A recently developed metric for tradable biodiversity credits has the potential to optimise resource allocation to species conservation efforts, a paper has said.

The study, led by researchers at Queen Mary University in London and published in the Journal of Industrial Ecology, said a market based on the Biodiversity Impact Credit (BIC) metric could contribute to reducing species extinction risk, and argued the results are set to boost confidence in the emerging biodiversity credit space.

Finalised last year by the lead author of the paper, Axel Rossberg, the peer-reviewed metric can be used to generate voluntary biodiversity credits as well as inform no-net loss policies.

“We show that in a perfect market trade in biodiversity credits quantified by our metric would lead to near-optimal allocation of resources to species conservation,” said the study.

“We further show that metric values are quantitatively convertible to several other metrics and indices already in use. Barriers to adoption are therefore low.”

Recently endorsed by the Taskforce on Nature-related Financial Disclosures (TNFD) for corporate reporting, BICs can also be applied to biodiversity-related financial disclosures combined with separate metrics addressing ecosystem services and integrity, said the study.

SURVIVAL PROBABILITY

The metric quantifies changes in species’ average long-term global survival probability, enabling organisations to assess if conservation and restoration projects or activities positively impact species abundance.

“When the sum of all BICs of an organisation is positive for a given group of species, this organisation contributes to a reduction of the mean long-term extinction risk of the species in that group,” said the BICs methodology paper.

Last year, Rossberg devised a set of methodologies focusing on trees close to extinction, large-scale afforestation and deforestation, and organisational biodiversity footprints.

UK-based charity Botanical Gardens Conservation International (BGCI) partnered with the team of researchers at Queen Mary University to facilitate and pilot transactions of biodiversity credits, and currently offers BICs generated through projects protecting threatened tree species.

However, BICs can also be applied to other threatened species, according to Rossberg.

“Our careful mathematical derivation guarantees that questions anybody may have about these biodiversity credits don’t remain unanswered,” he told Carbon Pulse.

“Nothing in our approach is arbitrary or done just because it ‘looks about right’.”

UNINTENDED OUTCOMES

Researchers said BICs are designed to limit the risks of unintended outcomes for nature as well as prevent greenwashing from companies, as they said simulations show that a credit market based on the BIC metric would have the necessary safeguards in place.

“While in a perfect market for BICs, deviations from optimal resource allocation to species conservation can arise, these misallocations are benign in the sense that they discourage monocultures and the drastic suppression of the populations of rare species,” the study said.

“Furthermore, the resulting market forces reduce the likelihood that dominant market participants arise, suggesting that overall resource allocation to conservation would be close to optimal in a perfect BIC market.”

Rossberg pointed out the newly published study is poised to increase the confidence of businesses, financial institutions, and philanthropic investors in market-based mechanisms for biodiversity conservation, at a time when demand for biodiversity credits has yet to pick up on a significant scale.

While attention to the voluntary biodiversity credit markets has ramped up since the 2022 Kunming-Montreal Global Biodiversity Framework, most companies have not translated their interest into transactions, partly due to uncertainties on the claims they can make when buying units.

By Sergio Colombo – sergio@carbon-pulse.com

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