What is a biodiversity credit?

A biodiversity credit is a certificate that represents a measured and evidence-based unit of positive biodiversity outcome that is durable and additional to what would have otherwise occurred.

This definition is dependent on there being a specific meaning of four other terms:

1. Biodiversity outcome

A “biodiversity outcome” is measured as the difference between the scenario with project activities and without project activities. Because it is measured, it implies that the credit represents an outcome already demonstrated. How the positive biodiversity outcome is typified rests upon the respective methodology. These outcomes can be a mix of ecological and management outcomes. Broadly, a positive biodiversity outcome is defined as:

A positive biodiversity outcome is an improvement in measures of biodiversity, a reduction in threats to biodiversity, or prevention of an anticipated decline in measures of biodiversity.

In more detail, this can be achieved through activities that seek the following:

Uplift
The improvement in biodiversity from project interventions such as ecological restoration indicated by the changed structure, composition, and function of the target ecosystem or species populations, or reduction in threat measures.

Avoided loss
The prevention of decline in biodiversity resulting from project interventions such as preservation or land designation indicated by the prevention of changed structure, composition and function of the target ecosystem or species populations, or prevention of increase in threat measures. Avoided loss projects will typically have demonstrable, imminent threats to biodiversity.

Maintenance
The maintenance of intact biodiversity through project interventions such as implementation of conservation management plans, effective recognition and protection of Indigenous rights and customary uses aligned with conservation objectives, conservation designations and sustainable financing of conservation, indicated by the prevention of changed structure, composition and function of the target ecosystem or species populations, or prevention of increase in threat. In maintenance projects, biodiversity will be threatened by medium- or long-term threats.

2. Measured and evidence-based
Credit methodologies will always include a measure of geographic area. In addition, methodologies must include multiple metrics of different aspects of biodiversity that describe a habitat’s condition, consisting of elements of structure, function, and composition (e.g., different, distinct dimensions of diversity in taxonomic groups, or habitat quality and structure). Some methodologies may also include one or more metrics that measure threats.

While methodologies must be evidence-based, it is recognized that some level of uncertainty is likely to remain an inherent factor, and “evidence-based” doesn’t necessarily mean demonstrated in the absolute. The use of multiple metrics will make methodologies more accurate at characterizing biodiversity benefits of credits and is necessary to ensure that project interventions aren’t causing one aspect of biodiversity to benefit while harming others.

BCA recognizes that markets will need different types of credits in accordance with their buyers’ needs, and ecological, geographic, and social conditions. Different types of credits include ones based on uplift in measures of biodiversity, avoided loss of habitat quantities and qualities, or maintenance of intact habitat and ecosystems. Evidence that can form the basis for selection of metrics can be based on conventionally peer-reviewed scientific methods and/or traditional ecological knowledge, presenting an opportunity to directly engage and partner with Indigenous Peoples and Local Communities. In any case, credit methodologies should go through broad consultation with interested parties and a public review process, and projects should go through a validation and verification process conducted by independent third parties.

While buyers may want—and ecosystems may require—one or more metrics that are specific or customized to a set of projects, there is also a need for at least some metrics and measurements to be comparable between projects, because this will allow investors to understand the different claims they can make regarding alternative investments and allow validation and verification bodies to understand how various crediting methodologies are performing.

A non-exclusive and non-exhaustive list of how the different credit types and the activities that generate credits can be measured includes:

Uplift

• Quantified change in one or more measures of biodiversity (e.g., quantified measures across a basket of underlying project-specific metrics, quantified measures in the dominant characteristics of ecological integrity, quantified measures of species or ecosystems of conservation or cultural importance); or
• Quantified measures of reduction in threats with evidence of a causative relationship between threat risk reduction and biodiversity uplift.

Avoided loss or maintenance

• Quantified prevention of detrimental change in one or more measures of biodiversity (e.g., quantified measures across a basket of underlying project-specific metrics, quantified measures in the dominant characteristics of ecological integrity, quantified measures of species or ecosystems of conservation or cultural importance);
• Quantified improvement in management effectiveness with evidence of a causative relationship between improved management effectiveness and biodiversity maintenance; or
• Quantified measures of reduction in demonstrable, imminent threats with evidence of a causative relationship between threat risk reduction and avoided loss of biodiversity.

3. Durability
Durability refers to the quality of the credits which relate to the period for which the positive biodiversity outcomes of a project are maintained without being reversed. BCA’s proposed definition of “durability” is:

Durability means the ability of a project to ensure that biodiversity outcomes on which credits are based are likely to endure for an extended period.

