Submission on Helping nature and people thrive – Exploring a biodiversity credit system for Aotearoa New Zealand

The Legislative Basis for the New Zealand Conservation Authority (NZCA) submission

1. The New Zealand Conservation Authority / Te Pou Atawhai Taiao o Aotearoa (Authority, NZCA) was established under the Conservation Act 1987 (Act), with members appointed by the Minister of Conservation. It is an independent statutory body with a range of functions, but primarily acts as an independent conservation advisor to the Minister and the Director-General of Conservation.
2. The Authority has a role as an objective advocate on matters of national significance and interest in the conservation arena and to provide high quality independent advice to the Department of Conservation (Department, DOC) on its strategic direction and performance.
3. The Authority has a range of powers and functions, under the Act, as well as under other conservation related legislation. Section 6C(2)(c) of the Act provides the Authority with the power to “advocate the interests of the Authority at any public forum or in any statutory planning process.”
4. Following the logic of the above powers and functions, and the fact that the implementation of the Aotearoa New Zealand Biodiversity Strategy is a strategic priority for the Authority, the Authority submits their views on the proposed Biodiversity Credit System.

NZCA submission

1. The NZCA submission is based on its analysis of: 
   • Te āwhina i te taiao me ngā tāngata kia puāwaiHelping People and Nature Thrive: Exploring a biodiversity credit system for Aotearoa New Zealand.
2. In this submission, the Authority first sets out its key submission points, then responds to the Discussion Document questions.

