The story has been updated with comments from Plan Vivo.

An analysis of recent transactions under five voluntary biodiversity credit frameworks has found that prices vary massively, ranging from $7 to $41,000 per unit for a 100-year conservation period, with average rates expected to surge in the coming years.

The lack of transparency as well as different levels of quality in the emerging market are among the causes of such disparities in pricing, according to the study led by economic analyst Elizabeth Heagney for the Australian consultancy firm Aton Consulting.

Nonetheless, credits are slated to play a prominent role in future biodiversity investments, the paper pointed out.

“There are few large transactions in these nascent markets, and although most credit issuers express a desire to trade via exchange platforms, transactions to date have almost exclusively been over-the-counter trades, and prices, for the most part, are undisclosed,” it said.

“The newness, thinness, and lack of transparency in existing biodiversity credit markets make it difficult to identify the going rate for a biodiversity credit.”

Heagney took into account the prices of biodiversity credits traded under five frameworks:

• Terrasos – $110 per unit for the preservation/restoration of 50 square metres for 30 years.
• Savimbo – $5 per unit for one hectare conserved for two months.
• Plan Vivo – $20 per unit for a 1% biodiversity gain over one ha per year, based on the company’s initial scoping (a figure Plan Vivo said is no longer accurate).
• RePlanet – $5 per unit for a 1% biodiversity uplift over one ha for 25 years.
• ValueNature – $100 per unit for one ha of land protected for 10 years.

Then, the researcher brought the underlying parameters of each framework – area of land impacted by the projects, period of management, and conservation outcomes – to a common basis of a 1% uplift in biodiversity over one ha, with conservation outcomes maintained over 100 years.

“FUNGIBLE, TRADABLE, AND LIQUID”

The median price stood at $750 and the mean price at $8,800, the paper calculated.

“Many of the prices presented in this paper have been reported from over-the-counter trades that occurred in 2023. Given that biodiversity markets are in their development phase, these prices are subject, and likely, to change”.

“We expect credit products to dominate future biodiversity investment, because, if properly designed, they can be fungible, tradable, and liquid,” the paper added.

However, Plan Vivo said study was “inaccurate without a clear source to the information for the credit price of PV Nature biodiversity credits”.

“The value of $20 for traded credits is an error. Plan Vivo are not trading any credits yet, and therefore attributing any price per credits is not possible,” Plan Vivo told Carbon Pulse.

“Importantly, they recognise that the price per credit will likely not be the same per project and will change depending on a number of factors including project size, significance and market demand factors, but it’s too early to tell yet.”

FINDING BALANCE

While attention to the voluntary biodiversity credit market has ramped up after the 2022 Kunming-Montreal Global Biodiversity Framework (GBF), which carved out a role for nature-based solutions to help bridge the biodiversity financing gap, most companies are still reluctant to translate their interest into transactions.

As well, many carbon developers set sight on the nascent market but have not yet the confidence to foray into the biodiversity space, with some stressing the need for more robust information on the reference price of biodiversity credits.

“If prices are too high, then biodiversity outcomes from private investment in conservation will be limited. Prices that are too low may signal that the conservation works being funded are not additional,” said the paper.

“Investing in these low-value products may open investors up to accusations of greenwashing and/or landholder exploitation.”

CORPORATE DRIVER

However, Heagney foresees demand for units climbing as companies seek to address their biodiversity impacts by adopting frameworks such as the Taskforce for Nature-related Financial Disclosures (TNFD) recommendations.

“Based on these forecast market trends, we expect the price of biodiversity credits to increase in coming years,” the paper said.

“This means that an even larger quantum of investment will be required to meet global biodiversity targets. We expect this to come, at least in part, from increasing reporting pressures on global corporate entities via TNFD, IFRS-ISSB [International Financial Reporting Standards Foundation-International Sustainability Standards Board], and other emerging frameworks or standards.”

Carter Ingram, managing director at advisory group Pollination, also emphasised last week that biodiversity credits could gain traction as a go-to solution to address corporate risks and dependencies.

The corporate risk management data generated by TNFD uptake could represent a foundation upon which a high-integrity nature credit market can expand, a separate report by Australian firm Clayton Utz said after last year’s launch of the TNFD recommendations.

By Sergio Colombo – sergio@carbon-pulse.com

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