Rewetted peatland at RSPB Lake Vrynwy Nature Reserve (c) Alex Falkingham (rspb-images.com)
Today's Nature's Advocates blog is written by Jenna Coull, the RSPB's Principal Economist.
The newly published State of Nature Report highlights that our nature continues to decline in the United Kingdom . On the back of our response to a call for evidence by the Parliamentary Environmental Audit Committee, we outline the role of environmental markets in tackling these declines and securing UK nature’s future.
UK Nature needs private investment
The UK Government has set a target for private investment to support nature recovery and has committed to raising £500m each year by 2027, increasing to £1bn by 2030. However, given that the Green Finance Institute estimates the finance gap (the gap between current commitments and what is needed to meet them) to be just under £6bn over the next 10 years this target lacks ambition. Public sector investment needs to increase too, but we cannot achieve nature recovery without significant private sector investment.
Environmental Markets are crucial to delivery
One of the most effective tools for investment to be realised is through environmental marketplaces, where credits for nature services are traded between providers and investors. There are some already in existence, for example through the Woodland Carbon Code. However, these markets are in their infancy and not yet lined up with UK conservation priorities, such as the species abundance target.
The RSPB already sells carbon credits in the UK and overseas. For example, in the UK our high integrity Peatland Code registered projects support the restoration of degraded Peatland in the UK, focusing initially on 4000ha within our own estate. In Sierra Leone, we support the Gola Rainforest Project partners to protect the 70,000-hectare national park and support the livelihoods of over 120 communities in and around the area. Much of the income for this project comes from carbon credit sales.
Gola rainforest canopy, (c) Michael Duff (rspb-images.com)
The case for government intervention
To be viable, environmental marketplaces need to operate in a way that brings confidence to all parties involved. Economists often make a case for the government to intervene in markets which are not, or subject to what is known as ‘market failure.’ There are several reasons this may happen. This can be due to poor or asymmetric information (e.g. where sellers know more about the quality of a product than the buyer), a positive or negative external consequence of production - an ‘externality’ (e.g. pollution from industry), dominance of one provider in the market enabling them to set prices, or the market for delivering public goods which would be unviable commercially (e.g. the police service). Government interventions to support well operating markets can be in the form of providing information, regulation, setting and enforcing standards. The nature and climate crises will not be effectively addressed without this leadership.
Confidence in current markets is low
Environmental markets need to be seen as being in a ‘nascent’ stage and confidence in them is low largely due to poor information. On the buyer side it is difficult for investors to ascertain the quality of credits sold for nature. On the supplier side there is a lack of certainty around the future of these markets, their prices and rules. This information is provided through what is known as market standards. Currently there is a lack of consistent standards or accreditation processes across the marketplace (the RSPB sets its own policies, which take considerable organisational resources) which makes investment risky and allows for ‘greenwashing’. There is no guarantee that finances will make it to environmental projects on the ground. Additionally, there are multiple markets for different nature services with no coordination between them; it is crucial that services are delivered at a scale to maximise both benefits to nature and to secure investment. The issue of ‘bundling’ of services – where one piece of land can be utilised to sell credits for multiple services – is being hotly debated.
The market needs action
The UK, with limited land for nature, must be able to compete for investment internationally. To do this these markets must be high-integrity, and a significant level of intervention is needed to ensure this is the case.
So, there is a role for government. This includes: establishing a sound regulatory baseline; setting high delivery standards and accreditation for participants in the market; creating demand through placing nature obligations on purchasers; establishing a baseline for current biodiversity so progress can be measured against this; supporting the scaling up of environmental projects; and reviewing any perverse incentives in current policy (e.g. taxation) that would prevent engagement in these markets. Alongside the government there is also a leadership role for the UK financial sector, to integrate new policy into existing international frameworks.
Time is running out
Government policy is moving forward (for example through the Green Finance Strategy and Nature Market Framework) albeit more slowly than is needed; we are a third of the way through the UN’s decade of the ecosystem restoration already. We welcome the commissioning of the British Standards Institute by Defra to look at standards for these markets. The Scottish Government are currently consulting on a new biodiversity framework made up of a suite of policies and a Natural Environment Bill which includes legally binding nature recovery targets. (The RSPB will be responding in due course.) The new UK-French Global Biodiversity Credits Roadmap, launched in June 2023 sets out a plan for scaling up global efforts to support companies buying credits that contribute to the recovery of nature in a credible way. Coordination is needed though to ensure consistency across policies.
Conclusion
With our extensive experience in delivering natural capital at reserves and with our partners, the RSPB is well sighted on the potential gains and pitfalls of environmental markets. The marketplace desperately needs timely government intervention to ensure it operates effectively, avoids greenwashing, and delivers for nature. We call on the government to take rapid action to help secure nature's long-term future.
Further resources
- Nature and Economics | The RSPB
- RSPB| Time to correct the disconnect at the Treasury - Nature’s Advocates - Our work - The RSPB Community
- RSPB | Tax: a neglected tool in the nature emergency? - Nature’s Advocates - Our work - The RSPB Community
- RSPB | Green finance - a greenwash on nature?
- RSPB | Why business has a crucial role in helping to save nature
- Press Release: State of Nature Report