Matching problems in biodiversity offset markets: a case study of the New South Wales biodiversity offsets scheme

Abstract

Biodiversity offset credits in New South Wales are transacted within a regulatory environment defined by detailed trading rules and many different types of biodiversity credits that can lead to thin markets and high transaction costs. This paper describes a market designed to facilitate efficient and effective transactions. The market includes a search algorithm to identify who can exchange with whom, according to the regulatory constraints, and an online exchange tool to facilitate efficient price discovery and allocation of offset contracts.