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Biodiversity offsetting (proposed edits)

Requirement for biodiversity offsetting

Biodiversity offset projects can be found on every major continent besides Antarctica.[1] As of 2019, over 100 countries had, or were developing, policies for biodiversity offsetting[2] and more than 37 countries required biodiversity offsets by law.[2] These policies generally implement biodiversity offsetting within planning systems to compensate for unavoidable residual damage to biodiversity as the final step of a mitigation hierarchy, a tool to manage biodiversity risk.[3] Where damage to biodiversity cannot be avoided or reduced, biodiversity offsetting may then be used as a conservation tool with the idea that development projects will result in either "no net loss", "net gain", or "net positive impact" of/on biodiversity.[4]

The terms used to describe biodiversity offsetting and the method of implementation differ regionally. The term 'biodiversity offsetting' is generally used across Australia, New Zealand, South Africa, and the United Kingdom.[5] However, different terms are used synonymously elsewhere: [5]

Term(s) for biodiversity offsetting (English translation) Country/countries
Biodiversity compensation Argentina, Chile, Colombia, Kazakhstan, Mexico, Peru, Spain, Uzbekistan, Venezuela
Biodiversity offsetting Australia, New Zealand, South Africa, UK
Compensation Denmark, Sweden
Compensation measures Canada, France, Germany, Madagascar
Compensatory mitigation United States
Conservation offset Canada
Eco-compensation China
Environmental reserve certification Brazil
Substitution, ecological/environmental compensation Sweden

In addition to public environmental policies, biodiversity offsetting may be required by lending institutions that co-finance developments. For example, any project financed by the International Finance Corporation (IFC) must deliver "no net loss" or "net gain" of biodiversity[6], required under the IFC's Performance Standard 6 (PS6). PS6 is regarded as influential and an example of best practice.[7] However, as of 2019, only 8 offset projects had been implemented directly because of this requirement.[2]

Finally, offset projects may arise from voluntary commitments made by corporations or across a sector.[8] Only a small proportion of offsets arise in this way, but the projects generated tend to be larger than those arising from public policy requirements.[2]

Compensatory mitigation in the US

Biodiversity offsetting has its origin in the no net loss wetland policies of the United States, introduced in the 1970s with the Clean Water Act. In the United States, biodiversity offsetting is referred to as 'compensatory mitigation' and is defined by the United States Department of Agriculture (USDA) as "mitigation that offsets unavoidable impacts to wetlands or other aquatic resources in advance." This is achieved through conservation activities, including restoration, creation, enhancement, or preservation.

Ecological compensation in China

In China, biodiversity offsetting is referred to as ecological compensation (simplified Chinese: 生态补偿机制; traditional Chinese: 生態補償機制; pinyin: shēngtài bǔcháng jīzhì), or eco-compensation.[5] The system for biodiversity offsetting in China requires that developers complete an environmental impact assessment (simplified Chinese: 环境影响评价) to determine the impact of their project, then choose either to offset the impacts themselves or pay the government to do it on their behalf.[9] A goal similar to "no net loss", referred to as "maintain biodiversity" (simplified Chinese: 维护生物多样性 traditional Chinese: 維護生物多樣性; pinyin: wéihù shēngwù duōyàng xìng) is used in China. However, ecological compensation does not have to adhere to a "like for like" principle, whereby an offset must be ecologically equivalent to the development site.[10]

The term 'ecological compensation' takes on multiple meanings in Chinese environmental policy, including compensation for ongoing development impacts (equivalent to biodiversity offsetting policies in other countries), compensation for previous development impacts, payments for ecosystem services, and compensation for illegal use of natural resources.[10] In the context of biodiversity offsetting, compensation involves mitigation of negative impacts on biodiversity arising from development projects by enhancing biodiversity elsewhere, typically aiming for "no net loss" or "net positive" biodiversity outcomes.[11]

Forests, grasslands, and wetlands in China have been destroyed because of development projects - for example, 42% of the wetlands on the Pearl River Delta (which makes up 26% of China's natural habitat) were lost between 1992 and 2012.[12] As a result, with the aim of reversing the habitat destruction caused by rapid expansion of infrastructure, the Chinese Government launched a national eco-compensation scheme over the late 1990s and early 2000s.[13] Some of the biodiversity offsetting mechanisms used in China include the forestry vegetation restoration fee (FVRF), grassland vegetation restoration fee (GVRF, simplified Chinese: 草原植被恢复费), and wetland restoration fee (WRF).

