Biodiversity credits have the potential to be a crucial source of funding for the conservation of Earth’s ecosystems. However, establishing a functional market for the buying and selling of these payment tokens won’t be an easy task. It is important to protect the diversity of plants and animals as it has a direct impact on the economy, with around half of global output being dependent on nature. Approximately $600 billion to $800 billion more per year is required to address and repair the damage caused to the natural world by global industry and agriculture.
One potential solution is the development of biodiversity-credit markets, where companies and investors can purchase credits to fund restoration and conservation projects that demonstrate positive outcomes for biodiversity. Public spending alone cannot provide the necessary funding to ensure the survival of ecosystems, which makes the involvement of capital markets and the private sector essential. Professor John Tobin-de la Puente, an ecologist at Cornell University, believes that allocating around 1% of new and reinvested capital in private markets could help address the biodiversity crisis.
While the World Economic Forum is working to bring together various stakeholders, the establishment of a scaled-up market is still some way in the future. However, some biodiversity-credit systems have already been introduced. For example, Australia has launched a system that allows investors to fund restoration projects without purchasing land. This follows the concept of voluntary carbon credits, which enable companies to buy credits to offset their emissions. The global carbon credit market is now worth $2 billion, showing its growth potential.
Nevertheless, the carbon-offset system has faced criticism for not delivering promised emissions reductions, funneling most of the funds to intermediaries, and allowing businesses to delay investment in cleaner technologies. A biodiversity credit market would need to overcome these problems, as well as develop its own solutions. Companies will eventually be required to assess and reduce their impact on natural systems, in line with agreements reached at the COP15 biodiversity conference. A U.N.-backed framework will soon be published to guide businesses on how to report and act on nature-related risks.
While the market for biocredits is likely to be voluntary at first, there are currently no plans for a major regulated market like the European Trading Scheme for carbon emissions. The lack of a universal metric applicable to every project is a challenge for biodiversity markets, unlike carbon markets where each credit represents one metric ton of carbon dioxide.
Plan Vivo, a carbon-market standard setter, plans to launch a biodiversity standard later this year to jump-start the market for credits for projects that conserve or restore important habitats. The collaboration with biodiversity data startup Pivotal aims to create the first certified biodiversity certificate in this emerging market. However, buyers are advised to be cautious of projects that develop their own methodologies and data systems without proper oversight.
In addition to developing a reliable supply, the biocredit market also faces uncertainty over demand. While there is growing interest in biocredits, particularly among chief sustainability officers, the market has yet to see significant purchase activity. Major companies, including global food companies with long agricultural supply chains, would be expected to show interest in using credits to mitigate their impact on biodiversity. However, no major companies have confirmed their interest in purchasing biodiversity credits.
It is important to note that biodiversity credits are not the only way to secure the necessary funds for nature conservation. Other tools, such as nature-linked bonds and blended finance, which combines development funds with private capital, can also contribute to protecting nature. By implementing these strategies effectively, we can drive innovation and create a nature-compliant economic model.
Overall, the establishment of a functional biodiversity-credit market presents both opportunities and challenges. It requires collaboration among various stakeholders to overcome existing issues and ensure the success of conservation efforts.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.