Wednesday, October 25, 2023
On the 25th of October, the Compensate Foundation published its white paper “
The biodiversity markets serve as a means to direct private sector funding toward actions that preserve and restore biodiversity. Private and public initiatives are paving the way for the rapid development of biodiversity credits, certification schemes, and projects. The direction of the biodiversity markets will be determined in the coming months.
The markets are expected to direct much-needed funding toward nature conservation and restoration projects, including those that do not align with the existing voluntary carbon market (VCM). However, there are serious risks involved if unregulated markets are implemented badly.
The risk of mainstreaming harmful practices arises if governance lags. Allowing the market to be flooded with cheap credits of questionable impact would undermine trust in the market and be counterproductive for nature. The proliferation of misleading claims and greenwashing would have the same undesired effect, damaging high-quality projects too.
We have learned from the VCM that trust can be easily lost and difficult to regain. Reversing fundamental flaws can be a challenging endeavor.
The challenge of attractive and robust biodiversity claims
The white paper sheds light on biodiversity claims, an issue that has received relatively little attention so far.
Simple and attractive claims inspire action. This will be a significant challenge with a topic as complex as biodiversity. The lack of agreed-upon and easily communicated claims may become a significant barrier to the markets.
Due to the complexity of biodiversity, the Compensate Foundation argues that contribution claims are the only feasible option for international biodiversity credit markets. Counterbalancing claims, or offset claims, should be limited to national or local biodiversity offset schemes, based on the idea of ecological compensation.
Even with the contributions approach, the claims should be robust and proportionate. The data behind the claims should be transparently available in order to create confidence. There is a risk of greenwashing if vague claims give a false, misleading impression of organizations’ net impact on biodiversity. Further guidance on making biodiversity claims is needed.
Avoiding the flaws of the voluntary carbon market
While biodiversity markets share many similarities with the VCM, biodiversity is a far more complex concept than carbon. It is inherently local and not as easily fungible. This has implications for the development of biodiversity markets.
It is imperative to learn from the experiences of the VCM. It would be a missed opportunity not to take advice from the good and bad practices of the VCM. This is the key motivation for the Compensate Foundation to publish this white paper.
Much of the discussion about the emerging biodiversity markets revolves around developing biodiversity metrics and credits, which may overshadow other critical integrity aspects.
Regardless of the units chosen, many quality issues in nature-based projects must be addressed to deliver real impact. These issues include robust baselines, ensuring additionality and permanence, preventing leakage and double counting, and recognizing the rights of indigenous peoples and local communities.
The lack of integrity of projects and credits has seriously eroded trust and damaged the reputation of the VCM. The emerging biodiversity markets cannot afford to face a credibility crisis like the one currently affecting the VCM. The integrity and transparency should be built from the start.
At this stage of market development, the priority should be to create necessary institutions, quality assurance mechanisms, and arrangements that guarantee transparency. Building a solid foundation for integrity should precede efforts to scale up the supply and demand.
The Compensate Foundation has been a critical advocate for improved integrity within the VCM. Since 2020, it has evaluated over 170 nature-based climate projects, gaining extensive experience with the possibilities, risks, and pitfalls of the VCM. The white paper translates this knowledge into recommendations for the biodiversity markets.
Text: Janne Rinne