The forestry vegetation restoration fee (FVRF) (simplified Chinese: 森林植被恢复费) was the earliest ecological compensation mechanism developed in China[10] and widely regarded as China's principal "no net loss" (NNL) instrument because they incorporate a legal commitment to no net loss of forest cover.[10] This means that developments (such as mining operations) occupying forest land with approval from the National Forestry and Grassland Administration should pay fees to restore this vegetation.[14] FVRFs were launched in 1998 as part of China's first Forestry Law, which established "a compensation fund for the benefit of the forest ecology".[15] They are also the most widely used compensation mechanism in China. This is because of a policy focus on prioritising forest protection and afforestation to promote sustainability. By contrast, WRF is in its infancy and GVRF has only been applied to a some regions.[10]

Mechanisms for ecological compensation, or biodiversity offsetting, are increasingly being discussed by the Chinese central government, which has made commitments to prioritise biodiversity conservation and to improve ecological compensation methods.[10][16][17] However, ecological compensation in China is often criticised for the substantial degree of government participation through use of public funds as finance sources.[13] On the other hand, government participation is also regarded as important in developing countries to ensure that biodiversity offset projects operate smoothly.[13] In addition, there is no standardised measurement for compensation programmes and quantitative metrics to determine impact on biodiversity are not mandated.[9]

Offsetting in Australia

In Australia, biodiversity offsetting has been applied since at least 2001, under the conditions of the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act).[18] At federal and state/territory levels, policies have been established to regulate biodiversity offsetting; potential biodiversity offsets may need approval both under the EPBC Act and under the policies of the state/territory where the development is occurring.[19]

The Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) regulates biodiversity offsetting at the federal level and forms the basis of the government's Environmental Offsets Policy. Under the EPBC Act, if a proposed development (such as housing developments, mining projects, or road construction) is likely to have an impact on a protected area, an Environmental Impact Assessment must be conducted. Offsetting can be carried out, as part of a mitigation hierarchy, to compensate for adverse impacts that cannot be avoided or minimised. The involvement of the federal government is limited to matters of national environmental significance, known as 'protected matters' under the EPBC Act.[20] For example, potential adverse impacts on biodiversity where world heritage properties, wetlands of international importance under the Ramsar convention, and listed threatened species are concerned.[19] Offsets are applied to nearly 80% of approved actions in Australia under the legal conditions of the EPBC Act, according to a report by the Australian National Audit Office in 2020.[21]

State and territory governments have established their own biodiversity offsetting policies, including in the Federal Capital Territory, New South Wales, Queensland, Victoria, Western Australia, and the Northern Territory - in Tasmania, biodiversity offsetting policy is only applied in specific contexts.

In 2023, the Australian government commissioned the first major audit of the biodiversity offsetting sector in the country. It was conducted independently and released in June 2024. According to the audit, only 10% of biodiversity offsetting sites had improved vegetation condition,[22] and a third of offset projects left the condition of vegetation in those areas worse than it had been before.[23] In practice, the efficacy of using offsetting policy to achieve "no net loss" or "net gain" outcomes is also impacted by administration.[24] For example, backloading is an administrative practice where offset assessments are deferred until after the approval of development impacts on biodiversity.[24] Backloading by federal administrators can contribute to the use of offsets as a default measure, rather than a last resort, and could therefore reduce their effectiveness as a tool to conserve biodiversity.[24] To increase the efficacy of the EPBC Act to govern biodiversity offsets, it has been suggested that the Act should be amended to reduce ambiguity.

Biodiversity banking in Australia

Australia also has biodiversity banking mechanisms. These are generally operated on a regional level, within individual states and territories. Biodiversity banking involves the generation of biodiversity credits (as proxies for biodiversity)[25] from assessing the biodiversity value of land where conservation activities to restore or manage habitats have been conducted. These sites, located away from the development site, are known as 'biobanks'. The biodiversity credits generated from biobanks can then be traded within a market framework to deliver biodiversity offsets that aim to mitigate the negative impacts of development projects.

