Biodiversity Credits for Environment Conservation | 27 Dec 2024

Source: DTE 

Why in News?

Recently, a new study published in the journal Proceedings of the Royal Society B, casts doubt on the effectiveness of the biodiversity credit market which is touted as a potential game-changer for biodiversity conservation. 

• The study also highlighted deep uncertainties within the market and questioned whether its benefits designed to offset biodiversity loss, truly outweigh the potential harms. 

What are Biodiversity Credits? 

• About: Biodiversity credits are a verifiable, quantifiable and tradable financial instrument that rewards positive nature and biodiversity outcomes (e.g. species, ecosystems and natural habitats) through the creation and sale of either land or ocean-based biodiversity units over a fixed period. 
  • The World Economic Forum (WEF) launched the Biodiversity Credits Initiative to unlock new financing for measurable positive outcomes for nature. 
• Mechanism: Biodiversity credits function similarly to carbon credits.  
  • When a company or government harms biodiversity, they can offset the damage by paying for conservation efforts elsewhere.  
  • The idea is to balance the overall loss to biodiversity through compensatory actions while attracting private funding for conservation.  
• Future Potential: WEF estimates the biodiversity credit market is worth USD 8 million, with projections reaching USD 2 billion by 2030 and USD 69 billion by 2050.  
  • The Kunming-Montreal Global Biodiversity Framework 2022 calls for financing mechanisms like ecosystem services payments, green bonds, and biodiversity credits to mobilize USD 200 billion annually by 2030. In line with this, the Biodiversity Credit Alliance (BCA) was launched. 

What are the Concerns Related to the Biodiversity Credit Market? 

• Flawed Concept: When a company or government harms biodiversity, they can offset the damage through conservation payments elsewhere, but this is criticized for shifting harm instead of preventing it and addressing root causes.  
• Displacement and Land Grabs: Wealthy corporations and nations could purchase credits sourced from poorer countries in the Global South, leading to land grabs and displacement of Indigenous and local communities.  
  • Displacement and loss of access to land and resources disproportionately affect women and marginalized groups. 
• Lack of Accurate Measurement: Unlike carbon credits, which are standardized in terms of one tonne of CO₂ or CO₂ equivalent, biodiversity credits are measured in hectares, making it difficult to equate biodiversity across different ecosystems, continents, and biomes. 
  • Additionally, Leakage occurs when harmful activities, like deforestation, shift to other areas, such as farmers converting new land for agriculture after adopting biodiversity credits. 
• Delay of Systemic Changes: Biodiversity credits may provide a temporary solution, delaying systemic changes needed to tackle biodiversity loss. 
  • Biodiversity credits, often issued for short periods, make it difficult to assess long-term impacts, as trends like butterfly populations require longer data for accurate evaluation. 

Way Forward 

• Addressing Root Cause: Efforts should be redirected towards preventing biodiversity loss in the first place like limiting deforestation, unsustainable agriculture, or fossil fuel extraction.  
• Context-Specific Metrics: Develop context-specific metrics considering species interactions, ecosystem health, and cultural significance, beyond just land area. 
• Shift Towards Holistic Approaches: Transform industries that drive biodiversity destruction (e.g., agriculture, forestry, and mining), promote circular economies, and aligning policy frameworks across sectors to prioritize biodiversity protection. 
• Monitoring and Reporting: Civil society and local communities should be empowered to scrutinize projects, hold corporations accountable, and ensure that credits lead to real conservation outcomes. 
• Non-Market-Based Approaches: A shift from market-based solutions like biodiversity credits to direct, nature-based solutions is needed, focusing on expanding protected areas, restoring ecosystems, and supporting community-based conservation that values nature's intrinsic worth.