Early participants in the voluntary biodiversity credit market have welcomed the move by France and the UK to develop a global market framework, but stress the need for the government process to work with existing initiatives.

The two European governments last week announced they will spearhead work to draw up a market framework in cooperation with a wide range of sovereigns, international organisations, and others with the aim of creating pilot markets by 2026.

The move sparked widespread excitement among biodiversity market participants.

“I think this is a fantastic development, as we only have a chance to create a new market for biodiversity credits if it is supported – ideally even mandated – by governments,” Edit Kiss, co-founder and chief commercial officer at Global Integrity Partners (GIP), told Carbon Pulse.

“It’s especially important for demand creation, and seeing how high it is on the French and UK government’s agenda is clearly a good sign,” she said.

Until now, the emerging voluntary biodiversity credit market – bar efforts from the Australian government to set up a domestic scheme – has been populated by companies and organisations taking a punt at there being sufficient interest from buyers, sellers, and developers to materialise for their efforts to be worthwhile, but without any guarantees.

The France-UK initiative is seen to potentially change that in a big way. There may still be no guarantees that a vibrant market develops, but a basic framework backed by a number of governments in rich and poor countries alike and potentially earning UN endorsement will significantly improve the odds.

“We celebrate leadership coming from these two countries at a time where nature markets are undergoing global scrutiny. The proposed roadmap is inclusive. The challenge will be that this becomes a reality,” said Mariana Sarmiento, CEO and founder of Colombian biodiversity credit developer Terrasos.

Like others speaking to Carbon Pulse, Sarmiento stressed the importance of the government process not only leading to a market able to attract money, but one that can also do what it intends to – generate positive biodiversity outcomes while ensuring the inclusion of those on the ground, especially in developing nations.

“Not by making developing countries passive participants or ‘recipients’, but building collaborative frameworks that have been developed or are being developed within the countries,” she said.

“Biodiversity credit markets need to make sense for biodiversity custodians and also for the governments representing countries that should benefit from these new markets.”

LULL OR NO LULL

The France-UK announcement came accompanied by a roadmap developed by consultancies NatureFinance and Carbone 4, outlining five key challenges for creating a high-integrity market.

That came just as news started trickling through about early-stage transactions, achievements, and a growing line of methodology initiatives.

A question now is whether the framework process – which will run until COP16 UN biodiversity negotiations in Turkey in Dec. 2024 – will inspire more participants to get involved, or if many instead decide to sit back and wait for a lower risk, ready-made framework.

The voluntary carbon market has seen muted activity compared to expectations over the past year or so, with some of the reason attributed to companies awaiting the outcome of various processes to mend the market’s aching integrity issues.

Johan Maree, advisor to the Biodiversity Credit Alliance (BCA), a UN-backed group of project developers and other stakeholders, did not expect last week’s announcement to stifle the fledgling market.

“The BCA’s understanding is that this announcement speaks to a broad political framework that will help enable the market, and at this stage does not go into detail regarding practical aspects, such as methodologies,” he said.

As such, he did not expect the French-British process to overlap or interfere much with the activities ongoing in the market, but instead welcomed collaboration.

“Within the BCA we have the major methodology and project developers doing important work to bring high quality projects to the market, and we remain eager and open to share our learnings and experience with anyone willing to lean on our work and include and include it in broader political regulatory processes,” Maree said.

GIP’s Kiss took the same approach, comparing the situation to REDD+ around 2013, when some developers piloted avoided deforestation projects while principles and an overall framework were discussed by negotiators at UN COP climate talks.

“I hope this will give a good momentum and I don’t think it will a negative impact on the development of the new standards, those are still very much needed and piloting of the new methodologies even more so we can generate some actual results from the early pilots, which then hopefully can inform the more top-down processes and link back to the UN CBD negotiations,” she said.

“I hope that this initiative will build on those new emerging standards and not necessarily aiming to create new ones, although obviously governments might want to establish national schemes that are more specific or appropriate for the local context.”

Similarly, Sarmiento of Terrasos emphasised that the new coming Franco-British process needs to help facilitate the try-and-fail process that is already underway, rather than compete.

“The important thing is that this initiative can really help to provide and promote flagship transactions that conserve key biodiversity areas in the long term, promote diversity and innovation, deliver benefits to countries and communities where these credits are developed, and are carried out in transparent and impactful ways that really mobilise finance,” she said.

“I think people are trying to figure out what works, what doesn’t, and what sticks. And this is actually something that the roadmap should encourage under minimum standards and guiding principles.”

THE OTHER SIDE OF THE COIN

Not everyone welcomed the initiative, however, with Paris-based think-tank Green Finance Observatory among those highly sceptical about what a global biodiversity market might bring.

“By diverting attention from the need for stricter environmental regulations, these markets enable us to continue to favour competitiveness and economic growth by claiming to compensate for the destruction caused elsewhere,” it said in a note posted on its website about the initiative.

“As for the idea that these biodiversity markets could provide financial assistance to vulnerable countries, the history of these markets suggests that the revenues in question will most likely once again be a small fraction of revenues, highly fluctuating and determined by the moods of private investors, and taking the place of real compensation.”

France and the UK will convene a working group, and aim to have a first draft of a market concept ready to present at the COP28 UN climate COP negotiations in Dubai in December.

By Stian Reklev – stian@carbon-pulse.com

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