Offsetting in Brazil

Offsetting in Canada

Canada has policy requirements for biodiversity offsetting on a national level. Notably, this includes a policy to offset loss of fish and fish habitat through habitat banking, under the Fisheries Act. According to the act, "no person shall carry on any work, undertaking or activity, other than fishing, that results in the death of fish"[26] and "no person shall carry on any work, undertaking or activity that results in the harmful alteration, disruption or destruction of fish habitat".[26] Policy states that other aquatic species at risk should also be considered when conducting habitat banking.[27]

Policy requirements for biodiversity offsetting in Canada are also set out by legislation to regulate Environmental Impact Assessments (EIA), which are planning tools that assess the potential effects of proposed developments. A federal process for conducting EIAs to prevent or mitigate significant adverse impacts on the environment, including through biodiversity offsetting, is underpinned by the Impact Assessment Act (IAA). The IAA requires that developers provide information on how mitigation measures will be used to eliminate, reduce, control, or offset the adverse effects of a project on biodiversity.[28] This echoes the mitigation hierarchy commonly applied in EIAs, but an explicit order for the application of steps is not mentioned in the legislation.[29] The IAA was passed in 2019 but amended in June 2024, after key parts of the act were deemed unconstitutional by Canada's Supreme Court for overstepping the boundaries of federal jurisdiction and encroaching into provincial jurisdiction.[30] In June 2024, in response to amendments to the IAA receiving Royal Assent, the Impact Assessment Agency of Canada began the process of updating policy and guidance documents.[31]

A draft biodiversity offset policy was released in 2020 by Environment and Climate Change Canada, using the mitigation hierarchy as a framework to implement offsets with the goal of achieving no net loss of biodiversity for all projects that negatively impact biodiversity.[32] The mitigation hierarchy outlined in the policy includes the steps avoidance, minimisation, restoration, and offsetting.[32] The policy emphasises offsetting as the final step of the mitigation hierarchy, with the need for offsetting determined by the negative impacts that remain once all other steps are applied.[32] Limits to the appropriateness of offsetting are acknowledged in the policy.[32]

Habitat banking in Canada

Habitat banking (similar to mitigation banking in the United States) is a tool used to offset negative impacts of potential projects or development activities on fish (or their habitats), in advance of impact occurrence, by restoring, enhancing, or creating fish habitat by completing conservation projects.[27] The positive impacts of these conservation projects on fish are quantified through habitat credits. Habitat credits can then be withdrawn from the habitat bank to offset negative impacts on fish or their habitats, but only by the creator of the habitat bank to offset their own impacts - the credits cannot be sold or traded to third parties.[27] In addition, projects must adhere to the hierarchy of measures (mitigation hierarchy) to be eligible to use habitat credits.[27]

In Canada, habitat banking was first used in 1993 in North Fraser Harbour in Vancouver.[33] Creation, restoration, and enhancement of habitat continues at Port Fraser - with creation, restoration, and enhancement of 15 hectares of fish and wildlife habitat since 2012, according to the Port Authority, to offset the effects of port development.[34] Across Canada, the majority of offset projects are aquatic, including 43% in wetlands, 33% in streams, and 22% in rivers.[35]

Further research is needed to determine a clear picture of the success of habitat banking in achieving no net loss of biodiversity and ecosystem functions in Canada.[36] A 2006 analysis found that 25% of habitat banking projects achieved no net loss of habitat productivity, while 12% achieved a net gain.[37] Compliance with monitoring requirements was also found to be low, meaning it was difficult to determine the effectiveness of projects in achieving no net loss.[36]

Offsetting in Colombia

Offsetting in France

Biodiversity offsets have been implemented in France, where policy requirements have been put in place.

