This chapter examines an emerging instrument, biodiversity credits, presenting its various definitions and interpretations. It discusses the evolution of biodiversity credits, highlighting international, national and subnational efforts to define, shape and scale up these mechanisms. Drawing on early experience, the voluntary carbon market and other biodiversity-positive incentives, the chapter then shares insights on how to ensure the effectiveness of biodiversity credits and outlines priorities for further work.
Scaling Up Biodiversity‑Positive Incentives
Delivering on Target 18 of the Global Biodiversity Framework
Abstract
Since 2022, there has been increasing interest in biodiversity credits as a mechanism to scale private finance for activities that deliver biodiversity gains. However, there is yet no clear definition of biodiversity credits. For example, some clearly distinguish these from biodiversity offset programmes (Chapter 6), whereas others do not.
How biodiversity credit programmes are designed and implemented will be key in determining whether they are environmentally effective and the extent of greenwashing risks.
Insights with emerging biodiversity credits to date – and other incentive mechanisms including voluntary carbon markets – underscore several key considerations:
Robust baselines, additionality and permanence, combined with monitoring and independent verification, will be key to ensuring integrity.
Government oversight in the design and implementation of any biodiversity credit mechanism should be established from the start to promote environmental integrity and equity.
While biodiversity credits may offer an additional way to mobilise finance from the private sector, governments should weigh their potential benefits and risks.
This chapter provides an overview of biodiversity credits – a mechanism that has been proposed recently to mobilise private finance for biodiversity and has garnered interest from various stakeholders. The chapter reviews initiatives by non-government organisations (NGOs), business and governments to explore its potential use, as well as the state-of-play of emerging biodiversity credits on the ground. The chapter also discusses policy developments in the voluntary carbon market that have been necessary to enhance environmental integrity and provides insights on areas that merit further work for the possible development of high integrity biodiversity credits.
Biodiversity credits are emerging as a new mechanism to mobilise private finance for activities that deliver biodiversity gains. Biodiversity credits are referred to in Target 19 of the 2022 Kunming-Montreal Global Biodiversity Framework which refers to: “Stimulating innovative schemes such as payment for ecosystem services, green bonds, biodiversity offsets and credits, and benefit-sharing mechanisms, with environmental and social safeguards.” Several different institutions, including international organisations or alliances, businesses, NGOs, academics and governments, are examining how biodiversity credit schemes could be designed and operationalised.
While biodiversity credits have garnered considerable interest since 2022, there is no universally agreed definition of a biodiversity credit. One reference to biodiversity credits described these as units intended to finance measurable gains in biodiversity through conservation or restoration (Ducros and Steele, 2022[1]). Several proponents of biodiversity credits have suggested that they are distinct from biodiversity offsets. NatureFinance, for example, states that biodiversity credit schemes are not intended to facilitate the ‘offsetting’ of negative impacts on biodiversity, but rather to reward positive gains (NatureFinance, 2023[2]). Similarly, GEF and IIED (2023[3]) (referring to these as “nature certificates”) states:
Throughout this report, nature certificates are defined and analysed to be distinct from biodiversity offsets in that they do not offset, or justify, nature or biodiversity loss done elsewhere. Nature certificates represent an entirely positive contribution to biodiversity. As they are not offsets, nature certificates are not constrained by ecological equivalency in that they do not have to compensate the loss of “equivalent” components of biodiversity or loss of local ecosystem services in specific areas. Hence, they have the potential to scale more easily than biodiversity offsets and, in particular, international trades can be envisaged.
In other cases, the distinction between biodiversity credits and biodiversity offsets is less clear. For example, it has been suggested that biodiversity credits should be undertaken in the broader context of the mitigation hierarchy (TBC, 2022[4]; WEF, 2023[5]), thereby implying the need to first avoid and minimise adverse impacts to biodiversity, prior to the use of a biodiversity credit – a hierarchy that is most often associated with biodiversity offsets. Moreover, IAPB (2024[6]) included biodiversity offsets (referred to as “local compensation of biodiversity impacts”) as one of three possible forms of biodiversity credits (discussed further below).
The lack of clear definitions leads to an inconsistent use of terms, risking confusion. Some use the terms offsets, compensation, credits and certificates interchangeably, whereas others make distinctions between them. For example, under some biodiversity offset schemes (Chapter 6), the term credit is used to refer to the biodiversity unit of exchange (e.g. the US Wetland Mitigation Banking programme and the NSW Biodiversity Offsets Scheme in Australia).1 It should be noted that this form of biodiversity unit is not new, with biodiversity offsets, including mitigation banking, being practiced in some countries for several decades (see e.g. (OECD, 2016[7])). As noted above, others use the term biodiversity credits to encompass a range of different types of approaches, where biodiversity offsets are a subset of these. For clarity, this chapter aims to distinguish between a biodiversity credit (and its conceptual novelties) and a biodiversity offset (under a no net loss or net gain cap, as part of the mitigation hierarchy), which is the focus of Chapter 6.
7.2.1. International (non-government) initiatives on biodiversity credits
Several non-government initiatives have emerged to guide the development of biodiversity credits, notably the World Economic Forum (WEF) Biodiversity Credits Initiative, the Biodiversity Credit Alliance (BCA), and the International Advisory Panel on Biodiversity Credits (IAPB). The WEF launched the Biodiversity Credit Initiative in 2022 to explore the potential of biodiversity credits to finance measurable positive outcomes for nature and its stewards. They describe biodiversity credits as “a verifiable, quantifiable and tradeable 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” (WEF, 2022[8]), and more recently, in their report “Nature Finance and Biodiversity Credits: A Private Sector RoadMap”, use the definition provided by the BCA (see below) (WEF, 2024[9]).
