Will we one day see the creation of an effective biodiversity market to respond to the collapse of life? In recent years, this solution, aimed at assigning a cost to nature and therefore financing compensation for its destruction, has seen a new lease of life. At the end of 2022, during COP 15 in Kunming-Montreal, the States committed at the end of an agreement which was intended to be as ambitious as that of Paris on the climate, to find new financing mechanisms for the protection of nature. The goal: to find 200 billion per year by 2030, by mobilizing all kinds of available resources, and in particular the private sector via biodiversity credits.
Since then, France has thought a lot about this question. Last March, during the One Forest Summit in Gabon, Emmanuel Macron already mentioned the creation of “biodiversity certificates”, making it possible to certify environmental protection policies, which could be “exchanged either with sovereign states or with the private sector as a contribution to nature protection. Paris is also at the initiative, with London, of a “roadmap for the development of reliable, impactful and equitable biodiversity credits”, announced during the Summit for a new global financial pact last June. Through these notions of credits, or biodiversity certificates, the State intends to rely on the market to remunerate environmental protection projects and allow private companies with harmful activities on nature to offset their impact.
But this initiative raises doubts. “We’ve already seen the film. It’s the same as for carbon credits, but worse this time,” warns Frédéric Hache, former market specialist, now director of the Green Finance Observatory. A little step back: since 2005 and the creation of the European carbon market, companies consuming a lot of energy and having exceeded their CO2 emissions quotas can buy “rights to pollute” from other companies that have not reaches their emissions limits, or “green” project leaders offering CO2 capture solutions (via forests or technological solutions). But this system has attracted a lot of criticism due in particular to the too large number of companies benefiting from “free” credits. Furthermore, its supposedly positive impact on nature, through the financing of reforestation projects, is now the subject of serious doubts, with certain “certified” credits not actually offering any benefit for the environment. These flaws could very well resurface when credits for biodiversity are implemented. This new system would even have one more major flaw. Because if the carbon market could boast of having a simple metric (the tonne of CO2 equivalent), “it is conversely impossible to standardize millions of species into a few liquid assets”, recalls Frédéric Hache.
The pioneering United Kingdom
Despite these pitfalls, certain mechanisms are beginning to emerge. In the United Kingdom, a system has existed since February for property developers. It plans to offset the harmful effects of their activities on the environment up to 110%, through actions with proven biodiversity gains. For promoters who do not achieve their objectives, the purchase of biodiversity credits on a regulated market will be possible, like what is done with carbon credits. But many questions remain: where can these compensations be made, how will the evolution of the economic value of a natural area be taken into account, will certain species be more valued than others, etc.? Unlike offsetting the effects of greenhouse gases, which are generally diffuse in the earth’s atmosphere, the impacts on the diversity of natural environments cannot be perfectly compensated.
Therefore, should we pay for virtuous practices and restore elsewhere what we destroy somewhere, or should we estimate the price of the “ecosystem services” provided by nature (such as the filtering of water through the soil, for example) and build a market around? Created at the initiative of France and the United Kingdom, the International advisory panel on biodiversity credits (IAPB) attempts to answer these questions. This small group of scientists and political leaders – including the former deputy governor of the Bank of France, Sylvie Goulard – denies wanting to “commodify” biodiversity. The IAPB claims to “help shape nature markets, increase and accelerate investments in nature in a way that benefits people and the planet”, taking into account the latest scientific data, people’s knowledge indigenous people, and market developments… “For the moment, there is no consensus on the establishment of a secondary market, but rather around voluntary instruments offered to companies to demonstrate their contribution to safeguarding biodiversity”, explains Alain Karsenty, economist and researcher at the Center for International Cooperation in Agricultural Research for Development (CIRAD), who participated in working groups on the subject. And one can doubt their success due to a lack of reliability.
A $70 billion market
This use of “certificates” rather than “credits” is also a position defended by the biodiversity branch of the ecological transition strategy consulting firm Carbone 4 and the Natural History Museum. The idea developed by the two bodies is to develop certificates attesting to the beneficial effects of a project, without providing support for compensation. “The heart of the research project is to establish a method to quantify the gains in diversity from restoration, regeneration, or conservation actions carried out in the field. But it cannot be an authorization to be canceled other negative impacts generated elsewhere”, explains Arthur Pivin, head of the Biodiversity division of Carbone 4. These biodiversity certificates could thus be purchased by a company to promote its impact on the environment, without giving rise to a dedicated market.
Will these devices experience the massive development that some predict? According to projections from the Davos Economic Forum, global demand for voluntary biodiversity credits could reach $2 billion in 2030, and peak at nearly $70 billion in 2050. An exciting prospect for supporters of green finance, who must be accompanied by solid scientific integrity: “Everyone is very aware of the dangers inherent in these devices, there is very strong vigilance on the interest and the risks of abuses in this market”, assures Claire Tutenuit. An essential point for these billions to protect the environment instead of destroying it.
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