Offsetting in South Africa

South Africa has a legal framework to govern the implementation of biodiversity offsetting through the National Environmental Management Act (NEMA) and the Environmental Impact Assessment Regulations (EIAR), though the term is not explicitly mentioned in these laws. NEMA puts forward a polluter pays principle, which could be implemented using biodiversity offsetting, and requires developers to consider the need to avoid, or to minimise and remedy (where avoidance is not possible), the loss of biodiversity, as part of sustainable development.[38] The EIAR includes implicit legal provisions for the use of offsets.[39] These laws form the foundation of the 'National Biodiversity Offset Guideline', issued by the Ministry of Forestry, Fisheries & the Environment in January 2023.[40] According to these guidelines, biodiversity offsets are required when it is likely that a proposed activity could have residual negative impacts on biodiversity of "medium or high significance" (where biodiversity may be lost in vulnerable areas, or areas of recognised importance), once measures have been taken to avoid or minimise these impacts.

The implementation of a national guideline on biodiversity offsetting was recommended by the National Biodiversity Framework (2019-2024).[41] In response to the recommendation, the 'National Biodiversity Offset Guideline' was released by the Ministry of Forestry, Fisheries & the Environment[40] to guide the implementation of EIAR and NEMA. It provides guidance on the principles of biodiversity offsets, the requirements for biodiversity offsets, biodiversity offsets in the context of Environmental Impact Assessments, selection of sites, and planning.[42] The principles of the guideline acknowledge offsetting as the last step of the mitigation hierarchy, a preference for ecological equivalence of offsets, and the need for offsets to be additional to conservation measures that are already legally required. It does not mention "no net loss" or "net positive impact" as goals for biodiversity, instead discussing the need to "counterbalance a residual impact".[40]

In addition to national guidelines, some South African provinces have their own offsetting guidelines. The first to develop a biodiversity offsetting framework was the Western Cape Province with the Provincial Biodiversity Offsetting Guideline.[39] The KwaZulu-Natal and Gauteng provinces have also published guidelines for biodiversity offsetting and other provinces are drafting their own policies.[39]

Guidelines in the Western Cape Province require developers to compensate for residual impacts on biodiversity and ecosystem services, as part of the environmental impact assessment process. However, if a project proposal is deemed to be fatally flawed (it has a major defect that should result in its rejection) through its impact on biodiversity, this means that offsets cannot be applied. Like national guidelines, the Western Cape's guidelines do not use the goal of "no net loss" to guide ambitions for offsets because it is considered to be unrealistic as a result of South Africa's status as a developing country.[43] Instead, the guideline attaches offset requirements to an acceptable loss of threatened vegetation types and ecosystem services.

However, the use of biodiversity offsetting in South Africa has attracted debate.[39] A range of barriers to effective implementation have been identified by researchers. For example, the lack of common understanding of the theory and practical application of biodiversity offsetting within the country is a particular challenge.[39]

Offsetting in the UK

Biodiversity Net Gain in England

Biodiversity offsetting has been formally implemented into the planning process in England through the introduction of Biodiversity Net Gain (BNG) on February 12 2024 under the Environment Act 2021 through modification to the Town and Country Planning Act. BNG is England’s domestic ecological compensation policy, designed to compensate for ecological harms caused by new developments. BNG requires that, to gain planning permission from Local Planning Authorities (LPAs), developers must demonstrate a 10% net gain in biodiversity[44] under the proposed development, relative to the pre-development scenario, using a 'Statutory Biodiversity Metric'.

Failure to meet this criterion obligates the developer to adjust their project plan, or compensate for the shortfall in biodiversity units through the purchase of biodiversity offsets, which are delivered either through a payment to the council or a third party, such as a broker managing a habitat bank. If no compensation sites are available within the local planning authority where the development is planned, compensation is permitted in other local authorities, triggering an increase in compensatory units required due to a spatial multiplier within the Metric. As a final option, developers can purchase 'statutory biodiversity credits' from the national government. Offsetting therefore represents a small proportion of biodiversity enhancements delivered through the policy; the majority of biodiversity enhancements come through habitat management activities implemented within the boundaries of new developments themselves.[44]

Assessments for Biodiversity Net Gain are conventionally integrated into the Ecological Impact Assessment (EcIA) process. This involves using data gathered from pre-development ecological surveys and processing it through the Statutory Biodiversity Metric (an Excel-based tool), to give a measure of the ecological value of a site in 'biodiversity units'. The metric uses habitat as a proxy for biodiversity[45] by combining factors like area, habitat condition, distinctiveness, and multiple parameters (like risk, the time required for habitat development, and the ecological significance of the site on a landscape scale) for each habitat section within the development area. Using the metric, an overall biodiversity score, measured in biodiversity units, is generated. Baseline biodiversity units within the development area and associated compensation areas owned or managed by developers are compared with anticipated biodiversity units following development. For example, if a develop damages a habitat of “high distinctiveness”, they will be required to compensate with habitat of the same type, instead of trading for a less ecologically-valuable habitat.

