This article is by Robert Nasi, Director General of the Center for International Forestry Research (CIFOR). It was originally written for Forest News.
As a tropical forest ecologist, I have spent decades studying ecosystems teeming with a complexity that still humbles me. I have seen firsthand how a single ancient tree can be an entire world for countless species, how the subtle shift in understory plants can signal profound changes in the ecosystem’s health, and how interconnected everything truly is.
So, when I hear discussions about creating markets to “save nature,” a part of me is hopeful, but a bigger part is deeply cautious.
The idea of channelling much-needed funds towards conservation is vital. But looking at how these market ideas have played out, like carbon markets, gives me pause. Forests, wetlands and the natural world are not simple spreadsheets; treating them as such can lead us down a perilous path.
The story begins with carbon markets. Born from a genuine desire to tackle climate change, these markets aimed to put a price on pollution, creating a system where emitting fewer greenhouse gases had a tangible financial value. The core idea was to create a tradable unit – a tonne of carbon dioxide equivalent (CO2e). If a company or a project could reduce emissions or pull carbon out of the atmosphere, they could earn carbon credits to sell in a carbon market.
From an ecologist’s viewpoint, the design of these markets favoured things that were easier to count than the intricate workings of a forest. Think of industrial projects: capturing methane from a landfill or installing solar panels. The inputs and outputs, the reduction in CO2e, could be measured with a certain engineering precision. This is not to say it was perfect. Still, it was more contained, more predictable than guaranteeing how much carbon a newly planted forest will store over the next century or proving that an existing forest would not have been logged anyway. This inherent bias towards the “easily quantifiable” was understandable from a market perspective thriving on clear, fungible units.
Big challenges emerged when these carbon markets tried to fully embrace Nature-Based Solutions (NbS) – using forests, soils and wetlands to soak up carbon. Forests or wetlands are incredible carbon sinks, no doubt. They can deliver a huge chunk of the emission reductions we need globally. But they are also living, breathing, dynamic systems. And this is where the carbon market’s simplistic logic began to clash with ecological reality.
Several persistent problems have plagued nature-based carbon projects:
Additionality – the “Would it have happened anyway?” question. Imagine a project claiming credits for protecting a forest from deforestation. Was that forest genuinely under immediate threat, or would it have remained standing even without the carbon money? Proving this additionality is incredibly difficult in complex social and economic landscapes. Many investigations have shown projects claiming credits for stopping deforestation that was unlikely to occur, generating “ghost credits” without real climate benefits.
Permanence – nature’s uncertainties. Forests store carbon, but that storage is not guaranteed forever. A forest planted for carbon credits might be destroyed by wildfire (an increasing risk with climate change), decimated by pests, or illegally logged decades later. The carbon market tried to create buffer pools of credits to cover such losses. Still, these are often based on generalised assumptions, not the specific, long-term ecological risks a particular forest faces. Carbon locked in a geological formation (a tech solution) is different from carbon in a living tree.
Leakage – shifting the problem. If you protect one patch of forest, does the logging operation just move to the unprotected forest next door? Or does it shift agricultural pressure to another region? This leakage means the net carbon benefit can be much lower than claimed at the project site. Accurately accounting for this across broad landscapes is a monumental task.
Measurement – counting carbon in a complex world. While we have methods to estimate carbon in forests (measuring trees, analysing soil), it’s far more complicated and variable than measuring emissions from a smokestack. This has led to concerns about the accuracy and reliability of the carbon accounting in many nature-based projects.
The results? A significant portion of nature-based carbon credits, particularly from avoided deforestation (REDD+) projects, have faced intense scrutiny and criticism for not delivering the climate benefits they promised. This isn’t just an academic debate; it has led to a drop in confidence and market value. The very mechanism designed to help forests ended up, in many cases, being undermined by trying to fit the square peg of ecological complexity into the round hole of a simplified market unit.
Now, the fashion is shifting towards biodiversity markets. Earth is facing the 6th extinction crisis, with wildlife populations plummeting. The funding gap for conservation is enormous, (under-) estimated at over $700 billion annually. So, the idea of creating biodiversity credits to attract private finance is gaining momentum, even getting a nod in global agreements like the Kunming-Montreal Global Biodiversity Framework.
But if we thought carbon was tricky, biodiversity is on another level entirely.
Carbon, as CO2e, is a global pollutant. A tonne reduced in one place has, theoretically, the same atmospheric impact as a tonne reduced elsewhere. This (imperfect) fungibility is what would allow a global carbon market to function. Biodiversity, however, is the epitome of diversity, local and unique. The specific mix of species, the genetic diversity and the intricate ecological relationships that define a patch of old-growth rainforest in the Amazon are utterly different from those in a Scottish pine forest or an Indonesian mangrove.
