort is required to maintain biodiversity outcomes, [trading] schemes can offer ongoing, regular biodiversity credit payments to stewards of biodiversity which continue to deliver and maintain demonstrated biodiversity outcomes,” the WEF draft said.

SAFEGUARDS

The paper, which includes 19 proposed guiding principles across transparent and sound governance, equity and inclusion, and rigorous MRV, will be circulated among a wide group of stakeholders and market participants for consultation, with an updated version planned to be released in the second half of the year.

However, with new participants flocking to the market daily, WEF said it hoped the principles could provide guidance to newcomers straight away.

“Broad agreement around a coherent set of principles for the biodiversity credits market would reinforce its legitimacy and prevent some of the issues seen in the parallel carbon market,” the paper said.

“This requires strong and collaborative public-private partnerships, and a dialogue across all stakeholders involved in the protection of nature, from biodiversity conservation organisations, businesses, and investors to civil society, academia, and Indigenous peoples and local communities.”

The WEF and other contributors, which included McKinsey, WWF International, SwissRe, Pollination, Conservation International, Verra, and others, set out principles to ensure the integrity and transparency of market governance as well as safeguards for the rights and benefits of Indigenous peoples and local communities.

In the draft, the authors stress the importance of building the new market on sound principles such as ensuring that Indigenous people and local communities have the right to agree – or not – to activities on their land, that they get to participate in the activities, and that they get a share of benefits.

“Empowering people and communities, and creating the conditions for them to become active stakeholders and shareholders in these projects is critical, particularly for IPs and LCs, who are the knowledge-holders and stewards of land and territories in at least 75% of the world’s 847 terrestrial ecoregions,” the report said.

ADDITIONALITY

WEF also laid out a number of principles around MRV, many borrowed from the carbon market, to contribute to ensuring market integrity and transparency, and avoidance of problematic issues like double-counting and greenwashing claims.

“Additionality is a question of central importance and the subject of extensive ongoing discussions. If there is no additionality clause, there is a risk that funding goes to locations that do not hold conservation risks. It also increases the risks of greenwashing and reputational risk in the market,” the WEF said.

“Clearly, the sale and purchase of non-additional biodiversity outcomes would reduce both the environmental effectiveness and economic efficiency of biodiversity credit markets.”

At the same time, the report said additionality rules should not be too strict, referring to the challenges for “high forest, low deforestation” regions to earn carbon credits in that market as an example of the downside of being too rigid.

“We propose that a more flexible approach to additionality is required in biodiversity credit markets. That is, a project should be considered additional if it led to positive biodiversity outcomes that would not have otherwise occurred under business as usual, regulatory requirements, or pre-existent lender requirements,” WEF said.

“Projects could be undertaken in protected areas, as part of other effective area-based conservation measures (OECMs) or on land that has existing biodiversity projects in place, provided that additional actions are undertaken to enhance biodiversity outcomes. Additionality in this context would encompass three types of ‘enhancements’ to a project site, arising from the project’s action to conserve the land and/or sea.”

The World Economic Forum held bilateral discussions with a range of market experts, and the chatter will continue on the sidelines of the annual Davos meeting that kicks off on Monday.

By Stian Reklev – stian@carbon-pulse.com

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