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Are Biodiversity Offsets Good for Biodiversity?

By Phil Gibbons

Policy-makers love biodiversity offsets while ecologists are wary of them. What's important is their impact relative to the status quo.

Love them or hate them, biodiversity offsets have become a popular policy instrument in Australia in recent years. They were included as part of reforms to land clearing legislation in South Australia, Victoria and New South Wales, and the recent review of the Commonwealth’s biodiversity legislation includes a recommendation to adopt mitigation banking (a form of biodiversity offsets).

Biodiversity offsets are actions that compensate for adverse impacts to biodiversity arising from development. For example, if you knock down trees to build houses, then you do something elsewhere to offset the impact from the loss of the trees. One can immediately see the attraction for policy-makers. However, is biodiversity better off with the introduction of offsets?

According to many Australian ecologists, the answer is a resounding no. Criticisms of biodiversity offsets focus on the inability of ecological restoration actions on one site to be sufficient, equivalent or timely enough to compensate for losses from development at another site.

However, what the critics don’t assess is whether the introduction of biodiversity offsets results in a net gain in biodiversity relative to the status quo. I’ll demonstrate this by using the introduction of biodiversity offsets in NSW as a case study.

The assessment methodology introduced with the NSW Native Vegetation Act in 2005, which included offsets, resulted in an 80% reduction in the area approved for clearing in rural NSW relative to the area approved for clearing under the previous policy (which did not include offsets). In my view, there were four reasons why the introduction of biodiversity offsets in NSW prevented considerable biodiversity loss.

1. Risk acknowledged
Clearing could only occur under the NSW Native Vegetation Act if it “improved or maintained” biodiversity outcomes. We argued that this standard could not be met if ecological communities or species that were rare or under considerable threat were cleared, even with offsets. This reflects the fact that offsets have inherent risks because biodiversity outcomes are unlikely to be strictly equivalent with losses, and the delay between the loss of biodiversity at the impact site and gains at the offset site can be considerable.

2. Gain must exceed losses
The second reason for a reduction in clearing approvals with the introduction of offsets is because most applications were rejected because they failed to provide predicted gains on the offset site that were sufficient to compensate for predicted losses at the impact site. That is, most clearing proposals were rejected even though they included an offset.

3. Transparency
Offsets introduced in a no-net-loss framework demand assessment using transparent and quantifiable rules. In NSW these were explicitly codified into a decision support tool, and the results were made publicly available. This gave the process greater integrity than impact assessments based on subjective tests, which is the norm in many parts of Australia.

4. Biodiversity now has economic value
The fourth reason for the decline in the area approved for clearing is that offsets now place an economic value on biodiversity in rural NSW. That is, it costs money for a developer to establish an offset, so developers place more emphasis on finding options that avoid or reduce biodiversity loss in the first place.

While the introduction of biodiversity offsets resulted in an 80% reduction in the area approved for clearing in NSW, the net loss in woody vegetation was not reduced anywhere near this much. Some continued clearing is genuine thinning, but the use of a strict offset policy has probably resulted in more clearing under other parts of the legislation than was intended.

The reason for this “leakage” goes to the heart of the land clearing issue. Where the NSW Native Vegetation Act failed was that it was not introduced as part of a broader policy to address the drivers of land clearing. Land clearing will continue in Australia until these drivers – global food demand, population growth and economic growth – are decoupled from biodiversity loss. Blaming biodiversity offsets for this continued land clearing is like blaming the fuel gauge when the tank is empty.

Dr Phil Gibbons is a Research Fellow at the Applied Environmental Decision Analysis centre at the Australian National University.