A report surveying global biodiversity credit suppliers has found the market is still very much in the embryonic stage, with the demand question yet to be full answered, however there are signs of growing interest.

Advisory firm and project developer Pollination released its second State of the Voluntary Biodiversity Credit Markets report on Monday, where it surveyed 16 major suppliers of credits, a sample which it said represents the bulk of international credit supply.

It estimates between $325,000 and $1.85 million worth of voluntary biodiversity credits have been sold globally, claiming it is the first time the size of the market has been revealed.

“Voluntary biodiversity credits are a relatively new type of instrument, but one that shows incredible potential,” Pollination Executive Director Laura Waterford said in a statement accompanying the report.

“We are seeing companies who care about their brand image and care about nature risk exposure have plenty of reason to purchase high integrity biodiversity credits without any need for an offsetting claim”.

The report also showed the vast differences between biodiversity credit prices, volumes, and price premiums between the respondents.

One commonality it noted, however, was biodiversity credit schemes drawing a clear distinction between voluntary credits and offsets, with 88% of respondents indicating their schemes are not intended to support the issuance of offsets.

“Already we are seeing the differences emerge in the shape of future voluntary biodiversity credit markets from what we have seen with carbon market,” Waterford said.

Pollination is strongly of the view that biodiversity credits should remain a separate instrument to offsets, Waterford said, adding that the survey results appear to show this view is a shared one.

However, 75% of respondents indicated they allow biodiversity credits to be stacked on top of carbon credit generating projects.

The majority of respondents also indicated that biodiversity credits issued under their scheme were being sold with either a physical product or commodity, or with a carbon credit.

WHO’S BUYING

A common question asked about biodiversity crediting schemes has been around where demand might come from, if not for the purposes of offsetting.

The report identified multinational corporations, financial institutions, and small-to-medium enterprises as the perceived top sources of demand for biodiversity credits, motivated by positive marketing and branding, followed by risk mitigation and philanthropy.

European companies were perceived to be the highest source of demand by respondents (44%), followed by Latin America and the Caribbean (25%,), while Oceania and North America closely followed (19%).

The survey also highlighted that companies are interested primarily in purchasing biodiversity credits sourced from areas close to their supply chain footprints and operations, with 81% of respondents sharing this view.

Respondents perceived contribution claims to be a key type of claim that buyers are seeking to make on the basis of their purchase of biodiversity credits, the report said.

However, mixed contribution and offsetting claims were identified as the most common claim type multinational corporations and financial institutions are seeking to make (38% and 32% of respondents, respectively).

“There has been a lot of commentary asking what factors might drive voluntary demand for biodiversity credits. Now we have some answers and they are really encouraging,” Waterford said.

However, 56% of respondents chose not to answer the question relating to perceived sources of demand, likely indicative of clear uncertainty.

BENEFIT SHARING

Respondents were also asked to what extent Indigenous Peoples and local communities’ were involved in biodiversity credits generation in areas where they have a continuing connection or legal interest.

The report said 75% of respondents indicated these groups are involved in varying ways, with the most common being project implementation activities with benefit sharing arrangements.

Additionally, almost 20% of survey respondents said buyers are already paying premium prices for projects involving these groups. With respondents reporting price premiums of 15% and 300%.

“Given Indigenous Peoples and local communities steward the vast majority of the world’s biodiversity, it’s critical that they are at the forefront of the design and implementation of these emerging market opportunities,” Pollination Foundation Co-CEO and report author Jane Hutchinson said.

IN THE WEEDS

Half of the 16 respondents said they had sold biodiversity credits, with 13% saying they started selling in 2022, and 38% said they did so in the last two years.

Around one-third of the respondents (38%) who had sold credits said they had sold fewer than 100 credits since they commenced trading, although one said they had sold more than 100,000 credits.

However, the report emphasised there is significant variability in the spatial component of biodiversity credits across the market.

Thirteen percent of respondents sold their credits for $200-700 each, the same number said they had sold their credits for between $10-25 each, while 50% said they sold theirs for between $2-10 each.

The surveyed suppliers said they expected to sell more than 100,000 credits over the next five years, but 25% said they were uncertain about the volume of future transactions.

Biodiversity credits sold have protected or restored up to 125,000 hectares of nature, according to the report.

Regeneration biodiversity projects were seen as the most common type of focus in theses schemes, which involve activities that deliver and improvement in ecological value over time.

All respondents noted their schemes support generation of credits in terrestrial ecosystems, while 63% were in freshwater ecosystems and 56% in coastal ecosystems

Despite the uncertainties highlighted, Waterford noted the fact that credits were being sold and issued, and integrity measures were maturing, demonstrated there was confidence building in these markets.

“Almost all the activity we’re seeing reported has come in the past 2-3 years. We are excited to see where these markets sit three years from now.”

By Mark Tilly – mark@carbon-pulse.com

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