Banking on Conservation: Species and Wetland Mitigation Banking

As mitigation banking continues to grow and diversify in 2007, we think it is a good time to highlight some of the intelligence we have amassed on this topic. In the following pages, we provide a cross-section of the timely reporting, market analysis, personal perspectives, controversial debates, and glimpses of the future that make this industry so exciting.

The central question that we ask ourselves at the Ecosystem Marketplace: how can society fix its economic system before it becomes too late to conserve the natural resources on which we all depend? So far, this question remains unanswered, but there is growing evidence that new markets linking people’s economic self-interest and the health of ecosystems represent one of the most promising ways to garner interest in the conservation challenges facing our world today. Over the last five years, we have witnessed the emergence of a whole new set of markets aimed at internalizing the true cost of environmental degradation by giving value to nature’s services. These markets include the carbon market in Europe, the sulfur dioxide trading system in the U.S., and one of the most interesting, though least understood, environmental markets out there: the market for wetland mitigation and species offsets.

The introduction of mitigation and species banking has begun to put a price on wetlands and endangered species (a price that can sometimes amount to hundreds of thousands of dollars per acre) such that, whereas most landowners once viewed wetlands or species on their properties as a “liability”, some now see them as potential assets. In other words, these markets are – to borrow from the Ecosystem Marketplace’s slogan – beginning to make the priceless valuable.

The actual mechanisms behind conservation and mitigation banking are deceptively simple, they are what observers in other countries have called “biodiversity offsets”, and the laws that create these markets work somewhat like this: Before a developer or a private owner is allowed to harm a wetland or “take” (a euphemism for kill) an endangered species, laws in the U.S. say they must obtain a permit from the relevant government agencies. In the case of wetlands, the agency responsible is the U.S. Army Corps of Engineers (USACE), in the case of species, there are various responsible agencies, usually the U.S. Fish and Wildlife Service (USFWS) or state-level departments of fish and game.

These markets having an impact in the U.S., and they are also being discussed (and sometimes copied) in countries as far- flung as Australia, Brazil, France, and Germany. In the U.S., in particular, these markets are coming of age, with distinct niches offering specialty credits for uplands, wetlands, and riparian buffer zones. Species banking, too, is spreading out in all directions from California, pushing the boundaries of bankable habitat to include marine species. It is a time of tremendous growth for the industry.

What is more, regulations issued by the U.S. Army Corps of Engineers and the U.S. EPA at the end of March 2006, now look set to send one section of the industry (private, for-profit mitigation banks) into overdrive. What these regulations say – again in a nutshell – is that all forms of mitigation need to be held to the same standards; a move that benefits private bankers whose work is already held to higher standards than other forms of mitigation. The regulations also address what many had argued was a major failing of the mitigation markets: their unwavering preference for mitigation as near to the site of impact as possible. Scientific studies had criticized this as being needlessly shortsighted, when mitigation could be used to address broader problems at the watershed scale. In other words, these new regulations are only likely to help this market grow.

This collection of feature stories demonstrates the breadth and depth of issues we cover at the Ecosystem Marketplace, and, we hope, it will give you a sense of the practical approach we take to reporting on wetland and species mitigation banking.