Assessing Market-based Mechanisms for Biodiversity Conservation: A Comparative Analysis of Biodiversity Credit Schemes

Biodiversity loss is accelerating, and funding to address it is insufficient, leading to a global biodiversity financing gap of US$ 600 - 820 billion per year (Deutz et al., 2020). Governments agreed to mobilise $200 billion per year and to accelerate innovative schemes, such as biodiversity credits (BC) (CBD, 2022).

BC share conceptual similarities with biodiversity offsets and carbon credits, which have been criticized to achieve the expected positive outcome for ecosystems. BC may face similar challenges and concerns and there is a significant gap in understanding how the emerging biodiversity credit schemes are addressing those challenges (Palmegiani et al., 2023; Wunder et al., 2024).

Building on a narrative, non-systematic literature review (Snyder, 2019) of 26 grey and peer-reviewed literature, the study identifies four categories of challenges: biodiversity accounting, social safeguards, demand and pricing of the credits, and governance. These challenges are translated into a set of criteria, to compare two biodiversity credit schemes developed by ERA Brazil and Terrasos on the practical implementations of those challenges.

The comparative analysis based on Bryman (2012, pp. 72, 74) reveals that both Terrasos and ERA Brazil demonstrate strong methodological approaches to biodiversity accounting, particularly regarding the definition of credit units, and the incorporation of long-term conservation commitments (Terrasos 2022 & ERA Brazil 2024). Both schemes establish clear monitoring frameworks and rely on third-party verification, reflecting lessons learned from carbon markets. However, social aspects, such as benefit-sharing, community engagement, and the recognition of Indigenous and local rights remain underdeveloped despite being central to the legitimacy and long-term success of BC (BCA, 2023; GEF, 2023). Challenges regarding demand and pricing are not sufficiently addressed, as both schemes largely depend on other actors such as buyers and policymakers in an unregulated emerging market (Ducros & Steele, 2022; WEF 2023).

Overall, BC have the potential to increase private finance for biodiversity by addressing the needs of businesses to comply with new regulations regarding sustainability and biodiversity conservation. Our work contributes to the ongoing discussion on how to finance biodiversity and the results may also support businesses, as potential buyers, in their biodiversity management.