A multi-stakeholder biodiversity market supervisor could advise on claims and provide quality guidance to both potential buyers and project developers, helping nature crediting to avoid the current integrity issues facing the voluntary carbon market (VCM), according to a non-profit.

Finland-based Compensate Foundation released a whitepaper on Wednesday that suggested there are still major gaps in early market infrastructure, as it called for a global governing body for the emerging biodiversity credit market.

“With the VCM, you can really now see the consequences if you don’t regulate the market and you let it evolve … Suddenly, it comes under more scrutiny and you find these very fundamental flaws,” Janne Rinne, policy and advocacy lead at the Compensate Foundation, told Carbon Pulse.

“For the biodiversity market, there should be some kind of international body that would oversee the market as a whole, one, not only made of the market players, but that ensures more robust quality control so that the market can predict quality assurance.”

Rinne drew parallels to the Voluntary Carbon Market Integrity Initiative (VCMI), a body working to shore up the integrity cracks of the voluntary carbon market on the demand side.

The VCMI released its ‘Claims Code of Practice’ in June, which outlined a three-tier system to rank corporate credit use, based on the proportion of company emissions where carbon credits are used to mitigate impact. The cross-stakeholder initiative aims to provide further guidance in November.

This code is intended to replace ‘carbon neutrality’ claims that historically underpinned carbon credit purchases, but have more recently drawn criticism for misleading consumers and for a lack of suitability for the post-2020 Paris Agreement era in which all nations are required to make emissions curbs.

CLAIMING  ISSUES

No such guidance exists for the biodiversity credit market, Rinne told Carbon Pulse, and it lacks clarity on what corporates should claim.

Potential buyers may find the market too confusing with multiple credit types emerging, such as species or habitat unit, and no clear equivalence in sustainability accounting, the not-for-profit outlined in its whitepaper.

“How biodiversity credits fit into evolving frameworks like the Science-Based Targets initiative or the TNFD is still open,” said Rinne.

“Credit buyers need some kind of guidance to back them up in the decision to buy these types of credit, and that’s absent at the moment.”

The absence of guidance and what could be claimed by corporates could be a major barrier to kickstarting the market, according to Compensate.

Much of the technical work of biodiversity crediting mechanisms so far has been focused on developing uplift methodologies and standards.

Verra’s recently announced consultation on its biodiversity crediting approach provided a brief insight into the direction of travel for units that may be issued under its SD Vista Nature Framework.

The standard body proposed an example whereby nature credits are used to de-risk its dependencies rather than used as an impact claim.

Also on the demand side, the World Economic Forum recently announced that it hopes to establish a buyers club and auction the first credits next year, although this is primarily focused on pricing.

Compensate contends that there also needs to be increased attention on what can be claimed by voluntary biodiversity credit buyers, possibly purchasing credits at the global level.

“The contribution type of claim is basically the only possibility but nobody knows how to do it well yet.”

ADDING UP

Another concern Rinne raised was the aspect of financial additionality, which could stifle supply where nature markets overlap.

Compensate’s whitepaper outlined bundling, stacking, and stapling approaches but there is no internationally-agreed approach as to financial additionality requirements.

“Carbon and biodiversity markets are now evolving at the same time. Project developers need more clarity on what happens if they participate in one, how it would play out with the other?” Rinne told Carbon Pulse.

“If you’re investing as a project developer or landowner, you’re investing financial resources for restoration. So you need to predictably know whether it’s good for one market, or another market, or both.”

In Finland, ecological compensation units from construction projects, carbon credits, and biodiversity credits could potentially overlap.

The distinction between credit approaches with different logic is not always clear to consumers and other stakeholders, according to Rinne, who described the  “only feasible option”  for voluntary biodiversity credits as contribution claims rather than representing a metric of impact equivalency.

But this issue is not Finland-specific. For example, the UK’s nature market principles allow stacking and bundling of carbon and biodiversity net gain units, although this approach has received criticism from academics.

Currently, there is no international framework to advise on a way forward for stacking and bundling of biodiversity credits, or how to accommodate national carbon and biodiversity offsetting regulations into the voluntary biodiversity market.

Compensate has been a long-term advocate of boosting integrity in the VCM. As recently as two years ago the company’s commercial arm was actively reviewing over 100 Verra and Gold Standard projects, but this branch, previously an active VCM participant, was recently wound down.

By Tom Woolnough – tom@carbon-pulse.com

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