Key submission points 

1. The Discussion Document states thatBiodiversity credit systems (BCSs) are described in the Discussion Document as an increasingly popular way of using private sector funding to support landholder and central and local government efforts to protect, maintain and enhance biodiversity. … By purchasing credits, people and organisations can finance and claim recognition for actions and outcomes related to protecting and enhancing nature on public and private land, including whenua Māori.
2. The Authority supports in principle the establishment of a system that provides a consistent methodology for allocating credit to investments in biodiversity, and for measurement and verification of claimed biodiversity gains. It supports the establishment of a BCS, subject to management of the risks discussed in the Discussion Document and in this submission.
3. The Authority supports a BCS that:
   a. Incentivises activities that benefit biodiversity, ideally with co-benefits for climate mitigation and adaptation.
   b. Supports te ao Māori (including the exercise of kaitiakitanga) and mātauranga Māori, and gives effect to te Tiriti o Waitangi.
   c. Fosters involvement in community conservation projects
4. Implementation of Te Mana o Te Taiao - The Aotearoa New Zealand Biodiversity Strategy (“Biodiversity Strategy”) is a strategic priority for the Authority. The Discussion Document references the Biodiversity Strategy only in a very general sense (that a BCS could support implementation of the Biodiversity Strategy), and the only other references are where “state of the environment” information contained in the Biodiversity Strategy is relied upon. Further analysis of how a BCS can be designed in a manner that specifically assists achievement of the Biodiversity Strategy’s stated goals and outcomes is needed
5. The Authority commends the Ministry for its broad analysis of BCSs (and similar systems) across the world, in formulating the proposals in the Discussion Document. Careful analysis of how those other systems provide for New Zealand’s unique features, including a high degree of endemism, extreme levels of existing biodiversity and habitat loss, and the high cultural value placed on taonga species, will be required.
6. The Authority sees two high level risks from the formal implementation of a BCS in New Zealand:
   a. The first risk is that over time, the BCS comes to be seen as a replacement for proper regulation of activities that result in loss of biodiversity.
   • A BCS cannot replace adequate regulation of activities that would result in loss of biodiversity. The indigenous flora and fauna of Aotearoa is already significantly depleted. Most remaining ecosystems have features that mean if they are depleted or destroyed, they cannot simply be replaced by new plantings, or protection of other ecosystems. As a result, it is essential that any BCS sits alongside a National Policy Statement on Indigenous Biodiversity (“NPSIB”) containing objectives, policies and methods designed to protect significant natural areas and maintain indigenous biodiversity across Aotearoa, and regional and district rules that implement the NPSIB.¹
   • Put another way, a BCS risks prioritisation of “trading” of positive for adverse biodiversity impacts over other measures such as avoidance and remediation, which are inherent in the “mitigation hierarchy”. As discussed, in Maron et al (2023):²If nature positive is translated into action with rigour, the wide global appeal of the concept presents an opportunity to trigger smarter avoidance and more-effective mitigation of impacts, as well as to incentivize long-term, fair and equitable outcomes for nature and people from ecological restoration and rewilding investments. However, if it replaces established, rigorous approaches such as the mitigation hierarchy, it risks amounting to mere greenwash. Embedding the mitigation hierarchy as an essential, but not sufficient, condition is the first step in the journey to nature positive. …Nature positive should not be used as cover for accumulation of further losses for biodiversity features that are already threatened.
   • Despite the evidence that voluntary methods alone are not effective at protecting indigenous biodiversity, regulation of activities that impact biodiversity is controversial, and political gains can be made by promises to “remove red tape” or “abolish SNAs”. The existence of a BCS carries the risk of supporting calls to weaken environmental regulation by appearing to provide an alternative voluntary system of biodiversity protection. If that eventuates, the BCS will have achieved the opposite of what is intended. The Authority submits that the principle that “the BCS complements, and does not replace, regulation of activities that result in biodiversity loss” should be enshrined in the BCS, to minimise the risk described above.
   b. The second risk comes from the inappropriate use of biodiversity credits as “offsets” or “compensation” to address the effects of activities that damage biodiversity:
   • The Discussion Document says that whether credits are used as an offset or not could be a design choice for a BCS.
   • The NPSIB and the Natural and Built Environment Act 2023 (“NBE Act”) provide for effects on biodiversity to be “offset,” provided (for most activities) there have been attempts to avoid, remedy or minimise effects first. If offsetting is not possible, effects can be “compensated for”.
   • Credits are more likely to equate to compensation than offsets, as they are unlikely to meet the requirements for offsets, in particular that an offset action must be “like for like”.
   • The Authority has concerns about the existing approach to offsetting and compensation in the NPSIB and NBE Act, as they allow for biodiversity loss. Allowing biodiversity credits to be used for offsets will incentivise the use of offsets and compensation, when these tools should be a last resort for activities with significant public benefits that cannot proceed in any other way.
   • Allowing biodiversity credits to be used for offsets or compensation implies that a positive “benefit” has been achieved, yet the “benefit” has only happened in response to the adverse effect. So, there is only a neutralising (at best) of a biodiversity loss rather than a “benefit” to biodiversity. While the Discussion Document says that credits used for offsetting could not be used to make nature-positive claims, a positive outcome is inherent in the concept of a “credit”, and so the underlying purpose of the BCS becomes confused.
   • The use of BCS credits for offsetting turns the BCS into a biobank for sourcing offset credits. The risks of this are described in Maseyk et al (2022):³ New Zealand is still grappling with many of the fundamentals of biodiversity offsetting. It is premature for councils to pursue formal schemes to deliver biodiversity offsets or compensation while key institutional settings (including knowledge, capacity, governance, and compliance) are still lacking. Until these issues are resolved, formal strategic mechanisms, including biobanking, should not be pursued by councils, as doing so risks entrenching further biodiversity declines. The premature establishment of formalised strategic mechanisms will not improve on the status quo and may serve to entrench poor practice.Formalised market-based schemes would necessitate a simplification of exchange to facilitate the trade, thus ‘relaxing’ offset design principles (e.g., degree of ecological equivalence or spatial proximity of the gains to the losses), and rigour and are therefore more likely to lend themselves to compensation outcomes. Facilitating compensation trades over biodiversity offsetting to a no net loss or net gain standard is not an appropriate response to the biodiversity or climate crises.

 The Authority submits that a BCS should not be used to provide credits to “offset” or “compensate for” activities resulting in biodiversity loss.

1. The Discussion Document focusses on how a BCS would work on land. More work is required to design a BCS suitable for freshwater and marine ecosystems.
2. The Authority agrees that the principles of BCS design and implementation are critical. A further round of consultation on these is necessary should Government proceed with a BCS.
3. The Discussion Document recognises the importance of the “Role of Experts”, although this title is misleading as the discussion is really about the importance of building a skilled workforce rather than “experts”. The Authority strongly agrees that capacity and capability building is essential. The Discussion Document says that a scheme such as Mahi mō te Taiao – Jobs for Nature that creates nature-based projects, could support a BCS. The Authority agrees, but understands that Mahi mō te Taiao is coming to an end in June 2025.⁴ The Authority would support reinvigoration of Mahi mō te Taiao, with appropriate funding. This will require additional funding for the Department of Conservation, if capacity building is to come from its budget.

