Biodiversity markets need support and development if we are to protect nature as we tackle climate change, writes Torrey Sanseverino, natural capital research associate at BeZero Carbon.
- Biodiversity markets can present a solution to ensure that the voluntary carbon market does not divert funding away from nature.
- Supply of all forms of carbon removals, both engineered and nature-based, is potentially set to increase.
- Biodiversity credits present a compelling solution but need standardisation and transparency to be effective.
According to some predictions, engineered carbon removals are set to make up the majority of removals in the voluntary carbon market (VCM), ahead of Nature-based Solutions (NBS) removals. Both types of removals will be necessary to mitigate climate change, but we need to ensure that funding for nature does not suffer as a result.
Biodiversity markets as an additional solution
Beyond their carbon removal benefits, NBS is an essential player in the protection and conservation of nature. Outside of the VCM, which ostensibly monetises carbon benefits, NBS currently do not receive significant finance through other voluntary ecosystem markets.
Supply of all forms of carbon removals, both engineered and nature-based, is potentially set to increase in the VCM alongside the market’s general expansion. Our analysis finds that by 2030, as much as 56% of the VCM could be removal credits, up from around 7% today.
Much of this growth will likely come from the scaling of engineered removals technologies. According to the Task Force for Scaling Voluntary Carbon Markets (TSVCM), in 2030 the practical potential of NBS removals credits is 2.9 gigatonnes of CO₂ per year compared to 1 to 3.5 gigatonnes of CO₂ per year of engineered-based removals.
In addition to reducing carbon emissions as much as we can, there is also an urgent need to scale carbon dioxide removal. The Intergovernmental Panel on Climate Change concludes that we need 10 billion tonnes of carbon removal annually by 2050, up from roughly half a million today.
But, the financing of nature protection and conservation need not be sacrificed for the growth of engineered removals. Approximately 70% of wildlife has been lost between 1970 and 2018 and almost one-third of all species are threatened with extinction, yet finance for NBS is lacking. In 2022 NBS received $154 billion in finance, but estimates suggest more than double that to $384 billion is needed per year by 2025. Triple that is needed by 2030 to reach $484 billion, to not only remain below 1.5°C increase in global temperatures but also to stop biodiversity loss and land degradation.
One solution to this would be for NBS projects to lean into their biodiversity impacts and launch biodiversity credit markets. If the additional value of biodiversity is realised, the funding risk for nature could be spread across multiple mechanisms and could increase total funding for nature.
Biodiversity markets could be a viable solution as the demand for biodiversity impacts of carbon projects already exists. Sustainable development goal (SDG) 15 Life on Land, commonly viewed as an indicator of biodiversity impact, is one of the top five most commonly claimed SDGs attached to retired carbon credits in 2022 in the VCM. Additionally, the demand for biodiversity-specific impacts will likely increase as more corporates adopt the frameworks for identifying and reducing impacts on nature such as Science Based Targets for nature.
Biodiversity credits present challenges
However, biodiversity credits are not straightforward. Firstly, biodiversity is not as simple to define as carbon. There isn’t one accepted definition of a biodiversity credit and biodiversity impacts are not comparable as biodiversity is unique to a particular area. For instance, an improvement in biodiversity in the Brazilian Amazon does not ‘offset’ a negative biodiversity impact, even of the same quantified amount, in the Indian Himalayas.
Secondly, biodiversity is difficult to measure. There are many methods which could be used to measure biodiversity alongside a lack of biodiversity accreditors with approved methodologies.
Thirdly, the potential tradeoffs between biodiversity and climate mitigation may need consideration. Although progress towards one also often comes with progress towards another, ensuring positive biodiversity impact may lead to a project not reaching maximum possible climate impact potential.
How to address them
As in the VCM, standardisation and transparency will be key for effective biodiversity credits. A standard definition of what a biodiversity credit is and approved metrics, could increase the applicability of impact metrics and provide limited comparability between credits. The establishment of an independent body, like the Integrity Council for the Voluntary Carbon Market (ICVCM) but for biodiversity markets, could fill this role.
Addressing the tradeoffs between biodiversity and climate mitigation would be especially challenging; however, transparency of project outcomes can mitigate this. Independent, third-party assessments of the impacts behind the biodiversity and carbon benefits could help buyers focus finance on the environmental cause they want to prioritise. Additionally, the consideration of nature in a wider sense instead of specifically biodiversity could better support a more holistic approach to ecosystem assets credits.
We are at a crucial decision point for financing nature. Decarbonisation is the first step and financing nature protection needs to be addressed alongside it. On the current trajectory nature and biodiversity are at risk of being left behind.
Instead, we can support nature finance by fueling mechanisms like biodiversity markets. Biodiversity markets need support and development if we are to protect nature as we tackle climate change.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.