Biodiversity offsetting is a system used predominantly by planning authorities and developers to fully compensate for biodiversity impacts associated with economic development, through the planning process. In some circumstances, biodiversity offsets are designed to result in an overall biodiversity gain. Offsetting is generally considered the final stage in a mitigation hierarchy, whereby predicted biodiversity impacts must first be avoided, minimised and reversed by developers, before any remaining impacts are offset. The mitigation hierarchy serves to meet the environmental policy principle of "No Net Loss" of biodiversity alongside development."Biodiversity offsets and the challenge of achieving no net loss" (Gardner et al., 2013)
Individuals or companies involved in arranging biodiversity offsets will use quantitative measures to determine the amount, type and quality of habitat that is likely to be affected by a proposed project. Then, they will establish a new location or locations (often called receptor sites) where it would be possible to re-create the same amount, type and quality of habitat. The aim of biodiversity offsets is not simply to provide financial compensation for the biodiversity losses associated with development, although developers might pay financial compensation in some cases if it can be demonstrated exactly what the physical biodiversity gains achieved by that compensation will be. The type of environmental compensation provided by biodiversity offsetting is different from biodiversity banking in that it must show both measurable and long-term biodiversity improvements, that can be demonstrated to counteract losses. However, there is so far mixed evidence that biodiversity offsets successfully counteract the biodiversity losses caused by associated developments, with evidence that offsets are generally more successful in less structurally-complex and more rapidly-recovering habitats such as loss of biodiversity simplified wetland habitats."The ecological outcomes of biodiversity offsets under "no net loss" policies: A global review" (zu Ermgassen et al. 2019) For biodiversity offsets to successfully compensate for the loss of biodiversity elsewhere, it is necessary that they demonstrate additionality (i.e. they deliver an improvement in biodiversity that would not otherwise have occurred). While there are individual case studies of offsets that have successfully delivered additional outcomes, other evaluations of large-scale biodiversity offsetting markets have demonstrated serious additionality shortcomings.
Terminology Biodiversity offsets are defined by the Business and Biodiversity Offsets Programme as "measurable conservation outcomes of actions designed to compensate for significant residual adverse biodiversity impacts arising from project development after appropriate prevention and mitigation measures have been taken."Business and Biodiversity Offsets Programme (BBOP). 2018. Glossary. BBOP, Washington, D.C. 3rd updated edition.
The definition also states that the goal of biodiversity offsets is to achieve no net loss of biodiversity, or ideally, a net gain. No net loss (NNL) is an environmental policy approach, defined as a goal for development projects/activities and policies where impacts on biodiversity are either counterbalanced or outweighed by measures to ensure that biodiversity is at the same level as it was before the project.
Related terms Biodiversity offsetting may be confused with related terms like biodiversity banking. Biodiversity banking refers to a market-based mechanism, whereby offsets become assets in the form of biodiversity credits that can be traded to offset the debit of negative impacts of development. Biodiversity banks refer to sites where conservation or restoration activities have been carried out for the benefit of biodiversity. The positive outcomes for biodiversity or a given area of the bank is quantified in the form of a biodiversity credit.
In some languages, such as Spanish or Mandarin Chinese, biodiversity offsets are described as "compensation" because there is no corresponding term for offsetting. The term compensation is generally used more broadly in English to describe measures to counterbalance damages to biodiversity caused by development projects. Compensation does not necessarily require the aim of a no net loss goal, equivalence in biodiversity loss and gain, or measurable outcomes for conservation. Biodiversity offsets may therefore be seen as a more specific and outcome-oriented type of compensation measure.
The term "mitigation" is also sometimes used synonymously with offsetting, such as in the United States, where biodiversity offsetting is described by "compensatory mitigation". However, "mitigation" can be used to refer to the sequence of actions described by the mitigation hierarchy, a framework commonly used to guide the application of biodiversity offsetting within planning processes like Environmental Impact Assessments. The mitigation hierarchy describes a series of measures that should be applied in sequence to reduce impacts on biodiversity to the point where no adverse effects remain, often including the steps avoid, reduce, restore/rehabilitate, and offset. Offsetting is often regarded as the "final resort" in the mitigation hierarchy.
