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A Better Kind of Offset

The emerging market for biodiversity offsets aims to curb-and reverse-our impact on the planet.

Offsetting your carbon footprint has never been easier. Drive a car 300 miles on a business trip, or hop on a flight to Hawaii for your honeymoon, and you can pay someone to reduce carbon emissions on your behalf. The idea behind offsets is simple: A ton of carbon is a ton of carbon, so you can balance out your own emissions by stopping the carbon from being released elsewhere. But how do you swap llamas for snow leopards? Can a similar economic model apply to balance something that isn't so easily measured-say, the amount of biological diversity in an area that is disturbed by a coal mine?These days, somewhere between 10 and 30 percent of all mammal, bird, and amphibian species are threatened with extinction. A major cause of this unprecedented loss is the destruction of natural habitat by what we now think of as basic human activities: planting a farm, cutting down trees, digging a mine, making a road, building a city, drilling for oil or gas-the same industries that provide crucial jobs and economic growth for people around the world.But the importance of biodiversity-that is, the variety of life on earth-is manifold. Genetic diversity prevents extinction; more plant species means a greater variety of everything from food crops to medicine; diverse ecosystems are more resilient in recovering from disasters like fire, flood, and drought. Protecting biodiversity, then, is vital to the existence of life as we know it. But how do we factor it into the business of life as we know it?An international consortium called the Business and Biodiversity Offsets Program has been working on the answer. For the past four years, BBOP, managed jointly by Forest Trends, Conservation International, and the Wildlife Conservation Society, has been quietly building a partnership of major companies, leading scientists, conservation experts, governments, and financial institutions to determine what to consider when designing and implementing biodiversity offsets. Using the carbon-credit market-worth $126 billion in 2008-as a model, BBOP is creating a portfolio of projects in a range of industries to show that biodiversity offsets can achieve better and more cost-effective conservation results.But unlike the carbon offset market, BBOP's aim is not just to right a wrong on the back end, but to first prevent harm as much as possible on the front end. So far, participants include Rio Tinto, Shell International, Goldman Sachs, the United Nations Development Program, and the World Wildlife Fund.The idea of biodiversity offsets is controversial to some in the conservation community; the fear is that that the use of offsets could encourage regulators to allow certain large-impact projects to go on as long as they offered offsets afterward to compensate. BBOP says that following a "mitigation hierarchy" (see below) is one of the main ways to ensure offsets are used correctly, so that businesses aren't given a license to trash.
"You must avoid harming [biodiversity] to begin with. Far better to do that than try to fix it afterward, or to try to fix it by protecting something somewhere else."
BBOP aims to ensure "no net loss" of biodiversity in development projects through conservation activities that will protect threatened habitat, support a country's existing biodiversity strategies, and address the needs of local communities. In late May, the group had a global coming-out party with the release of handbooks describing what it has learned from six different pilot programs around the world, including sites in South Africa, Ghana, New Zealand, and the U.S.; projects in the first phase focused on extractive industries like oil, gas, and mining. The reports are helping to determine a standard methodology for measuring biodiversity; they also aim to show that "no net loss" can actually help companies manage their costs and liabilities in the long run.Typically, a developer is required to do environmental-impact studies on a site before it begins work. BBOP stresses what it calls a "mitigation hierarchy": The first priority is to avoid and minimize the impacts of a project on biodiversity; second is restoration. A biodiversity offset is the final option in this hierarchy; it is used only to tackle the remaining impact. In other words, an offset should only come into consideration after all other prevention and mitigation measures have already been taken-it doesn't wipe the slate clean if you've torn down a rainforest in one place and helped preserve one in another."If you have something very important on your site, you must avoid harming it to begin with," explains Kerry ten Kate, director of BBOP, Forest Trends, and a leading expert on biodiversity offsets. "Far better to do that than try to fix it afterward, or to try to fix it by protecting something somewhere else. Biodiversity is not the same in one place as it is in another."This logically begs the question: How can the amount of biodiversity be measured? One scientific method offered by BBOP is adapted from the "habitat hectare" approach developed in Victoria, Australia: Surveyors assign scores to a site based on the quality and quantity of native plants and animals, as well as landscape features and ecological function. A hectare is weighted according to its biological health: for example, the actual area might be one hectare, but weed invasion or the lack of large trees makes it worth less than one from a healthy habitat standpoint.Local experts first choose a "benchmark" site-an independent area that is as pristine as possible-and select roughly 20 top attributes that best characterize ecosystem health. These might include four tree species and one kind of bush that indicate thriving native vegetation, plus an iconic bird species and an insect that indicates the richness of soil. The assessment might include the size of a patch of wilderness-is it connected to others, or is it isolated by development? Once this benchmark description is ready, it is used as the comparison for the pre-project condition of a site and the predicted condition after development. The difference is the amount of biodiversity that will be lost.Similarly, once a potential offset site has been identified, the "gain" in biodiversity is calculated by estimating how activities like replanting native trees and removing invasive species will raise the score of a habitat. The purpose is to show a balance between a project's impacts on the original biodiversity of a site and the benefits achieved through an offset.Since biodiversity is so tough to measure relative to carbon, ten Kate admits to having a bit of "carbon envy." The wisdom lies in selecting a critical mass of things that indicate the overall health of that ecosystem, but at the same time are easy to measure in a short period. "We can't possibly count every soil microbe or nematode, so we adapted established methods that give a good estimate of the quantity and quality of biodiversity overall," she says. "This is where local experts are indispensable."
