A native forest restoration company is in talks with two major standards to launch its first biodiversity credit projects next year, with a big park in the Philippines among the sites under consideration, the firm told Carbon Pulse.

Hawaii-based Terraformation is investigating applying Verra’s Nature Framework as well as the Global Biodiversity Standard (TGBS) developed by Botanical Gardens Conservation International (BGCI), according to the company’s head of carbon strategy, Xavier Hatchondo.

“We have several initiatives possible for early certification, including an opportunity to develop a biodiversity credit project with Verra on a 200,000-hectare area within a park in the Philippines, which we will explore in Q1 next year,” Hatchondo told Carbon Pulse.

The company is currently carrying out feasibility studies for the project, with the first phase focused on carbon credits, and the second on biodiversity.

“We are working closely with Verra as they accredited the projects in our pipeline, so we can transition easily from their carbon standards to the Nature Framework that is currently under development,” Hatchondo added.

Verra, the world’s biggest private issuer of carbon credits, recently said it is on track to launch its Nature Framework towards the end of the year, following a consultation round arranged in 2023.

The scheme will enable stacking of carbon and nature credits, meaning the same project can earn both credit types as long as there is no double counting of benefits.

“Nonetheless, our plan is to generate carbon and biodiversity credits on separate project areas, at least in the first phase,” said Hatchondo.

“We want to be very cautious about double counting.”

SHIFTING TO BIODIVERSITY

Co-founded in 2020 by former Reddit CEO Yishan Wong, Terraformation has five projects under validation by the end of this year under Verra’s Carbon Standard (VCS) and Climate, Community, and Biodiversity (CCB) standards.

In 2022, it launched a ‘seed to carbon forest’ accelerator, helping to guarantee high-quality offsets to investors in exchange for early-stage project finance.

“Some areas just outside these project sites may not be eligible for carbon – for example, due to deforestation. We can use those lands to launch biodiversity credit pilots and see how the market evolves.”

Terraformation is also speaking with UK-based conservation charity BGCI to explore opportunities to collaborate on biodiversity projects, Hatchondo said.

In June, BGCI released a site-based biodiversity standard, TGBS, which is applicable to all land management projects, including habitat restoration, tree planting, and agroforestry initiatives.

While it does not explicitly mention voluntary biodiversity credits under its scope as it covers a far wider range of metrics, the standard could be used together with the BGCI’s Biodiversity Impact Credit set of methodologies.

“BGCI is extending its network of potential auditors in some of the same countries that Terraformation is working in, such as Kenya, Tanzania, Philippines, and Colombia,” said Hatchondo.

“There’s room for working with them as well as other standards, provided that the market grows in the next months, creating real opportunities for investment.”

TURNING POINT

Although attention to the voluntary biodiversity credit market has increased after the 2022 Kunming-Montreal Global Biodiversity Framework, which carved out a role for nature-based solutions in plugging the financing gap on nature, companies have not yet translated their interest into transactions.

“We’ve been proposing investments in biodiversity credits to our carbon credit buyers for a while now, but we have not seen the demand yet,” said Hatchondo.

“However, I believe that once major players in the carbon market like Verra or SBTi start venturing into the biodiversity space and setting new standards, confidence will increase among potential buyers.”

This could also incentivise those carbon developers that set sight on the emerging market to set up biodiversity projects.

While some have recently taken steps to generate biodiversity credits, including the Community Forests and InCarbon, the majority are still reluctant, partly due to the high monitoring costs they would have to face.

“You need a lot of technology to monitor biodiversity uplift, and it’s still super costly. Environmental DNA and acoustic devices, in particular, can be really expensive,” he said.

Early crediting initiatives to date have yielded erratic prices, reflecting the diverse nature of each unit, though high implementation and monitoring costs will likely lead to increased prices in the long term, he added.

“We expect to sell the biodiversity credits at no less than $50. At $5 or $15, there is no chance you can deliver a good product,” said Hatchondo.

In the past few months, other major players in the carbon credit space, such as climate financier Respira International, identified the lack of robust information on the reference price of biodiversity credits as a critical barrier holding them back from entering the market.

Switzerland-based digital carbon standard Open Forest Protocol (OFP) has also decided to delay the takeoff of its biodiversity credit framework due to market uncertainties.

By Sergio Colombo – sergio@carbon-pulse.com

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