Abstract

Implementing Biodiversity Credits and Offsets:
Causes of Failure and Designs for Success

Yasuhiro KUBOTA

Think Nature Inc.
and
University of the Ryukyus

 Market-based mechanisms such as biodiversity credits-offsets are increasingly promoted for achieving nature-friendly outcomes across sustainability, policy, and finance. However, implementations that are weakly grounded in ecological science risk underestimating impacts and producing green wash rather than effective biodiversity outcomes. This paper identifies the structural reasons why biodiversity credit and offset schemes often fail and proposes science-based design principles to enhance their robustness and credibility. Key challenges include insufficient quantitative treatment of biodiversity’s irreplaceability and spatial heterogeneity, discretionary selection of indicators, and weak outcome-based evaluation of conservation and restoration actions. These limitations hinder reliable quantification of biodiversity losses and gains, undermining market integrity. We argue that successful implementation requires scientifically grounded natural capital accounting supported by high-resolution ecological data and transparent algorithms. Central to this approach is the explicit application of the mitigation hierarchy and quantitative assessment of biodiversity conservation priorities and habitat quality across spatial scales. As the main failure modes of biodiversity credit-offset schemes are relatively well understood, advancing data and analytical technologies with a focus on failure avoidance offers a practical pathway toward more effective, policy-relevant, and financially credible biodiversity markets.