Biodiversity credits – saving the world or another greenwashing?

Kredyty na rzecz bioróżnorodności

If nothing changes, by 2050. more than a million known species of plants, fungi and animals may disappear from the face of the Earth. It has been estimated that some $700 billion is needed to curb the alarming rate at which humans are annihilating biodiversity. Where to get them from? One of the proposed tools for species conservation is to be biodiversity credits offered to private companies and organizations. This solution has many supporters, but also a growing number of opponents.

Take credit for biodiversity?

At the COP15 summit in December 2022. Representatives of the governments of nearly 200 countries around the world signed the landmark Kunming-Montreal agreement. As part of it, a decision was made to mobilize at least $200 billion. annually to promote biological diversity. Biodiversity credits are to be one of the components of this financial initiative.

The World Economic Forum, which has been instrumental in developing the idea of credits, explains that the idea is to have a credible, tradable financial instrument to implement actions with a measurable, positive impact on biodiversity. In other words, private companies wishing to invest in the environment will have the opportunity to purchase units of credit from organizations actively engaged in species protection or restoration.

Analogy to carbon credits

Biodiversity credits are compared to a tool developed in the early 21st century. In order to reduce harmful emissions. Voluntary Carbon Credits (VCMs) are designed to give companies whose operations involve the production of carbon dioxide and other greenhouse gases the opportunity to buy back the equivalent of their own in emissions in the form of subsidizing projects to reduce the amount of carbon in the atmosphere. Thus, it is a compensation for the damage done to improve the global ecological balance.

Unfortunately, voluntary carbon credits have not been as successful as expected. According to the World Economic Forum, their market has admittedly already reached a value of 2 billion The amount is expected to reach $1.5 billion and is expected to continue growing through 2030, but a number of problems have emerged during the implementation phase. Among the most important are difficulties in evaluating credited projects, the limited availability of financing options and risk transfer, as well as challenges related to accounting and avoiding double counting of environmental gains.

Criticism of the new instrument

The U.S. lobbying group Campaign for Nature released a report in early 2024, openly criticizing the assumptions and prospectivity of biodiversity credits. According to its authors, the private sector is not interested in the new initiative, which means that demand for loans will be very low. This suspicion is confirmed by earlier reports from the daily newspaper The Wall Street Journal , according to which giants such as Nestlé, Shell and Unilever are openly announcing that they will not use the loans as they develop their own environmental activities.

Another potential problem already identified in the carbon credit market is the threat of wasted funds due to intermediation. Indeed, the situation has been exploited by companies and individuals acting as mediators between credit buyers and organizations implementing environmentally friendly projects. As a result, a significant portion of the funding goes into private pockets. Also controversial is the scenario where negatively impacting biodiversity companies buy credits for peace of mind and better marketing potential instead of investing in changing technological processes. In the case of carbon credits, situations have even been observed where emission reductions have been overestimated, some of which would have been achieved even without the financial commitment of the company in question.

How to measure biodiversity?

The idea of buying credits is that you can clearly identify the units of positive results achieved in the implementation of projects. In the case of carbon credits, the issue is obvious – the emissions produced and reduced are measured in tons ofCO2 equivalent. However, biodiversity is not easily quantified, making comparability and financial estimation of privately supported initiatives difficult.

Ideas so far include calculation formulas based on, among other things. on the degree of degradation of a given ecosystem, its uniqueness, its potential for restoration and connection to other ecosystems, as well as avoided biodiversity losses in percentage terms. There have also been suggestions of converting credits into photographic evidence of the presence of specific species on a designated unit of land. However, standardization of the system on a global scale is still far from being achieved, and critics point out that it should also take into account the principles of additionality and sustainability of effects, so far quite neglected.

The role of indigenous communities

The biodiversity we are fighting for is concentrated in areas far from socio-economic centers. Up to 80 percent of all plant, animal, fungal and coral species are found in areas inhabited by traditional indigenous societies. Meanwhile, their role in environmental projects is still inadequate.

In many parts of the world, for example, land ownership is unregulated. Without them, the implementation of projects resulting from the loans could set a dangerous precedent of state authorities or private companies taking over areas to the exclusion of the interests of the people living there. In other cases, approval for project implementation is given by entities that do not represent the opinion of the entire local community.

Pollination Group, a consulting and advisory firm, in one of its first analyses of the operation of biodiversity credits, found serious violations in the social sphere. In her view, the vast majority of programs implemented so far do not involve obtaining the free, prior and informed consent of indigenous peoples, while overlooking the requirement to build local partnerships and share profits.

Do biodiversity credits have a future?

Although still in its infancy, biodiversity credits are already working – in September 2023. There were a total of 26, most of them run by private companies. The adopted goals include protection and regeneration of ecosystems, as well as management and adaptation to climate change. The Savimbo project in Colombia is presented as one of the more successful initiatives. It is based on a remarkably simple methodology for the protection of one key species, whose presence indicates the health of a given ecosystem. In the Colombian part of the Amazon, that species is the jaguar. The local community receives credits for documenting the presence of these cats in its territory.

However, there is no shortage of doubts. The aforementioned Pollination Group report emphasizes that diversity credits should in the future focus on marine and coastal ecosystems, which have been neglected so far. Promoting projects that are owned or implemented by indigenous communities and that include long-term financing without specifying an upper pool of funds are also indicated as important.

Instead, a competitive report by the International Institute for Development and Environment (IIED) postulates that a set of monitoring principles and tools must be adopted. They will enable companies buying credits to clearly demonstrate the extent to which they are minimizing their negative impact on biodiversity or actively supporting it. This will prevent a situation where species are protected in one part of the world to overshadow their destruction in another.

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