Compliance markets: United States – National Programs
U.S. Wetland Compensatory Mitigation
Compensatory mitigation in the U.S. takes the form of a national wetland and stream offsets program (called ‘compensatory mitigation’) driven by compliance to the Clean Water Act (§404) and the principle of no net loss. After following the mitigation hierarchy, applicants filing for permits to drain, fill, or dredge a wetland or stream may offset their impact. Offsets must be sourced from projects within the same watershed (known as the “service area”) as the impact, usually designated by U.S. Geological Survey Hydrologic Unit Codes (i.e., HUC 0166900 indicates the Lower Rappahannock watershed in northern Virginia).
Permittees may create their own offsets (called permittee-responsible mitigation), or pay for offsets via third-party mitigation banks or ILF programs. The agency in charge of oversight is the U.S. Army Corps of Engineers (US ACE), which interprets and implements regulations at the regional level.
In April of 2008, the Corps and the U.S. Environmental Protection Agency (EPA) jointly issued the Final Rule on Compensatory Mitigation for Losses of Aquatic Resources. Previous guidance on compensatory mitigation created differing drivers and standards for the three categories of offset supply: permittee responsible, mitigation bank, and ILF. The new regulations in 2008 introduced a watershed focus and give preference to larger, landscape-scale offsets created before the impact. (Previous guidance favored on-site restoration.)
The new rules give a stated preference hierarchy of offsets from mitigation banks (first preference) or ILF programs (second) as opposed to permittee-responsible offsets (third). The new rules also provide equivalent standards for all categories of supply credits. Now, anyone creating credits – be it a developer, non-profit, government, or for-profit organization – will have to create most of their credits before they can sell them and will have long-term funding requirements. The new rules have resulted in greater equivalency between mitigation options, though full implementation across districts remains uneven.
A more detailed summary of the US wetland mitigation banking system is available here.
U.S. Conservation Banking
U.S. Conservation banking is enabled by the legal requirements of the United States Endangered Species Act (ESA). Specifically, section 7 requires federal agencies to consult with the U.S. Fish and Wildlife Service (USFWS) regarding potential impact to threatened and endangered species, and section 10 requires “incidental take permits” and Habitat Conservation Plans for those impacts. The USFWS is the principal agency that administers the ESA with respect to terrestrial and freshwater species, while the National Marine Fisheries Service is the lead agency with respect to marine and anadromous species.
In May 2003, the USFWS released the official federal guidance for the establishment, use, and operation of conservation banks. This guidance was closely modeled after the State of California’s guidance for conservation banks, which has been in place since 1995. California is a leader in conservation banking, and uses its state Endangered Species Act and Environmental Protection Act to facilitate conservation banking with The California Department of Fish & Game (DFG) as the enforcing agency. While a “Conservation Banking Agreement” is the most standardized mechanism for creating bankable endangered species credits, other legal agreements have been used in the past, such as: wetland banking agreements, safe harbor agreements, habitat conservation plans, and memorandums of agreement.
U.S. Recovery Credit System and Habitat Credit Trading System
The recovery credit system gives federal government agencies the flexibility to offset temporary impacts for threatened and endangered species found on federal lands by undertaking short-term or permanent conservation actions on non-federal lands. The goal is to keep species from becoming endangered or threatened by partnering with private landowners to manage and protect species for a specified timeframe. The program is similar in concept to the conservation banking program, but it temporarily offsets temporary impacts and is only an option for federal agencies. Guidance for the program was published in July 2008.
Compliance markets: United States – Subnational Programs
State of Maryland Forest Conservation Act
The State of Maryland’s Forest Conservation Plan establishes a threshold on forest land and requires either retention on-site, afforestation on-site, afforestation off-site, or a payment to a county compensation fund when development impacts forests. Conserved or afforested areas are permanently conserved in a conservation easement. Off-site forest mitigation banking is authorized in five counties in the state. The law is compliance-driven and comes into play during the development review process.
State of North Carolina’s Buffer Mitigation Program
Along with meeting federal regulations on wetlands and streams, developments in specific watersheds in North Carolina impacting riparian buffers must meet mitigation requirements under the state’s Riparian Buffer Protection Rule. Credit banking is allowed under the program.
Compliance markets: Canada – National Programs
Canada Fish Habitat (‘HADD’) Compensation
At the national level, the Fisheries Act and the 1986 Policy for the Management of Fish Habitat require compensation for impacts to fish habitat in Canada, or more specifically “harmful alteration, disruption, or destruction” (HADD) of fish habitat. Fish habitat compensation is regulated by the Department of Fisheries and Oceans’ Fish Habitat Management Branch. The Fisheries Act includes the principle of no net loss of the productive capacity of fish habitats, and authorization for impacts to fish habitat require a permit. In applying for a permit, the applicant must show adherence to a mitigation hierarchy by “relocation, redesign, and mitigation” and then compensation of net residual loss. Impacts on fish habitat arise from: urban and industrial development, roads and highways, harbors and marinas, forestry, agriculture, hydropower, and extractive industries.
Compliance markets: Canada – Subnational Programs
Alberta Wetland Compensation
Alberta has a 2007 Provincial Wetland Restoration/Compensation Guide that provides guidance on the permit process, mitigation hierarchy, and compensation process under the 2000 Water Act. Although the Guide was developed in 2005 (and revised in 2007), it has been used in practice for longer. Compensation occurs though restoration of degraded wetlands.
Manitoba Wetland Compensation
Manitoba’s Infrastructure and Transportation agency is party to an agreement with crown corporation Manitoba Habitat Heritage Corporation (MHHC) to source compensation needs through MHHC. When roads impact a North America Waterfowl Management Plan area, the transportation agency compensates MHHC with funds to restore or rehabilitate wetlands and place a conservation easement on the land.
New Brunswick Wetland Compensation
New Brunswick’s Wetlands Conservation policy of 2002 commits to no loss of “provincially significant wetland habitat” and no net loss of wetland functions of all other wetlands greater than one hectare. The policy also includes a mitigation hierarchy of avoid, minimize, and mitigate.
Nova Scotia Wetland Compensation
Nova Scotia’s Operational Bulletin Respecting Alteration of Wetlands guides regulators making decisions on proposed impacts to wetlands under the 2007 Environment Act. The Bulletin uses the mitigation hierarchy and gives preference to restoration and enhancement projects to create compensation. Mitigation via creation or preservation of wetlands is allowed if used in conjunction with another mechanism.
Prince Edward Island Wetland Compensation
Prince Edward Island has a policy that includes both no net loss and a mitigation hierarchy in its 2003 Wetland Conservation Policy. The policy also includes guidelines for how to compensate.
The U.S. Fish and Wildlife Service (USFWS) supports several voluntary conservation programs meant to proactively conserve species. Candidate Conservation Agreements with Assurances guarantee non-federal landowners exemption from later conservation requirements if species are voluntarily protected and are later listed under the Endangered Species Act (ESA). Conservation banks developing candidate species credits for voluntary buyers are being piloted in several states.
The USFWS is also crafting policy to underpin a voluntary crediting system for at-risk species not yet listed under the ESA. Under the proposed policy, landowners generate credits for practicing conservation activities that benefit declining wildlife or at-risk species. The credits can then be sold or traded to a third party or, if the species is later listed, the credits can be used to offset actions that negatively impact the species.
This new policy is expected to be implemented largely at the state level. Voluntary conservation would take place in coordination with states’ conservation framework and existing wildlife plans.