Conservation credit trading platform launched!
It is often argued that many of the public goods which farmers are asked to provide should be remunerated through public payments from the CAP budget since there are no functioning markets for the majority of ecosystem services. However, despite bold ambitions to green the CAP, the RISE Foundation has consistently argued that relying on public spending and regulation alone without the participation of the market and the private sector will fail to adequately address the pervasive market failures that have led to the undersupply of public goods and biodiversity losses on Europe’s farmland.
With this in mind, last December, the RISE Foundation, in partnership with the Environment Bank Ltd and under the patronage of MEP Paolo De Castro, co-hosted an expert workshop in the European Parliament in order to raise awareness about the benefits of habitat banking as a flanking measure alongside public subsidy programmes to support the provision of public goods and services in agriculture. The workshop was opened by MEP Paolo De Castro and was followed by a presentation from Guy Duke, Director General of the Environment Bank Ltd – a UK based company which is pioneering the concept of mitigation and compensation schemes with national and local authorities, and developers at several pilot sites across the UK.
Mr Duke explained in his presentation how this market instrument functions and who can benefit, the potential size of the EU market for habitat banking, and the possible steps to develop such a market in the EU. To access the presentation in full, please click here. In short, the concept of habitat banking is simple, though the functioning in practice is more complex. Habitat banking is “a market where credits from actions with beneficial biodiversity outcomes can be purchased to offset the debit from environmental damage. Credits can be produced in advance of, and without ex-ante links to, the debits they compensate for, and stored over time.” (definition taken from the Eftec/ IEEP technical report on habitat banking for the European Commission – a very thorough introduction to the subject available here).
The European Commission and European Investment Banks have both shown a great deal of interest in habitat banking. The EU Biodiversity Strategy to 2020 prioritises work on offsetting and habitat banking within the context of the proposed no net loss initiative for 2015, and this is highlighted as a priority within the Resource Efficiency Road Map. In July 2011, an exploratory workshop on habitat banking was convened by the Director General of DG RTD, and involved representatives from DGs ENV, CLIMA, ECFIN, AGRI and DEV, the European Investment Bank and various external stakeholders. The EIB also convened a workshop on the issue in October.
Habitat banking is one method of delivering biodiversity offsets – i.e., conservation outcomes which compensate for significant residual adverse biodiversity impacts arising from new developments. These offsets hereby become assets which can be traded, effectively creating a market system for compensation liabilities. The goal is to achieve at least no net loss to the environment, and at best a net gain of biodiversity on the ground with respect to species composition, habitat structure, ecosystem function and people’s use and cultural values associated with biodiversity.
The system must be designed in such a way as to provide benefits to all stakeholders involved: developers, landowners, planning authorities and the wider community. The result is win-win. Ecosystem erosion from development projects gives rise to ecosystem enhancement through compensating investment that would not otherwise take place. Developers are able to clarify the planning process, notably as regards sustainability aspects, limit costly delays, and improve their image. Land owners obtain the income necessary to provide more ecosystem services to society, and their respect of regulatory obligations such as those regarding the Habitats Directive, the Framework Water Directive, nitrates and pesticides utilization, and agricultural practices, is enhanced. Governments benefit from significant complimentary private funding for public goods spending as well as job creation and related economic growth, notably in rural areas. And finally, citizens benefit from the long-term maintenance of ecosystem services and natural capital, access to nature, enhanced recreational landscapes and significant health benefits.
According to Mr Duke, the global market for biodiversity offsets in 2010 exceeded $3 billion. While more research is needed in this area, the potential size of the UK market alone for biodiversity offsetting is estimated to be in the region of £1-2.5 billion (credit spend value per annum), depending on a number of factors including the economic climate (based on house prices and trends in per hectare payments over ten years).Scaling up across Europe, the EU market would be worth several tens of billions of Euros per year and possibly as much as €100 bn/yr, a claim backed up by the European Investment Bank.
