Making the market work for nature while helping to tackle poverty

Marking World Wildlife Day today (3 March), IIED is proposing a new system that would help protect biodiversity and also reduce poverty, bringing conservation and development together.

Paul Steele's picture
Insight by 
Paul Steele
Paul Steele, IIED chief economist
03 March 2020
A baby orangutan clings to its mother as she hangs from a branch

A baby orangutan clings to its mother. IIED's biocredits system learned from the Malua BioBank, which sought to generate commercial incentives for biodiversity conservation to compete against alternative land uses, and supported wild orangutans in Malaysia (Photo: Sascha Wenninger, via FlickrCC BY-SA 2.0)

The rich diversity of life in all its forms is under threat. Despite years of work to protect it, this destructive trend continues to grow. But effective action is possible.

Too often governments and the private sector view biodiversity as not having a value unless it is sold for profit or industrially developed. This causes destruction, such as forests being replaced with palm oil and pulp and paper plantations, soils and waterways polluted by chemical dumping and oceans overfished.

But as IIED has long shown, nature has an intrinsic value that can and should be included in a country’s wealth reflecting the benefits it provides, including natural ways for storing carbon, purifying water and for attracting tourism and recreation.

In our new report launched today, ‘Making the market work for nature: how biocredits can protect biodiversity and reduce poverty’, IIED proposes a new system – the first of its kind – for using the market to help save biodiversity and raise funds as an incentive to conserve it, while making sure that the women, children and men living in and around these areas also benefit.

How to make the market work for nature

The system comprises biocredits – units of biodiversity in all its forms, from forests to indigenous seed varieties, coral reefs to tigers and insects. The value of biocredits rises only when the area or the number of species it comprises increases, providing an incentive for improving conservation areas and species numbers.

Biocredits would finance conservation efforts in a specific area and, unlike carbon and biodiversity offsets, they could not be set against destructive activities in other areas.

Under the system, in developing countries governments, organisations, companies or individuals, such as farmers, would provide these biocredits through new market institutions set up to issue, register and monitor them. These will need to be established as was similarly done when the system of carbon trading was created.

The baseline of every credit would be verified when registered. When sold it would be entered into an official register, monitored and its ownership tracked to maintain compliance and transparency ensuring the area covered was not degraded or destroyed.

For conservation to work, the people living amid and near areas rich in biodiversity need to benefit from its protection. With biocredits, a proportion of the money raised would be channelled to local communities in low- and middle-income tropical countries, where most of the world’s biodiversity is located.

This is key to making sure their incomes are protected and local people have an incentive to safeguard biodiversity. 

Learning lessons from existing systems

In developing this system, we looked at other systems, for example Rhino Bonds in South Africa and eastern Africa, the Malua BioBank (PDF) in Malaysia, species conservation banks in the United States, and community carbon credits linked to REDD+.

These approaches share several important common points, for example they offer traceability as a way to make credible, long-term contributions to conservation and through this attract investors. They also propose that if biodiversity is to be counted as an asset, it needs to be managed as an asset.

But these systems also have shortcomings, such as being too complex and expensive to set up or not having done enough to identify buyers who want to improve and protect biodiversity or tackle climate change.

Biocredits would provide a financial incentive to increase biodiversity while also making sure some of the world’s poorest people who live around it benefit. It is crucial, particularly in the run-up to the renegotiation of the Convention on Biological Diversity’s conservation targets in October, that conservation and development work together.

Without more effective action, our grandchildren will inherit a world where nearly half of today’s biodiversity has gone – animals, plants, insects, whole ecosystems.

Effective action is urgently needed and biocredits are one way to make a difference and help protect the diversity of nature on which all life depends.