By Liz Kivi
Participants have applauded the government’s pilot programme for New Zealand’s voluntary biodiversity market, but an expert says the emerging market needs better regulation to avoid reputational risk and fraud.
Last week the government announced it was supporting the voluntary credits nature market to expand by running nine pilot projects across the country.
However John O’Brien, manager director of Carbon Market Solutions, says a lack of government regulation could lead to the same issues that are currently a problem for New Zealand’s voluntary carbon market.
O’Brien, who has worked with climate finance and in global carbon markets for more than 25 years, says the biodiversity credits market is an interesting market but needs to be done well. “This new market absolutely needs to have integrity.”
He believes the core principles of the Integrity Council for the Voluntary Carbon Market (ICVCM), which are being applied to the voluntary carbon market in many places around the world, should also be applied to the biodiversity credits market. “This means that strong governance is important. It means that companies should not submit and approve their own standards, validate or audit and verify their own projects, make their own determination of additionality, or hold biodiversity credits in their own registry.”
However, some companies included in the government’s pilot programmes are currently doing exactly that: creating their own standards and auditing themselves. O’Brien says this is a clear conflict of interest.
“Companies should not be allowed to develop their own standards that have not been approved by government, or be allowed to audit or verify their own projects. This is a conflict of interest.
“The market should not be allowed to regulate itself. The lessons from the voluntary carbon market where there has been too much ‘Wild West’ behaviour need to be learned and the Core Carbon Principles of the ICVCM should be applied to this new biodiversity credits market which has a lot of potential to create positive biodiversity outcomes for New Zealand.”
Currently there is a lack of government regulation. “It means that the government needs to step in to either establish or approve standards, establish or approve a third party registry or registries, and step in and take action when rules are broken.”
O’Brien says that there are also questions around demand. “The government also needs to think about what they can do to help create more demand in the emerging biodiversity nature credits market. One of the reasons that the voluntary carbon market in New Zealand is so small is that there is such a limited demand and there are companies which are buying voluntary carbon credits one year and then are often no longer buying them the next year.”
Difficult to design
A policy brief from Landcare Manaaki Whenua Landcare Research, released this month, also sees major challenges for the market, listing integrity and demand as part of a list of “difficult problems” for voluntary biodiversity markets in Aotearoa.
The brief says that biodiversity markets are more difficult to design and implement than markets for other environmental goods, such as carbon. “A number of problems will need to be addressed if a biodiversity credit market is to avoid harm to biodiversity and attract and maintain the social support it needs in order to operate.”
The authors list eight difficult problems facing voluntary biodiversity markets in New Zealand:
- Markets predicated on damage and loss are risky for biodiversity.
- Voluntary biodiversity markets may not attract substantial private investment.
- Integrity principles for voluntary biodiversity markets will be difficult to meet.
- Unintended and perverse outcomes are likely.
- Adequate biodiversity currencies are neither simple nor easily measured.
- Durable voluntary biodiversity markets will have high overhead and transaction costs.
- New Zealand lacks appropriate underpinning biodiversity data and information.
- Capacity and capability for designing and implementing a voluntary biodiversity market in New Zealand are poor.
The need for government funding could also cause unintended consequences, the policy brief says. “Governments usually need to fund considerable set up and ongoing infrastructure to support a scheme. This may divert funding away from more critical and effective interventions. The costs and benefits of a voluntary biodiversity credit market should be weighed against other mechanisms that could be used to enhance and protect New Zealand’s indigenous biodiversity.”
Booming international market
According to the Ministry for the Environment, New Zealand companies spent an estimated $20 million on voluntary credit purchases – both carbon and nature credits – last year. However most of this was on overseas purchases.
MfE does not regularly collect voluntary market data in New Zealand and the figure is estimated based on Environmental Protection Authority data on NZU purchases for voluntary cancellation and engagement with New Zealand businesses who purchased voluntary credits in 2024.
However, private investment in nature is booming globally, with MSCI Research and Insights reporting more than US$102 billion in private finance for nature in 2024, up from $9 billion in 2020.
‘Bandaid on a gaping wound’ – Green Party
Steve Abel, Green Party Agriculture spokesperson, says the newly announced Biodiversity Credit scheme is “a tiny positive” that doesn’t undo the harm to biodiversity the coalition Government has caused.
“This is a bandaid on a gaping wound which does nothing to address a deepening crisis and runs the risk of being mere greenwashing.”
Abel says that credit schemes and covenants are an important pathway to protecting vital biodiversity on farmland, but these alone are not nearly enough to address the biodiversity crisis in Aotearoa.
“One tiny step in the right direction does not make up for the significant damage this Government is doing to the environment in many ways including through cuts to the Predator Free programme, Department of Conservation funding, significant natural area identification, and Jobs for Nature.
“You cannot pretend to care for biodiversity while openly making policy that destroys it, targeting wetlands as a cash cow through tax deductibility, weakening or removing protections for freshwater, and allowing significant pollution to be permitted in our most vulnerable waterways.
“Furthermore, market and corporate driven biodiversity credits can be little more than a greenwashing tool – and there’s proven to be very little demand without regulatory requirements for them.”
Working through risks and opportunities
David Hall, policy director at Toha, which is involved in the Silver Ferm Farms pilot project, says the government’s pilot programme is an important step to work through the risks and opportunities for New Zealand’s voluntary nature markets.
“Landowners and communities are increasingly ambitious about restoring and regenerating the landscapes they live in. Companies and investors are increasingly engaging with their nature-related impacts. Voluntary nature markets are simply instruments that bring together supply and demand for nature-positive impact.”
Hall says there are a variety of nature market instruments and methodologies, both in New Zealand and around the world, with different levels of promise and possibility. “That’s why a pilot programme is so important, to create a space for experimentation and learning. Market actors, regulators and tangata whenua need to work through the risks and opportunities, to explore what works and what doesn’t.
The Silver Fern Farms’s Nature Market Accelerator is exploring the potential for nature data markets in food supply chains. “The vision is that future farmers will be exporting food, fibre and nature data, where data represents on-farm improvements to biodiversity, landscape resilience and carbon stocks,” Hall says.
The Toha Network is supporting Silver Fern Farms as a technology partner, using data templates and digital payment systems to help farmers get recognised and compensated for their land stewardship. “This is homegrown, globally innovative ‘nature tech’ to support farmers who want to leave the land better than they found it.”