Biodiversity credit markets show promise but face ‘deep uncertainties’ new study warns

Sub: Sci

Sec: Biodiversity

What Are Biodiversity Credits?

Represent measurable, evidence-based units of positive biodiversity outcomes.
Quantified by comparing scenarios with and without project interventions.
Global Framework and Goals:
- Prominent in discussions at global conferences, including the 2022 Kunming-Montreal Global Biodiversity Framework.
- Part of innovative financing mechanisms (e.g., green bonds, biodiversity offsets) to mobilize $200 billion annually by 2030 for conservation.
How They Work:
- Credits are generated through verified conservation activities
- Can include habitat restoration, species protection, or ecosystem enhancement
- Must demonstrate measurable biodiversity improvements
- Purchased by companies to offset their biodiversity impacts
Key Features:
- Usually site-specific and non-transferable between ecosystems
- Require baseline assessments and ongoing monitoring
- Need third-party verification and certification
- Often involve long-term commitments to maintain biodiversity gains

Key Methodological Challenges:

Definition and Quantification of Biodiversity Units:
- Most methodologies define biodiversity credits based on area (e.g., hectares) rather than a universal metric like carbon credits (1 tonne of CO₂).
- Metrics often reduce biodiversity’s complexity to simplistic numeric values, ignoring species interactions, cultural significance, and intrinsic biodiversity value.
Fungibility Issues:
- Biodiversity credits lack interchangeability due to biodiversity’s unique, place-specific nature.
- Example: An isolated forest patch cannot equate to one in a connected landscape.
Detection and Tracking Outcomes
- Monitoring conservation or restoration over time is riddled with uncertainties.
- Short-term assessments (e.g., butterfly populations) risk misjudging project success due to natural yearly variations.
Demonstrating Additionality
- Proving biodiversity gains beyond “business-as-usual” scenarios is costly and uncertain.
- Revenues from biodiversity credits may substitute public funding, undermining true additionality.
Addressing Leakage
- Leakage occurs when conservation activities displace harmful practices elsewhere (e.g., converting new land for agriculture).
- Most methodologies lack effective strategies to quantify or mitigate leakage risks.

Regulatory and Market Concerns

Current market value estimated at $8 million, projected to grow to $2 billion by 2030 and $69 billion by 2050 (World Economic Forum).
Regulatory Gaps:
- Lack of standardized methodologies creates risks of misrepresentation and inefficiency.
- Effective regulation requires transparency, industry commitment, and civil society scrutiny.
Project Durations:
- Credits are issued for varying periods (e.g., 5 years, but can range from 1 month to project duration), complicating long-term accountability.