As the twin crises of biodiversity loss and climate change intensify, policymakers and businesses are exploring new ways to integrate nature into economic decision-making. One of the approaches is the use of nature credits – market-based instruments designed to reward actions that protect and restore ecosystems.
In April, the Commissioner for Environment, Water Resilience and Competitive Circular Economy, Jessica Roswal, hosted a high-level roundtable on developing biodiversity certification and nature credits and facilitating market development. It paved the way for further work of the European Commission to potentially release the legislative proposal on nature credits in the longer-term. While waiting for the roadmap to be published in the coming weeks, we have analysed the elements of the non-official draft roadmap outlining a plan to develop a market for nature credits. This article explains what nature credits are, what could be in the Commission’s roadmap, and what challenges lie ahead.
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What are Nature Credits?
Nature credits are units that represent measurable, verifiable improvements in biodiversity or ecosystem health. They aim to reward “nature-positive” actions — efforts that go beyond legal obligations to enhance biodiversity, restore ecosystems, or strengthen natural water cycles. The concept is inspired from the current carbon credits market where carbon removal or avoidance is monetised to push companies in a climate-positive direction.
Unlike carbon which circulates freely into the atmosphere, biodiversity and habitats are much more location-specific. Hence, nature credits must also be location-specific, reflecting the unique character and ecological value of the land or water systems involved.
An efficient nature credit system could bring many benefits, including:
- Incentives for businesses to align with biodiversity targets.
- Potential capital reallocation, treating biodiversity as a strategic asset rather than an operating cost.
- New revenue stream for farmers, forest owners and ecosystem managers who engage in nature-positive actions.
There are also concerns around the development of the nature credits framework, which could stimulate diversion of public money away from nature and increase green-washing among others. In line with the EU’s Biodiversity Strategy for 2030 and the mitigation hierarchy, offsetting environmental impacts through offsetting credits should only come after all reasonable actions have been adopted to avoid, minimise, and restore ecological impacts.
What could be in the Commission’s Roadmap?
The Commission plans to start by carrying out an EU-wide assessment of the market potential for nature credits, including demand projections and investment drivers. The assessment will allow the EU to take well-informed decisions on a potential legislative framework.
A range of pilot projects on nature credits, including those funded by the Commission and the EU member states, both within the EU and externally, will give valuable insight on the required governance structure, certification scheme, and amount of initial public investment to kick-start a functional market.
Credible and cost-efficient certification is the cornerstone of any nature credits system rewarding real, verifiable benefits, which would not have been achieved in all circumstances. A nature credit will become a tradable unit only after the successful delivery and verification of measurable biodiversity outcomes, translating certificates into quantifiable units that can be registered, pooled, banked, and traded.
The Commission will also set up an expert group on nature credits and certification. The group will be composed of representatives from Member State authorities, the financial sector, farming and forestry, businesses, civil society, academia and international representatives.
In terms of the linkages with other regulations, the Commission potentially envisions the use of certificates as a contribution to national restoration targets under the EU Nature Restoration Regulation, or national biodiversity targets adopted in response to the Global Biodiversity Framework.
The Commission proposes to learn from the Carbon Removal Certification Framework, which is in more advanced stages of development. Carbon projects under the scheme should have a mandatory positive contribution to biodiversity and will reward carbon sequestration projects restoring and enhancing biodiversity (such as peatland rewetting, planting of trees, and sustainable agriculture and forestry).
Certificates would be reflecting the progressive achievement of biodiversity outcomes, allowing ongoing evaluation and increased transparency, at the same time potentially linking to existing schemes, such as EU organic practices.
Based on all these elements, the Commission plans to come forward with further (potentially legislative) steps in 2027.
What Are the Obstacles to a Market for Nature Credits?
Despite growing momentum, obstacles remain.
- Complexity: unlike carbon credits, estimating biodiversity benefits is very context dependent. Benefits are very difficult to estimate with a single metric, hence the complexity of defining a robust certification methodology.
- Greenwashing risks: a poorly designed scheme could reduce the incentive to tackle the biodiversity crisis by allowing companies to buy nature credits instead of taking meaningful action on their own activities.
- Cost barrier: certification processes are resource-intensive, especially for small-scale landholders. Upfront costs, lack of technical expertise, and fragmented ecological data can hinder participation. Moreover, the costs of setting up governance systems may outweigh short-term benefits for early adopters.
- Low market demand: While the Commission foresees a significant increase in the demand for nature credits, the ongoing simplification drive, reducing the scope of CSRD, could further reduce the incentive for the use of nature credits.
- Land-use conflicts: Nature markets may unintentionally intensify land-use conflicts, especially if financial incentives drive land out of food production. The Commission is aware of the possibility, and emphasised that food security and forest multifunctionality must not be compromised.
Final Thoughts
Nature credits hold significant potential to mobilise private finance for biodiversity, helping the EU achieve its climate and restoration goals while supporting sustainable livelihoods. By establishing a trusted, transparent market, the Commission aims to create incentives for proactive ecosystem stewardship.
However, the success of this initiative hinges on careful design, broad participation, and robust safeguards. Lessons from carbon markets must inform the rollout to ensure credibility.
With thoughtful implementation and stakeholder collaboration, nature credits could become a cornerstone of a nature-positive, resilient European economy.
With this roadmap, the Commission will initiate a phase of consultations on nature credits. Companies and other interested stakeholders can actively take part in this process to shape a robust, valuable, and cost-effective system and get an advance notice of what will be coming up. Now is the time to engage with policymakers and help the EU shape a balanced system where conservation is no longer an externality but a valued investment contributing to global and EU biodiversity objectives.