The projections for life on earth are bleak: At the current rate, one million known species could go extinct by 2050. On Dec. 7, diplomats from nearly every country will convene in Montreal for a ten-day summit on biodiversity conservation, trying to find ways to reverse that trend.
The biodiversity crisis has one thing in common with the climate crisis: Policymakers are pushing to monetize the solutions and make private companies pay.
In a Dec. 5 paper published, economists at the International Institute for Environment and Development (IIED), a UK think tank, and the UN Development Program expressed support for the nascent market for “biocredits.” The idea is that conservation groups—nonprofits or for-profit companies—working to protect ecologically important habitats or thwart biodiversity loss could convert their efforts into tradable credits. These could be purchased by companies, institutional investors, or individuals with an interest in supporting conservation or fulfilling a sustainability mandate—just as carbon credits offer a way to invest in projects that cut emissions.
Biocredits, the paper argues, “could provide an option to encourage stronger private sector financial flows” toward the overall cost of preventing further loss, which the Nature Conservancy estimates at nearly $1 trillion per year by 2030, $824 billion more than is currently invested by public and private entities globally in conservation.
Today, the biocredits market is almost nonexistent. But interest is picking up, according to a September report by Credit Suisse. And the IIED paper highlights three startups in Africa and South America that are workshopping methods to create and sell biocredits.
Biocredits could avoid the biggest pitfall for carbon credits
In theory, creating a carbon credit is easy: One ton of carbon emissions either avoided or pulled from the atmosphere equals one credit. The metrics for biocredits are murkier, and must somehow reflect the lives saved of flora and fauna in some unit of geographic space.
One of the startups cited by the IIED paper “defines a unit of biodiversity as a 1% increase or avoided loss in the median value of a basket of metrics, per hectare.” The “basket” would change depending on the specific ecosystem, and could include things like the number of endangered species present in that area, or the number of individuals from a certain species present there. More research into those methods is needed before biocredits can take off, the paper cautions.
In another way, though, biocredits are simpler than carbon credits. Carbon is essentially fungible—a ton emitted in the US has the same impact on the global climate as a ton emitted in Kenya—so carbon credits have frequently been traded and marketed as “offsets,” with the assumption that the buyer is free to pollute as long as they buy a compensatory number of credits. That assumption leads to all kinds of sloppy accounting, double-counting, and greenwashing, with the upshot that the carbon market hasn’t been effective at driving down total global emissions, which is ultimately the point.
How do biocredits work?
Biocredits, in contrast, are clearly not fungible. No one can argue that it’s fine for a company to bulldoze a forest in the US as long as it pays for conservation in the Amazon. In other words, biocredits cannot be used as “offsets.” Buying one doesn’t give the buyer any right except to say, “I supported conservation.” As a result, biocredits avoid much of the bad-faith math that has discredited the carbon market.
Nevertheless, not everyone is keen on the idea of biocredits. In an open letter published in November, more than 100 academics and environmental groups cautioned against the development of a biocredit market, because it “promotes a meaningless monetary valuation of nature” and could be construed as a replacement for environmental regulation. The IIED paper also recommends that any biocredit trading system should include the views of indigenous communities and others living in the area being conserved.
Still, the biggest test for the biocredit market will lie in how many buyers step forward. The strategic allure of offsetting, dubious as it is, has driven rapid growth in the carbon market. When the incentive to participate is merely altruism, rather than a cover for environmentally damaging corporate behavior, buyers may line up around the block. If they were so inclined, in fact, biocredits likely wouldn’t be needed in the first place.