Do offset markets for nature really work?

Do offset markets for nature really work?

25.05.2015 - Posted by Kane Travis
Recently we had a lunchtime talk with Associate Professor Sarah Bekessy who has been teaching in environmental studies and sustainability at RMIT University since 2004. Sarah is interested in the intersection between science and policy in environmental management, and spoke to us about offsets and whether offset markets for nature can really work.

Murrumbidgee river near Gigerline Nature Reserve ACT

Murrumbidgee river near Gigerline Nature Reserve (ACT) - close to the ~110 ha M2G Offset Habitat conserved to compensate for vegetation and habitat losses resulting from the Enlarged Cotter Dam (ECD) and Murrumbidgee to Googong Water Transfer Project (M2G) [photo source: David Reid, Dave's ACT]

This discussion took me back to my involvement in offsets when it wasn’t quite so fashionable and lacked the sophistication of some of the programs today. At that time, I managed the environment program over the Shepparton Irrigation Region and part of that role was to negotiate vegetation removal as a referral agency to local government. There were no real offset rules then and it was guided by what felt to be reasonable. If a species was considered vulnerable in the Irrigation Region, such as White Cypress Pine, I used a 12:1 replacement ratio. For common species, it was about 6:1. I also made it a contractual condition to have 80% plant survival at 2 years. I found I was often stuck between the developer, Council and local environmental advocacy groups, but on the whole I am pretty convinced we achieved a genuine net gain for the environment at that time.

So how does that compare to the way offsets are managed and thought about now?

It appears to me that a lot of people have been doing a lot of thinking and a glance at the literature shows hundreds of research papers on the topic. There is also no doubt that the State and Federal Governments have taken to it with enthusiasm and there appears to be a steep incline in the uptake of offset schemes nationally. However, as discussed by Sarah, there are some untenable assumptions in existing schemes which are undermining their benefits.

In a project we just completed for the Victorian Water Industry, which developed a framework for Water Quality Offsets, we used a set of criteria that aimed to manage these risks. For example, the proponent would need to demonstrate that any offset proposed will indeed provide an environmental benefit (additional to any planned works), will be appropriate in terms of timing, will be measurable, and enforcable.

Policies that allow habitat destruction to be offset by the protection of existing habitat are pretty much guaranteed to result in further loss of biodiversity. Similarly, schemes that allow trading the immediate loss of existing habitat for restoration projects that promise future habitat will, at best, result in time lags in the availability of habitat. This lag increases extinction risk, or at worst, fails to ever achieve the intended offset at all. When we are talking multiple decades to transition to mature ecosystems, a lot can go wrong in that time.

Due to the uncertainties about the way in which restored vegetation matures, the current thinking strongly suggests that the biodiversity bank should be a savings bank. Accrued biodiversity values could then be demonstrated before they are used to offset biodiversity losses.

As described by Sarah in one of her papers*:

“…the only workable and equitable system is one in which assets are banked for the future and trading is only possible once it can be demonstrated that assets have matured (reached ecological equivalence with whatever losses they are being traded against). The value of biodiversity assets (savings) should be demonstrated before they can be used to offset loss of biodiversity elsewhere. New investments could be sold to a party interested in liquidating an equivalent amount and quality of vegetation.”

Our discussion also touched on the fact that some things simply should not be for sale. Some things, such as critical habitat for listed threatened species, should not be tradeable.

“Offsetting is not a panacea for unbridled development and must be firmly established as the last and most costly step of the “avoid, mitigate, and compensate” hierarchy…” *

This principle is enshrined in EPBC Act offsets policy (and various state guidelines) – maybe the questions about offsets should include an assessment of how capable the industry and bureaucracy are at sticking to the rules?

The current implementation of offset programs seems to have advanced substantially, but it still isn’t perfect in my opinion. I recently heard an extraordinary example of a Koala offset being provided for in-road roundabout. I wonder if teaching the Koala road sense was part of the offset deal.

If you feel like getting into some heavier reading then Sarah’s publications can be found at this Google Scholar site, but if you are after an example with a pretty unique twist on expressing a view on offsets try this link

* Bekessy SA, Wintle BA, Lindenmayer DB, McCarthy MA, Colyvan M (2010), The biodiversity bank cannot be a lending bank, Conservation Letters vol.3, issue 3, 11 March 2010