Protecting and restoring biodiversity will require private investment

While new international targets have been agreed, previous failures demonstrate that it is cash that is needed
The Guardian 15 Feb 11;

Unfortunately and coincidentally, as the UN-led International Year of Biodiversity was coming to its end late last year, it was confirmed that 2010 targets to halt biodiversity loss across Europe and significantly reduce the rate of biodiversity loss internationally had not been reached.

The failure of these targets to galvanize action at the scale and pace needed to protect and restore biodiversity has not prevented new 2020 targets being created. The EU has again agreed another target to halt biodiversity loss in Europe, but this time by 2020, while the latest international conference on biodiversity held in Nagoya, Japan, agreed various new international targets, including at least halving the rate of loss of natural habitats by 2020.

These new targets mean that we will continue to have legally binding international targets in place, but this by itself is insufficient to avoid repeating the failures and disappointments of the last decade. To succeed in the present decade and beyond, we must do something for the first time: actually stump up enough cash to deliver our biodiversity objectives.

Given the developed world's fiscal crisis, this will necessitate novel approaches to raising and deploying capital. The way money has been raised historically – primarily through public sector expenditure or voluntary donations to charities – while important, is unlikely to generate the scale of capital needed to finally halt the loss of biodiversity, or turn the tide through ecological restoration. Progress will require us to rapidly increase the money available for biodiversity protection and restoration from all sources and in particular, this means raising the private sector's contribution.

Habitat banking and biodiversity credits are one set of critically important tools for increasing private sector investment in the protection and restoration of our natural world. In a joint report published today I set out with others how we could introduce a successful habitat banking and conservation credit system.

In the report we focus on Britain, and specifically England, because the coalition government has said that it will introduce new ways to protect biodiversity in the forthcoming natural environment white paper due this spring. In the Conservative party's general election manifesto there was also a pledge to "pioneer a new system of credits to protect habitats". As a result of these commitments, there is a unique opportunity to successfully render a working and effective system in the UK that could be replicated, improved and expanded across Europe and throughout the world.

Habitat banking is defined as a market where biodiversity credits from actions that benefit biodiversity can be purchased to offset environmental damage. Actions that benefit biodiversity might include restoring a habitat or avoiding biodiversity loss in the first place. Credits can be produced in advance of need and stored over time. Simply, they create a means to pay for and finance biodiversity conservation by making those who damage the environment pay for fixing it.

Biodiversity credits are not a license to trash. Credits should only be available to compensate for damage that is unavoidable and the aim of credits must be to provide a new and additional layer of protection for biodiversity above and beyond what is provided through existing national and international protection.

For habitat banking to deliver the scale of private investment required, there also needs to be enough supply and demand for credits in the market. So in addition to establishing biodiversity credits and defining robust rules and standards to govern a new market, government also needs to establish visible long-term demand for credits. Without this, investment in the projects that generate credit supply will not occur at any meaningful scale.

One way to create demand for credits would be to enshrine a legal commitment to no net loss of biodiversity and move towards net gain. To achieve this objective new obligations to purchase biodiversity credits for those that directly or indirectly harm biodiversity and habitats should be introduced. At the start this might apply to property developers and the agricultural sector only, but over time there is no reason why other actors in the economy, whether public or private, should not pay for the inevitable and unavoidable damage to biodiversity that many economic activities directly or indirectly cause. Ramping up demand for credits over time would translate into credit creation and the scale of investment we need on the ground to tackle biodiversity loss.

To kick start a deep and liquid market in conservation credits in the short term, government could support the development of the market in other ways as well. For example, corporation tax relief on the costs to the buyer of purchasing credits that deliver net gains to biodiversity would be a powerful incentive to encourage investment. Another way to support the development of a vibrant market would be for government to underwrite a fixed number of early credits at a set minimum price. This would create a forward price curve for biodiversity credits, which would immediately encourage private investors to deploy capital into credit supply generation, without waiting for the growth of a market.

By creating a new means to finance the protection and restoration of our natural world and make those who damage the environment pay for fixing it, we can finally address the perennial problem with delivering our biodiversity targets and objectives: a lack of means. Conservation credits would also allow us to price the value of habitats and biodiversity into decision making throughout the economy. Achieving all this will not be easy, but the benefits of success are substantial and long term. Getting a system right in the UK could, hopefully, transform the way we value nature and finance its protection globally and this is a rare and exciting opportunity the government should not pass up.