Relevant conservation activities
Biodiversity offset projects can involve various management activities that can be demonstrated to deliver gains in biodiversity. These activities very often include active habitat restoration or creation projects (e.g. new wetland creation, grassland restoration). However, also viable are so-called "averted loss" biodiversity offsets, in which measures are taken to prevent ecological degradation from occurring where it almost certainly would have happened otherwise. Averted loss offsets might involve the creation of new protected areas (to conserve fauna species that would otherwise have disappeared), the removal of invasive species from areas of habitat (which otherwise would have reduced or displaced populations of native species), or positive measures to reduce extensive natural resource use (e.g. the offer of alternative livelihood creation to prevent activities leading to deforestation).
Any activities that do not result in a positive and measurable gain for biodiversity would not generally be counted as part of a biodiversity offset. For instance, if a developer funds ecological conservation research in a region that they are impacting through a project, would not count as an offset (unless it could be shown quantitatively how specific fauna and flora would benefit). instead, this would be a more general form of compensation. Note that biodiversity offsets can be considered a very specific, robust and transparent category of ecological compensation. Poorly designed offset policies may also create perverse incentives that lower conservation standards and unintentionally encourage further biodiversity decline.
Receptor sites
Under many offset systems, receptor sites are areas of land put forward by companies or individuals looking to receive payment in return for creating (or restoring) biodiversity habitats on their property. The biodiversity restoration projects are financed by compensation from developers looking to offset their biodiversity impact. The resulting change in biodiversity levels at the new receptor sites should be equal to, or greater than, the losses at the original 'impact site'; In order to achieve no net loss – and preferably gain – of overall biodiversity. Such systems often rely on the buying (by developers) and selling (by landowners) of conservation credits.
However, characteristics of receptor sites can vary across different jurisdictions. In some countries, for instance, land is primarily state-owned, and so it is the government that owns and manages biodiversity offset projects. For biodiversity offsets in marine environments, receptor sites might be subject to multiple management organisations and not necessarily owned by anyone. Controversially, some biodiversity offsets use existing protected areas as receptor sites (i.e. improving the effectiveness of areas that are already managed for biodiversity conservation).
Requirement to offset biodiversity
Biodiversity offset projects can be found on every major continent besides Antarctica.GIBOP, (2019-09-05), 'Global inventory of biodiversity offset policies (GIBOP), International Union for Conservation of Nature, The Biodiversity Consultancy, Durrell Institute of Conservation & Ecology, https://portals.iucn.org/offsetpolicy/ As of 2019, over 100 countries had, or were developing, policies for biodiversity offsetting and more than 37 countries required biodiversity offsets by law. 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. 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.
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. However, different terms are used elsewhere: Term(s) for biodiversity offsetting (English translation)Country/countriesBiodiversity compensationArgentina, Chile, Colombia, Kazakhstan, Mexico, Peru, Spain, Uzbekistan, VenezuelaBiodiversity offsettingAustralia, New Zealand, South Africa, UKCompensationDenmark, SwedenCompensation measuresCanada, France, Germany, MadagascarCompensatory mitigationUnited StatesConservation offsetCanadaEcological compensationChinaEnvironmental reserve certificationBrazilSubstitution, ecological/environmental compensationSweden Biodiversity offsetting may also 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, required under the IFC's Performance Standard 6 (PS6). PS6 is regarded as influential and an example of best practice. However, as of 2019, only 8 offset projects had been implemented directly because of this requirement.
Finally, offset projects may arise from voluntary commitments made by corporations or across a sector. 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. For example, the Ambatovy mine in Madagascar uses voluntary avoided loss offsets to mitigate impacts on biodiversity by compensating for forest clearance at the mine. The project is on track to achieve no net loss, but the permanence of conservation outcomes achieved using its biodiversity offsets is not yet known.
Biodiversity compensation in Colombia In Colombia, the equivalent term for biodiversity offsetting translates literally to biodiversity compensation (Spanish: compensaciones de biodiversidad). Principles to govern application of offsets have been established and, since 2012, the country has had a 'Biodiversity Offsetting Manual' (Spanish: Manual para la asignación de compensaciones por pérdida de biodiversidad) under Resolution 1517, with an updated manual released in 2018 under Resolution 256. Required principles to guide offset design include a no net loss objective, equivalence between the offset and impacted ecosystem, additionality, and a minimum duration of the length of the development project.