A voluntary biodiversity credit market would come with a number of risks, and nations should instead require corporates to pay towards climate adaptation and nature measures, a representative for the African Development Bank (AfDB) said on the sidelines of COP28 Tuesday, as the bank hopes to get the adaptation mechanism it has pushed for years to get approved at the talks.

UK-funded development agency FSD Africa and Geneva-based think tank NatureFinance on Tuesday organised a South-South collaborative event to discuss potential designs of the emerging voluntary biodiversity credit market.

However, the manager of the AfDB’s climate and environment finance division, Gareth Phillips, argued at the event that a biodiversity credit market would be fraught with risks and that countries would be better off setting targets for climate adaptation efforts contributions.

“[Corporations] should simply be required to contribute towards these goals,” Phillips said.

“They are already contributing to mitigation, so requiring them to contribute to adaptation and biodiversity is not a dealbreaker.”

MARKET RISKS

Phillips outlined a number of issues he saw as problematic with trading biodiversity credits, including early movers’ efforts to agree on a metric that could be the equivalent of a tonne of carbon in the emissions market, and concluded that if one hadn’t been found yet, it probably won’t happen.

“It’s a bit of a red herring and we shouldn’t waste our time trying to do that,” he said.

“What matters is the amount of money that consumers and corporates in the developed world are investing into genuine projects that contribute to biodiversity and … adaptation.”

Financial contributions, on the other hand, are easy to count.

“That is something you can measure and be transparent about and it is something that has value because within the framework of the Paris Agreement finance is a huge, measurable indicator and there are massive discrepancies between what we invest in meaningful mitigation and adaptation. Biodiversity is nature’s way to adapt to climate change,” said Phillips.

As well, he expected a biodiversity market could easily prove inequitable, as buyers would go for the cheapest credits, or for projects with “catchy” megafauna while ignoring other ecosystem types.

TRYING AGAIN

His comments came as the AfDB is again trying to get COP approval for the Adaptation Benefits Mechanism (ABM), six years after the initiative was first launched by the bank along with Climate Investments Funds (CIF).

The idea is to create a business case for companies to pay for climate change adaptation by setting up a mechanism similar to the UN Clean Development Mechanism (CDM), but with the difference that credits won’t be traded in a secondary market, but instead be retired by the companies earning them against their contribution requirements or for voluntary purposes.

Baseline and monitoring methodologies would be created for adaptation benefits, overseen by a central market administrator, and once projects generate units based on those they would be placed in a central registry, from which they would be retired.

While not directly biodiversity related by nature, “biodiversity is nature’s own adaptation,” according to Phillips.

Among additional benefits to be drawn from the ABM would be that carbon mitigation co-benefits would remain in the host country, hence potentially sparking higher climate ambition levels, according to the initiative’s website.

The AfDB hopes to get the mechanism approved under the fledgling Article 6.8 of the Paris Agreement, which deals with non-market cooperative approaches, though it is not clear how it would fit with the Global Biodiversity Framework.

There is also an initiative to create a US version of such a mechanism, but that is stuck in Congress, Phillips told Carbon Pulse at the sidelines of the event.

A handful of pilot ABM projects have been established in Africa, but this is below the 25 the bank had aimed for by the end of 2023.

By Stian Reklev in Dubai – stian@carbon-pulse.com

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