Authority Responses to Discussion Document Questions

1. Do you support the need for a biodiversity credit system (BCS) for New Zealand? Please give your reasons.
   • The Authority supports in principle a BCS, subject to ensuring the risks identified in this submission and in the Discussion Document are fully addressed so that there is confidence that a BCS will in practice contribute to maintaining and enhancing biodiversity.
2. Below are two options for using biodiversity credits. Which do you agree with? (a) Credits should only be used to recognise positive actions to support biodiversity. (b) Credits should be used to recognise positive action to support biodiversity, and actions that avoid future decreases in biodiversity. Please answer (a) or (b) and give your reasons.
   • Credits should only be used to recognise positive actions to support biodiversity as described in (a).
   • “Averted loss” actions, as described in (b), assume that activities that result in loss of biodiversity will be allowed so there is a “benefit” in averting the loss. In a system with adequate environmental regulation, all activities should be undertaken to at least achieve no net loss. That is the objective of the NPSIB.⁵In that context, there is no benefit in averting a future loss, as those losses must be averted anyway. Additionally, the gains from “averted loss” actions are very difficult to estimate (see Maseyk et al (2023)⁶).
   • For clarity, avoiding future decreases in biodiversity due to non-human impacts (e.g. pest control that manages current and future populations of browsing animals) is part of option (a) and should be encouraged as part of a BCS.
3. Which scope do you prefer for a biodiversity credit system? (a) Focus on terrestrial (land) environments. (b) Extend from (a) to freshwater and estuaries (e.g., wetland, estuarine restoration). (c) Extend from (a) and (b) to coastal marine environments (e.g., seagrass restoration). Please answer (a) or (b) or (c) and give your reasons.
   • The Authority supports a BCS that applies to all domains (Option C). A vast proportion of New Zealand’s biodiversity is found in marine environments yet is often overlooked.
   • However, significant further work is required to design a BCS suitable for freshwater and marine ecosystems. For marine ecosystems in particular, fishing is one of the main impacts on biodiversity. The BCS would need to take into account what activities are already permitted under the Fisheries Act 1986 to ensure that purported biodiversity gains are not undermined by legal fishing. A BCS could provide encouragement for iwi and hapū to protect their rohe moana (and receive a benefit for their work in doing so) using existing tools under the Fisheries Act and RMA.
4. Which scope do you prefer for land-based biodiversity credits? (a) Cover all land types, including both public and private land including whenua Māori. (b) Be limited to certain categories of land, for example, private land (including whenua Māori). Please answer (a) or (b) and give your reasons.
   • The Authority does not support application of a BCS to land managed under the Conservation Act and legislation referenced in Schedule 1 of the Conservation Act. Such land is already subject to a requirement that it be protected, preserved or similar (depending on its status).
   • The Authority supports the ability for Māori to generate BCS credits for activities that protect biodiversity on whenua Māori.
5. Which approach do you prefer for a biodiversity credit system? (a) Based primarily on outcome. (b) Based primarily on activities. (c) Based primarily on projects. Please answer approach (a) or (b) or (c) and give your reasons.
   • The Authority acknowledges that there are pros and cons with each option. A projects-based approach is likely to provide the most benefit for groups and individuals undertaking conservation projects as it will likely have the lowest transaction costs (such as requirements for assessment of specific biodiversity gains). However, an outcome-based approach is likely to be most robust in ensuring the biodiversity gains inherent in a biodiversity credit are actually achieved. At this stage, the Authority does not have an opinion on which approach is best.
6. Should there also be a requirement for the project or activity to apply for a specified period to generate credits? Please answer Yes/No and give your reasons.
   • Yes, and this is inherent in the “permanent or long-term” BCS principle. Short-term projects or activities are unlikely to achieve lasting biodiversity gains.
7. Should biodiversity credits be awarded for increasing legal protection of areas of indigenous biodiversity (e.g., QEII National Trust Act 1977 covenants, Conservation Act 1987 covenants or Ngā Whenua Rāhui kawenata? Please answer Yes/No and give your reasons.
   • No. Increasing legal protection does not achieve biodiversity gains, unless it is accompanied by permanent or long-term actions such as fencing, pest control, or planting. The credit should relate to the biodiversity outcome not the change in legal status.• See also the Authority’s response to question 4 in relation to conservation land.
8. Should biodiversity credits be able to be used to offset development impacts as part of resource management processes, provided they meet the requirements of both the BCS system and regulatory requirements?
   • No. See paragraph 7(b) of the Authority’s key submission points.
9. Do you think a biodiversity credit system will attract investment to support indigenous biodiversity in New Zealand? Please give your reasons.
   • No opinion
10. What do you consider the most important outcomes a New Zealand biodiversity credit system should aim for?
    • The most important outcome for a BCS is that it assists in halting biodiversity decline. Important co-benefits are: mitigating and adapting to climate change, enhancement of freshwater quality and aquatic habitats, engaging people in conservation in ways that increases their connection to nature, enhancing the mana of taonga species and ecosystems.
11. What are the main activities or outcomes that a biodiversity credit system for New Zealand should support?
    • The main activities or outcomes that a BCS should support are those that involve active interventions that can be demonstrated to enhance biodiversity, such as planting, pest control, habitat enhancements that remove sediment or nutrient run-off. Ideally, activities or outcomes would also provide for (and these are related/overlapping concepts): the exercise of kaitiakitanga by Māori, community conservation projects, projects that build capacity.
12. Of the following principles, which do you consider should be the top four to underpin a New Zealand biodiversity credit system? Principle 1 – Permanent or long-term (e.g., 25-year) impact Principle 2 – Transparent and verifiable claims Principle 3 – Robust, with measures to prevent abuse of the system Principle 4 – Reward nature-positive additional activities Principle 5 – Complement domestic and international action Principle 6 – No double-counting, and clear rules about the claims that investors can make Principle 7 – Maximise positive impact on biodiversity
    • It would be clearer if there were two sets of principles, one set for principles that relate to the action that generates the credit (additionality, permanent or long-term impact, biodiversity outcome, alignment with regional/domestic/international outcomes) and a second set of principles that relate to the design of the scheme (transparent and verifiable, robust, no double counting, clear rules for investors)• All of the proposed principles are important and should be retained. However, there appear to be overlaps, e.g. Principle 4 (“additional activities”) and Principle 6 (“no double counting”), and Principle 2 (“verifiable claims”) and Principle 6 (clear rules about the claims investors can make”) so it should be possible to reduce these to 4 principles without losing any components.
