Policy mechanisms for internalising the externalities:

the example of biodiversity offsetting SFT Workshop

December 2013

Guy DukePrincipal Investigator, EMTF Research Phase I & II

Director Europe & Research, The Environment Bank LtdSenior Visiting Research Associate, Oxford University ECI

England - biodiversity loss

• 492 species extinct in last 200 years• 7 species with Species Action Plans gone in last

decade• All taxa - 25% butterflies, 20% amphibians, 10% bees,

2% plants extinct• Quantity and distribution as well – 60% of all species

declining• Most loss outside protected areas

Natural EnvironmentWhite Paper 2011

• Triggered by CBD Nagoya, Lawton review, National Ecosystem Assessment & evidence of biodiversity decline

• Three themes– Growing a green economy– Reconnecting people and nature– Protecting natural environment

• Four policy initiatives for environment– Local Nature Partnerships– Nature Improvement Areas– Ecologically coherent planning (NPPF)– Biodiversity offsetting

UK Ecosystem Markets Task ForceResearch and Findings

REMIT: To review the opportunities for UK business from expanding green goods, services, products, investment vehicles and markets which value and protect nature’s services.

REPORTING: To senior ministers through the Green Economy Council

EMTF - BACKGROUND

http://www.defra.gov.uk/ecosystem-markets/work/evidence/

5 PRIORITY RECOMMENDATIONS

• OTHER OPPORTUNITIES

http://www.defra.gov.uk/ecosystem-markets/work/publications-reports/

EMTF - FINDINGS

• SCALE OF OPPORTUNITY FOR UK BUSINESS

• Market approach – scale, transaction costs, nature• £90-470m/yr • Mandatory for liquidity, brokers to balance supply & demand• Good scalability, good practice transferable• Risks acknowledged – but well-designed market can overcome them

• POTENTIAL BENEFIT TO NATURE• 1100-3400 km2 new habitat over 20 years• Larger, ecologically more viable sites; funding for l/t management

EMTF – RESEARCH FINDINGS on BIODIVERSITY OFFSETTING

SEPTEMBER 2013 • GOVERNMENT RESPONSE TO EMTF PUBLISHED• GREEN PAPER ON BIODIVERSITY OFFSETTING PUBLISHED

EMTF – RECOMMENDATIONS on BIODIVERSITY OFFSETTING

• Phase 1 - Desk-top study on effectiveness of PPS9 in delivering no net loss - failure

• Phase 2 - Analysis of 570 planning applications (major developments), looking closely at how PPS9 was applied in 46 of those cases (including interviews of planning officers) - failure

• Phase 3 - Predicted the biodiversity results and costs of applying PPS9, compared to those when applying the offsetting metric, using a sample of real-life historic cases – offsetting cheaper

UK Government analysis of planning

National Planning Policy

NPPF 2011 - demands ‘sustainable development’• Para 118 - Planning authorities should aim to enhance

biodiversity• Para 152 – If adverse effects are unavoidable… then

compensatory measures can be used• Para 176 – Where [such measures] are necessary…. [they must

be] secured through appropriate conditions or agreements.

Offsetting pilots – 6 county pilots, 2012-2014Conservation covenants – Law Commission consultation 2012Green Paper – September 2013

Biodiversity offsettingthrough planning

• Compensating for impact in one place with gain in another• Offsetting ‘metrics’ allow for estimation of both loss and gain• Simply a tool for planners – guarantees no net loss• Measurable – accountable, transparent, consistent• Enables development and delivers biodiversity protection i.e.

sustainable development• Observes mitigation hierarchy• Additional/complementary to statutory site protection

Biodiversity offsetting – global principles

• Net biodiversity gain (no net loss at minimum)• Follows the mitigation hierarchy• Recognises limits – not within protected areas• Large-scale and long-term• Equity – especially locality• Like-for-like or like-for-better (trade up)• Multipliers to account for risk and lag• Transparent, documented and evidenced

Mitigation hierarchy

An independent broker that will: – calculate Credit requirements for developers – calculate Credit availability at ‘receptor’ sites– register offset receptor sites on a live trading platform– facilitate the creation, purchase and tracking of credits,

using certificates– ensure the long-term management, monitoring and

reporting of receptor sites, using legal agreements– ensure site long-term protection using covenants.

The Environment Bank

• Guidance notes– Introduction, Planning Authorities, Developers, Landowners– County specific versions

• Trading platform– Launched on-line Feb 2012; National registry

• Metrics– Delivering national frameworks, accreditation & validation– Developing software

• Legal agreements– Legal planning advice– COPA & Conservation Bank Agreement– Conservation credit certificates & letters of sale

EBL Infrastructure

Essex offsetting strategy

How does it work?

• LPA offers offsetting as option• Developer chooses offsetting, impact assessed• Land managers register receptor sites• Developer seeks to purchase credits – consults national

registry, chooses receptor site (with LPA)• Environment Bank brokers deal - signs legal agreements to

purchase with developer, and to manage with receptor site land manager

• Money transferred, over time, to the land manager against specific conservation management

• Monitoring and reporting systems for LPAs

What’s needed?

• Willing LPAs & developers and a network of receptor sites – buyers and sellers

• Metrics for assessing credit requirements of developments and credit value of ‘receptor sites’

• Trading systems e.g. brokers, platforms• Delivery systems e.g. legal assurance, fiscal

assurance, registries, monitoring and reporting systems

Benefits• For Planning authorities

– Transparent, consistent & auditable– Enables rigorous ecological input– Removes compliance monitoring needs but retains decision-making locus and enforcement

capability– Removes obligations but increases accountability

• For developers– Reduces planning delays and consultant costs, Greater clarity, predictabiity and consistency– Potential increase in net developable area– Long-term liability discharged, no long-term management costs– Transparent and accountable delivery of SD

• For conservation– Ensures environmental value accounted for in all planning decisions– Gives financial disincentives to habitat destruction– Mainstreams land management value– Enable long-term and large-scale habitat conservation– Increased funding to NGOs

Biodiversity offsetting

www.environmentbank.comhttps://environmentbank.mmearth.com