IUCN has been involved in research and debates about biodiversity offsets and habitat banking for several years. Recently, IUCN Economics contributed to a study of the feasibility of habitat banking in Europe, led by Economics for the Environment Consultancy. This study (The use of market based instruments for biodiversity protection – the case of Habitat Banking) investigates the scope for using market-based instruments (MBI) and more specifically Habitat Banking to protect biodiversity at Community level – and the possible conditions and limitations for their use.
There has been growing interest in many countries in the potential (and limitations) of biodiversity offsets as a practical response to unavoidable loss of habitat, as a means of assigning responsibility for biodiversity loss to private developers, and as a new source of funds for conservation and restoration (see: http://bbop.forest-trends.org/). There is also interest in the feasibility of offsetting biodiversity losses in advance of damages, sometimes called “habitat banking”.
The use of MBI is gaining acceptance as cost-effective, with Habitat Banking a potentially efficient MBI to get business to compensate for unavoidable harm from development projects. Habitat Banking can also contribute towards meeting the post 2010 EU biodiversity target and enhance the provision of ecosystem services.
The final study results indicate that although Habitat banking can be done voluntarily, a viable market of biodiversity credits will only be created by regulation that defines equivalence between those debits and credits, and enforces compensation obligations on those creating debits by developing, polluting or damaging, thereby ensuring sufficient levels of credit demand. The comparison of Habitat banking with other MBI for biodiversity, suggests that it can offer a useful additional instrument to help biodiversity policy move towards a "no net loss" objective, which remains part of the post 2010 biodiversity target and will feature in the future policies. Moreover, the creation of market incentives can stimulate private investment in biodiversity conservation, and facilitate economies of scale and efficiencies in delivering biodiversity offsets. The study also identifies a number of other opportunities but also risks associated with delivering biodiversity conservation through Habitat Banking, while it describes some possibilities for establishing an efficient system of Habitat Banking that can work in conformity with the existing EU legislative framework.