The BCA was launched in December 2022 at CBD COP15, and comprises a group of scientists, academics, conservation practitioners and standard setters. The BCA Task Force includes Ekos, Plan Vivo, Terrasos, ValueNature, amongst others. The BCA is facilitated by SIDA, UNEP FI and UNDP. The BCA defines a biodiversity credit as: “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” (BCA, 2024[10]). In this context, BCA states that a “biodiversity outcome” is measured as the difference between the scenario with project activities and without project activities, with a credit representing an outcome that has already been demonstrated. Moreover, 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 monetisation of the biodiversity credits.
The IAPB, an independent panel with support from France and the UK, was spurred by an earlier French-UK government-led initiative, launched in June 2023, to develop a biodiversity credits roadmap to support companies’ contribution to nature recovery (France and UK, 2023[11]). The roadmap set out a plan to scale up global efforts to support companies in buying biodiversity credits. It was designed to centralise expertise on biodiversity credits to examine best practices on issues ranging from credit funding governance mechanisms to monitoring frameworks. The French-UK initiative established the IAPB to lead this process as a global, independent and multidisciplinary expert group, to guide and encourage the use of biodiversity credits. The IAPB was set up comprising panel members, five working groups, and knowledge partners, with the working groups established to focus on measurement, demand, supply, stewardship and governance. Panel and working group members are composed of representatives from finance, business, Indigenous Peoples and local communities, NGOs and academia. The IAPB adopts the same definition of a biodiversity credit as the BCA (IAPB, 2024[6]).
These and other institutions have been exploring key issues on how biodiversity credits could be designed to promote environmental integrity. For example, the WEF released a Consultation Paper on “High-Level Governance and Integrity Principles for Emerging Voluntary Biodiversity Credit Markets” in December 2022 (WEF, 2022[12]), with a follow up report in 2023 on guidance to support early use of biodiversity credits with high integrity (WEF, 2023[5]). Other reports on high integrity biodiversity credits have been released by The Biodiversity Consultancy (TBC, 2022[4]), Pollination (Pollination, 2023[13]), and Plan Vivo with Fauna & Flora International and Carbon Tanzania (Plan Vivo, 2023[14]). These reports cover a range of issues, including the need to promote robust and verifiable positive biodiversity impacts. They emphasise the importance of ensuring that actions are additional, co-designed with local stakeholders to ensure equity and inclusion, and supported by transparent reporting on biodiversity outcomes. Overall, the reports have tended to highlight what is needed (e.g. that MRV should be transparent) rather than on how such principles would be operationalised in practice.
The IAPB conducted an open consultation in 2024, seeking inputs and views on a broad range of six different possible models (“archetypes”) for how biodiversity credits could be used. The consultation also considered the key factors, challenges and opportunities that could influence the success of such use cases through the lens of five thematic and cross-cutting features on impact, operability, scalability, tradability and equitability. The six models covered both “compensation” approaches – namely voluntary insets, voluntary offsets, and compliance offsets; and “contribution” approaches – namely corporate voluntary CSR contributions; provision of consumer products/services bundled with nature contributions, and regulatory driven CSR.2 The outcomes of the consultation, based on feedback from 87 respondents as well as additional feedback received from stakeholder discussions, were released in July 2024 (IAPB, 2024[15]).
Following the public consultation, the IAPB released its framework for high-integrity biodiversity credit markets in October 2024 (IAPB, 2024[6]), suggesting three possible ways that biodiversity credits could be used, namely: 1) for evidence-based contributions to nature goals; 2) for local compensation of biodiversity impacts (i.e. biodiversity offsets); and 3) for insetting within buyers supply chain. The first and third approaches are reviewed and further examined below. The second approach, local compensation of biodiversity impacts, which IAPB states must be local-to-local and like-for-like, are referred to as biodiversity offsets in this report. As biodiversity offsets are covered in Chapter 6, this approach is not further discussed here.
IAPB describes evidence-based contributions as voluntary contributions whereby the methodology to develop a biodiversity credit would need to be robust in terms of outcomes achieved, and which could be either regulated or unregulated. IAPB associates these contributions with claims that the buyer of the credit can then make. Examples of voluntary contributions provided by IAPB include work under Australia’s Nature Repair Act (discussed in the section below) and a Conservation Exchange pilot in Canada (Box 7.1).
The Ministry of Environment and Climate Change Canada (ECCC) launched a three-year Conservation Exchange (CX) pilot in 2021, with the core objective of increasing the level of voluntary business investment in nature conservation. Under the pilot, businesses that fund conservation projects delivered by proven conservation organisations will receive a government-backed certificate to recognise the benefits of the conservation work they are funding. Each certificate will include information about the biodiversity benefits of the conservation work that is comparable across projects.
The ECCC Audit and Evaluation branch released an evaluation of the CX pilot in June 2024 providing key findings, challenges and lessons learned. Challenges cited covered the following: that conditions for high demand were not realised; the process for estimating biodiversity benefits is not fit for high volumes of projects; impacts beyond outputs are difficult to assess; and that costs are high on a per-project basis. The report notes that the actual spending on the CX pilot from 2021-22 to 2023-24 was CAD 5 million (~USD 3.8 million), during which time four projects were in progress. The three lessons learned reported are that: the CX pilot is a relevant and timely intervention for the ECCC; delivery and design should be strengthened to maximise impact; and more effort, data and time are needed to assess results.
The CX pilot has since been extended to March 2026. Some (albeit limited) information on the ongoing and completed projects is made publicly available on the Ministry’s website. As of January 2025, six on-going projects were listed, with funders including Aviva, Nutrien and TC Energy.
Source: (ECCC, 2024[16]); Environment and Climate Change Canada, Conservation Exchange Pilot. Government of Canada. Retrieved June 3, 2025, from https://www.canada.ca/en/environment-climate-change/services/nature-legacy/about/conservation-exchange.html.
