FIRNS Project: Biodiversity crediting for Peatlands and Woodlands

The Biodiversity Credit Development Project was established to explore the feasibility of integrating biodiversity credits into the Woodland Carbon Code (WCC) and Peatland Code (PC). The project aimed to develop a scientifically rigorous, repeatable, and scalable methodology for quantifying biodiversity uplift, ensuring that biodiversity credits could complement carbon credits within UK nature markets.The project was led by the PC and WCC in partnership with Soil Association Certification and SRUC.

After a review of existing voluntary biodiversity credit (VBC) market mechanisms at the end of 2023, the Operation Wallacea Methodology was selected as the foundation for this project due to its comprehensive and adaptable framework for quantifying biodiversity uplift. This methodology utilizes a "basket of metrics" approach, inspired by the Consumer Price Index, to assess biodiversity changes across various taxa and structural aspects of ecosystems. By incorporating at least five site-specific, peer-reviewed biodiversity metrics—typically including one structural metric (e.g., habitat condition) and four taxonomic metrics (e.g., species richness of birds, functional invertebrate groups)—the method provides a nuanced and accurate reflection of ecological health. A biodiversity credit is defined as a 1% increase in the median value of these combined metrics per hectare, offering a standardized yet flexible unit for biodiversity assessment. This approach aligns with the project's goals of scientific rigor, repeatability and cost-effectiveness, making it accessible for landowners and project developers. Additionally, the Operation Wallacea methodology is specifically designed to be contextualised to unique environments. It is freely available and open source, and has been used in VBC projects both domestically and internationally. Given these benefits, the methodology worked well as a skeleton from which the PC and WCC could create their approach. The framework of the PC and WCC would be similar enough to existing market frameworks, but the specific metrics for biodiversity uplift quantification could be contextualized to UK woodlands and peatlands and reviewed by teams of experts. By having a quantification framework that is shared broadly in international VBC markets, but having the data uniquely contextualised to the WCC and PC habitats, the team could align with larger market frameworks without compromising on rigour or ownership of the framework by the PC and WCC. 

After working with teams of ecologists to identify the appropriate metrics for UK Woodlands and Peatlands within the Operation Wallacea methodology, the team conducted pilot studies to test the methodology in real-world conditions. RePlanet was selected to facilitate the standardised biodiversity data collection due to their experience with the Operation Wallacea Methodology, their affordability, and their experience sampling in UK Habitats. Using the results of piloting, Soil Association Certification (SAC) reviewed the datasets and performed site visits. Their work focused on understanding how the existing mechanisms of independent validation from the carbon market could be applied to biodiversity crediting, and where the approach would need to be changed or updated for the nuances of biodiversity data. 

The UK Land Carbon Registry also supported the development of this project by providing feedback on market trends in credit stacking and bundling. Using the market framework outlined by Julia Mccarthy in her Ecosystem Marketplace report, we explored different options for stacking and bundling and their compatibility with the existing carbon framework of the WCC and PC. Originally, the programme was looking at a “multi-credit bundle” approach. Any type of unbundled stacking presented significant challenges in function when integrating with existing financial additionality guidelines in the carbon market. 

However, following conversations with the UK Land Carbon Registry, the team pivoted towards proposing an “explicit bundle” approach. The reason for this is because of the nascency of the market. During New York Climate Week 2024, there were many conversations around stacking and bundling. But at the time of the conference, there was no consensus yet regarding how multi-credit bundles would be implemented. Carbon is a predicted unit, whereas biodiversity is a measured outcome, with few tools for accurate predictions of change. And these two credits can theoretically generate at different rates across a project’s lifespan. This presents the challenge of deciding how credits are bundled. Do you bundle credits based on a per-ha rate, or do you have a set ratio? Could you bundle credits 1:1, and then sell the remaining credits unbundled? These approaches could also lead to fractional credits, which are often seen as low integrity or with low purchase potential. These types of challenges are not yet resolved in the larger VBC market. And as such, selecting an option that later is considered low-integrity after further market regulations have formed is a major reputational risk to the codes. An explicit bundle still allows a unit of carbon to have an explicit, quantified percentage of biodiversity uplift per hectare associated with it, but avoids many of these challenges. Further explanation of the explicit bundle approach, and the challenges the codes face with bundled credits, are outlined in the learning toolkit documents below. 

To wrap up the first phase of the project, all relevant outputs and lessons have been collated and presented on this page. The aim is that all the lessons from this project can be shared with the wider nature markets community, to foster growth and collaboration in this burgeoning market.

The Biodiversity Credit Development Project explored how biodiversity uplift could be measured, validated, and monetized within the UK’s evolving nature markets. Over the course of the project, the team:

• Developed a proposal for a scientifically rigorous biodiversity crediting methodology, aligning with best practices in biodiversity monitoring
• Conducted pilot studies to test the feasibility of biodiversity credit quantification using the proposed framework
• Worked with the UK Land Carbon Registry to explore crediting mechanisms
• Hosted a public consultation, receiving feedback from landowners, project developers, and ecologists
• Collated the project outcomes and learnings on this page, to create a learning toolkit for those wishing to further develop or engage in nature finance mechanisms in the UK

The Peatland and Woodland Carbon Code teams have been awarded funding to continue this project. This phase will:

• Collate and analyse data from pristine or restored woodland and peatland sites
• Refine and develop metrics, creating community similarity indices for some species groups, helping us to understand how community structures are changing and improving
• Use this data to calculate the biodiversity uplift of a project
• Review the costs and potential income from monitoring biodiversity uplift
• Create a roadmap for incorporating biodiversity crediting into the Woodland Carbon and Peatland Codes
• Provide template documents and improve the process to validate and verify biodiversity projects