"Businesses have a strong economic incentive to do well with biodiversity and local communities, since it relies on good performance to get a license to operate."
So what's in it for a business to achieve "no net loss"? Contrary to what we might think, a business has a strong economic incentive to do well with biodiversity and local communities, since it relies on good performance to get a license to operate. "For a company to get permission to undertake a mine or a road or a house, it needs to satisfy a regulator and get the support of local communities. It can take many years, and it can be hugely expensive," ten Kate explains. If a project contaminates a local water supply or harms the forest upon which a community depends, it is a disaster that can cost a company dearly. "Companies have told us that if you come in with a good track record, it saves a lot of time and money. So it's very much a financially material issue."BBOP doesn't yet have published figures on the costs of each offset; so far, indications are that the offsets are minor relative to the cost of the entire project. On the regulatory side, biodiversity offsets are becoming a part of responsible lending practices for major international banks and government agencies.One of BBOP's pilot case studies involved an offset for a coal mining facility near Greymouth, on the South Island of New Zealand. This was a retrospective study: the mine is closed and its operator, Solid Energy New Zealand, had already undertaken restoration activities, but it voluntarily looked to quantify its residual impacts on biodiversity in order to accomplish the goal of no net loss.On a global scale, New Zealand's biodiversity is relatively modest, but it's significant because most native plant and animal species here are found nowhere else. To supplement information on the mine site that had been gathered before mining began, Solid Energy conducted further surveys on similar habitat nearby that resembled pre-mining conditions; key species found there, like the great spotted kiwi, were identified. Exotic plant and animal invasion was considered in the calculation; other disturbances observed in the mine's footprint included roads built specifically to access coal reserves, lower bird species diversity and population, erosion, and blackened tree canopies.The survey of the New Zealand mine's impact on biodiversity loss was completed in the last year; the offset is now being designed. The shortlist of offset activities includes a project focusing on the great spotted kiwi, improving the species' forest habitat through weed removal and the controlling of introduced pests and predators.Closer to home is a BBOP pilot that concerns a 12-home real estate development project on Bainbridge Island, near Seattle. The City of Bainbridge Island partnered with a private landowner to design an offset for impacts resulting from building the homes and the relocation of a shoreline road further inland. Two types of offsets were considered. An "in-kind" offset compensates for something in the same general habitat where the impact takes place-in this case, it's forest habitat where the homes and the new road would be situated; planting of native conifers, removal of invasive species, and establishing protection of undeveloped land with local land trusts have already begun. In-kind offsets are fundamental best practice, says Patrick Maguire, program officer for Forest Trends. "But there's also the possibility of conserving instead a habitat that is a higher priority. This project explored whether or not it's feasible to compensate a different habitat."The "out of kind" offset considered was the restoration of crucial marine habitat in Puget Sound, since salmon habitat is threatened on the island and its restoration is a high regional priority. This additional offset would contribute to the "net gain" that is preferred by BBOP-that the nature, scope, and scale of the offset does more than replace the amount and condition of biodiversity lost through the project.The Bainbridge Island project is the first to use BBOP's handbook to design a biodiversity offset for U.S. residential and infrastructure construction. It's particularly significant since it has already begun to show how biodiversity offsets might be incorporated as standard practice for future sustainable building design here. Marja Preston, who wrote the report on the Bainbridge pilot, says that the focus was on methodology development and how it could apply to the ecosystems of the Pacific Northwest and to smaller-scale projects. "We found that we could in fact create a very efficient methodology that would work very well and not be prohibitively expensive," she said. Local interest has led the city government to create an incentive system for biodiversity offsets to motivate developers in residential and commercial construction. Preston says the policy will likely be adopted this summer.Perhaps BBOP's most important achievement to date is the issuing of 10 basic principles agreed on by all its partners, from multinational companies to governments, conservation groups, indigenous peoples, and banks. It's a one-page statement of commitment that emphasizes the big picture when it comes to best practices. One principle in particular stresses the "landscape scale" approach.To that end, BBOP's second phase, which begins this year and ends in 2011, will focus on expanding pilot programs and working at the national level with various governments. BBOP leaders hope that with more experience and field data, they can create internationally agreed standards within six years and explore "conservation banking" to plan biodiversity offsets that complement each other and scale up conservation efforts at the best locations in the landscape.Ten Kate says that's one of the best outcomes she can imagine going ahead: "Not just to look at a tiny footprint, or to fixate on individual projects, but to think of one's cumulative impacts on a larger, regional scale." The organization's ultimate goal? To change the status quo-making biodiversity offsets a standard part of business practice and taking a giant step toward no net loss.

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