IAPB places supply chain insetting under the category of compensation (rather than contribution) and considers that such a system could work under either a voluntary or compliance (i.e. mandatory) setting. It notes that the supply chain insetting model could for example be used to address nature-related dependencies and risks.
As an illustration of how insetting might work, the example provided by IAPB (2024) is Green Collar’s work in developing Reef Credits in Australia. The Reef Credits Scheme, a voluntary environmental market, pays land managers for improved water quality resulting from their on-farm actions. Credits can be generated in one of two ways: 1) by reducing the flow of nutrients (i.e. dissolved inorganic nitrogen - DIN) to the Great Barrier reef, through improved cropping practices or by establishing wetlands; and 2) by repairing gullies that prevent fine sedimentation erosion on agricultural land. One reef credit represents 1 kilogram (kg) of DIN or 538 kg of fine sedimentation prevented from entering the barrier reef. Credits generated can be sold to government, business, investors or philanthropy seeking to reach water quality targets or corporate sustainability outcomes (GreenCollar, 2025[17]). According to Ecomarkets - Australia, the independent administrator of the scheme, 47 000 reef credits have been issued and 41 000 credits retired between 2020 (when the first Reef credits were issued) and mid-2024 (EcoMarkets Australia, 2024[18]). While Ecomarkets do not publish reef credit prices, they state that Reef Credits have sold for AUD 100 per credit (Ecomarkets Australia, 2024[19]). Generating additional demand for Reef Credits has been cited as a challenge which has been attributed to the voluntary nature of the market as there is limited incentive for buyers to purchase credits beyond Corporate Social Responsibility objectives (Green Finance Institute, 2024[20]). In response, the Queensland government has committed to purchasing AUD 10 million worth of credits over the period 2024-27, which has provided confidence to farmers that credits they generate will be purchased.
It is, however, difficult to determine the extent to which this approach may be considered supply chain insetting for biodiversity, as the possible purchasers include for example philanthropy and purchases by business and investors may be made without a clear link to, or measurement of, their supply chain impacts on biodiversity. In addition, overall, the term insetting is not yet clearly defined (Box 7.2).
In the context of climate change, where the term insetting first emerged, insetting has been referred to in different ways, often as verified greenhouse gas mitigation outcomes within a company’s own supply chain. This is distinct to carbon offsetting, which involves the purchase and retirement of a GHG mitigation outcome from outside a company’s supply chain. However, there is yet no officially agreed definition of carbon insetting.
In the case of biodiversity, biodiversity offset schemes put a constraint on development, operate under the broader framework of the mitigation hierarchy (Chapter 6) and are used to address project-level impacts. Project-level impacts may be understood to refer to direct operations. Negative impacts on biodiversity can, however, occur at different stages of a business’ value chain (e.g. direct operations, upstream supply chains, downstream supply chains and investments). Biodiversity insetting could therefore be interpreted to mean going beyond addressing project-level impacts under the broader mitigation hierarchy to addressing value chain impacts, also under the broader mitigation hierarchy.
Taking a different perspective, the IAPB indicates that supply chain insetting – described as “proactive investment within supply chains to enhance biodiversity-related productivity” – could also be used to address dependencies. Specifically, it states: “The use of biodiversity credits as insetting refers to an approach where companies or organisations proactively invest in biodiversity within their supply chains and in the places where these are located, for example to address nature-related impacts and dependencies”. Arguably, addressing dependencies (rather than impacts) in supply chains may have stronger similarities to businesses’ motivations to engage in a payment for ecosystem services programme.
Note: Background papers including work on insetting available here: https://sciencebasedtargets.org/news/sbti-releases-technical-publications-in-an-early-step-in-the-corporate-net-zero-standard-review.
Source: (IAPB, 2024[21]), Framework for High Integrity Biodiversity Credit Markets; (Wetterberg, Ellis and Schneider, 2024[22]), The interplay between voluntary and compliance carbon markets: Implications for environmental integrity, 10.1787/500198e1-en; (White et al., 2023[23]), Principles for using evidence to improve biodiversity impact mitigation by business, 10.1002/bse.3389.
These ongoing initiatives illustrate the myriad different entry-points being considered for biodiversity credits, and the various issues that are being explored. Meanwhile, several governments are also beginning to consider possible pathways for biodiversity credits or certificates. These are reviewed in the following section.
7.2.2. Government-led initiatives considering the role of biodiversity credits
Several national governments are also beginning to consider the role of biodiversity credits (or certificates) for domestic use.3 The government-led initiatives in OECD countries are summarised below.
In the UK, a Nature Markets Framework was released by HM Government in March 2023 (Government, 2023[24]) with the intent to scale up private investment in nature recovery and sustainable farming. Nature markets are described broadly to cover carbon, nature recovery, clean water and other benefits, and encompass both voluntary markets and markets driven by regulatory obligations. The framework sets up how government intends to guide and support the development of nature markets and its vision to embed integrity and principles in the framework. As part of this work, the British Standards Institute, in collaboration with Defra and industry, is working on integrity principles for nature markets to boost market confidence and increase private sector investment in nature recovery (British Standards Institute, 2023[25]). A progress update on the Nature Markets Framework (Department for Environment, Food & Rural Affairs, 2024[26]) was released in March 2024, with UK government principles for voluntary carbon and nature market integrity (Department for Energy Security & Net Zero, 2024[27]) released in November 2024. In the UK, the term credit is sometimes used to referred to the units purchased in the Biodiversity Net Gain policy, which is a biodiversity offset programme, discussed in Chapter 6.
In New Zealand, the Ministry of Environment and the Department of Conservation released a discussion paper in July 2023 exploring the role of biodiversity credits for Aotearoa New Zealand in incentivising the protection and restoration of native wildlife. Various possible design options are proposed, including the possibility for nature-positive claims by purchasers of credits (Ministry for the Environment, 2023[28]). Public feedback was sought between July to November 2023 with a total of 276 submissions received, from business/industrial groups, Iwi/Maori groups, territorial authorities and central government agencies, and others. A summary of submissions was subsequently released in April, 2024, together with the individual submissions (Ministry for the Environment, 2024[29]).
