Introducing mandatory natural capital accounting and nature risk disclosure schemes would create the foundation for demand in a New Zealand voluntary biodiversity credit market, according to government-commissioned advice.

Investor and advisory firm Pollination was last year engaged to provide advice to the New Zealand government on establishing a potential biodiversity market in the country.

It submitted its recommendations last December, and the NZ environment ministry has since launched a public consultation process on such a voluntary market, but Pollination’s report to the government was only made public on Thursday.

While containing many of the elements the government is consulting on at the moment – role of Indigenous people, what role the government should play, how the market should function, and so on – the report showed that Pollination’s expectation was that demand under such a voluntary scheme would primarily come from making certain reporting systems mandatory.

“Requiring corporations to monitor and report on the state of nature within their sphere of control through the preparation of natural capital accounts would increase awareness of adverse impacts on nature caused by a business’ direct operations … and also increase stakeholder scrutiny if that information is made publicly available,” Pollination wrote.

“This would indirectly increase pressure on corporates to demonstrate they are also contributing to positive outcomes for nature, which could be done via the purchase of biodiversity credits,” it said.

While a large and growing number of organisations stand ready to provide biodiversity credits if and when a sizeable market emerges, it is far less clear where exactly demand is going to come from.

Some observers have warned against building a voluntary nature market, arguing that offsetting is the only way sufficient demand can materialise and that a global biodiversity offsetting scheme could do more harm than good.

New Zealand has a biodiversity offsetting programme in place like a number of other countries, and the government’s July consultation documents admitted that there might be some overlap between the existing scheme and a new voluntary programme.

However, Pollination said making reporting schemes like the Taskforce on Nature-related Financial Disclosures (TNFD) obligatory would help create buy interest without basing a market on just compensating for harm.

Mandatory TNFD disclosures, like natural capital accounting, would drive corporate awareness of their and their supply chains’ nature impacts, according to Pollination.

“This would indirectly increase pressure on corporates to demonstrate they are investing in positive outcomes for nature to mitigate their exposure to systemic nature-related risks, which could be done via the purchase of biodiversity credits,” it said.

It also advised the NZ government to develop a scheme in close consultation with business to ensure it is aligned with their priorities, and to run a public awareness campaign on the state and trends of nature and biodiversity in New Zealand.

GOVERNMENT SUPPORT

Supply is generally considered less tricky in the emerging biodiversity market, though Pollination stressed there were things the government could and should to secure a steady stream of units.

Those included co-designing the scheme with iwi – Maori tribes – to ensure the market is well aligned with iwi values, beliefs, and knowledge systems.

The government could also consider to buy credits itself and set a minimum price to provide certainty for project developers, as well as contribute financially or otherwise to development of data sets and methodologies, Pollination said.

As well, it should consider legislating the scheme to provide clarity on legal rights to biodiversity.

A separate way to drive investments in New Zealand nature would be to facilitate investment in biodiversity co-benefits in the national carbon market, Pollination said.

Steps to achieve that would include offering payment for co-benefits through the Carbon Neutral government programme, developing methodologies for certifying co-benefits appropriate to NZ ecosystems that could be attached to carbon credits, and building knowledge and capacity on nature-based solutions.

The New Zealand government’s ongoing publication on a potential biodiversity credit market will close on Nov. 3.

By then the country will have had a national election, with recent polls suggesting there will be a change in government after two consecutive three-year periods with the Labor party in charge.

It is not clear where a conservative government led by the National party would stand on a biodiversity market.

By Stian Reklev – stian@carbon-pulse.com

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