In the second installment of this series, we examined how MERESE mechanisms introduce incentives for conservation by financing management and restoration activities. Biodiversity credits, however, represent the next evolutionary step: a system in which financing is activated only when measurable and verified ecological results are achieved.
While MERESE mechanisms pay for carrying out activities, biodiversity credits pay for demonstrating real improvements in nature. This difference fundamentally transforms the incentive system and opens the door to new flows of private investment.
What are biodiversity credits?
Biodiversity credits are verifiable units that represent a real ecological gain: improvements in habitat quality, ecosystem recovery, increases in key species, or reduced risk of loss.
From an economic perspective, they emerge to address a structural problem: biodiversity generates public benefits, yet there is no price that incentivizes its conservation.
- Credits introduce that missing price and create a mechanism in which:
- Projects that generate ecological improvements can issue credits, and
- Actors who impact nature—or wish to contribute to it—can acquire them.
- To ensure integrity, each credit must comply with essential principles: additionality, measurability, verifiability, permanence, and the absence of double counting.
In short, they turn biodiversity into a tradable asset capable of mobilizing private investment toward conservation.
What do biodiversity credits measure?
Unlike carbon, biodiversity cannot be measured with a single unit. Therefore, credits rely on composite metrics designed to capture real changes in the ecosystem.
The most common indicators include:
- Habitat extent (quantity): Hectares restored or conserved.
- Ecological quality (functionality): Vegetation cover, habitat structure, presence of native species, connectivity, threat pressure.
- Benefits for priority species: Increases in populations or improvements in critical habitat.
- Risk reduction: Lower probability of ecosystem loss or degradation.
- Permanence: Guarantees that improvements will be maintained for decades.
A central principle is net gain of biodiversity. A credit only exists if the intervention produces more biodiversity than the initial baseline.
The World Economic Forum (WEF) published a compendium of metrics applied in biodiversity credit markets up to 2024. See publication here.
Biodiversity credits only hold value if there is confidence that they represent real and verifiable improvements in nature. That confidence is built through standards—sets of rules, methodologies, and indicators that define how biodiversity gains should be measured, verified, and certified.
What standards exist globally?
Unlike carbon—where markets and standards are consolidated—biodiversity credits are still in a development phase. Today, there are three major types of standards:
1. National regulatory standards
Created by governments and mandatory for compensation projects. Their strength lies in legal enforceability and scale; their limitation is that they operate only within their country. Examples:
- United Kingdom – Biodiversity Net Gain (BNG) using the DEFRA metric
- Australia (NSW) – Biodiversity credits
- U.S. state-level habitat credit systems (California, Nevada, Washington State, Maryland, North Carolina)
2. Voluntary market standards (project-based)
Designed for voluntary transactions between companies, NGOs, and impact funds. They function similarly to voluntary carbon standards. Examples:
- Verra – Biodiversity Credit Framework
- Plan Vivo – Biodiversity Standard
- UNDP – Biodiversity Credits Alliance (BCA)
Methodologies developed by organizations such as Restore, Fronterra, and the Zoological Society of London. This segment is growing rapidly, driven by corporate demand for TNFD-aligned reporting.
3. Emerging pilots and nature-positive frameworks
Experimental standards promoted by international institutions seeking global compatibility. These include:
- European Commission – Nature Credits Pilots (with Sierra del Divisor as one of three selected sites)
- Frameworks developed by TNFD, SBTN, OECD
- The Taskforce on Nature Markets
Although these are not yet transactional standards, they are shaping the future architecture of biodiversity markets.
How is a biodiversity credit project developed?
Although each standard has its own rules, all follow a common results-based cycle:
- Ecological baseline: Initial assessment of the ecosystem (habitat, species, threats). Defines the starting point.
- Intervention plan: Restoration and conservation actions, measurable goals, budget, and timeline. Must demonstrate additionality.
- Field implementation: Forest restoration, wetland management, threat control, community agreements.
- Biological monitoring: Ongoing measurement of ecological change—habitat, species, integrity, connectivity.
- Independent verification: An external auditor validates the results and confirms compliance with the standard.
- Credit issuance and sale: Credits are issued according to the net biodiversity gain achieved and can be sold to voluntary or regulated buyers.
In essence: credits finance verified results, not actions.
Ecological improvements → verification → credits → financing → more conservation.
In this first installment on biodiversity credits, we have examined the technical architecture that turns ecological results into tradable units. In the next part, we will explore who is buying these credits, what is driving this emerging global market, and why Peru has a strategic opportunity to position itself as a regional leader.