    • The NPSIB provides for regional councils to prepare regional biodiversity strategies and to have regard to these when developing restoration objectives, policies, and methods for inclusion in regional policy statements and plans.⁷ The purpose of a regional biodiversity strategy is to promote the landscape-scale restoration of the region’s indigenous biodiversity. A regional biodiversity strategy must meet the requirements of Appendix 5 of the NPSIB. This includes supporting achievement of domestic targets, and enables measures that are intended to implement other objectives, such as biosecurity, climate mitigation, amenity, or freshwater outcomes, where those measures also contribute to protection and restoration of indigenous biodiversity. It makes sense, given the work that will go into regional restoration planning through this mechanism (including public and Māori consultation and input) and given that Appendix 5 already contains many similar requirements or goals to those that a BCS would be aiming for, that there should be good alignment between actions that produce biodiversity credits and regional biodiversity strategies. Accordingly, Principle 6 should be amended to focus on “Consistent with regional biodiversity strategy”, with domestic and international action having a secondary focus if they are referenced at all. Alignment with international action may be complex to achieve (or demonstrate) in practice. 
13. Have we missed any other important principles? Please list and provide your reasons.
    • There are no principles relating to the cultural importance of species and ecosystems, the exercise of kaitiakitanga by Māori, and protection of taonga species. This is a significant omission. While not every action that generates a biodiversity credit needs to actively achieve cultural benefits, all actions should at least consider how cultural benefits can be achieved, how the exercise of kaitiakitanga can be supported, and how matauranga Māori can be incorporated.
    • An additional principle should be included, stating that “the BCS complements, and does not replace, regulation of activities that result in biodiversity loss” should be enshrined in the BCS, to minimise the risk described in paragraph 12 of the Authority’s key submission points.
    • See also the Authority’s response to Q12 regarding consistency with the relevant regional biodiversity strategy.
14. What assurance would you need to participate in a market, either as a landholder looking after biodiversity or as a potential purchaser of a biodiversity credit?
    • N/A
15. What do you see as the benefits and risks for a biodiversity credit market not being regulated at all?
    • If one or more non-regulated BCSs establish on a large scale, there is potential for these not to produce the biodiversity gains they claim. While this is not a risk in and of itself, the main resulting risk is the diversion of investment away from projects that are achieving better biodiversity gains. The main benefit of a non-regulated BCS is the low or nil transaction cost to public funds.
16. A biodiversity credit system has six necessary components (see figure 5). These are: project provision, quantification of activities or outcomes, monitoring measurement and reporting, verification of claims, operation of the market and registry, investing in credits. To have the most impact in attracting people to the market, which component(s) should the Government be involved in? Please give your reasons.
    • The main component that the Government should be involved in is operation of the market and registry. Quantification of outcomes, monitoring, measurement and reporting, and verification of claims are also important but should be able to be undertaken by private entities provided appropriate rules are established (potentially with the Government having an audit role).
    • Ideally, Government would also to have an indirect role in project provision, by funding projects through schemes such as Mahi mō te Taiao - Jobs for Nature.
17. In which areas of a biodiversity credit system would government involvement be most likely to stifle a market? • Government should provide principles that projects must achieve to qualify to earn BCS credits, but Government should not specify which projects will or will not achieve credits, as this is likely to discourage innovation.
18. Should the Government play a role in focusing market investment towards particular activities and outcomes and if so why? For example, highlighting geographic areas, ecosystems, species most at threat and in need of protection, significant natural areas, certain categories of land.
    • Yes, but this should occur through regional biodiversity strategies as already provided for in the NPSIB.
19. On a scale of 1, not relevant, to 5, being critical, should a New Zealand biodiversity credit system seek to align with international systems and frameworks? Please give your reasons.
    • 2 – somewhat relevant. Alignment with international systems and frameworks is not necessary for a New Zealand BCS to contribute to halting the decline of New Zealand biodiversity, so at least initially this should not be a priority. Alignment may assist in attracting overseas investment in New Zealand projects so could be something that is considered if a New Zealand BCS is established and proves itself.
20. Should the Government work with private sector providers to pilot biodiversity credit system(s) in different regions, to test the concept? If you support this work, which regions and providers do you suggest?
    • Yes, “on the ground” pilots tend to be useful. The Authority has no opinion on which regions should be prioritised for this.
21. What is your preference for how a biodiversity credit system should work alongside the New Zealand Emissions Trading Scheme or voluntary carbon markets? (a) Little/no interaction: biodiversity credit system focuses purely on biodiversity, and carbon storage benefits are a bonus. (b) Some interaction: biodiversity credits should be recognised alongside carbon benefits on the same land, via both systems, where appropriate. (c) High interaction: rigid biodiversity ‘standards’ are set for nature-generated carbon credits and built into carbon markets, so that investors can have confidence in ‘biodiversity positive’ carbon credits. Please answer (a) or (b) or (c) and give your reasons.
    • The Authority’s view is that projects that only achieve a biodiversity outcome, or only achieve a carbon storage benefit, should still be recognised under each system, with projects achieving co-benefits being encouraged. If there are to be nature-generated carbon credits within carbon markets that are described as “biodiversity positive”, then it is important that these meet principles that ensure they are actually generating biodiversity gains.
    • It is not clear to the Authority how each system (level of interaction) would affect the proposed BCS or the ETS, or that options a, b and c are the only options - so the Authority is not in a position to choose between option a, b or c.
22. Should a biodiversity credit system complement the resource management system? (Yes/No) For example, it could prioritise: Significant Natural Areas and their connectivity identified through resource management processes, endangered and at-risk taonga species identified through resource management processes.

