What exactly are biodiversity credits?

Biodiversity credits are the common unit of measure for offsets in the Biodiversity Offsets Scheme and the previous BioBanking Scheme.

Biodiversity credits are used to measure both:

  • the unavoidable impacts on biodiversity from development and clearing at a development site
  • the predicted improvement in biodiversity conditions gain at a stewardship site.

The Biodiversity Assessment Method (BAM) defines two types of biodiversity credits that are used to measure impacts on both development sites and stewardship sites. The two types of credits are:

  • ecosystem credits – measure the value of threatened ecological communities, threatened species habitat for species that can be reliably predicted to occur with a Plant Community Type (PCT), and PCTs generally
  • species credits – apply to all other threatened species that are found to occur at that location and cannot be reliably predicted to occur within the identified ecological communities at the development site.

Biodiversity credits created at a stewardship site via a Biodiversity Stewardship Agreement can be used to offset the loss of biodiversity values on the development site (a credit obligation) by being traded and retired. This sale is called a biodiversity credit transfer and the credit is then retired to satisfy the credit obligation.

Biodiversity credits are a mechanism that allows individuals and companies to invest in environmental projects that contribute to richer biodiversity. A credit itself is a legal document, analog or digital, describing where the environmental action has taken place, who has developed it, according to what methodologies, and that it has been certified according to a certain system. Biodiversity credits may be transacted after issuance.

Credits trading

Subject to regulation, anyone can buy credits. A typical buyer could be a developer needing to offset their projects’ impacts on biodiversity. Other buyers could be government bodies using the market to achieve conservation outcomes or philanthropic organisations.

The money from the sale of credits from a biodiversity stewardship site is used to fund the management of the site in perpetuity. This amount is called the Total Fund Deposit. When the Total Fund Deposit is fully paid, the money from any additional sales of credits from a biodiversity stewardship site is paid directly to the owner.

Ultimately, the market determines the overall price paid for each credit. The landowner and credit buyer are free to negotiate any price as long as the Total Fund Deposit is satisfied.

There are rules that govern which credits can be used to meet a credit obligation. These rules are known as the offset rules. For more information visit offset rules.

For ecosystem credits this is affected by the class of credits a particular PCT occurs in.

Offsetting the impact on biodiversity by development is complete when the credit obligation is satisfied and the credits retired from the market. Visit Offset obligations and credits trading.

Why biodiversity credits?

There is a strong economic justification for incentives that encourage private land owners towards nature-focused management of their land including payments for ecosystem services as well as confirmation of the benefits of ecological restoration. The rationale behind market-driven instruments for biodiversity conservation is that positive and negative impacts on biodiversity can be measured and represented as credits and debts, and as such can be integrated in economic-decision making. A business may have to pay for regulatory mitigation of its biodiversity impact, or may wish to contribute to a voluntary net-positive impact on ecosystems thus improving its image and reputation towards its customers. Likewise, if a landowner may gain a profit from protecting or restoring habitat, they may provide more habitat protection than they would have done without compensation.

Biodiversity credit vs offsets

Biodiversity offsets are relatively common in many countries and are used to compensate for biodiversity loss with the goal to create a no net loss, or even a net gain of biodiversity often connected to land exploitation for building, mining and other activities with negative environmental impact. Biodiversity offsets are often a legal requirement in m any country in order to obtain, for example, an exploitation permit by a state agency. Biodiversity credits, on the other hand, are not a legal requirement, and can therefore be used to describe a positive biodiversity impact resulting from a targeted action toward that purpose.

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