The durability of projects should be analyzed considering the financial and legal assurances established to ensure that the biological outcomes are maintained over time. This includes measures such as:

• Increased legal and/or customary protection status of the project site including through protected areas, and Other Effective Area-based Conservation Methods (OECMs), among others.
• Restrictions on the use of natural resources as reflected by land (or other relevant ecosystem) title annotations and limitations; examples of these include conservation easements, conservation covenants, and conservation usufructs.
• Restrictions on the use or extraction of specific groups of species or habitats and availability of enforcement capacity to ensure compliance with those restrictions.
• Improvements in the management effectiveness of the Protected Areas, OECMs, and Indigenous and Community Conserved Areas (ICCAs) based on recognized standards such as International Union for Conservation of Nature (IUCN) Green List.
• Establishment of an endowment or conservation fund that is legally or contractually obligated to the long-term financing or interventions needed to maintain biodiversity outcomes.
• Improvements in the measures of social, economic, cultural, and spiritual well-being of Indigenous Peoples and Local Communities.

The possibility to designate legal protection and corresponding land use restrictions will depend on local laws and regulations. Customary law protections may depend on customary lore and context. A project could take place within or outside an area designated for biodiversity protection, sustainable management, OECMs, or ICCAs.

The time period necessary to address threats and to protect and restore ecological integrity varies depending on the type of ecosystem, knowledge of the effectiveness of biodiversity conservation interventions, and appropriate conservation modality. It may often be that reducing threats might not lead to biodiversity increase quickly or at all, due to multiple or complex threats interacting, or new threats arising at the same time (either due to reducing other threats or not). National legal systems around property and real estate also affect the duration over which an area’s dedication to conservation purposes can be assured. In some countries, it is possible to secure site protection for 99 years or longer whereas others may only allow 20 years of conservation designation. Longer commitments will almost always have greater biodiversity benefits.

Agreements to maintain biodiversity credits and use-restrictions on land or water that support those agreements should aim for protections that last for as long as legal structures like easements or designations allow. At minimum, biodiversity credits should be durable for 20 years and buyers should always have clarity and evidence on the mechanisms which provide that durability.

4. Additionality
Biodiversity credits should only be awarded to project interventions where biodiversity outcomes are additional to those that otherwise would occur without the project intervention and revenue from the monetization of the biodiversity credits. Projects seeking to issue biodiversity credits must quantitatively and qualitatively demonstrate that the positive biodiversity outcomes would not be achieved without the project and anticipated biodiversity credit revenues. The appropriate approach to demonstrating this must be provided in credit methodologies. “Additionality” for biodiversity crediting is defined as:

Additionality means a requirement that credits can only be assigned to biodiversity outcomes that are attributable to the project intervention, and would not have otherwise happened.

Any assessment of project additionality should consider baseline conditions compared to the biodiversity outcomes of the project. Issues related to avoidance of potential doublecounting must be considered and addressed. Project additionality may vary greatly, even across similar types of interventions. For example, threats to biodiversity are not the same in countries with strong institutional and governance frameworks as in countries where environmental regulations barely exist.

The purpose of the financial additionality requirement is to ensure that the buyer of biodiversity credits can be confident that they are helping to cause the project intervention with their money. If credits are granted for maintenance activities within public conservation areas, it must be demonstrated that revenue from the sale of biodiversity credits will not undermine the government’s responsibility to finance biodiversity conservation (i.e., must be additional to government financial responsibilities). Therefore, crediting methodologies should consider the variations in regional, institutional, and economic contexts in any baseline. In the next section, “Issues for further discussion”, the paper raises several important points regarding how additionality can be assessed depending on types of project activity.

 

Issues for further discussion
Biodiversity credits cannot exist outside of a credit framework or system which determines whether and how they can be used. Some of the key principles that are part of any biodiversity credit system include:

Is there any evolving consensus on how to determine additionality for maintenance projects?

BCA acknowledges the importance of biodiversity credits for maintenance of interventions aimed at preventing threats to intact ecosystems and supporting local communities that depend on these landscapes.

The maintenance of biodiversity within a project site is a viable form of avoided loss intervention, particularly when the site is home to species or ecosystems of conservation significance and where this ecosystem will degrade if not maintained or threats are not continually averted. For example, some maintenance scenarios are highly dependent on fostering and adjusting economic incentives within threatened ecosystems. Biodiversity credits can help ensure that ecosystem-dependent communities have sustainable livelihoods, thereby allowing them to continue preserving and enhancing these ecosystems. This enables biodiversity credits to fund the conservation opportunity costs for such communities, together with on-going conservation management costs, including monitoring for threat events, and prevention of threat events. In such cases, the additionality criteria elaborated in the above definition must demonstrate that the ecosystem is not able to be maintained without interventions that require a new source of financing and that this new source of financing needs to be sustainable (i.e., on-going for the entire project period). For public conservation areas, it must be demonstrated that revenue from the sale of biodiversity credits is additional to—and would not undermine— the government’s obligation to finance biodiversity conservation.

Mechanisms that might enable sustainable conservation and effective management and contribute to the documentation of additionality may include conservation management plans, legal recognition and protection of Indigenous rights, customary practices aligned with conservation objectives, legal conservation designations, and sustainable financing before the crediting period concludes. This may be particularly relevant for privately managed and community-based protected areas (e.g., OECMs) that are not under the jurisdiction of a national government.

How can additionality be determined?

