Financial Analysis of Habitat Conservation Banking in California

Habitat conservation banking is a policy instrument for conserving endangered species by providing financial incentives for the landowners in the United States. This policy instrument aims to protect habitat, but little or no thought has been given to its financial performance. A financial analysis of habitat conservation banks (HCB) informs policymakers and conservation biologists of the long-term success of this policy and the future of HCBs. This paper evaluates 26 habitat conservation banks (HCB) in California by calculating their Net Present Values (NPV). We do so by compiling the cost and revenue data for habitat conservation banks. The average annual cost of operating HCBs was $42.78/acre (median: $22.58/acre), and the average credit price or revenue from credit sale was $6014.72/acre (median: $553.65/acre). The average NPV for 26 HCBs was $4205.90/acre at a 4% rate of return, indicating an overall positive return from such an easement instrument. However, only 14 HCBs out of 26 produced a positive return. With the inclusion of land acquisition costs, three of eight HCBs performed financially well. On the brighter side, the number of HCBs has increased with time. But there is not enough evidence to ascertain financial certainty from their revenues. A right selection of space (land acquisition costs can make or break finances for HCB) and species could encourage landowners to establish HCBs. This could build confidence on those who may have been discouraged from lack of knowledge and fear of losing revenue due to regulatory compliance to conserve endangered species habitat in their land. The findings are helpful in identifying lands and prioritizing investments to generate conservation credits.

Metrics and Equivalence in Conservation Banking

Offsets are increasingly used to compensate for unavoidable development impacts on species and habitats. Many offset programs pursue no net loss, but research on the success of these programs is lacking, including research on conservation banking’s success in conserving protected species under the US Endangered Species Act. This article provides a case study analysis of two conservation banks in the state of California, comparing the conservation gains provided by banks with the losses from development impacts. It provides an analysis of credits and metrics to determine whether the gains are equal to the losses in terms of type, condition, and amount. Results do show that the gains exceed the losses in terms of acreage. However, the program uses indirect metrics (acreage), and the equivalence of the losses and gains, besides habitat type and size, is not reflected. Banks provide a baseline in their documentation and conduct monitoring of species abundance and habitat quality, but they do not use it to measure additional conservation gains. More detailed metrics and transparent indices to certify the acres in production could allow for a quantification of conservation benefits and an evaluation of program success. However, selecting standardized metrics is challenging because they need to be species-specific to reflect the goal of species recovery, and still be operational in practice.

Making the priceless valuable: forests and ecosystem services

Historically, forest ecosystem services have been undervalued or not valued at all, thus encouraging the destruction and conversion of our global forest estate. Fortunately, these last decades have witnessed a real shift – the active and innovative development of markets and payments for the ecosystem values of forests and other ecosystems. Payments for Environmental Services programs are now in place around the globe. Schemes focused on forest carbon, such as the California Cap-and-Trade law, programs in China and Colombia, South Korea and Chile, coupled with new initiatives in the aviation sector, point to steady progress toward the carbon/climate value of forests. Innovative green infrastructure initiatives around water and watersheds in Peru, Costa Rica, Australia and South Africa provide another growing stream of value for forests. And sustainable commodity supply chains and conservation banking bring more large-scale private sector actors and new business sectors to the table. Here we provide a global status of PES around the world.

The use of biodiversity offsets in mining and energy development

This article first reviews the nature of biodiversity offsets and their use in selected jurisdictions, including the UK, US, Canada and Australia. The unique approach to biodiversity offsets in New Zealand under the Resource Management Act 1991 (RMA) is then examined in detail, including judicial consideration and analysis of the concept in several recent decisions. The RMA is the primary legislation governing the protection of the environment and the use of land, air and water resources in New Zealand, guided by the principle of 'sustainable management'. The Crown Minerals Act 1991 (CMA) governs the allocation of mining rights and access to minerals over private and Crown land. Opportunities for offsets through the mineral permitting and resource consenting regime is discussed, and mining and energy development case studies are used to illustrate the use of biodiversity offsets in practice. The article also examines the value of national policy guidance in the design of biodiversity offsets, the use of conservation covenants to ensure durability of offset arrangements, and the idea of 'conservation banking' to facilitate and encourage industry 'buy-in'. Conclusions and recommendations are made, which hopefully may inform and advance the debate on the use of biodiversity offsets in other jurisdictions.