Biodiversity Credits – A Financial Incentive for Organic Farming & Biodiversity Restoration

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Noa Widdershoven
Noa Widdershoven
Jawole Joseph

The Biodiversity Crisis

Global biodiversity is declining at an unprecedented rate, with experts warning that approximately 1 million species are at risk of extinction.

This crisis is also felt in the Netherlands, where we witness a rapid decline in insects, farmland birds and butterflies. Following decades of high-intensity, conventional agriculture, the Netherlands now finds itself on the edge of an ecological abyss: battling a nitrogen crisis and the threat of vital insect-and bird species going extinct. There is some hope; the Netherlands shares the EU pledge to conserve, protect and restore 30% of its biodiversity by 2030. However, given the current political climate, it might be wise to explore other bottom-up initiatives that could help overcome this crisis. This week, the Robin Food Coalition explores the potential of the biodiversity credit market.

Unfortunately, the impact of biodiversity loss is far-reaching and influences many facets of human health, wellness, and development. Studies show that biodiversity protection is linked to carbon sequestration. Healthy forests, aquatic-, and rural ecosystems serve as carbon sinks, and therefore biodiversity loss can limit these systems’ ability to effectively absorb carbon. Secondly, ecosystem variety helps to mitigate the spread of zoonic illnesses and diseases by supporting natural predators of disease vectors. However, the most immediate impact of biodiversity loss is on food security. Given that around 75% of food crops rely on animal pollination, the extinction of diverse insect species would have catastrophic consequences for crop pollination, soil health, and ultimately, agricultural productivity.

Conventional Agriculture & The Importance of Organic

Unsurprisingly, our current agriculture system is a key contributor to biodiversity loss. The intensification and homogenisation of agricultural land use, chemical plant protection products, fertilization, and habitat fragmentation practices, have been shown to drive the loss of habitats and key food sources for a variety of species. Around 80% of flying insect species are dramatically affected by pesticides and fertilizers, potentially leading to complete extinction.

Converting to organic is therefore necessary, if we wish to preserve our ecosystems, and ensure food security. Organic farming increases bird-, insect-, and soil organism species abundance by 50% compared to conventional.

In the Netherlands, only 4.5% of Dutch agricultural production is currently organic, despite the country being the world’s second-largest exporter of agricultural products. The Netherlands has committed to boosting this to 15% by 2030 – no small feat, and a significant gap that can only be bridged through collaborations between the public sector, businesses, NGOs, and individual land stewards. So, how can we incentivize farmers to transition towards organic practices?

Biodiversity Credits: A Possible Solution

Following the establishment of the Kunming Montreal Global Biodiversity Framework in 2022, a new solution to biodiversity restoration gained traction: Biodiversity Credits.

As defined by the World Economic Forum, “a biodiversity credit is a verifiable, quantifiable and tradeable unit of restored or preserved biodiversity over a fixed period”. Similar to carbon credits, biodiversity credits are a voluntary market-led mechanism that stimulate environmental conservation by providing financial incentives to farmers, land stewards, or businesses to inset nature-based solutions. Insetting activities may involve organic practices (avoiding chemical pesticides and fertilizers), agroforestry, planting native species, implementing habitat corridors, crop rotations, or wetland restoration. Biodiversity credits can then be purchased by financial institutions, agri-businesses, or other corporations seeking to offset their Scope 3 ecological impacts during their transition to net-zero. Whereas carbon credits focus on reducing global CO2 equivalent greenhouse gasses, biodiversity credits focus on preserving and enhancing species diversity in a specific aquatic or land-based area. The end goal: generating a net-positive increase in biodiversity.

However, the biodiversity credit market is still in its early stages, making it uncertain for potential buyers and sellers. Due to the lack of information and implementation guidelines, many landowners and companies are unclear about the benefits and the win-win potential of this market. Additionally, standardized regulatory frameworks and measurement guidelines are needed at national, regional, or global levels. Therefore, many questions are still left open. For example, what unit of measurement should be used to define the minimum area? What percentage of biodiversity net-gain must be achieved after the agreed time period? And considering greenwashing fears following scandals in the carbon market, how will we ensure there are no discrepancies between guaranteed impact and quality measurement, reporting and verification?

Thus, currently the market is still too immature to directly incentivize farmers to transition.

Nature On the Balance Sheet: Measuring Net-Gain & Providing Financial Incentives

However, the good news is that while we await the stabilization of the biodiversity credit market regionally and globally, the Robin Food Coalition is making important strides to overcome these challenges and solidify the feasibility of this market for farmers and SMEs in the Netherlands. As of January 2024, we started a pilot together with The Landbanking Group to add natural capital onto the balance sheet and redefine growth by rewarding investment in nature. Through the leveraging of satellite imaging, geo-sensing and AI technology, The Landbanking Group measures water, soil, carbon and biodiversity levels of a pre-defined land area to generate natural capital accounts. This way, insetting activities can be monitored over a period of time and the specific biodiversity net-gain determined. Moreover, by working together with major accounting firms, The Landbanking Group has managed to ensure that this data can be implemented on the balance sheet and used for financial purposes. The results are a win-win situation for people, planet, and profit:

Various plant and animal species are protected, and their populations increased; overall, a specific and measurable biodiversity net-gain is achieved. Secondly, farmers increase their land value and obtain financial gains, while agri-food SMEs and corporations can better manage scope 3 transitions. Lastly, a long-term contribution is made towards food security, and the mitigation of zoonotic diseases.

As soon as the biodiversity credit market matures and addresses the abovementioned uncertainties, it will become possible to directly measure the net-gain with our pilot. This advancement would mean that a farmer transitioning to organic agriculture can open a natural capital account and potentially sell the biodiversity delta as a biodiversity credit; simultaneously, they can monetize their efforts by converting natural capital into assets.

We advise farmers and SMEs to be prepared and keep a watchful eye towards biodiversity credits. Given the urgency of the biodiversity crisis, widespread adoption may come sooner than we think.

See full report: Biodiversity Credits – updated 09-06-2024

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Meer weten?
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Noa Widdershoven
Noa Widdershoven