How voluntary carbon markets can boost biodiversity
As COP16 draws to a close, finance is urgently needed to ensure nature protections gets the finance it needs – with biodiversity markets in their infancy, voluntary carbon markets can bridge the gap, says Luke Pritchard
Two years ago, global leaders committed to protecting 30 per cent of the world’s natural ecosystems by 2030 at COP15. As COP16 comes to a close, there remains a significant gap between ambition, action and the finance needed to deliver on this ‘30 by 30’ target.
Nearly $7 trillion of public and private finance activities each year have a direct negative impact on nature – 30 times more than what is currently invested in nature-based solutions (NbS). In other words, when it comes to halting nature loss, we’re trying to stop a flood with a sandcastle and the tide keeps rising.
Meanwhile, nearly of countries have yet to submit their plans to achieve the goals set out at COP15. As we look to governments for decisive and urgent action, their leadership leaves a significant gap that needs to be filled.
Reaching the 30 by 30 target requires immediate acceleration of action and finance for nature. To ensure biodiversity protection gets the support it needs – and with the biodiversity credit market still in its infancy – the voluntary carbon market (VCM) can help bridge the gap.
Although VCMs don’t have a flawless track record, their governance is far more advanced than that of biodiversity markets. This positions them to deliver immediate financial flows while providing a foundation for biodiversity credits to evolve with integrity. Despite hesitation from the biodiversity community due to the VCMs’ past challenges, there is a significant opportunity to embrace the VCM as a catalyst for progress toward shared goals.
There is still a $700bn financing gap between current global biodiversity conservation finance and that needed to hit the 2030 target. While development funding for nature rose to $15.4bn in 2022, much of this increase consisted of loans from multilateral banks, rather than grants or investments that could support more long-term conservation projects.
Encouragingly, however, private finance for nature has grown dramatically, from $9.4bn to more than $102bn over the past four years. This surge signals a strong appetite among investors to support nature-based solutions. Carbon markets offer an existing way to channel and increase finance to help reduce the gap.
VCMs also provide a mechanism that directly funds initiatives for nature conservation. For example, carbon markets have the potential to deliver up to 32 per cent of the global potential of nature-based solutions by 2030. By integrating biodiversity considerations into carbon offset projects, these markets can and must address both climate change and biodiversity loss. Preserving ecosystems not only sequesters carbon but also supports species and habitats under threat from deforestation, pollution and more.
The Rimba Raya project in Indonesia, for instance, demonstrates how carbon markets can be leveraged to deliver these dual benefits. By protecting more than 64,000 hectares of peat swamp forest from conversion to oil palm, the project not only sequesters significant amounts of carbon but also provides a vital refuge for the endangered Bornean Orangutan, Proboscis Monkey, Bornean Agile Gibbon, Asian Sun Bear, Sunda Pangolin and Clouded Leopard. The project also serves as a source of sustainable employment opportunities for local communities, develops nurseries, plants trees and supports local business cooperatives.
Furthermore, the VCM can help biodiversity credits leapfrog their development, implementing the learnings gained and addressing similar problems ahead of time. Though the VCM is by no means finished with its own “growing pains”, the biodiversity credit market can learn from the experiences of the VCM to fast-track high-integrity, transparent investment as it develops. This also allows for faster uncovering of biodiversity credits’ unique challenges.
For example, VCMs have shown how important governance is. The advances of the Voluntary Carbon Markets Initiative (VCMI) and Integrity Council for the Voluntary Carbon Market (ICVCM) provide a roadmap for building credibility, trust and integrity for biodiversity-focused credits.
Biodiversity is inherently more complex than carbon
While biodiversity is inherently more complex to measure and monitor than carbon emissions, the VCM has also shown how important tracking progress is nevertheless. The emerging biodiversity credit market should prioritise creating scientific consensus around robust methodologies that accurately capture ecological impacts to ensure investments are funding real conservation.
The VCM – and its critics – have also shown the important role of engaging and empowering local communities. VCM projects and their fledgling biodiversity counterparts will only provide durable results if communities are at the helm. Engaging them from the onset not only ensures the success of conservation efforts but also promotes equitable benefits for those directly affected by climate impacts.
It could take another decade to build serious demand for biodiversity credits. In the interim, we can take advantage of the progress made in VCMs to deliver finance to these communities for their critical work preserving biodiversity.
As global leaders wrap-up COP16 and look to the UN Climate Change Conference (COP29), the role of carbon markets in supporting biodiversity must not be overlooked. There is still a long road ahead to ensure high integrity across all aspects of the carbon market, but its potential to create dual benefits for climate mitigation and biodiversity makes it a powerful tool in the fight against both crises. Encouraging investment in initiatives that deliver benefits for the climate and nature transparently and accountably represents a win-win opportunity that we cannot afford to miss.
By harnessing the momentum of VCMs, we can begin to close the gap between what is promised and what is delivered in biodiversity finance. This not only accelerates the protection of ecosystems but also lays the groundwork for sustainable finance mechanisms like biodiversity credits, creating a resilient pathway toward achieving our conservation goals by 2030.
Luke Pritchard is director of the Beyond Alliance, We Mean Business Coalition