How biodiversity markets can iterate from carbon to improve efficiency

Currently, in carbon markets, the main burden of methodology development falls on developers, an effort that often ends in nothing. Perhaps biodiversity markets offer an opportunity for iteration. Can we improve action and outcomes by reallocating roles, or streamlining procedures? 

We are living in a human-caused mass extinction event, and we must act on behalf of biodiversity. The survival of other species, and our species both depend on it. The 1992 Convention on Biological Diversity established an international mechanism for action, and the 2022 Kunming-Montreal Global Biodiversity Framework treaty has been ratified by 196 nations. We have shared aims. 

Now the time has come for action, with an estimated $180B commercial biodiversity credit market emerging to measure, trade, and reach these aims.  

At the beginning of 2023, Carbon Pulse published an analysis of this market, and how it relates to existing carbon markets — Dos and don'ts – Biodiversity market looking to carbon for guidance. In it, they stated that the biodiversity crediting market needed to establish robust standards early to drive growth. 

However, robust standards require time.  Time that is crucial to channel finance for biodiversity protection and restoration, as global targets are slipping away. Currently we have met only  one-third of the required total for global targets.

How can we iterate on carbon markets, to increase speed and accuracy of action in biodiversity? 

Streamlining methodologies as an opportunity to improve action

It has been just over 20 years since the publication of the first carbon-dioxide removal methodology — Incineration of HFC 23 Waste Streams --- Version 1. Today, several hundred methodologies are scattered across all productive (or destructive, as in the case of deforestation) sectors. These methodologies delineate processes that contribute to climate change in over 50 standards for voluntary carbon accreditation — and range from the simple to highly complex, as is the case for some REDD+ methodologies (which are, in fact, the closest to biodiversity conservation, a symptom of what might be to come).

Since the inception of the carbon market, the burden of developing methodologies has fallen on project developers, as their use is a prerequisite for certification. After approval, developers have carried the additional burden ensuring these methodologies are standardized, widely used, in addition to ensuring the generation, integrity, and quality of their carbon credits. 

So, if you want to build your house, it is not enough to draw up the plans; you also need to develop a general regulation on buildings, applicable to a wide range of situations and get it approved in a public setting. 

Some standards also require a study of the potential global applicability of the proposed methodology. Then, you must pay for the review of the standard and an independent third party to ensure transparency.

What if the standards themselves or other independent parties took on the task of the methodological developments required by their activity? It could be just as transparent with the advantage that a standard (in principle) would be in a much better position to guarantee independent evaluation and the principles required than a developer.

Yes, the current approach of requiring approved methodologies for certifying carbon projects is justified.  It helps ensure the integrity and quality of carbon credits. However, the path to their development — at least in the case of carbon markets — has taken years of enormous effort, frustration, and considerable expense that in many cases has ended in nothing. 

Further, it has placed a financial burden on developers that has significantly restricted market access, and slowed focus on action. 

If we are to learn from the carbon markets, we must find a more agile regulatory pathway with a fair sharing of burdens among the different actors. 

Currently, it is on the projects that the main burden for action falls: that of conserving and restoring biodiversity in a context of crisis and urgency, which cries out for effective action on an adequate scale, over and above wars and petty interests.

How can we enable this action? 

How biodiversity methodologies differ from carbon methodologies

Compared to carbon projects, the complexity of biodiversity credits poses challenges in developing methodologies for specific ecosystems. This means methodologies could have to limited replicability and excessive efforts focused on theoretical developments rather than practical biodiversity conservation actions —delaying actual conservation actions on the ground.

While developing methodologies for biodiversity credits may indeed be more intricate and context-specific, it is crucial to balance the need for robust, scientifically sound approaches with practicality and efficiency to ensure the effectiveness of biodiversity conservation efforts.

Standardized methodologies might not be suitable for all project types, particularly innovative projects that involve new technologies or approaches. Allowing flexibility in addressing methodological issues directly in the project design could encourage innovation in biodiversity conservation and restoration strategies.

For the past two years, Savimbo, together with other volunteers, has been developing an interoperable biodiversity unit to help standardize and streamline the nascent biodiversity credit market. This unit is defined in terms of area, time, a differential in ecosystem integrity attributable to a biodiversity conservation or restoration initiative, and an independent categorization of the relative value of the ecosystem.

There is little controversy or difficulty in measuring area and time since these are two widely standardized concepts. As for the categorization of the relative value of the ecosystem, since it is done independently of the developer (and ideally, of the certifying standard), it is essentially up to the developer to define: 

1. How to define and measure the integrity of the ecosystem and 

2. How to monitor and report. 

The other elements commonly included in methodologies should be defined by the standard under which the certification shall be done.

Many types of biodiversity projects have clear conservation and restoration actions. Often these are explicitly defined by the standard or by an external committee. For these methodologies, the development, prior approval and use of a methodology would not be necessary, as long as essential elements are clearly defined in a project design document.  In this case, project documents must only emphasis the practical implementation of biodiversity conservation actions to ensure tangible on-the-ground impact and effective conservation outcomes, delineate stakeholders involvement, and show robust design of robust monitoring and evaluation mechanisms to assess their effectiveness. 

Projects that defined their specific methodological elements in their design documents could then be approved more quickly and at a lower cost.

The development of methodologies would still remain open to those who are willing to go down this path. Ideally, if they can contribute elements and processes that facilitate the implementation of projects in different places and even ecosystems. 

A middle path could also be the definition of an innovation and learning stage, where biodiversity conservation and restoration projects can move forward without approved methodologies for a prudent period, about two years, after which it would be possible to define better whether the use of approved methodologies is indispensable and, if so, the types of actions, the types of ecosystems and the essential elements that these should have. Only after this analysis and reflecting on who should bear the burden of the methodology development could their use be required to implement biodiversity conservation and restoration projects.

Conclusion, biodiversity methodologies and improved action

The biodiversity crisis demands urgent action. Let us prioritize practical conservation efforts on the ground — streamlining processes to channel resources effectively while maintaining scientific rigor and stakeholder involvement. Through pragmatic approaches, we can drive tangible progress in conserving and restoring ecosystems without getting mired in excessive bureaucracy.

Written by Alvaro Vallejo, biodiversity expert and independent consultant.