Biodiversity credits ≠ carbon credits. Treating them the same way is conceptually wrong

The voluntary carbon market took two decades to develop the methodological infrastructure that buyers now rely on. Biodiversity finance is attempting to compress that timeline without resolving the fundamental measurement problem that carbon never had to face.
Apr 9 / Jessica Brown

The Appeal of the Analogy

When biodiversity finance began attracting serious institutional attention — roughly from COP15 in Montreal (2022) onward — the voluntary carbon market provided an irresistible template. Carbon credits had demonstrated that a global market for ecosystem services was commercially viable. The measurement framework, the certification bodies, and the registry infrastructure  — all existed and had been pressure-tested at scale. The temptation was to transfer this architecture to biodiversity to develop biodiversity credits to enable corporations to purchase units to offset their biodiversity impacts. 

The analogy is conceptually misleading, and understanding why requires examining what made carbon measurable in a way that biodiversity is not.

Why Carbon Was Measurable and Biodiversity Is Not
(In the Same Way)

Carbon's critical advantage as a traded commodity is dimensional simplicity. A tonne of CO₂ equivalent is the same regardless of where it is emitted or sequestered (with important exceptions around permanence and leakage, which the carbon market has spent twenty years partially addressing). The global atmosphere is, for practical purposes, a well-mixed system. A tonne of CO₂ reduced in Uganda has the same radiative forcing benefit as a tonne reduced in Germany. This dimensional equivalence is what makes geographic arbitrage in carbon markets coherent.
Biodiversity has no equivalent. An area of tropical rainforest in Borneo and an area of temperate woodland in Scotland cannot be compared on a single metric without losing most of the information that matters ecologically.

Species richness, functional diversity, genetic diversity, habitat connectivity, soil microbiome integrity, hydrological function — these are multidimensional attributes of ecosystems that cannot be simplified into a single unit without severe information loss. The 'biodiversity credit' as currently conceived in most market frameworks is a proxy for one or a small number of these dimensions, not a comprehensive measure of ecological value.

The TNFD's LEAP (Locate, Evaluate, Assess, Prepare) approach acknowledges this multidimensionality by requiring organisations to assess nature-related dependencies and impacts across location-specific contexts rather than aggregating to a single score. This is methodologically correct but creates an obvious market design problem: if credits are location-specific and ecologically context-dependent, the liquidity and price discovery functions that make commodity markets efficient are difficult to achieve.

The UK Biodiversity Net Gain Framework:

The UK's mandatory Biodiversity Net Gain (BNG) framework, which came into force in February 2024 for major developments and April 2024 for smaller sites, provides the most developed regulatory biodiversity credit market currently operating at scale. Under BNG, developers must demonstrate a minimum 10% net gain in biodiversity units before planning permission is granted. Biodiversity units are calculated using the Biodiversity Metric 4.0, developed by Natural England, which assigns scores to habitat types based on area, condition, distinctiveness, and strategic significance.

The metric is methodologically defensible within its design intent — measuring habitat quality before and after development — but it has limitations that practitioners purchasing off-site biodiversity units (i.e., credits from a third-party habitat bank) need to understand. 
  • First, the metric is habitat-based, not species-based. It does not directly measure the ecological outcomes most conservation biologists consider central: population viability of specific species, genetic diversity, or trophic web integrity. 

  • Second, habitat condition is assessed at a point in time; long-term maintenance of habitat quality depends on the management covenant attached to the credit, which carries its own counterparty and governance risk. 

  • Third, the metric treats geographically distant habitats as substitutable, subject only to a local multiplier, which ecologists have challenged as insufficiently stringent for functionally connected landscapes.

The Baseline Problem: More Intractable Than in Carbon

In the carbon market, additionality — demonstrating that reductions would not have occurred without carbon finance — is contested but conceptually tractable. A baseline scenario (what emissions would have been without the project) can be constructed from historical trends, regulatory requirements, and comparable project data. The debate is about methodology and accuracy, not about whether a baseline is conceptually possible.

In biodiversity markets, the baseline problem is more intractable because biodiversity baselines are dynamic, nonlinear, and ecologically context-dependent. What constitutes the 'reference state' for a habitat that has been degraded over decades? Should the baseline reflect current degraded condition, the condition prior to degradation, or some theoretically optimal condition? Different answers produce dramatically different credit quantities and imply different restoration trajectories. The TNFD's guidance acknowledges this as an open methodological question. Most biodiversity credit frameworks have resolved it pragmatically rather than rigorously — accepting current condition as the baseline — which systematically undervalues restoration relative to protection of high-quality habitats.

What Institutional Buyers Need to Know Before Entering This Market

The biodiversity credit market is at an earlier methodological stage than most of its promotional materials suggest. For institutional buyers, a minimum due diligence should include: 
  • Assessment of whether the biodiversity metric used in the credit is scientifically validated and by whom;

  • An understanding of the habitat type, geographic context, and management commitment underlying the credit;

  • A review of the permanence (whether maintenance obligations legally binding, for how long, and what happens if the habitat bank operator fails?);

  • A review of additionality — would the habitat have been protected or restored without biodiversity credit revenue?
The Science Based Targets Network's (SBTN) guidance on nature targets signal that regulatory frameworks for nature-related corporate claims are converging — which will eventually raise the standards that biodiversity credit buyers need to demonstrate. Buyers should build the due diligence capability as the market becomes more scrutinised and established.
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By Jessica Brown
Senior Ecologist