In Australia, the Nature Repair Market is a legislated, national, voluntary biodiversity market. It encourages land management practices that improve biodiversity, such as protecting and managing existing habitat or native vegetation. The Nature Repair Market allows individuals and organisations to undertake projects in accordance with methods to generate a tradeable biodiversity certificate. Methods outline project requirements including conditions for registration, eligibility, reporting, record keeping and monitoring. The Nature Repair Market aligns with the Australia Carbon Credit Unit (ACCU) scheme, allowing eligible projects to earn both a biodiversity certificate and ACCUs. Both schemes are administered by the independent Clean Energy Regulator. Scheme integrity is supported by an independent Nature Repair Committee, a scientific expert reference group, and a public register for projects to ensure transparency.
The Scottish government released a consultation paper on Natural Capital – Market Framework: Engagement Paper in April, 2024, with an opportunity for written feedback until June 2024 (Scottish Government, 2024[30]), and subsequently released a Natural Capital Market Framework in November 2024 (Scottish Government, 2024[31]). The latter covers proposals to inter alia enhance investment in natural carbon via support to a peatland carbon market pilot. It also notes that “[o]ver time, initiatives such as the Taskforce on Nature-related Financial Disclosures (TNFD) could increase demand in voluntary nature and biodiversity markets as UK companies increasingly incorporate nature-based solutions into their long-term strategies for financial disclosure, transition planning and supply chain management”. To this end, the government will explore options for an ecosystem restoration code to support potential demand for voluntary biodiversity credits. It notes that by 2026 the Scottish Government aims to “have fully tested options for a new ecosystem restoration code, including its objectives, ownership and governance structure, approach to monitoring, reporting and verification, and the process for nature credit issuance”.
France has also introduced the possibility of voluntary biodiversity credits as an extension of its 2016 mandatory biodiversity offsets law (i.e. with the obligation to avoid, reduce and compensate for adverse biodiversity impacts). The Green Industry law of October 2023 amended the Environment Code in its Article L163-1-A and replaced natural compensation sites (SNC) with natural compensation, restoration and renaturation sites (SNCRR). This was partly because only one SNC site had been approved by the State since the 2016 Biodiversity Law. The introduction of SNCRR also made it possible to implement both regulatory compensation obligations within the framework of the mitigation hierarchy (i.e. avoid, reduce, and compensate sequence), and to promote voluntary nature restoration actions. More specifically, units from NCRR may be sold in the form of services to project owners required to meet obligations to compensate for damage to biodiversity referred to in Article L. 163-1, as well as to natural or legal persons wishing to contribute for any other reason to the restoration of biodiversity. New regulatory texts were subsequently introduced in November 2024, relating to the compensation, restoration and renaturation of sites and their approval (Decree No 2024-1052 and 1053), whereby approval must be provided by the territorially competent regional authority after consulting with the Regional Scientific Council for Natural Heritage or the National Council for the Protection of Nature, as appropriate. In effect, what the voluntary nature of the scheme implies is that anyone who may wish to, may purchase a unit of NCRR (i.e. even if they are not obligated to do so under the biodiversity offset law). This option also exists in the New South Wales Biodiversity Offsets Scheme, where third parties such as individuals, conservation groups, philanthropists and government departments may purchase and retire biodiversity offset units under the mandatory scheme.
In the European Commission, work is also underway to consider how nature certificates and credits could support nature-positive contributions and outcomes. Various initiatives including collaboration with the European Investment Bank and IUCN have commenced, as well as pilots in France (related to wetlands) and Estonia (related to forests). The Nature Conservancy and Metabolic Consulting (2024[32]), produced guidance intended to help inform this workstream.
While these government-led initiatives are still in early stages of development, they suggest that a variety of different options are being considered. These range from the use of allowing voluntary participation in existing mandatory biodiversity offset programmes, to the possibility of nature-positive claims to be made for positive contributions to biodiversity.
7.2.3. The state-of-play of biodiversity credit projects
As high-level principles for biodiversity credits are being considered by a range of institutions, and a few governments are beginning to consider the possible use of biodiversity credits, various biodiversity credit projects have emerged (Box 7.3). These projects are at different stages of development and vary in their approach.
Several initiatives are underway that have developed, or are in the process of developing, biodiversity credits. A selection of these emerging biodiversity credit initiatives is summarised below.
Ekos, a carbon measurement and certification company in New Zealand, issued biodiversity units comprising one hectare of biodiversity conservation for short-term (one year) biodiversity outcomes, such as keeping pest and weed numbers low. They indicate that the difference between philanthropy is that the biodiversity benefits need to be delivered, measured and verified. Purchased by Profile Group, the proceeds from the sale of the biodiversity units will fund the conservation management of 83 hectares at Sanctuary Mountain Maungatautari for 2022.
A voluntary biodiversity credits (VBC) scheme has been initiated in Colombia. The product was created by ClimateTrade, a blockchain-based climate marketplace, and Terrasos, a Latin American biodiversity conservation and habitat banking organisation. The first project to issue VBCs is the Bosque de Niebla-El Globo Habitat Bank (also called the Spectacled Bear Habitat Bank). Each VBC from the project, priced at USD 30, corresponds to 30 years of conservation and/or restoration of 10 square metres of the Bosque de Niebla forest.
In February 2018, the Australian branch of carbon project developer South Pole launched a stapled carbon and biodiversity product for voluntary buyers, called an EcoAustralia™ credit. Each EcoAustralia credit combines one “Australian biodiversity unit” (ABU) with one carbon credit (issued by Gold Standard). Each ABU represents 1.5 square metres of habitat protection. By leveraging state legislative schemes, each ABU is intended to ensure that contributions to conservation are robust, measurable and verified, drawing on accepted scientific practices to evaluate habitats and measure biodiversity. Purchasers of EcoAustralia™ credits support Australian biodiversity conservation projects voluntarily (no corresponding vegetation removal to offset).
