Biodiversity credits and certificates: what’s the difference?

Alain Karsenty. Biod­iversity cred­its enable envir­on­ment­al dam­age to be off­set. The sys­tem does not, in essence, alter the prin­ciple of reg­u­lat­ory off­set­ting that already exists in many coun­tries, recently includ­ing France. An infra­struc­ture developer must fol­low the ‘avoid, reduce, off­set’ sequence, and there­fore coun­ter­bal­ance any dam­age to nature that could not be avoided. This off­set­ting must take place near the affected areas and with­in sim­il­ar ecosystems.

Where­as, under tra­di­tion­al com­pens­a­tion, the pro­ject developer seeks a site them­selves to meet their oblig­a­tions, biod­iversity cred­its offer sup­ply-side com­pens­a­tion. In oth­er words, a third party car­ries out con­ser­va­tion or res­tor­a­tion work before eco­lo­gic­al dam­age occurs and then sells the cred­its to those who need them. These parties are required by reg­u­la­tion to pur­chase cred­its cor­res­pond­ing to the hab­it­ats affected.

This sys­tem has advant­ages. Firstly, it ensures that com­pens­a­tion takes place, as it is car­ried out in advance. It also enables the devel­op­ment of more coher­ent con­ser­va­tion frame­works by cre­at­ing biod­iversity cor­ridors, rather than estab­lish­ing con­ser­va­tion or ren­at­ur­a­tion areas solely based on land avail­ab­il­ity. France is devel­op­ing nat­ur­al sites for com­pens­a­tion, res­tor­a­tion and ren­at­ur­a­tion (SNCRR) based on this approach.

Cer­ti­fic­ates are a fin­an­cial instru­ment like any oth­er. They attest to a pos­it­ive impact on nature. A com­pany can pur­chase this tool and high­light it in its report­ing or as part of its CSR policy. As com­pens­a­tion is no longer an issue, a loc­al con­nec­tion is no longer neces­sary. For example, a Japan­ese bank could pur­chase cer­ti­fic­ates to fund the cre­ation of a new pro­tec­ted area in Mad­a­gas­car. The main prob­lem that can arise is that of gre­en­wash­ing or double count­ing: a com­pany may pur­chase a cer­ti­fic­ate, pub­li­cise its pos­it­ive impact, and then resell it to anoth­er company.

Nev­er­the­less, some stake­hold­ers use the terms “cred­it” and ‘cer­ti­fic­ate’ inter­change­ably. This is the case with the IAPB, the Inter­na­tion­al Advis­ory Pan­el on Biod­iversity Cred­its, which uses the term ‘cred­it’ in both instances, on the basis that cred­its could serve both as off­sets and as contributions.

Yes, in the­ory. But in my view, we need to keep these two mech­an­isms clearly sep­ar­ated. Off­set­ting is gov­erned by very strict rules of equi­val­ence and prox­im­ity, which is not the case with cer­ti­fic­ates. Accept­ing the ver­sat­il­ity of these tools risks weak­en­ing the reg­u­lat­ory frame­work gov­ern­ing off­set­ting require­ments, where­as we should instead be tight­en­ing them.

On the oth­er hand, we can envis­age ways of link­ing the two. Once everything that could be done in terms of loc­al off­set­ting has been done but oblig­a­tions remain, it should then be pos­sible to sup­ple­ment these by pur­chas­ing cer­ti­fic­ates. Off­sets must be provided ‘in kind’ and close to the affected areas, but it is not uncom­mon for oper­at­ors to be unable to find suf­fi­cient land to restore or equi­val­ent hab­it­ats to con­serve in the vicin­ity. Many reg­u­la­tions out­side France there­fore allow oper­at­ors to ful­fil their com­pens­a­tion oblig­a­tions by con­trib­ut­ing money to spe­cial­ised funds or pro­tec­ted areas. Extend­ing this flex­ib­il­ity to the pur­chase of cer­ti­fic­ates cer­ti­fied by pub­lic author­it­ies would help to stim­u­late demand for these vol­un­tary instruments.

The European Uni­on is cur­rently work­ing on a sys­tem of nature cer­ti­fic­ates, inten­ded to be sup­ple­men­ted by nature cred­its. Nature cer­ti­fic­ates would be gen­er­ated from prac­tices deemed to be bene­fi­cial to an eco­sys­tem, whilst cred­its would be issued based on an index of the health of the eco­sys­tem in question.

The prac­tice-based cer­ti­fic­ate approach is, for example, cham­pioned by the Organ­isa­tion for Biod­iversity Cer­ti­fic­ates (OBC) in France. These cer­ti­fic­ates would spe­cific­ally fund the cost of actions under­taken, such as plant­ing hedgerows or recruit­ing eco-guards to com­bat poach­ing. How­ever, there is no con­sensus on this approach. Some believe that only res­ults meas­ured using a biod­iversity ‘met­ric’ (num­ber of spe­cies, improve­ment in water qual­ity, etc.) should be taken into account. But this poses cer­tain prob­lems. Firstly, because res­ults are some­times only meas­ur­able years after a prac­tice has been imple­men­ted. Yet these actions come at a cost. Cer­ti­fic­ates would help fund the adop­tion of new prac­tices or the con­tinu­ation of good practices.

Fur­ther­more, cli­mat­ic uncer­tain­ties and bad luck must be taken into account. A pro­ject may have put all the right prac­tices in place, but be affected by extern­al events (fire, flood­ing, dis­eases, etc.) which can undo all the efforts – and thus under­mine its abil­ity to secure fund­ing.  The ori­gin­al­ity of the European pro­ject lies in com­bin­ing these two dimen­sions, even though, at this stage, rep­res­ent­at­ives of the European Com­mis­sion envis­age that only cred­its will be trad­able units. Con­sulta­tions are expec­ted to con­tin­ue for at least anoth­er year before this European mar­ket is launched.

Gre­en­wash­ingcan occur on the sup­ply side: that is, through the sale of bogus biod­iversity cred­its or cer­ti­fic­ates, which do not make much of a dif­fer­ence on the ground. We won’t be able to avoid this. In par­tic­u­lar, for cred­its derived from con­ser­va­tion meas­ures, it will be dif­fi­cult to determ­ine wheth­er, without the sale of these cred­its or cer­ti­fic­ates, a landown­er would actu­ally have car­ried out eco­nom­ic activ­it­ies that des­troy nat­ur­al hab­it­ats. When it comes to eco­sys­tem res­tor­a­tion, there will always be a risk of excess­ive issu­ance of cred­its or cer­ti­fic­ates rel­at­ive to the actu­al cost of the operations. 

But there is also, of course, the issue of gre­en­washin­gon the part of buy­ers. What hap­pens if min­ing or oil com­pan­ies want to buy biod­iversity cer­ti­fic­ates to pub­li­cise the fact that they, too, have a pos­it­ive impact on nature? This is a ques­tion that will inev­it­ably arise. Pro­ject ini­ti­at­ors (loc­al author­it­ies, farm­ers, organ­isa­tions, etc.) could cer­tainly include exclu­sion clauses.

The aim is also to avoid rep­lic­at­ing the prob­lems iden­ti­fied in the car­bon mar­ket. For example, it is import­ant that it is the people con­cerned who determ­ine the actions to be taken in their area, rather than an extern­al party com­ing in and telling them: ‘We want to run a biod­iversity pro­ject; we’ll pay you, but in exchange, you must adopt the prac­tices we pre­scribe.’ The object­ives must be the res­ult of col­lect­ive decisions.

Interview by Pauline Fricot