Biodiversity banking

Biodiversity banking, also known as biodiversity trading, conservation banking, mitigation banking,^[1] habitat banking, compensatory habitat,^[1] or set-asides,^[1] describes a market-based framework for biodiversity offsetting where offsets can be traded in the form of credits to offset negative environmental impacts of development projects or activities. This involves biodiversity banks, areas with biodiversity value.^[2] On the site of a biodiversity bank, conservation activities may be carried out to preserve, restore, enhance, or conserve biodiversity.^[3][4] The outcomes of projects carried out at biodiversity banks are valued in the form of credits, which can be purchased as a way to offset unavoidable adverse environmental impacts, often with the aim of achieving no net loss of biodiversity.^[5]

Biodiversity banking emerged from wetland mitigation banking in the United States, beginning in the 1980s and arising from the no net loss policies developed with the Clean Water Act in the 1970s.^[6] Since then the concept has been extended, including its application to the bond market.^[7][8]

The terms used to describe biodiversity banking are dependent on the focus of conservation aims and the policies of the country or region in which it is applied.^[9] Some of the countries where biodiversity banking has been implemented include the United States, Australia, Canada, Brazil, and Colombia.^[10]

Biodiversity banking is distinct from biodiversity offsets, though they are closely related. Biodiversity offsets are measurable conservation outcomes that result from actions to compensate for the significant negative impacts of development projects, once appropriate measures to avoid or minimise these impacts have been taken.^[11] Biodiversity offsetting and biodiversity banking are commonly applied with the goal of achieving no net loss of biodiversity, or more ambitiously, a net gain of biodiversity.^[12]

Biodiversity banking generally turns offsets into assets that can be stored or traded, through the creation of biodiversity credits that quantify the value of projects undertaken to restore, create, or enhance biodiversity in advance of a development and away from its potential site.^[13][14] The sites where these projects are carried out are referred as banks.^[14] While more than 100 countries have developed requirements for biodiversity offsetting,^[15] frameworks for biodiversity banking are less widespread.

The terms used to describe biodiversity banking differ according to the biodiversity that the system aims to conserve. For example, habitat banking, species banking, conservation banking, and mitigation banking are forms of biodiversity banking.^[9]

In practice, biodiversity banks rely on existing governmental laws, which forbid companies or individuals of buying up land in an area that houses, say a critically endangered species. An exception is also in place in this governmental law which allows companies to buy up the land nonetheless, if they also buy a certain amount of compensation credits with a certified biodiversity bank. These credits, which represent a significant extra cost to the company, are then used to provide revenue for the biodiversity bank, but the revenue derived thereof is also used by the bank to buy up conservation area elsewhere for the endangered species.^[16]

In the United States a "mitigation banking" process applies to impacts on wetlands. It requires that developers firstly avoid harm to wetlands, but if harm is considered unavoidable, then wetland habitat of similar function and values must be "protected, enhanced or restored" to compensate for those that will be damaged. The process comes under the US Clean Water Act 1972, the US Army Corps of Engineers regulations ^[17] and the commitment to "no net loss" of wetlands habitat.

Since about 2000, the term "species banking", sometimes called "conservation banking", has applied to impacts on species of special concern, typically those that are listed by state and federal agencies under the U.S. Endangered Species Act or its state-based equivalent. Similar to wetlands banks, conservation banks are designed as compensation for impacts to listed species or their habitat, ensuring a similar no net loss policy for these biodiversity resources.^[18]

Compensation for impacts to a stream riparian zone may also be required in relation to the linear distance of lost stream functions resulting from stream bank structures (e.g., concrete or rip rap), sedimentation, channelization, dredging or similar activities.^{[citation needed]}

Two biodiversity banking schemes operating in Australia are the New South Wales BioBanking scheme,^[19] which commenced in 2008, and the Victorian Native Vegetation Management Framework scheme. Both schemes apply particularly to developers, where biodiversity values will be reduced through land clearing and building development. The framework requires developers to source biodiversity credits through a market mechanism to offset biodiversity loss.

Listed species, critical habitat, wetlands and stream habitat are all components of biodiversity ecosystem services. Taken collectively, they may be referred to as "biodiversity banks".

In Alberta, Canada, Alberta Biodiversity Monitoring Institute (ABMI) researchers use the oil sands industry of Alberta as a case study in their paper in which they evaluated the commonly used and costly ecological equivalency-based biodiversity offset in terms of economic and ecological performance with more flexible alternative offset systems. They used ABMI's "empirically derived index of biodiversity intactness to link offsets with losses incurred by development." They evaluated ecologically equivalent areas in regards to vegetation types and regional conservation priorities such as the recovery of the boreal woodland caribou and the Dry Mixedwood natural subregion in the oil sands region. They found that flexible alternative systems like the priority-focused offsetting networks, cost 2-17 times less than the ecological equivalency-based biodiversity offset vegetation cost 2–17 times more than priority-focused networks.^[20]

In 2019, Ontario-based regional conservation biology charity, Carolinian Canada Coalition launched a pilot model for the Conservation Impact Bond, a financial tool which pays for actions to increase biodiversity.^[21]

In the form of habitat banks (Spanish: los bancos de hábitat), biodiversity banking has been implemented in Colombia since 2016, when the first habitat banks were piloted there.^[22] By August 2022, at least 10 habitat banks had been registered in the country.^[22] A desire to address the deficit in funds to implement the National Biodiversity Strategy was a motivation for promoting the development of habitat banks in the country.^[23]

The regulations were released by the Ministry of Environment and Sustainable Development in June 2017 under Resolution No. 1051 and updated in 2018 by Resolution No. 256.^[24] Habitat banking is allowed as a mechanism for offsetting. Each biodiversity credit is worth 1 hectare of restored land in a habitat bank.^[22]

• Biodiversity – Variety and variability of life forms
• Mitigation banking – Wetland improvement to offset development
• Conservation in Australia – Protection of biodiversityPages displaying wikidata descriptions as a fallback
• Environmental issues in Australia
• Economics of biodiversity – Economic importance of biodiversity
• Ecosystem services – Benefits provided by healthy nature, forests and environmental systemsPages displaying short descriptions of redirect targets
• Satoyama – Japanese term for the area between flat coastal plains and interior mountain foothills
• Biodiversity offsetting – System to mitigate development of land

• Bayon, Ricardo; Fox, Jessica; Carroll, Nathaniel (2007). Conservation and Biodiversity Banking A Guide to Setting Up and Running Biodiversity Credit Trading Systems. Environmental market insights. London: Earthscan. ISBN 978-1-84407-471-6. OCLC 163617799.

• NSW Department of Environment and Climate Change
• ABC Saturday Extra Biodiversity banking part one
• ABC Saturday Extra Biodiversity banking part two
• DEFRA definition and discussion of biodiversity offsetting
• Conservation Banking profile on database of Market Governance Mechanisms