Abstract
Abstract Most programmes that incentivise the supply of public goods such as biodiversity conservation on private land in Europe are financed through the public purse. However, new ideas for how to fund biodiversity conservation are urgently needed, given recent reviews of the poor state of global biodiversity. In this paper, we investigate the use of private funding for biodiversity conservation through an offset market. The environmental objective is to increase some measure of biodiversity in a region (‘net gain’) despite the loss of land for new housing. Farmers create biodiversity credits by changing their land management and then sell these credits to housing developers who are required to more than offset the impacts of new housing development on a specific indicator of biodiversity. Combining an economic model of market operation with an ecological model linking land management to bird populations, we examine the operation, costs, and biodiversity impacts of such a (hypothetical) market as the target level of net gain is increased. A general result is established for the impacts on price and quantity in the offset market as the net gain target is made more ambitious. For a case-study site in Scotland, we find that as the net gain target is increased, the number of offsets traded in equilibrium falls, as does the market-clearing offset price. Changes in the spatial pattern of gains and losses in our biodiversity index also occur as the net gain target is raised.
Highlights
75% of global land has been “significantly altered” by human development, largely driven by land use change for infrastructure and agricultural production
Recall our first research question: how does the equilibrium market-clearing price of offsets vary according to an increasing requirement for biodiversity net gain? Within Proposition 1, we showed that the effect of increasing the net gain requirements on the equilibrium quantity of offsets is ambiguous
There is a growing movement towards conservation policies which focus on a net gain in biodiversity (Maron et al 2020). As part of these policies, developers are required by regulators to deliver a net gain in biodiversity alongside new infrastructure developments that negatively impact existing habitats and species
Summary
75% of global land has been “significantly altered” by human development, largely driven by land use change for infrastructure and agricultural production. In place of restricting development completely, new approaches need to be applied that give governments, developers, regulators and wider society new tools to help reduce the negative impacts of development pressures on the natural world (Simmonds et al, 2020) Net gain can be achieved in two ways 1) by over-compensating directly for the loss in biodiversity affected by development or 2) by first ensuring no net loss in the directly impacted biodiversity and proving additional gains in other biodiversity values, known as “out of kind” compensation (Bull and Brownlie, 2017) Critical to both of these is the idea of additionality: only those actions that would have not otherwise occurred should be counted towards the creation of a biodiversity offset credit (Laitila et al 2014)
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