You cannot swap one for the other and claim equivalence. The idea of offsetting the destruction of a unique, ancient woodland by creating a new plantation elsewhere, even if it is larger, fails to capture the true ecological loss. Many species, soil structures and ecological functions take centuries, if not millennia, to develop and cannot be simply recreated.
This brings us to the Herculean task of defining a tradeable unit of biodiversity. What exactly would we be trading?
Some propose a “basket of metrics” – counting key indicator species, measuring habitat quality, or assessing ecosystem functions. For example, the Wallacea Trust, working with Plan Vivo, suggests defining a credit as a 1 per cent uplift in a basket of at least five locally relevant metrics per hectare. This is a more nuanced approach than a single, crude measure.
In England, the Biodiversity Net Gain (BNG) policy, now mandatory for many developments, uses a statutory Biodiversity Metric. This complex tool calculates biodiversity units based on habitat type, area, condition, distinctiveness and strategic location. Developers must show at least a 10 per cent net gain in these units.
While efforts to quantify are necessary for any transaction, they are fraught with peril. How do you weigh the importance of different species or functions in your basket? Does an increase in common, adaptable species truly compensate for the loss of a rare, specialist one? There’s a real risk of “metric gaming” – focussing on what’s easy to measure or improve to get a good score, rather than what’s most critical for the ecosystem’s long-term health.
The BNG metric in the UK, for instance, has already seen cases where rigid application led to ecologically questionable trade-offs on development sites, like sacrificing native tree planting to maximize grassland units because the existing grassland’s score improved.
If we simply take the flawed architecture of carbon markets—with its inherent struggles over additionality, permanence, leakage and MRV – and apply it to the even more complex, site-specific and non-fungible world of biodiversity, we are setting ourselves up for failure on a grander scale. The risk of greenwashing – creating an illusion of positive impact while real ecological damage continues or is inadequately compensated – is immense.
Early experiences with biodiversity compensation schemes, like wetland mitigation banking in the US and the BNG in the UK, offer vital lessons. The US system, while channelling billions into wetland restoration, has still struggled to achieve its “no net loss” goal, partly due to issues with ensuring true ecological equivalence of offsets and gaps in monitoring.
The UK’s BNG, though young, is already facing challenges with enforcement capacity at local levels, concerns that the 10 per cent gain might just be a buffer against uncertainty rather than a true ecological uplift and questions about the long-term viability and monitoring of on-site gains. These aren’t just teething problems; they point to fundamental difficulties in making these market-like mechanisms deliver genuine, lasting benefits for Nature.
So, what is the alternative? Is there one indeed? I believe that if we are to use market-like mechanisms for biodiversity, they must be built on a foundation of ecological realism:
Embrace local uniqueness, not global fungibility – We must accept that biodiversity value is local and specific. A credit from a restored peat bog in Scotland is different from one from a protected coral reef in Indonesia. Markets should focus on driving investment into specific, high-priority ecosystems, with metrics tailored to those places.
Prioritise real outcomes over tradable units – The goal shouldn’t be to create a perfectly liquid commodity, but to ensure that investments lead to genuine, measurable and lasting improvements in ecosystem health, species survival and local livelihoods. This means robust, long-term monitoring by independent ecologists, not just a paper exercise.
Integrity in measurement is key – If we must use metrics, they need to be scientifically sound, transparent and reflect true ecological complexity as much as possible, moving beyond simplistic proxies like mere acreage. We need to be honest about uncertainties and build in large precautionary buffers.
Strengthen governance and transparency – Independent verification, clear rules, public registries and well-resourced enforcement are non-negotiable. The conflicts of interest that have sometimes plagued carbon markets (where those who benefit from credit sales also influence their validation) must be avoided.
Empower local and Indigenous stewards – Indigenous Peoples and local communities are often the most effective guardians of biodiversity. Any market mechanism must respect their rights, involve them centrally in design and governance, and ensure they receive equitable benefits. Schemes like Plan Vivo, which mandate a significant portion of funding goes to local stakeholders, offer a good starting point.
Focus on contributions, not just offsets – The language matters. Biodiversity credits should primarily fund additional conservation and restoration – nature-positive contributions – rather than being seen to compensate for avoidable destruction elsewhere. The mitigation hierarchy (avoid, minimise, restore, then offset as a last resort) must be rigorously applied.
Our planet’s biodiversity is not a collection of interchangeable parts that can be easily valued and traded like stocks or shares. It is the intricate, evolved web of life that sustains us all. While financial mechanisms can play a role in its protection, they must be designed with a deep understanding of and respect for ecological principles. We cannot afford to simply replicate the flawed logic of past market attempts.
For the sake of the forests I study, the people who steward these, and the myriad life they support, we need to be far more thoughtful, rigorous and honest in how we approach the “valuation” and “marketing” of nature.
It demands nothing less.