Integrity of natural capital markets is “pretty rigorous”

IN A live panel on 8.9ha TV, Charlie Davis, a partner at Sylvestris Land Management, said that to work, natural capital markets have to maintain incredibly high integrity. “And having engaged with the codes as they stand I am very confident in their integrity. I question those who haven’t gone through the process of registering schemes saying, “ah, you know, it’s bandit country…” It’s pretty rigorous. I’m happy with that, and I want it to stay like that.”

Part of the wide ranging discussion on natural capital markets centred on the fungibility of natural capital assets.

Ms Davis said “Natural capital isn’t going to be a silver bullet for land managers to fund all of their nature positive land management. Fungibility is one of the aspects.

“There’s a lot of noise around nature-based solutions and natural capital, but at the moment there are only three externally regulated natural capital markets. The three that exist are the voluntary carbon market, biodiversity net gain, and nutrient neutrality. Each of those has a different level of fungibility.

“Carbon, theoretically, has universal fungibility. A tonne of carbon that’s sequestered anywhere in the world is equivalent to a tonne of carbon sequestered anywhere else in the world, so it can be used and traded as an offset against any acclivity that also emits a tonne of carbon.

“Biodiversity net gain has an intermediate level of fungibility – it’s based on equivalence still; equivalence of habitat and habitat condition, but it’s also graded on the basis of proximity to where the activity that it is trying to rectify was undertaken. This is very suitable for what it’s trying to achieve – it’s important that we don’t concentrate all of our environmental action in pockets and leave other areas denuded.

“Nutrient neutrality isn’t fungible at all. It’s based on a specific location that’s been identified because certain actions are being carried out in those areas, so it can’t be moved around. It exists within a very particular location.

“What this means is that there are limits to the markets with actual buyers – the markets that we’ve set out here are the only ones that buyers have confidence in because of policy and legislation – they’re driven by policy and legislation rather than pure market appetite. So there is a limit on what land managers can engage in in terms of natural capital and the other key limit is land capability. Not all interventions are suitable or fit into all land types.”

Ms Davis also said that additionality was critical. “Additionality will always be sacrosanct within private markets for eco-system services. It’s a way to ensure that interventions that are being paid for weren’t going to be undertaken anyway under a business as usual scenario. It’s that difference that creates a tradeable asset.

“What I envisage is that support for maintaining pre-existing good habitats will be achieved through different means – that this is one of the tools in the tool box, and that private markets for natural capital aren’t going to solve all of our conservation, biodiversity and climate issues.

Towards the end of the panel discussion there was also debate about the perceived “false dichotomy between ecosystems with fungible markets and those without monetisable value.”

From the audience, Henry Leveson-Gower, the Chief Executive of Promoting Economic Pluralism, said “Many ecosystem services will never have fungible markets such as natural flood management and water pollution reduction. Both are too local and geographically specific.

“But just because there is no secondary market and ecosystem services are not commodified for such a market, this does not mean they are not monetisable. Multiple providers and beneficiaries of ecosystem services can negotiate locally payments for such services developing long-term growing collaborations, which can be increasingly significant economically. This is also a model that can be replicated in many areas without fungible secondary markets.” Mr Leveson-Gower cited the example of 3Keel’s LENS model.

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