Wallacea Trust, in collaboration with a working group, developed an open-source biodiversity credit methodology that applies in all ecoregions and habitats worldwide. Biodiversity credits are based on a basket of at least five metrics chosen to represent the conservation objectives within the ecoregion for the habitats included in the application site. A biodiversity credit is defined as a 1% uplift or avoided loss in the median value of the basket of metrics per hectare.
RePlanet (UK) is issuing biodiversity credits using the Wallacea Trust biodiversity credit methodology. The biodiversity credits can be used in two ways: 1) as ex-post uplift credits where the increase in biodiversity is quantified at regular intervals and 80% of the uplift monetised as credits after each verification claim; and 2) as ex-post loss avoidance credits.
Another private sector initiative is that of ValueNature (South Africa). ValueNature is facilitating the development of four nature investment and biodiversity credit projects spanning 500 000 ha across four countries in the Global South to bring to market by 2024. Across these projects, ValueNature is working on nature crediting pilots with Plan Vivo in Uganda and Verra in Zambia and South Africa. Terrasos and SouthPole are other private sector initiatives, while the government-led initiatives are from Australia, Gabon and Niue.
In Sweden, Orsa Besparingsskog sold pilot biodiversity credits to Swedbank in 2023 from a domestic forestry project. It is based on a pilot methodology developed by the Swedish University of Agricultural Sciences (SLU). The project covers an area of 13 ha for a period of 20 years.
Source: (Compensate Foundation, 2023[33]), From Carbon to Nature: What the biodiversity markets can learn from the Voluntary Carbon Markets; (GEF and IIED, 2023[3]) Innovative Finance for Nature and People: Opportunities and challenges with biodiversity-positive carbon credits and nature certificates, www.thegef.org/sites/default/files/documents/2023-03/GEF_IIED_Innovative_Finance_Nature_People_2023_03_1.pdf; (WEF, 2022[34]), Biodiversity Credits: Unlocking Financial Markets for Nature-Positive Outcomes, https://www3.weforum.org/docs/WEF_Biodiversity_Credit_Market_2022.pdf.
In Colombia, the voluntary biodiversity credits (VBCs) are effectively an extension of the mandatory biodiversity offsets policy that was first introduced in 2012 and has gradually evolved since (Salès, Frascaria-Lacoste and Marty, 2023[35]). For example, habitat banks were recognised in Decree 2099 of 2016, regulated by Resolution 1050 of 2017 and adopted by Resolution 256 of 2018. The primary driver of demand stemming from the mandatory biodiversity offsets programme comes from economic activities requiring environmental permits for their operations (hydrocarbons, energy, mining, infrastructure, among others), particularly environmental licenses, forest exploitation permits, and production from forest reserves.
Terrasos, a developer of habitat banks in Colombia, offers biodiversity units for both compliance and voluntary purposes. For compliance purposes, one hectare represents one compliance unit; for voluntary purposes, one voluntary unit (referred to as a Tebu or Terrasos biodiversity unit) represents 10m2. According to one source, Tebu sales had reached USD 124 000 as of October 2024 (IDB, 2024[36]). In comparison, total units sold by Terrasos had reached USD 7 million since 2017 (where each unit sells for approx. USD 10 000) (Cavano, 2024[37]).
To date, at least five studies have attempted to review the emerging biodiversity credit schemes, to provide insights on how they compare across a range of different design characteristics. Pollination (2023[38]) reviewed eight voluntary biodiversity credit schemes and found significant differences in relation to the biodiversity outcomes targeted (e.g. protection, regeneration, maintenance, as well as adaption to climate change), and the range of approaches used regarding metrics adopted (e.g. ecosystems, habitat, vegetation), crediting approaches and ecosystem coverage.
A compilation of global data on emerging biodiversity credit initiatives identified 34 that were developing and implementing standards and methodologies (as of September 2023) (Wunder et al., 2024[39]). Of the initiatives identified, 41% of the initiatives were operational (with 9% as pilots) and almost half under development. 23% of the credits focused on averted loss and/or biodiversity maintenance, 18% focused on biodiversity improvements, while most combined both. Seven cases (20%) monitored actions to create credits, whereas 18 cases (53%) monitored biodiversity outcomes relative to a baseline defined ex-ante. Some cases aimed to feature ex-post verification of outcomes against a data-driven dynamic counterfactual, thus attempting to eliminate confounding factors, whereas other cases were either unclear or not described. Overall, more than half of biodiversity credit projects at the time were either based on actions and their projected change, or remained unclear in conveying how they will generate credits. Result- or performance-based credits with evaluated outcomes or impacts against well-defined counterfactuals were rare. They also found that 41% of cases included third-party auditing of their biodiversity outcomes, with the rest having either decided against third-party auditing (18%) or that information at the time was still unavailable (41%).
The IAPB’s “Landscape analysis of biodiversity credits projects”, summarised results from an on-line survey which aimed to elicit information from project developers on a range of issues covering project development, intervention design and project implementation (IAPB, 2024[40]). A total of 60 project developers responded to the survey, providing information on biodiversity credits and/or nature-based carbon credits. According to these results, the most common type of project developer was private companies, followed by NGOs and then IPLCs. 18 projects were in implementation or scale out phase, with 44 projects at pilot stage or under development. Similar to the findings of (Wunder et al., 2024[39]), the results of this survey suggested a broad range of heterogeneity in the types of actions being taken (e.g. conservation, restoration, avoided loss), the different ecosystems being considered, and the types of approaches being used to consider issues such as additionality and permanence. More broadly, respondents cited the lack of a robust market and insufficient demand for biodiversity credits as a primary constraint to project development and the scaling of a credit market. Many respondents also indicated that the lack of agreed metrics and variations in accreditation methodologies caused confusion among both developers and potential buyers, thus limiting the market.
