Extra credit? Consultation on biodiversity credit scheme comes to a close

24 October 2023

The Ministry for the Environment and Department of Conservation are consulting on a potential biodiversity credit system for New Zealand. The scheme would aim to recognise (and finance) projects and activities which enhance or protect indigenous New Zealand biodiversity. The consultation closes 3 November 2023.

New Zealand is renowned for its biodiversity. However, as with many countries around the world, that biodiversity is increasingly under threat. While many landowners are taking steps to preserve our unique flora and fauna, there are questions around how to encourage such activities.

The Ministry for the Environment (MfE) and Department of Conservation (DoC) consultation, “Helping nature and people thrive – Exploring a biodiversity credit system for Aotearoa New Zealand” is considering one possible approach.1 In this article, we provide an overview of the consultation topic and how interested parties can get involved.

What is a biodiversity credit scheme?

A biodiversity credit scheme seeks to attract private sector funding to invest in landholders’ efforts to protect indigenous biodiversity, for example, grasslands, wetlands and native forests. Credits would provide a measurable and traceable unit, representing a project or activity which protects or enhances that biodiversity.

Landholders involved in “nature-positive” actions would earn credits and receive funds for them through their activities. A scheme like this would also recognise Māori-led initiatives, utilising mātauranga Māori to manage biodiversity. How exactly credits are earned would be a key design point for such a scheme.

Organisations and individuals would then be able to purchase credits as a way of financing nature-positive actions, just as they may purchase carbon credits. This would provide a source of funding for such activities which would complement traditional financing methods. MfE and DoC suggest that demand for credits could be expected to increase over time as businesses look to understand and address the impacts they have on nature.2 Interest may also be driven by developments overseas, including the recent release of the Recommendations of the Taskforce on Nature-related Financial Disclosures.3

Some biodiversity credit schemes may also have an associated biodiversity credit market on which credits can be traded. This could operate similarly to the voluntary carbon market.

Biodiversity schemes are becoming increasingly popular worldwide. The United Nations is supporting the Biodiversity Credit Alliance which is seeking to develop guidance on developing biodiversity credit markets. Various non-profits and charities are also establishing schemes overseas. Notably, in 2023, the Australian Government introduced the Nature Repair Market Bill, with an aim to establish a framework under which eligible landholders (including First Nations people, farmers and conservation groups) would be able to participate in a Nature Repair Market. Landholders undertaking environmental projects over relevant minimum periods would receive a tradeable certificate which would then be tracked through a national register. However, concerns have been raised around the Bill permitting offsetting of credits.4 The Bill currently remains before the Senate.

With biodiversity credit schemes increasingly emerging, officials are concerned that, left to their own devices, poorly designed systems might undermine efforts to promote biodiversity, encourage ‘greenwashing’ or fail to give effect to te Tiriti or adequately provide for iwi rights. They may also lack mechanisms to address abuse of such systems.

How credits would be awarded

A key design point for any biodiversity credit scheme would be how to award credits. The consultation paper notes three possible options:

  • By outcome. Some overseas examples award one credit for every 1 percent increase (or avoided decrease) in indigenous biodiversity over a hectare of land. An approach like this is similar to that used in the voluntary carbon market (where one credit represents one tonne of carbon dioxide removed from the atmosphere).
  • By activity. Other schemes quantify activities to support biodiversity, for example by measuring hectares of land managed for invasive pests.
  • By project. Australia’s proposed approach would be project-based, with certificates issued for biodiversity projects, rather than credits. Standardised assessments would enable the market to compare the value of different projects.

Regardless of the approach adopted, any system is likely to require a range of measures in order to properly recognise different activities and projects, with those measures capable of being verified and audited at different levels. Designing such a system will require in-depth knowledge of relevant ecosystems, with designers needing to work closely with Māori, landholders and communities. 

How would a market for biodiversity credits work?

Another key question  would be whether to allow biodiversity offsets, where credits might be purchased to offset negative impacts of development on indigenous biodiversity. The consultation paper notes that biodiversity offsets already exist as a resource management tool, being available to address impacts on biodiversity which cannot otherwise be avoided. There would be a design choice as to whether biodiversity credits could also be used for offsetting. In addition, the consultation paper raises questions around how biodiversity credits might interact with carbon credits, particularly where both might be issued for the same project.

There are also questions as to what role the government should play in any biodiversity credit system. In particular, the consultation paper notes that the Government could take on the following roles:

  • Market enablement, in which it would provide policies and guidance for a voluntary scheme, as well as potentially funding system development as the market is established.
  • Marketed administration, where it establishes and manages a voluntary scheme and remains active in its ongoing management and administration.
  • A mix of the above roles.
Next steps

Submissions on this initial consultation paper close at 11:59pm on Friday 3 November 2023. Submissions can be made through Citizen Space.

It should be noted that this consultation was issued prior to the recent general election. It is not yet clear what approach the new Government may take to the issue of biodiversity credits. However, where individuals or entities may be impacted by the above, we would encourage them to provide a submission, so that their thoughts can be accounted for at this early stage, regardless of the direction subsequently taken.

If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.

[1] See https://consult.environment.govt.nz/biodiversity/nz-biodiversity-credit-system/[2] Consultation paper at 8.[3] Final TNFD Recommendations on nature related issues published and corporates and financial institutions begin adopting[4] https://www.theguardian.com/australia-news/2023/jun/30/labors-nature-repair-market-must-ban-offsets-and-will-need-initial-funding-injection-scientists-say

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.