In Southeast Asia, carbon credit requirements can diverge from biodiversity conservation requirements. A Perspective in Nature Reviews Biodiversity examines the structural limitations of carbon markets for conservation: optimizing carbon sequestration and preserving biodiversity are two distinct objectives, and current instruments may not ensure equivalent results for both. The problem stems partly from the design of rules and the structure of incentives.

The Essentials

  • The VCS is primarily a program for crediting greenhouse gas reductions and removals; biodiversity is framed by safeguards and can be verified through complementary mechanisms such as CCB.
  • Nature projects are registered under the Verified Carbon Standard (VCS) in Southeast Asia, according to the Verra registry.
  • Non-native monocultures can be admitted on a limited basis in certain VCS projects on degraded ecosystems, but their effect and frequency must be established on a project-by-project basis.
  • The tension is institutional: the VCS pays for quantified carbon units, while biodiversity benefits are subject to safeguards or complementary certifications rather than a distinct VCS unit.
  • Reforms exist—dual carbon-biodiversity standards, expanded ecosystem service payments—but they encounter a price and governance problem that the voluntary market alone cannot solve.

Monospecific Plantations Win the Bidding

To understand what is happening in Southeast Asia, one must understand how a carbon project is financed. A project proponent—an NGO, a forestry company, a local government—submits a file to a certification body like Verra, which administers the VCS. Auditors measure the quantity of CO2 sequestered or avoided. Carbon credits are issued. These credits are sold to companies seeking to offset their emissions.

The project proponent is paid per ton of CO2, not per protected species.

Remuneration is linked to quantified carbon results, subject to methodological rules and environmental safeguards. Eucalyptus, acacia, tropical pine meet these criteria. Dipterocarp forests, rich in species and slow-growing, respond differently to certification methodologies depending on contexts and projects. The Nature Reviews Biodiversity Perspective warns against potential incentives and misalignments between carbon and biodiversity. These dynamics can vary depending on contexts and projects.

These outcomes may stem from measurement bias rather than fraud. Auditors are doing their job correctly according to existing rules. Project proponents respond rationally to incentives. The problem lies upstream.

VCS Certification: What It Measures and What It Leaves Out

The Verified Carbon Standard is the primary reference framework for the global voluntary carbon market. Verra, which administers it, registers nature projects in Southeast Asia. The scale is significant. The scale is significant.

The VCS requires that each project demonstrate its additionality—that is, that the carbon sequestered would not have been captured without the project. For AFOLU projects, the VCS imposes a minimum longevity of 40 years and a mechanism to manage the risk of non-permanence. It has incorporated optional biodiversity indicators in recent years via the CCB label (Climate, Community and Biodiversity Standards), but this label remains optional. A number of projects stop at the basic carbon credit, simpler to certify. The CCB label is an additional feature of a VCU; the superior liquidity of the base credit is not established by VCS rules.

The VCS credits carbon and does not necessarily require complete quantification of biodiversity gains, but biodiversity is not entirely absent from its safeguards. The two are linked in old-growth tropical forests: diverse forests and less intensively managed forests can improve resilience and certain biodiversity and carbon stability outcomes, depending on context, species, and management regime. But this ecological truth is not reflected in the price of a carbon credit at five dollars per ton.

The IUCN indicates that primary forests in the Indo-Malayan region are home to more than 5,000 threatened species. A carbon credit that finances the partial replacement of these habitats with plantations is not neutral for global biodiversity, even if the carbon accounting is sound.

The Geography of the Problem: Borneo, Mekong, Papua

The risk profile is not uniform. Projects located on formerly deforested or degraded lands, abandoned pastures, fallow rice fields, rehabilitated mining areas generally present a positive biodiversity balance sheet. Replanting in these contexts, even with species of low diversity, improves the baseline ecological state.

The problem concentrates elsewhere: in areas where secondary or degraded forest presents an ecological value to be assessed before carbon project entry. These regions include forests important for biodiversity; the adequacy of certification criteria must be evaluated according to the methodologies and projects concerned. These regions include forests important for biodiversity; the adequacy of certification criteria must be evaluated according to the methodologies and projects concerned.

The baseline is a central issue: it designates the counterfactual scenario of activities and emissions or removals of greenhouse gases in the absence of the project. In the rule consulted, eligibility is formulated in terms of degraded ecosystems and ecosystem health safeguards, not solely carbon stock. Other approaches emphasize specific composition, vertical structure, and connectivity. These two readings of the same landscape can lead to opposite conclusions about a project’s value.

This divergence can influence the eligibility of certain forests for carbon projects and their protection status. Southeast Asian lands fall within this gray zone of uncertain eligibility.

Reforms Underway, but a Central Price Problem

Faced with these findings, several actors are working to correct the rules of the game. Verra has indicated directions for revising its methodologies to strengthen biodiversity requirements in AFOLU-type projects (Agriculture, Forestry and Other Land Uses). The Integrity Council for the Voluntary Carbon Market (ICVCM) publishes Core Carbon Principles that include stricter environmental safeguards. The CCB label, while optional, is gaining ground with corporate buyers concerned about their image.