In a more recent study, Wauchope et al., (2024[41]) focus only on credit operators that sell credits based on biodiversity outcomes and not those based on management actions (based on information available as of July 2024). They examine how a variety of issues related to metrics, additionality, leakage and permanence are being addressed and highlight various risks and uncertainties that would need to be resolved to address measurement challenges, such as the need to estimate dynamic counterfactuals to determine environmental additionality.
In terms of market size, Pollination (2024[42]) released an updated State of Voluntary Biodiversity Credit Markets in September 2024. Focusing only on voluntary biodiversity credits, i.e. as distinct from biodiversity offsets - whether used for voluntary or compliance purposes, the analysis presented is based on 16 responses from biodiversity credits scheme administrators to an online survey.4 Based on information received, the report estimates that between USD 325 000-1 870 000 worth of credits had been sold (i.e. cumulative). Also looking only at biodiversity credits (i.e. as distinct from biodiversity offsets) and covering both private and government-led schemes identified across 20 regions, BoombergNEF (2024[43]) estimates that less than USD 1 million of biodiversity credits have been purchased.
While survey-based analyses are useful tools to gather insights, feedback and data, and are providing valuable insights on the evolving state-of-play of biodiversity credits on the ground, the results present only a snapshot and are less transparent when the underlying datasets are not made available. In this context, Bloom Labs, a biodiversity finance newsletter and consultancy, provides a publicly accessible database of biodiversity credit schemes.5 Covering a total of 53 biodiversity credit schemes as of February 2025, it provides information on each scheme, including status (active or in development), methodology type (outcome- or practice-based), activity type, credit calculation approach, whether there is a registry or not, when the entry was last updated, among many other fields.
Insights and lessons for biodiversity credits (if they were designed to be a voluntary mechanism) and what their operationalisation might entail can be drawn from voluntary carbon markets (VCM), which have existed for more than three decades. Several issues have come to light regarding their environmental integrity. On the supply-side, these issues include a lack of additionality and permanence (Wetterberg, Gomez and Lanzi, 2025[44]), double counting and over-crediting due to methodological shortcomings related to setting baselines, estimating leakage risk and carbon accounting (Carbon Market Watch, 2023[45]), and negative effects on other social and environmental objectives (Lauer, S. et al., 2024[46]; Seddon et al., 2021[47]). On the demand-side, issues include the lack of direct efforts to mitigate greenhouse gas emissions and questionable claims about the use of carbon credits (Wetterberg, Gomez and Lanzi, 2025[44]). Experience with VCMs has shown that insufficient integrity management systems accompanying the voluntary market can undermine GHG mitigation (Wetterberg, Gomez and Lanzi, 2025[44]).
Lack of integrity is an environmental and social concern and can also lead to a lack of trust. It is worth noting that following recent scrutiny in VCMs, demand for carbon credits has declined, with the total value of traded carbon credits at around USD 0.7 billion in 2023, compared to USD 1.9 billion in 2022 (Ecosystem Marketplace, 2024[48]). In comparison, the total value of permit markets (i.e. regulated carbon markets, which are more similar to mandatory biodiversity offset programmes) in 2023 was over USD 900 billion (Manuell, 2024[49]).
The lack of environmental integrity in VCMs has spurred numerous responses from the private and public sector alike in an effort to enhance transparency and ensure accurate information. Overall, VCMs have evolved into a complex landscape comprising numerous standards and registries, exchanges, ratings providers, supply side integrity initiatives such as the Integrity Council for Voluntary Carbon Markets (ICVCM), demand side integrity initiatives such as the Voluntary Carbon Market Integrity (VCMI), and broader linked initiatives such as the Science Based Target initiative (SBTi), the High Level Expert Group on net-zero emissions commitments of non-state entities (HLEG) and the Task Force on Climate-related Disclosures (TCFD) (Figure 7.1). The variety of existing standards can pose challenges for market participants who may find these confusing especially as not all standards uphold the same level of quality. In the case of carbon crediting mechanisms, these too can be improved by inter alia, making all project documents available to the public, and strengthening quality assurance and quality control (CarbonMarketWatch, 2024[50]).6 Targeting carbon crediting mechanisms (i.e. supply side integrity), the ICVCM was established in 2021 with the aim to set and maintain a global standard for high integrity in the VCM and is driving harmonisation among carbon crediting mechanisms and methodologies through a common assessment framework.
Source: (Downey, 2024[51]), The voluntary carbon markets ecosystem, simplified, www.sylvera.com/blog/voluntary-carbon-markets-ecosystem-explained.
In 2024, the VCMI released its Claims Code of Practice (version 2.1) in response to the general confusion that has emerged because of the variety of statements or claims that hundreds of companies were making in association with their carbon credit transactions, their GHG emissions performance and future commitments. Targeting demand-side integrity, its primary stated purpose is “to provide clear requirements, recommendations and supporting guidance to companies and other non-state actors on how they can credibly make voluntary use of carbon credits as part of their near-term emissions reduction objectives, and long-term net zero commitments” (VCMI, 2024[52]).
Following concerns in VCMs, several governments are taking a more active role to promote environmental integrity. Regulations that expose companies to potential legal liability for misleading or untransparent use of carbon credits include California AB 1305’s carbon offset disclosure requirements and the EU’s Empowering Consumers for the Green Transition Directive, with the EU Green Claims Directive under development. For further examples see Wetterberg, Gomez and Lanzi (2025[44]).
