Great thoughts Eric. It's a comples discussion. I do hope we learn from the carbon markets. I too come from a carbon background as well (reforestation of degraded land) and the only way to scale our efforts was to use carbon as a financing vehicle, while reforestation offers so many additional benefits. One of the take-aways from the carbon markets is that I think we should ban the word "offset". Rather use language such as "counterbalancing" impact.
Businesses will have to start recognizing and account for nature, and that's something that will be new to many. But it's important to recognise natural capital as a supplier. A supplier that has rights and deserves compensation. The operative word in this whole narrative is financing. And unfortunately, most CFOs demand something in return.
This whole C-credit story is hijacked long time ago .
How is it's creditable for a big comp like Amasone / Microsoft or a Oil-producing country like Quatar to buy C-credits , while doing zero, and then only passing on the cost to the consumer ?
Nature/ Agriculture is the only source of C-capturing , but at the end is also a consumer ---- so it wil pay for the good it do !
What started as a novel idea , is again hijacked by Big Business and clever consultants !
IMO the fundamental problem with biodiversity credits is the issue of equivalence. Markets require liquidity and liquidity requires equivalence. As one central basis of measurement, carbon markets offer high equivalence (despite the emerging issues about measurement and verification). Biodiversity intrinsically has a low level of equivalence. For example, how would you value an Amazon wild harvest credit vs a Namibian kelp forest credit vs an Australian oyster reef credit without effectively dumbing down the basis for measurement or aggregating away the value.
The value of biodiversity is in its detail, much of which is held in localised knowledge - the sort of thing that satellite imaging and remote sensing can't see. Moreover, nature, like knowledge is essentially analog. For two acoustic guitars to play the same note, each has to be tuned to the specific instrument. We can standardise the note, but the tuning is different. In other words, the value of natured-based financial instruments is in the tuning, not the note.
As for value over time, I find it useful to think about this as analogous to balance sheets and profit and loss statements. The valuation of natural capital (ie SEEA) can be seen as an exercise in creating an extended balance sheet representing diverse nature assets that appreciate or depreciate in value against a previous time period. By contrast, credits and contracts are a pricing exercise that one might associate with a profit and loss report. Just as business assets provide a basis for producing products that generate revenue, natural capital assets can also be seen as a basis for generating revenue from nature-based "products". Like a balance sheet asset, natural capital value is a value at a particular point of time based on a standardised method of valuation. On the other hand, a nature-based credit or contract is based on a standardised product that is valued (priced) based on demand at a particular point in time.
Great piece Eric. You said "ensure" twice and "perpetuity" and "relate/relational" 4X each. You should check out BASIN's Ecological Ensurance model. It does precisely this: triangulates relational value to ensure the RealValue of Natural Capital in perpetuity. Full details at: https://docs.basin.global/
Great questions you are raising here. Thank you. I don’t have any great answers right now. Let’s all get to work think this through asap.
emailed you
Great thoughts Eric. It's a comples discussion. I do hope we learn from the carbon markets. I too come from a carbon background as well (reforestation of degraded land) and the only way to scale our efforts was to use carbon as a financing vehicle, while reforestation offers so many additional benefits. One of the take-aways from the carbon markets is that I think we should ban the word "offset". Rather use language such as "counterbalancing" impact.
Businesses will have to start recognizing and account for nature, and that's something that will be new to many. But it's important to recognise natural capital as a supplier. A supplier that has rights and deserves compensation. The operative word in this whole narrative is financing. And unfortunately, most CFOs demand something in return.
Make it investable and CFO's can't object.
This whole C-credit story is hijacked long time ago .
How is it's creditable for a big comp like Amasone / Microsoft or a Oil-producing country like Quatar to buy C-credits , while doing zero, and then only passing on the cost to the consumer ?
Nature/ Agriculture is the only source of C-capturing , but at the end is also a consumer ---- so it wil pay for the good it do !
What started as a novel idea , is again hijacked by Big Business and clever consultants !
IMO the fundamental problem with biodiversity credits is the issue of equivalence. Markets require liquidity and liquidity requires equivalence. As one central basis of measurement, carbon markets offer high equivalence (despite the emerging issues about measurement and verification). Biodiversity intrinsically has a low level of equivalence. For example, how would you value an Amazon wild harvest credit vs a Namibian kelp forest credit vs an Australian oyster reef credit without effectively dumbing down the basis for measurement or aggregating away the value.
The value of biodiversity is in its detail, much of which is held in localised knowledge - the sort of thing that satellite imaging and remote sensing can't see. Moreover, nature, like knowledge is essentially analog. For two acoustic guitars to play the same note, each has to be tuned to the specific instrument. We can standardise the note, but the tuning is different. In other words, the value of natured-based financial instruments is in the tuning, not the note.
As for value over time, I find it useful to think about this as analogous to balance sheets and profit and loss statements. The valuation of natural capital (ie SEEA) can be seen as an exercise in creating an extended balance sheet representing diverse nature assets that appreciate or depreciate in value against a previous time period. By contrast, credits and contracts are a pricing exercise that one might associate with a profit and loss report. Just as business assets provide a basis for producing products that generate revenue, natural capital assets can also be seen as a basis for generating revenue from nature-based "products". Like a balance sheet asset, natural capital value is a value at a particular point of time based on a standardised method of valuation. On the other hand, a nature-based credit or contract is based on a standardised product that is valued (priced) based on demand at a particular point in time.
Great piece Eric. You said "ensure" twice and "perpetuity" and "relate/relational" 4X each. You should check out BASIN's Ecological Ensurance model. It does precisely this: triangulates relational value to ensure the RealValue of Natural Capital in perpetuity. Full details at: https://docs.basin.global/