Preliminary scientific evidence on the ecological outcomes of Biodiversity Net Gain suggests the policy facilitates the trade of habitat losses from construction for smaller, but more ecologically valuable habitats to be delivered in the future.[44] There are concerns that the governance (monitoring and evaluation) of the biodiversity benefits delivered through the policy is insufficient to ensure these future biodiversity outcomes are effectively secured.[46] Additionally, there are concerns that the Biodiversity Metric may not be an effective proxy for biodiversity, and therefore that a net gain in biodiversity demonstrated by the metric may not translate into real-world improvements in biodiversity such as wildlife populations.[45]

Prior to Biodiversity Net Gain

Prior to this policy, developers could voluntarily incorporate offsets into project plans after following a mitigation hierarchy to manage risk to biodiversity by taking steps to avoid and minimise ecological harm at the development site, unless legally required for impacts to protected sites and species.

The Lawton Review in 2010 proposed that biodiversity offsets established through planning processes could be used to enhance ecological networks, but warned that biodiversity offsetting must not become ‘a licence to destroy’.[47] At the time the report was written, offsetting was mandatory only in areas where a development of great public interest would have a significant impact on the European Union’s Natura 2000 network or any site inhabited by a European protected species. The Review recommended the establishment of pilot schemes to test potential biodiversity offsetting systems in the country. A 2011 white paper ‘The natural choice: securing the value of nature’ responded to the Lawton review and announced plans to introduce voluntary biodiversity offsetting through pilot schemes.[48]

In April 2012, the Department for Environment, Food, and Rural Affairs (Defra) launched a voluntary biodiversity offsetting pilot scheme.[49] Developers in pilot areas were required to provide compensation for biodiversity loss under planning policy and were able to choose offsetting to do so. The scheme also aimed to test a biodiversity offsetting metric developed by Defra. This scheme included 6 pilot areas: Doncaster, Devon, Essex, Greater Norwich, Nottinghamshire, and Warwickshire.[50] In March 2014, the pilot scheme ended and was reviewed by Collingwood Environmental Planning Limited in partnership with the Institute for European Environmental Policy (IEEP). However, the scheme also drew criticism from Friends of the Earth who described it as a “licence to destroy”[51] and the possibility of like-for-like compensation of biodiversity loss has been questioned.

In 2012, a standard metric for biodiversity was piloted by Defra for use in the biodiversity offsetting pilot scheme.[52] Consultation from environment, planning, land management, academic, and development sectors led to numerous updated biodiversity metrics over a period of several years. Biodiversity Metric 4.0 was launched by Defra and Natural England in March 2023 to measure Biodiversity Net Gain.[53] A Statutory Biodiversity Metric was later introduced as part of the Environment Act as the legally mandated metric for use under the biodiversity net gain policy. This metric uses habitat as a proxy for biodiversity[45] by combining factors like area, habitat condition, distinctiveness, and multiple parameters (like risk, the time required for habitat development, and the ecological significance of the site on a landscape scale) for each habitat section within the development area.

The British Government announced its plans to mandate a biodiversity net gain policy in England in March 2019, as part of a forthcoming Environment Bill that would require 'developers to ensure habitats for wildlife are enhanced and left in a measurably better state than they were pre-development’.[54] The Bill was later enacted as the Environment Act 2021. Initially, BNG was planned to come into force by November 2023, but delays meant that it was not implemented until February 12 2024. This delay was criticised by environmentalists, including The Wildlife Trusts, who called it “another hammer blow for nature.”[55] In response to these criticisms, a government spokesman reaffirmed the government’s commitment to BNG, saying that “we are fully committed to biodiversity net gain which will have benefits for people and nature.”[55]

Controversy

The use of biodiversity offsetting as a tool for conservation remains controversial.

References

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