Most institutions working on biodiversity credits have acknowledged both potential opportunities and risks depending on how their design evolves. The WEF for example states that when strongly assured for high environmental and social integrity, credits can generate benefits for nature and Indigenous peoples and local communities, while simultaneously enabling private sector value creation. On the other hand, improper use of biodiversity credits may harm nature and local communities and expose buyers to strategic, operational and reputational risks (WEF, 2023[5]). Similarly, TBC (2022[4]) identified overarching risks and potential solutions for the design of biodiversity credits (Table 7.1).
Source: (TBC, 2022[4]), Exploring Design Principles for High Integrity and Scalable Voluntary Biodiversity Credits, www.thebiodiversityconsultancy.com/fileadmin/uploads/tbc/Documents/Resources/Exploring_design_principles_for_high_integrity_and_scalable_voluntary_biodiversity_credits_The_Biodiversity_Consultancy__1_.pdf.
The risks identified in Table 7.1 all relate to the environmental integrity of a biodiversity credit system, apart from the unintended social impacts. As with any new concept, and with the fundamental, overarching objective of ensuring environmental integrity of such an instrument, several issues remain to be addressed. Design characteristics that need to be considered for any biodiversity instrument to be effective (whether it be for a PES, a biodiversity offset, or a biodiversity credit) include additionality, permanence, leakage and double counting (OECD, 2010[53]; OECD, 2016[7]; Wauchope et al., 2024[41]; Wunder et al., 2024[39]).
Regarding possible unintended social impacts, the risks that biodiversity credits may pose on Indigenous Peoples and local communities has been recognised in a number of the non-government biodiversity credit initiatives. IAPB (2024[21]) for example highlights the need to respect legal and customary land and water rights, and to ensure free, prior and informed consent. Moreover, Step 1 in the proposed biodiversity credits life cycle is to engage with Indigenous People and local communities (as well as throughout the credit life cycle).
Turning to demand-side issues, possible demand for voluntary biodiversity credits has frequently been associated with developments underway in the TNFD and the SBTN (BCA, 2023[54]; IAPB, 2024[6]). For example, TNFD- and SBTN-aligned assessments of nature-related risks, opportunities, impacts, and dependencies can help companies identify opportunities to invest in or purchase biodiversity credits from projects in priority jurisdictions, supply chains, landscapes, or seascapes to mitigate exposure to such risks (IAPB, 2024[55]).
As of February 2025, 526 companies and financial institutions had committed to voluntary reporting of their nature-related risks and opportunities in line with TNFD recommendations (TNFD, 2025[56]). The TNFD’s approach to assessment and disclosure aligns with and operationalises the specific requirements of Target 15 of the GBF, which calls on governments to introduce measures that encourage business to disclose their nature-related dependencies, impacts and risks by 2030. It is arguably also in the self-interest of business to better understand their nature-related risks and opportunities. Related to this, the Science-Based Targets for Nature has developed approaches for companies to set targets related to freshwater and land. The approach goes beyond direct operations to cover their upstream value chains. As of October 2024, three companies had publicly adopted targets for these.7 At a minimum, as companies and financial institutions better understand their dependencies on nature (as well as their possible exposure to future reputational and regulatory risks), they are likely to be self-motivated to proactively address their risks.
Other possible motivations of demand for voluntary biodiversity credits that have been identified include philanthropic, Environmental Social and Governance (ESG) motivated investments, and possible competitive advantage (BCA, 2023[54]) (Pollination, 2024[42]). Nonetheless, the surveys conducted to date suggest that at the present time, current levels of uncertainty in how biodiversity credits could be used is hampering market demand (IAPB, 2024[40]). These challenges are also prevalent in the Canadian Conservation Exchange pilot, for example (Box 7.1).
Based on the work that has been undertaken on biodiversity credits thus far, as well as experience from VCMs, the review above suggests that there is likely to be significant further work needed to provide clarity on how such a mechanism could be designed and implemented to reach its intended objectives of scaling up private finance to foster positive biodiversity outcomes, and well as investment of resources to ensure sufficient guardrails for high-integrity biodiversity credits. Various design options are still being considered under the umbrella term of biodiversity credits, from voluntary to mandatory schemes; systems that would count only positive outcomes, to those that would be embedded in the mitigation hierarchy; and/or whether (and how) firms might be able to make claims associated with their voluntary investments; amongst others.
One confounding issue is that terms are often not clearly defined or are used interchangeably across different users albeit to mean different things. This has also been the case in voluntary carbon markets and the climate policy space more broadly, where language used is not always clear and consistent. As a result, some frequently used climate terms can be confusing, interchangeable and even misleading (SBTi8). Efforts should be made to try to avoid this in the case of a biodiversity credit market so that a clearer distinction can be made between biodiversity offset units (often referred to as offsets) and biodiversity credits used for non-offsetting purposes. Moreover, if emerging biodiversity credit schemes encompass characteristics that are different in terms of how they would need to be designed and implemented, new terms – with clear definitions – could be introduced to unambiguously distinguish between these. In the United States SO2 emissions trading programme and the EU ETS, for example, where there are absolute caps on emissions (i.e. they are cap-and-trade programmes), the units are called allowances. In other types of programmes in the US, where there is no absolute cap but rather an estimation of a baseline (referred to as a baseline-and-credit schemes), the units are called credits. Similar distinctions could be made between units for biodiversity offsets that have an absolute objective of no net loss or net gain, and baseline-and-credit style units or otherwise other types of units that can be counted as contributions towards an objective.
Further clarity is needed on the definition and boundaries of biodiversity insetting – including whether in addition to impacts it also addresses dependencies (as some indicate that it could) – on what contributions may mean and what companies may credibly claim. Where insetting is used to address negative impacts, it can be viewed as an extension of biodiversity offsets – typically applied at the project level – to the supply chain. Maron et al. (2023[57]) stress that project-level impacts should be addressed via the mitigation hierarchy and that biodiversity offsets to compensate for residual impacts should apply a like-for-like approach. They suggest that these principles should also apply to value chain impacts but acknowledge that like-for-like compensation is more difficult at this level due to limited visibility over value chains. This reinforces the importance of applying the mitigation hierarchy comprehensively. Only once the mitigation hierarchy has been fully applied to both project-level and value chain-level impacts to ensure a minimum of no net loss, can additional investment in actions that benefit biodiversity help to fulfil the final step towards alignment with nature positive (arguably what is referred to as positive outcomes or contributions). Otherwise, claims that an organisation is nature-positive cannot be considered credible.