These developments are heading in the right direction. But they run up against a structural obstacle: measuring biodiversity is expensive and complex to standardize. Counting species, mapping floristic composition, assessing ecological connectivity require field expertise that few projects systematically mobilize. Conversely, measuring CO2 with a standardized and remotely verifiable method (by satellite, by model) has become relatively accessible. The cost of biodiversity certification and the price of biodiversity credits influence the optimization choices of project proponents.

This refers to a question of institutional design that the voluntary market alone cannot resolve. The difficulty of monetizing complex ecosystem services, water filtration, pollination, local climate regulation, goes beyond the carbon market alone. Broader payment mechanisms for ecosystem services (PES) exist in theory, but their deployment at scale remains marginal. Without a price on biodiversity, carbon projects optimize for what is priced.

Putting a Price on Biodiversity Without Reducing It to a Single Metric

The problem of carbon markets in Southeast Asia illustrates a broader tension in environmental policy: pricing one attribute can create trade-offs, but its effect on other attributes depends on the rules, safeguards, and multidimensional requirements of the mechanism. This is a variant of Goodhart’s Law: when a measure becomes a target, it ceases to be a good measure.

The challenge for the 2030-2040 decade is to build market instruments that reward overall ecosystem health rather than a single measurable attribute.

Several avenues are emerging in the literature and in current policies. The first is the architecture of dual credits, which would require a certified nature project to simultaneously satisfy biodiversity and carbon sequestration thresholds to obtain its credits. Some pioneering projects in Costa Rica or Colombia already operate on this hybrid model. The challenge is to make it operational at the scale of Southeast Asia, where institutional contexts vary considerably from one country to another.

The second avenue involves biodiversity bonds, modeled on green bonds, which would allow financing ecosystem conservation rich in species without subjecting them to the logic of carbon market returns. The IUCN and several regional governments have begun exploring this terrain, but instruments remain experimental.

The third avenue, perhaps the most solid in the long term, is regulatory rather than market-based. The Kunming-Montreal Global Biodiversity Framework, adopted at COP15 in 2022, sets a goal of protecting 30% of land and oceans by 2030. Integration of binding biodiversity criteria into national forest policies, rather than into voluntary markets alone, could transform the challenge. Carbon projects operate within a national legal framework; modification of the national forest regulatory framework would be more structuring than the proliferation of voluntary labels.

The obstacle in this scenario is governance. Southeast Asian countries, particularly Indonesia, Malaysia, and Papua New Guinea, have variable institutional capacities to implement and enforce complex forest rules. Forest management decentralization in Indonesia, for example, creates significant gaps between national rules and local practices.

A less favorable scenario would see possible substitution of secondary forests rich in species with certified plantations if carbon market rules are not strengthened. Companies could purchase carbon credits presented as nature solutions to offset their emissions, while financing ecological simplification of the environments they claim to protect. Carbon accounting would be correct. Net ecological impacts could be significant.

A favorable scenario would assume convergence between strengthened certifications including mandatory biodiversity requirements, national regulation protecting secondary forests, and public or multilateral funding for biodiversity measurement costs. The Paris Agreement and the Kunming-Montreal Framework provide a political framework for this convergence, but their enforcement mechanisms remain limited for rapid implementation.

Requirements That Credit Buyers Can Formulate Now

Pending broader institutional reforms, levers exist at the scale of transactions. Companies purchasing carbon credits can contractually require that their suppliers obtain the CCB label or an equivalent integrating verified biodiversity criteria. Some major buyers like insurers or technology companies have already included these criteria in their compensation requests for proposals.

Governments can condition access to their national carbon markets on stricter biodiversity requirements, within their national registries. Investors in carbon funds can also use their selection criteria to favor projects integrating biodiversity.

These signals remain weak against demand for cheap carbon credits. But they indicate a direction: pressure on credit quality, carried by a few demanding buyers, can begin to modify market standards before regulators act. This is how private standards have evolved in other sectors—fisheries, cocoa, soy—even if results have been uneven.

For decision-makers and project proponents in Southeast Asia, the difficulty remains in building a market instrument that rewards ecological complexity without reducing it through the act of measuring it. The tools exist in part. A regional architecture for biodiversity cooperation already exists, but a fully integrated regional mechanism linking carbon certification, forest regulation, and biodiversity financing is not established.

Sources

  1. Eco-Business / Nature Reviews Biodiversity, “Carbon markets in Asia fall short on biodiversity goals, study warns”: https://www.eco-business.com/news/carbon-markets-in-asia-fall-short-on-biodiversity-goals-study-warns/
  2. Verra, VCS Registry (Verified Carbon Standard), Southeast Asia AFOLU projects: https://registry.verra.org/
  3. IUCN, Biodiversity hotspots in Southeast Asia, regional red lists (no specific URL guaranteed)
  4. Integrity Council for the Voluntary Carbon Market (ICVCM), Core Carbon Principles: https://icvcm.org
  5. Kunming-Montreal Global Biodiversity Framework, COP15 (CBD, 2022)