• Yes, a BCS should complement the resource management system, by complementing implementation of the restoration-focussed aspects of the NPSIB. This is achieved by referencing regional biodiversity strategies in the BCS principles.

1. Should a biodiversity credit system support land-use reform? (Yes/No) (For example, supporting the return of erosion-prone land to permanent native forest, or nature[1]based solutions for resilient land use.)
   • Yes, and this appears inherent in the principles proposed elsewhere in the Discussion Document (permanent or long-term impact, maximised biodiversity impact).

1. It is also essential that national policy and regulation is expanded to also address marine biodiversity (the NPSIB presentlyonly addresses terrestrial biodiversity)
2. Martine Maron, Fabien Quétier, Mariana Sarmiento, Kerry ten Kate, Megan C. Evans, Joseph W. Bull, Julia P. G. Jones, Sophus O. S. E. zu Ermgassen, E. J. Milner-Gulland, Susie Brownlie, Jo Treweek & Amrei von Hase, ‘Nature positive’ must incorporate, not undermine, the mitigation hierarchy, Nature Ecology & Evolution · September 2023.
3. Maseyk F, Ussher G, Christensen M 2022. Improving outcomes from biodiversity offsetting and compensation. Challenges and opportunities for the use of strategic mechanisms. Contract report No. 2022/173 prepared for the Regional Council Biodiversity Working Group. The Catalyst Group, RMA Ecology, and Natural Resources Law.
4. The Discussion Document says that Mahi mō te Taiao is due to end “in June 2025, when most projects conclude”. This is incorrect. Most projects initiated or upscaled under Mahi mō te Taiao are urgently seeking alternative funding to ensure the biodiversity gains they have achieved are not lost.
5. NPSIB Objective 2.1(1)(a) …to maintain indigenous biodiversity across Aotearoa New Zealand so that there is at least no overall loss in indigenous biodiversity after the commencement date.
6. Maseyk et al (2023), p 55.
7. Clause 3.23 NPSIB