Governments that are considering the use of voluntary or mandatory biodiversity offsets and different forms of biodiversity credits could set up an informal process to exchange on their initiatives as well as insights, including challenges encountered and lessons learned, as these evolve. Initial questions for clarification could entail:
Are voluntary or mandatory biodiversity offset schemes being considered (i.e. with an explicit objective of no net loss or net gain) or broader types of compensation (i.e. where there is no demonstrably quantifiable equivalence between what is lost and gained)?
Regarding the scope of compensatory biodiversity credits, are project-level impacts being considered (i.e. as is the case for biodiversity offsets), or also supply and value chain impacts?
Are some biodiversity credit schemes or proposals considering only contributions towards biodiversity goals (i.e. excluding their use for compensatory purposes)?
To what extent is stacking and bundling with other markets, such as voluntary carbon markets, being considered?
Are features being considered or proposed whereby companies would be able to make any biodiversity or broader nature-related claims, and if so, would these be linked with initiatives underway e.g. under the TNFD and SBTN?
Other considerations might include the types of principles (which may be similar across approaches, e.g. the need to ensure additionality, transparency, equity and justice, etc.) and options for operationalising them (e.g. how are baselines being considered to ensure additionality, the need for standards and registries). An important question here is the role and level of government engagement. Further questions might include the types of metrics and measurement approaches being considered to monitor and evaluate outcomes.
There are, of course, likely to be various other questions that merit consideration and that may usefully be examined. Answers to these questions could help to develop a clear typology of the different design and implementation features of biodiversity credit approaches being considered.
How the market for biodiversity credits evolves over the next few years will determine whether the possible opportunities from this mechanism outweigh the risks, or vice versa, as well as whether biodiversity credits represent a cost-effective approach for delivering biodiversity objectives when accounting for the overall costs needed to support a high integrity biodiversity credit scheme. Given the risks that have been identified with voluntary biodiversity credits, and the lessons and insights that have stemmed from VCM, it would seem more prudent for any voluntary biodiversity credit scheme to be undertaken with some government oversight and guidance.
For example, it is likely that a voluntary biodiversity credit market would eventually require an approach similar to the ICVCM, as noted also by (BCA, 2024[58]). Similarly, if buyers of voluntary biodiversity credits were able to make any claims associated with their purchase, it is likely that a claims code of practice may also need to be developed, similar to the one the VCMI developed for carbon credits. Legislation to ensure claims are reliable, comparable and verifiable could also be envisaged.
As the currently nascent voluntary biodiversity credits market evolves, a central publicly available platform collecting information on various elements and characteristics of the biodiversity credits would be helpful to facilitate transparency on the methods that are being used. As noted above, while this service currently seems to be provided by Bloom Labs, a consultancy, it is not clear how institutionalised the service is.
Biodiversity credits have also been described as outcome-based payments. If this is indeed their defining feature, then in this regard, they are like payments for ecosystem services (though buyers of ecosystem services in PES programmes are users (beneficiaries) of the ecosystem services or third parties acting on their behalf). Other scenarios might also be envisioned whereby, for example, companies that are not end users of direct beneficiaries of ecosystem services could seek to pay into existing government-led national, regional or local PES schemes, and could arguably earn certificates in exchange for this, indicating how much they contributed to the scheme financially. Such an approach would be more similar to what is referred to in the forest carbon discourse as a ‘contribution’ model. Instead of buyers of forest carbon credits claiming that the credits can offset emissions to achieve ‘net zero’, they instead make a ‘contribution’ to global climate mitigation through investments in forests (Blanchard et al., 2024[59]).
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← 1. The NSW Biodiversity Offsets Scheme allows for the establishment of biodiversity stewardship sites via biodiversity stewardship agreements that are established with the Biodiversity Credits Supply Taskforce. The sites must be assessed via the Biodiversity Assessment Method by an accredited assessor.
← 2. These were described as: Voluntary insetting: Organisations use biodiversity credits to secure or improve access to ecosystem services upon which they and their value-chains rely. Voluntary offsetting: Organisations take responsibility for reducing unmitigated and residual biodiversity impacts. Compliance offsetting: Organisations must measure and address the impacts of specific activities on nature in one place by providing improved outcomes to nature in another. Corporate voluntary CSR contributions: Organisations make commitments to improve the state of nature in their CSR strategies that they fulfil with biodiversity credits. Provision of consumer products/services bundled with nature contributions: Companies offer products/services bundled with biodiversity credits to give consumers a means to directly support positive nature outcomes. Regulatory driven CSR: Governments require organisations to make evidence-based contributions towards nature which could be fulfilled by biodiversity credits.
← 3. IAPB (2024[6]) identified 16 existing government-led biodiversity credit frameworks underway, in various stages of development, five of which were compensation schemes (which this report refers to as biodiversity offsets).
← 4. The 14 organisations that expressed consent to be identified as respondents are: BioCarbon Standard, Climate Action Company (formerly, CarbonZ), CreditNature, Environment Bank, ERA Brazil, Gold Standard Foundation, GreenCollar, Plan Vivo Foundation, rePLANET, Savimbo, Terrain NRM, Terrasos, Verra and Wilderlands.
← 5. The database of biodiversity credit schemes is available at https://www.airtable.com.
← 6. Other issues relate to governance arrangements and oversight of third-party auditors.
← 7. See the target tracker at https://sciencebasedtargetsnetwork.org.