Biodiversity markets are still a developing concept in Europe. Recent years have seen a growing focus on biodiversity despite a failure to meet the European Union (EU) target of halting biodiversity loss in the EU by 2010. Biodiversity offsets and other compensation mechanisms continue to gain recognition as a policy tool, with a number of countries – including the UK, France, Spain and Sweden – taking intital steps to develop markets for biodiversity, though in some cases offset pilots have been met with public pushback.
Only one country, Germany, has a well-established formal system for compensating damage to biodiversity, and this is largely run by the public sector, although the country is developing more market-like features and involving private operators. However, nascent markets could see a boost thanks to the recent European Commission commitment to develop a “no net loss” strategy by 2015 that embraces the use of payments for ecosystem services.
EU Habitats and Birds Directives and Environmental Liability Directive
A network of protected sites (Natura 2000 sites) has been established under the Habitats (1992/43/EEC) and Birds (1979/409/EEC) Directives. Impacts in these protected areas are strictly regulated. However, development projects deemed to have overriding public interest can be allowed with strict like-for-like compensation of ecological loss. The implementation of these Directives in some countries also requires compensation for damage to habitats of threatened species.
The more recent Environmental Liability Directive (ELD; 2004/35/EC) harmonizes previous liability regimes and implements the polluter pays principle: making the parties responsible for environmental damage financially responsible for preventing and remediating that damage. The equivalency requirements under the ELD are not limited to strictly like-for-like. In some countries, financial transactions are permitted to implement one-off compensatory actions as a last resort; in others such transactions are banned for Natura 2000 protected areas.
Germany – Impact Mitigation Regulations (Eingriffsregelung)
The 1976 Federal Nature Conservation Act in Germany introduced the Impact Mitigation Regulations (IMR). This law is mandatory and precautionary, aiming to ensure ‘no net loss’ by first avoiding damage, and then requiring restoration and compensation for residual unavoidable impacts.
Amendments to Germany’s Federal Nature Conservation Act in March 2010 established the concept of “natural areas’” to reflect spatial relationships between the sites of intervention and compensation measures; compensation measures must take place with the same natural area. The updated act also attempted to limit the use of high-priority agricultural land for compensation projects. Ecological impacts in the German system can be mitigated either through like-for-like compensation or through an intervention worth an equal number of “eco-points” as the original site before impacts.
In the Netherlands compensation for biodiversity impacts is required under a number of regulations, including the the Nature Conservation Act, the Law on Spatial Planning, the Flora and Fauna Act, and the Forestry Act. Impacts to National Ecological Network (EHS) sites require the responsible party to designate new EHS areas in order to ensure no net loss of biodiversity, or where this is not possible make a financial contribution to the National Green Fund.
The Dutch National Fund for Rural Areas is also piloting a compensation bank mechanism in the Rhine and Meuse polders to help meet demands for offsets and test the feasibility of offsetting on sites outside of Natura and EHS areas.
In France, five biodiversity bank pilots are currently supported by the Ministry of Ecology in partnership with local public and private organizations. National offset guidance is currently under development as well.
Compensation requirements have been present in the UK for some years, through Schedule 9 of the UK Electricity Act (1989) and the Town and Country Planning Act’s Section 106 agreements (1990).
In 2012, the UK Department for Food and Rural Affairs (Defra) supported the launch of six biodiversity offset pilots to test out offsetting’s potential to deliver biodiversity ‘net gain.’ The government initiatied a public consultation following these pilots to inform the possible development of a national-scale offsets program, though it is presently unclear whether such an initiative will be pursued.
The Swedish Environmental Compensation System introduced in 1999 a framework for offsetting impacts to species or habitats where impacts take place within Natura 2000 or other protected high-priority sites. Mitigation is typically carried out by the municipal government, and mitigation requirements may be relatively relaxed in terms of requiring like-for-like or spatially relevant compensation.
An Environmental Impact Assessment (EIA) law passed in 2013 newly allowed the use of conservation banking and provided some preliminary guidance on the instrument’s use, but does not mandate the use of offsets outside of significant impacts to Natura 2000 sites. Instead, the responsibility of establishing offset requirements is left to regional governments.
Denmark, Finland and Switzerland
Compensatory mitigation is also used at a smaller scale in Denmark (at the municipal level), Finland (where a pilot is underway), and in Switzerland (where two cantons are carrying out compensation based on the German model).
Projects to generate offset credits for the voluntary market have generated interest in a number of EU countries, though most efforts remain in demonstration stages. For example, a partnership between AB Agri, a food supply chain organization, and offset brokers the Environment Bank was announced in the UK in early 2014 to generate conservation credits on private lands. In the Netherlands, the BioCom project is piloting voluntary biodiversity offsets for both direct and supply chain impacts. BioCom is a joint effort between the Dutch government, energy company BioX Group BV, food services firm Kruidenier Groep BV, timber company Koninklijke Houthandel G. Wijma & Zonen BV, and conservation NGOs. The No Net Loss Initiative (NNLi) is backing additional pilots in the Netherlands with private sector involvement. Voluntary offset projects are also underway or proposed in the Czech Republic, France, Italy, Norway, and Sweden.