Biodiversity credits are used to measure both:
- the unavoidable impacts on biodiversity from development and clearing at a development site
- the predicted improvement in biodiversity condition gain at a stewardship site.
The Biodiversity Assessment Method (BAM) defines two types of biodiversity credits that are used to measure impacts on both development sites and stewardship sites. The two types of credits are:
- ecosystem credits – measure the value of threatened ecological communities, threatened species habitat for species that can be reliably predicted to occur with a Plant Community Type (PCT), and PCTs generally
- species credits – apply to all other threatened species which are found to occur at that location and cannot be reliably predicted to occur within the identified ecological communities at the development site.
Biodiversity credits created at a stewardship site via a Biodiversity Stewardship Agreement, can be used to offset the loss of biodiversity values on development site (a credit obligation) by being traded and retired. This sale is called a biodiversity credit transfer and the credit is then retired to satisfy the credit obligation.
Subject to regulation, anyone can buy credits. A typical buyer could be a developer needing to offset their projects' impacts on biodiversity. Other buyers could be government bodies using the market to achieve conservation outcomes or philanthropic organisations.
The money from the sale of credits from a biodiversity stewardship site is used to fund the management of the site in perpetuity. This amount is called the Total Fund Deposit. When the Total Fund Deposit is fully paid, the money from any additional sales of credits from a biodiversity stewardship site is paid directly to the owner.
Ultimately, the market determines the overall price paid for each credit. The landowner and credit buyer are free to negotiate any price as long as the Total Fund Deposit is satisfied.
There are rules that govern which credits can be used to meet a credit obligation. These rules are known as the offset rules. For more information visit offset rules.
For ecosystem credits this is affected by the class of credits a particular PCT occurs in.
Offsetting the impact on biodiversity by development is complete when the credit obligation is satisfied and the credits retired from the market.