The use of market-based instruments for biodiversity protection –The case of habitat banking – Technical Report


This report describes the results of a project led by the Economics for the Environment Consultancy (eftec) and IEEP, which examined the potential use of habitat banking in the EU in the context of alternative economic instruments for biodiversity protection. Habitat banking is a biodiversity compensation mechanism that is based on the concept of biodiversity offsets which are, according to the Business and Biodiversity Offsets Programme, “measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development and persisting after appropriate prevention and mitigation measures have been implemented. The goal of biodiversity offsets is to achieve no net loss, or preferably a net gain, of biodiversity on the ground with respect to species composition, habitat structure and ecosystem services, including livelihood aspects”.

Habitat banking is defined in this report as: “a market where the credits from actions with beneficial biodiversity outcomes can be purchased to offset the debit from environmental damage. Credits can be produced in advance of, and without ex-ante links to, the debits they compensate for, and stored over time”. Biodiversity credits in the context of this project include both habitats and species.

The study’s specific objectives were to:

  • Investigate whether habitat banking can be managed so that it benefits biodiversity protection and could be expanded into an EU-wide system;
  • Compare habitat banking to other market instruments as a means of delivering biodiversity protection;
  • Identify the tools and components of such a system, to deal practically with challenging issues such as equivalency, efficiency and location;
  • Analyse the conditions and limitations for the development of habitat banking at the Community level, and
  • Develop guidance on how habitat banking could be implemented in keeping with the requirements of relevant laws, policies, institutions and stakeholders.

The research identified a range of opinions and experience with habitat banking from around the world, and from economic theory, and presents a preliminary institutional analysis for practical implementation. It aims to guide future European policy options to address biodiversity loss and conservation objectives.

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