However, there are risks involved which require careful thought and managed, as it was pointed out by Karl Falkenberg – Director General of DG Environment at the European Commission and Peter Carter, Chief Environmentalist at the European Investment Bank, who were invited to comment on the presentation of Mr Duke during the workshop. These include, notably the need to safeguard against creating ‘a licence to trash’ valuable ecological sites and to ensure that compensation measures go beyond the baseline (i.e. do not interfere with existing EIA legislation or Natura 2000 sites) and do not simply apply to sites which are already undergoing restoration or natural regeneration due to land abandonment. Therefore, receptor sites should satisfy a number of conditions if they are to bring added value to a habitat banking project. For example, they should already produce biodiversity benefits or be likely to significantly offer them in the future, they should be undesignated as protected areas and should be under threat from degradation through development. This, when considering the network of already protected sites, reduces somewhat the availability of sites and needs careful consideration in the future. Fundamentally, there is a need to try and establish like for like sites on a local scale. Some habitats can be more readily restored, especially semi-natural and manmade habitats, for particular species, rather than habitat / ecosystem as a whole. It is difficult to restore ancient forests or habitats which have evolved over thousands of years and these should be preserved wherever possible whereas the creation of early successional stages of some habitats is highly valuable as these are often rare in many parts of Europe.
One of the hurdles to date is how to make habitat banking workable alongside existing protection measures and environmental legislation which may be unevenly transposed into national laws creating an unlevel playing field across EU member states and making it easier for certain member states with weaker measures to capitalise on offsetting opportunities and penalising member states with higher levels of existing protection. Furthermore, there is a potential risk that landowners with current high biodiversity value let that biodiversity deteriorate in anticipation of future conservation policy incentive mechanisms, or make demands for higher payments in order to upkeep existing arrangements. These risks need to be carefully mitigated in the planning stages in order to avoid perverse effects. Evidently, better implementation and enforcement of existing conservation and protection measures is key to achieving a level playing field in which a European-wide system can function. In addition, good public scrutiny and external supervision is essential to ensure against perverse incentives and corruption in the worst cases. This is necessary preparatory work in order to set the right conditions under which habitat banking can flourish.
Ultimately, the performance of habitat banking is enhanced when the law requires compensation by developers for ecological damage, receptor sites for the relevant credits are chosen for their potential to deliver ecological gains, and land managers enter into legally binding multiannual management agreements, monitored by the habitat bank or local planning authorities as long as the credits last.
While there are issues to address in order to develop the habitat banking market in the EU, many of the associated risks can be mitigated with sound planning strategies and caution in the early stages of habitat banking’s development and a lot of thought and analysis has already gone into these strategies at the policy level in the European Commission and EIB.
Habitat banking was given a boost last week when The Environment Bank launched the first online ‘conservation credit’ trading platform. The Environment Bank, the first organisation to deliver biodiversity offsetting in the UK, and Mission MarketsTM, a professional services firm specializing in the impact and sustainability sectors and operating an international platform for exchanging environmental credits, jointly announced the first online marketplace for conservation credits in the UK.
The online Conservation credits Exchange will allow conservation groups, farmers and landowners to register their wildlife sites so as to provide ‘conservation credits’; these credits will then be available to developers for purchase to offset their impacts on biodiversity – putting a transferable value on biodiversity loss and establishing private sector funding for the long-term management of conservation sites.
The next step is to develop supportive policy at EU level in order to create positive signals to continue piloting this innovative scheme throughout Europe. And in this vein, MEP Paolo De Castro has expressed his intention to write an own-initiative report from the Agri and Envi committees in the European Parliament on habitat banking as a flanking measure to support the financing of public goods delivery in agriculture, an initiative which would help send supportive signals to EU member governments that this is a viable policy to help mitigate biodiversity degradation and should be encouraged and grown. He announced his intention to do so at the close of our December 16th workshop which was an excellent early Christmas present!
We will support this endeavor and hope to see habitat banking develop as a useful tool under the 2015 no net loss initiative!
