Nature markets took centre stage on Tuesday at the European Parliament’s environment (ENVI) committee meeting, with an EU biodiversity negotiator sharing concerns raised by some MEPs about the role of biodiversity credits in plugging the nature finance gap.

During the discussion, lawmakers Cesar Luena of the S&D group and Carola Rackete of GUE/NGL asked for more details on the EU’s position, with Rackete urging the European Commission not to be “fooled” by biodiversity credits and offsetting schemes.

The request came after the European Commission President Ursula Von der Leyen backed nature credits in two separate speeches last month, arguing that market-based mechanisms are key solutions to the need for economic incentives to restore nature.

Addressing the concerns, Hugo Schally, the EU lead negotiator for the Global Biodiversity Framework (GBF), clarified the distinction between biodiversity ‘certificates’ and ‘credits’, acknowledging MEPs’ concerns about the latter.

“There is an ongoing discussion on the use of biodiversity certificates and biodiversity credits, and I think we need to clarify the distinction between the two,” he said.

“While biodiversity certificates are seen by the Commission as a very interesting instrument to allow companies to contribute to nature-positive activities, we share the concerns that have been voiced with regard to the practicability, transparency, and accountability of the development of biodiversity credits.”

The ENVI definition of the terms appeared to vary somewhat from the way market participants use them, where “credits” usually refer to units companies can invest in to be seen contributing to the protection or restoration of nature, whereas “offsets” is applied to describe units used to compensate for negative impacts. In that context, “certificates” and “credits” are often used interchangeably.

In light of that, Schally said the European Commission is conducting various investigations on the topic, including a survey on biodiversity credits launched in May in collaboration with global consultants ICF and German environmental consultant Perspectives.

The initiative is set to play a critical role in helping shape the market, as the topic is increasingly polarising opinions, with some perceiving crediting as a promising solution to channel private financing into biodiversity while others fear that there are too high risks of unintended outcomes and argue it shouldn’t be pursued at all.

The European Commission is also working closely with the European Investment Bank (EIB) and the European Central Bank (ECB) to provide additional guidance for private companies and the financial sector on the economic risks posed by the loss of biodiversity, as well as on the definition of ‘nature positive’.

“We all agree that the public funding will in no country be sufficient or even necessary for reaching the targets and goals of the GBF, which is why we need to focus on how to mobilise private funding and investment,” Schally said.

Biodiversity credits are expected to be widely discussed during side events at COP16, due to be held in Cali, Colombia, in less than a month.

EU AT COP16

Regarding COP16, Schally said the EU institutions will support the discussion around the three top priorities outlined by the Colombian presidency over the last few months – finalising a monitoring and reporting framework for the implementation of the GBF, defining financial mechanisms to mobilise resources, and actively involving Indigenous Peoples.

Moreover, the EU will work to advance efforts on two key topics, identified by the European Commission:

• Highlighting the connection between climate change and biodiversity
• Mainstreaming nature conservation across policies and major economic sectors, including transport, agriculture, fisheries, and forestry

However, the European Commission has not yet determined who will represent it at the summit, with the participation of von der Leyen yet to be confirmed.

The ENVI meeting came after the European Commission proposed on Wednesday to postpone its regulation against deforestation by one year, in an attempt to please international partners who repeatedly expressed concerns about the impacts of the law on supply chains.

On Tuesday’s meeting, MPEs raised concerns over the possibility, with Schally reassuring them the move will not impact the final purpose of the law.

“The delay in having this implementing regulation does not change anything to the fundamental obligations,” Schally said.

“We have listened very carefully to to the agriculture industry and our partner countries, and will make a lot of efforts to ensure that when it enters into force in application, they will actually be well prepared.”

PLASTIC TALKS

MEPs also discussed the topic of the global plastic treaty being negotiated at UN level. Notably, 2024 is considered the year of “3 COPs”, as negotiations on plastic are expected to be finalised at the fifth round of talks, scheduled to be held over Nov. 25 – Dec. 1 in Busan, South Korea.

According to Schally, who is also the EU lead negotiator for the plastic treaty, there are currently three groups that actively oppose the agreement.

The first one consists of emerging economies, such as Indonesia and Brazil, which support in principle the ambition to have a full lifecycle-based treaty but are concerned about more harmonised rules.

Secondly, there are the major primary polymer producers and exporters, such as India and China, who Schally said are “quite worried” about the impact of any restriction on their processing and converting industries.

The third group, led by Saudi Arabia, Iran, the Gulf Cooperation Council, and Russia, is advocating to have a treaty that focuses only on waste collection and management, without addressing the production.

While the third group is considered to be the most hard to convince, Schally said the EU is “quite hopeful” to gain a common ground with countries like Indonesia, China, and India.

“I share the worries that too many participants in the negotiation are putting too much emphasis on waste management and collection,” he said.

“This is clearly not the EU position, and it is not acceptable for us. We need to have an agreement that covers the full life cycle of plastic.”

The treaty is set to have large implications for how the world will deal with the plastic pollution crisis and its impact on nature, as well as for the emerging plastic credit market.

Plastic credits could be included in the agreement as a financing mechanism to help plug the funding gap on waste collection and recycling, poised to reach an estimated $40 bln by 2040.

By Giada Ferraglioni – giada@carbon-pulse.com

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