Conservation becomes an asset class — if the rules allow it

By Angela Arnante

THE PHILIPPINES has enormous potential to generate value from a growing class of environmental assets such as carbon credits, biodiversity credits, blue carbon credits, watershed service units, and more likely to come. As global rules for these markets take shape, the country needs policies to be ready for what’s ahead. What exactly are these assets?

Think of the gold stars children receive in kindergarten. A child completes an assignment, helps clean the classroom, or does something good, and the teacher awards a star. The star is not the good deed itself, but proof that it was performed.

These assets work the same way, except the “star” is awarded only after scientific measurement and independent verification. When a forest is restored, a habitat protected, or a watershed rehabilitated, a credit may be issued once the benefit is measured against an accepted standard.

But unlike classroom stars, these assets may acquire financial value. They may be owned, transferred, sold, or retired. Buyers use them to finance verified environmental improvements, meet climate or nature commitments, or, in the case of carbon credits, offset part of their emissions. Their value depends on whether the underlying benefit is real, measurable, durable, and independently verifiable. The conservation activity creates the benefit; the credit makes it recognizable, recordable, and transferable.

DIFFERENT FORMS OF ENVIRONMENTAL VALUE
A carbon credit generally represents one metric ton of carbon dioxide, or its equivalent, removed from the atmosphere or prevented from being released. Green carbon credits come from terrestrial ecosystems like forests and grasslands. Blue carbon credits come from coastal and marine ecosystems, such as restored mangroves that store carbon, reduce erosion, and support fisheries.

Some literature uses “yellow carbon” for carbon stored in agricultural soils, more commonly called soil or agricultural carbon credits, generated through practices like cover cropping or reduced tillage.

A biodiversity credit, sometimes grouped under the broader term “nature credits,” represents a verified improvement in biodiversity, such as increased species abundance or habitat recovery. Watershed service units represent measurable gains in water quality, retention, or flood regulation, often from restored forest cover upstream.

These examples show how conservation can produce several forms of measurable value. As science, monitoring technologies, and environmental markets develop, new credits or methodologies may emerge for pollination, soil health, habitat restoration, and other ecosystem services.

A NATURAL OPPORTUNITY
The Philippines possesses the physical endowment needed to participate in these emerging markets. It is one of the world’s megadiverse countries, ranks fifth globally in plant diversity, and has one of the world’s longest coastlines. It has an advantage for forest, biodiversity, blue carbon, and coastal restoration projects.

These markets can channel private financing into conservation that government and communities cannot fund alone, turning conservation from a public expense into a productive undertaking.

The Philippine Ecosystem and Natural Capital Accounting System Act, or PENCAS, is an important starting point because it recognizes ecosystems and their services as part of the country’s wealth. But accounting for natural capital is only the beginning. Further policies must define these intangible assets and establish how they will be owned, issued, transferred, and retired.

UPDATING THE RULES
The country’s natural resource rules were developed when the principal activity being regulated involved extracting timber, minerals, and other physical resources. These rules served a legitimate purpose. They sought to prevent depletion, protect national patrimony, and preserve Filipino control over the country’s natural wealth. Under the 1987 Constitution, agreements for the exploration, development, and utilization of natural resources in the public domain generally may not exceed 25 years, renewable for another 25 years.

But restorative projects that do not involve large-scale extraction require different rules — especially since many operate beyond 25 years, with some extending for up to a century. These assets need a policy environment based on conservation timelines rather than extractive ones. Projects that keep forests standing, restore biodiversity, and protect watersheds should be treated accordingly.

The current rules create an irony. Large-scale mining, an extractive industry, may accommodate up to 100% foreign participation under the Philippine Mining Act. Renewable energy has likewise opened to full foreign ownership. Conservation projects, despite similar capital and technical requirements, enjoy no equally clear path. An investor may find it easier to finance a mine or an offshore wind farm than the long-term restoration of a forest, even though restoration, by definition, depletes nothing.

This matters because conservation projects require substantial upfront spending on environmental baselines, mapping, rights documentation, community consultations, technical studies, registration, verification, monitoring, and specialized technology. To develop such projects at scale, foreign financing, technical expertise, and project development should be welcomed.

NEW ASSETS NEED CLEAR RIGHTS
The country needs clear rules defining these new assets, distinct from ownership of the underlying land and natural resources. The rules must also determine who initially owns the environmental outcome, as may be represented by a credit.

On private land, the presumption should generally favor the landowner unless the right is assigned by contract. Within ancestral domains, the ownership and decision-making rights of indigenous peoples must be recognized, together with free, prior and informed consent, and fair benefit-sharing. On public lands, the respective rights of the State, tenure holders, communities, and project developers must be clearly allocated.

Property rights are the foundation of any market. Investors will not commit long-term capital amid competing claims, uncertain contracts, or project timelines that outlast the underlying agreement.

Also, the rules should focus on credible measurement, independent verification, transparency, environmental integrity, and respect for communities. They should prevent fraud, double-counting, and false environmental claims without imposing duplicative approvals and unnecessary restrictions on investment.

In the longer term, constitutional reform should make the natural-resource framework more forward-looking. The Constitution should distinguish activities that extract and deplete natural resources from investments that protect, restore, and increase their value.

REWARDING CONSERVATION
People respond to incentives, one of the basic principles of economics. When protecting nature produces a legitimate return, landowners, communities, indigenous peoples, developers, and investors gain stronger reasons to keep forests standing and restore damaged ecosystems.

Conservation has always been worth doing, especially in a country regularly battered by typhoons, but it has rarely offered strong financial incentives. These new assets, carbon and nature credits, give verified conservation outcomes measurable economic value.

Good rules can align these private incentives with the public interest. This means project terms beyond 25 years, full foreign participation, clear ownership rules, and strict standards for verification, monitoring, and environmental integrity. The gold star is no longer merely recognition of a good deed — it becomes a tangible reward for those who protect and restore nature.

Angela Arnante is the assistant director of Policy and External Relations at the Foundation for Economic Freedom and an Asia Freedom fellow at the London School of Economics and Political Science.

angela.arnante@gmail.com