A framework to analyse the effectiveness of biodiversity offset policy

This is Part 4 of a series of posts outlining the research journey of my PhD so far. 

In this series of blog posts, I’ve introduced the motivation for my research topic, described the general range of approaches used to evaluate environmental policies, and have suggested some reasons as to why evaluation may not happen as often as we’d like it to. In this post, I’ll be outlining how I intend to progress my research into the future.

I began my PhD by asking the question, “What environmental outcomes are being delivered by biodiversity offset policies?”.  As I noted previously, there has been extremely limited evaluation of the effectiveness of biodiversity offsetting, relative to how long such policies have been in place in some parts of the world. Australia has been dabbling in biodiversity offsetting for close to 20 years, and species conservation banking in the United States has been going on since the 1990’s. These are two jurisdictions with highly developed policies, and are often regarded as world leaders in biodiversity offsetting.

And yet, although there has been some analysis of what drives the establishment of conservation banks in the US (Fox and Nino-Murcia, 2005) and the ecological values contained within them (Bunn et al 2014), there has been no analysis of whether these bank/offset sites are adequately compensating for the permitted impacts on species listed under the Endangered Species Act. The recent Senate inquiry in Australia concluded that there is a “…lack of evidence that offsets are effective and actually achieving their intended outcomes”. In contrast, there have been a number of evaluations of the US wetland mitigation banking policy over time (e.g , Brown and Lant 1999, Reiss et al. 2007) though none of them provide for particularly happy reading

Despite this clear lack of understanding of policy effectiveness in Australia and the US, and the limited to mixed success seen with wetland banking in the US, we’re still seeing a surge in popularity in biodiversity offsetting internationally. This is concerning from a policy perspective, whereby the lessons learned by the US and Australia over time are not being transferred to countries developing policies of their own, so there could be a lot of unnecessary “reinventing the wheel” going on. But the stakes are particularly high with biodiversity offsetting, which essentially permits the loss of biodiversity in a location now, in exchange for compensation somehow, somewhere, sometime in the future. The risk of maintaining and even exacerbating biodiversity loss (Gordon et al. 2015) is very real.

In finding that answering the “What…?” this question was actually going to be extremely difficult, I asked “Why is there a lack of information on what outcomes are being delivered by biodiversity offset policies?”. Perhaps there are particular issues acting as barriers to evaluation. If so, what could these be?

Picture2Indeed, if we step back a bit, and consider thatmonitoring and evaluation is a key component of good public policy (Dovers and Hussey, 2013), then this could provide a useful framework to identify a range of issues which ultimately influence what environmental outcomes are delivered by biodiversity offsetting policy.

If we think about what makes a “good” biodiversity offset policy, there has been a lot of discussion in the literature about what should be the some of the key policy principles (e.g, no-net-loss, like-for-like). This research speaks to how the policy is framed and what the goals could be (item 2 in the figure), but not necessarily how it should be implemented, monitored or evaluated.

There’s also been a lot of research which has been focused on developing and refining offset metrics, which can most accurately measure how much and what kind of biodiversity values are to be lost from an impact site, and what would be an adequate compensation at the offset site. Considering things like time lags, uncertainty and the specific biodiversity features being impacted is really important (see our recent paper on the EPBC Act offset metric, and a related blog post).

Although the availability of credible and scientifically robust offset metrics is obviously an essential component of formulating biodiversity offset policy, there are a range of issues (which are often non-ecological) which influence the environmental outcomes likely to arise from offset policy. We can conceptualise these issues as falling into one of three domains – measurement, institutional and organizational.

The measurement domain is concerned with how to appropriately measure biodiversity impacts and calculate the resulting offset requirements. Biodiversity is far more difficult to measure, and can be far more value-laden than other environmental commodities such as carbon dioxide or water (yes, I realise that biodiversity is not necessarily a commodity). We need to know how to measure biodiversity in order to calculate a currency or unit of trade that can then be considered in a regulatory environment or traded in a market.

We also need to be mindful that there is a fundamental trade-off between the complexity of such a currency, and the size of an environmental market. If you have a currency that requires considerable time and effort to calculate, high transaction costs will discourage market participation. If you have a really simple currency (e.g hectares), you will miss a lot of ecological detail (e.g habitat quality, occupancy, time lags), but transaction costs will be lower. Salzman and Ruhl (2000) described this trade-off in market size and currency as “fat and sloppy versus thin and bland”.

Picture3If biodiversity is impacted through a development, there is often a regulatory obligation to compensate for that impact. The institutional domain is concerned with how those obligations are legally codified, what mechanisms are in place to transfer obligations between different individuals or organizations, and how these obligations can be enforced. If there is limited oversight of offset trades due to a lack of capacity in enforcement, then we can’t be sure whether the offsets promised as part of a development approval ever actually occur. Similarly, if the legal mechanism used to secure an offset site into the future can easily be overridden (such as nature refuge agreements in Queensland, Adams and Moon 2013), then we’re far less likely to deliver positive environmental outcomes from offset policies.

Finally, the organizational domain considers the organizations that sit within a policy environment, and how those organizations interact and behave as mediated by institutions. For example, the transaction costs incurred as a result of complying with a policy or participating in a market will influence how an organization behaves (see Coggan et al 2013). High transaction costs will discourage market participation, and could provide a reason for lobbying the government to reduce policy complexity to ease regulatory burden.  Who bears the risk in the event of an offset failing to deliver its agreed outcome will also have a major influence in whether and how an outcome is delivered.

So, there’s a little insight into my brain and how I plan to frame the next stages of my research. I don’t have any answers yet (obviously), but in the next post I’ll describe the outcomes of a recent workshop I organized at the ANU which aimed to untangle some of these ‘non-ecological’ issues which may be influencing how effectively biodiversity offset policy can be implemented.

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