Considering the discussion above, below is a non-exhaustive list of options that may work for determining additionality based on different activity types within projects seeking to issue biodiversity credits. In many cases, additionality must be determined based on more than one of the options below. For example, evidence of financial additionality side by side with designation of a site. The restoration or protection of sites on which habitat has been damaged or destroyed (e.g., forest clearing), or legal protections (i.e., degazetting) have been removed within the past five years or a similar period, should not be considered additional because of risks that this could perversely incentivize more of those initial, harmful actions to biodiversity.

Uplift
Additionality under uplift could be assessed based on:

• Ecological restoration, habitat enhancement, exotic/invasive species removal or species management that would not have otherwise occurred without the project.

Avoided loss
Additionality under avoided loss could be assessed based on a combination of the following:

• A reference site with clear justification of the similarity between the project site and reference site in terms of ecological integrity.
• A reference scenario based on the project site and its surroundings that clearly demonstrates what biodiversity loss at the project site is most likely to happen in the absence of the project.
• Short term threats at the project site being imminent and unquestionable, and justifying conservation actions.
• Effective recognition and protection of Indigenous rights and customary uses aligned to conservation objectives.
• Evidence of financial additionality whereby new finance is not simply displacing previous public or private finance.
• Improved governance and management effectiveness of the project site including the creation of endowments for ensuring durability.
• Designation of project sites for conservation, for example, through the incorporation of the project site into the national protected and conserved area system or through land use restrictions, which may either provide durability benefits or additionality benefits. It is very difficult to distinguish between site designations that happen for other reasons (for example, a country’s commitment to 30 x 30 goals).
• Successful challenges to land and resource use-related decrees or regulations, permits, licenses, or concessions.

Maintenance / threat reduction

Additionality under maintenance / threat reduction could be assessed based on:

• A reference site with clear justification of the similarity between the project site and reference site in terms of ecological integrity and threat profile.
• A reference scenario based on the project site and its surroundings that clearly demonstrates what biodiversity loss at the project site is most likely to happen in the absence of the project.
• Medium term threats at the project site being unquestionable and justifying conservation actions.
• Designation of the project site for conservation, for example, through the incorporation of the project site into the national protected and conserved area system or through land use restrictions.
• Effective recognition and protection of Indigenous rights and customary uses aligned to conservation objectives.
• Improved governance and management effectiveness of the project site including the creation of endowments for ensuring durability.

When is it appropriate to base biodiversity credits on outcomes related to activities or interventions rather than on measurement of biodiversity impacts?

In an ideal world, crediting methodologies might all be based on measurement of change in biodiversity. In many ecosystems and projects, measurement of biodiversity change will be possible, for example, because some of the changes happen rapidly. However, in other ecosystems or situations, it is simply not practical to wait for all biodiversity outcomes to be achieved to award credits, particularly if one of the goals of biodiversity credit markets is to accelerate finance into conservation activities. Some ecosystems may take 100 years or more for biodiversity to change in response to restoration or management activities (e.g., Arctic or desert ecosystems). As a result of this, some proposed methodologies are based on evidence of removal of a threat, or biodiversity conservation management interventions that are based on a plausible and validated “theory of change” incorporated into an intervention logic model. Other proposed methodologies are based on measurement of physical conditions of habitat (e.g., pH of water or absence of soil erosion) that support biodiversity. These approaches pose the risk of inaccurately measuring biodiversity, since biodiversity may not respond to either threat reduction or changing physical conditions, for reasons beyond the control of the project. However, such approaches are more likely to be measurable in a timespan relevant to finance in some specific contexts. Ultimately, biodiversity crediting needs a governance system that creates a set of enforced rules on when it’s appropriate to use activity- and interventionbased metrics.

While BCA is not currently able to provide one recommendation or definition that creates rules for the use of different crediting methodologies, the following principles that try to balance the tradeoffs among these approaches can be proposed:

Measurement of changes in biodiversity are more likely to accurately and precisely match the technical goals and purpose of biodiversity crediting, and should be preferred unless they are difficult to measure or slow to achieve, or especially subject to annual or other temporal variation that creates uncertainty around the appropriate crediting for a project.

Methodologies that use indicators of threat reduction or physical habitat condition in issuing credit numbers are more likely to accurately assess biodiversity conditions and be trustworthy to buyers, if those methodologies and the credits sold under them also include at least some measurement of changes in biodiversity.

Measures of threat reduction are more likely to be useful in crediting when there is a strong scientific evidence base (i.e., demonstrated causal relationship) with which to associate a quantitative change in biodiversity with a quantitative change in threat or physical measures. The weaker the scientific evidence for a causal or correlative relationship, the more questionable these measures are as a basis for issuing credits.

Finally, it is worth noting that the biodiversity credit market will have to evolve in a context where availability of data will be asymmetric between countries and regions of the world, but this should not be a barrier to market access. Methodologies need to account for this. Regardless, investment in public data sources that support biodiversity credit markets is essential to secure an equitable and fair market.