Executive Summary
The biodiversity financing gap exists mainly due to a knowledge gap: the valuation of ecosystem services. Ecosystem services are the direct and indirect contributions ecosystems (known as natural capital) provide for human wellbeing and quality of life. This can be in a practical sense, such as providing food and water or regulating the climate. We understand that the productivity and regulatory functions of ecosystems are of great value to our economic sectors, but we have little understanding of the price tag of this value, let alone the abatement costs (and benefits) of declining ecosystem services.
One of the most important ecosystem services is provided by soil as carbon sinks for climate regulation, storage for organic carbon, and aid in regulating atmospheric carbon dioxide levels. Effective carbon pricing mechanisms, such as carbon offsets, are essential to fund activities that improve soil quality and sequester carbon, thereby closing the biodiversity financing gap and promoting economically viable environmental practices. The EU Soil Strategy 2030 and the EU Carbon Removals Certification Framework are critical initiatives aimed at increasing soil organic carbon (SOC) content and achieving land-based climate neutrality by 2035. These efforts are crucial for transitioning to a climate-neutral economy.
In order to determine the socio-economic value of soil in Europe as a source of carbon sequestration, we refer to the conservative estimates of the global cost of carbon by the COACCH project, which is USD 132 per tCO2-eq globally. This leads to a socioeconomic value of about USD 18.3trn (1.1x Europe’s GDP) through the GHG emission channel. This ranges from about USD 26bn in Malta to USD 3.2trn in Sweden.
Virtuous soil management practices present significant carbon offsetting – and thus transition – opportunities for the financial sector. This study examines five soil improvement measures—three crop management practices (cover cropping, no tillage, and use of green manure) and two broader land restoration techniques (agroforestry and sustainable forest management) that can enhance soil quality, in six countries: Germany, France, the Netherlands, Italy, Spain, and the UK. All these measures contribute to preventing soil erosion, enhancing carbon sequestration, and improving biodiversity.
The total required investment for these five levers is estimated to be USD 32.7 bn (present value of current and future measures) and ranges from USD 13mn for forest management in the Netherlands to USD 4.1 for cover cropping in France. These costs are primarily influenced by the land size available in countries, expected adoption rates, and implementation costs per hectare. Note that it takes 5-10 years for these soil management practices to provide their full benefits. The socioeconomic benefits are much higher, reaching USD 6.7bn for no tillage and 5.1bn for green manure in France. Therefore, the majority of measures can be considered 'no regret' moves as they are cost-effective and have much higher socioeconomic values than the investment required to implement them.