Published online by Cambridge University Press: 28 November 2012
There is growing interest in the use of market mechanisms, such as offsetting and payments for ecosystem services, to further the conservation of biodiversity. The specific needs of biodiversity mean that this approach faces significant challenges in terms of defining the units that can be the subject of the economic or market devices, of ensuring that such mechanisms do deliver conservation gains and of establishing appropriate governance arrangements. There are also ethical concerns that a market approach entails a commodification of nature which sacrifices some of the very elements which make nature valuable to us. The market-based schemes currently being operated and devised should be studied carefully to see how successfully these challenges can be met.
1 This statement reveals a simplistic verdict on a large and complex debate on how far various economic methodologies can indeed reflect such non-commercial values and preferences; a convenient summary of the methods used can be found in Chapter 5 of Asafu-Adjaye, J., Environmental Economics for Non-Economists: Techniques and Policies for Sustainable Development (World Scientific Publishing Co., 2005), pp. 109–40. See further Section 5 below.CrossRefGoogle Scholar
2 Legal systems conventionally hold that wild animals are not owned by anyone (unless and until captured or killed) and, although wild plants may belong to the landowner as a result of the principle of accretion, they are not generally viewed as distinct items of property; separate rules have been developed for dealing with valuable crops: see Reid, C.T., Nature Conservation Law (W. Green, 3rd edn, 2009), pp. 16–20, 268–9.Google Scholar
3 Secretariat of the Convention on Biological Diversity, Global Biodiversity Outlook 3 (CBD, 2010), available at: http://www.cbd.int/gbo3.
5 E.g., Driesen, D., ‘Alternatives to Regulation? Market Mechanisms and the Environment’, in Baldwin, R., Cave, M. & Lodge, M. (eds.), The Oxford Handbook of Regulation (Oxford University Press, 2010), pp. 203–22; Gunningham, N., ‘Environmental Law, Regulation and Governance: Shifting Architectures’ (2009) 21(2) Journal of Environmental Law, pp. 179–212.
7 A report in 2010 found ‘39 existing programs around the world, and another 25 in various stages of development or investigation’, representing a ‘global market size [of] $1.8–$2.9 billion at minimum’: see B. Madsen, N. Carroll & K.M. Brands, ‘State of Biodiversity Markets Report: Offset and Compensation Programs Worldwide’ (2010), available at: http://www.ecosystemmarketplace.com/documents/acrobat/sbdmr.pdf.
8 One valuable study is eftec, IEEP et al., ‘The Use of Market-Based Instruments for Biodiversity Protection: The Case of Habitat Banking – Technical Report for European Commission DG Environment’ (2010), available at: http://ec.europa.eu/environment/enveco/index.htm. See also McKenney, B.A. & Kiesecker, J.M., ‘Policy Development for Biodiversity Offsets: A Review of Offset Frameworks’ (2010) 45(1) Environmental Management, pp. 165–76. The different types of economic and market approach to environmental protection that have been or could be applied to biodiversity management is the focus of the author’s AHRC-funded project on ‘The Privatisation of Biodiversity?’, which examines global experience with a view to possible application in the UK.CrossRefGoogle ScholarPubMed
9 E. Broughton & R. Pirard, ‘What’s in a Name? Market-Based Instruments for Biodiversity’ (2011) Ifri/IDDRI Analyses No. 03/11, available at: http://www.iddri.org/Publications/Collections/Analyses/AN_1103_MBI_broughton_pirard_EN.pdf.
10 In many parts of the world what are seen as the ‘natural’ ecosystems are, in fact, the product of centuries of human intervention and require such intervention to continue if the habitat is to be maintained.
11 For an overview see Katoomba Group et al. ., Payments for Ecosystem Services: Getting Started – A Primer (Forest Trends, The Katoomba Group & UNEP, 2008), available at: http://www.unep.org/pdf/PaymentsForEcosystemServices_en.pdf.
12 Reference is also made to conservation easements (or servitudes or covenants) whereby, as a matter of property law, enduring restrictions are placed on the use of land to further conservation goals. Depending on the details of the scheme – e.g. whether landowners receive benefits in exchange for creating such burdens on their land – these may or may not be regarded as ‘market-based’, but in their reliance on private initiative rather than direct state regulation they do face at least some of the same challenges.
13 For consideration of different objectives in the context of existing biodiversity law and policy see eftec, n. 8 above, at pp. 210–20.
14 A scheme may insist on this either to provide a margin for error or to contribute to reversing past losses. In Victoria (Australia) an offsetting scheme aims for a net gain, defined as: ‘Net Gain is the outcome for native vegetation and habitat where overall gains are greater than overall losses and where individual losses are avoided where possible’: Department of Natural Resources and Environment, Victoria, ‘Victoria’s Native Vegetation Management: A Framework for Action’, 2002, at p. 18, available at: http://www.dse.vic.gov.au/__data/assets/pdf_file/0016/102319/Native_Vegetation_Management_-_A_Framework_for_Action.pdf.
15 Walker, S., Brower, A.L., Stephens, T. & Lee, W.G., ‘Why Bartering Biodiversity Fails’ (2009) 2(4) Conservation Letters, pp. 149–57; Business and Biodiversity Offsets Programme (BBOP), ‘No Net Loss and Loss-Gain Calculations in Biodiversity Offsets’, Mar. 2012, available at: http://bbop.forest-trends.org/guidelines/Resource_Paper_NNL.pdf.CrossRefGoogle Scholar
17 See US Environmental Protection Agency website at http://www.epa.gov/airmarkets/progsregs/arp/basic.html.
18 Intergovernmental Panel on Climate Change (IPCC), ‘Climate Change 2007: Synthesis Report’ (Contribution of Working Groups I, II and III to the Fourth Assessment Report of the IPCC) (2007), Section 2.1.
19 Methane makes a contribution per tonne 25 times that of carbon dioxide: Solomon, S. et al. ., Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University Press, 2007), Table 2.14.Google Scholar
20 Salzman & Ruhl (n. 16 above, at p. 614) phrase the challenge in establishing an adequate currency as being: ‘can the metric capture the significant values exchanged or do some important features remain external to the trades?’.
21 Salzman & Ruhl (ibid., at p. 612) correctly refer to the ‘range of fungibilities’ exhibited by the commodities involved in environmental traded markets.
22 Very large emissions of greenhouse gases in one place create an immediate risk to the health of those in the vicinity, not just a contribution to climate change at a global level.
23 See the examples in Salzman & Ruhl, n. 16 above, at pp. 611–2 and Chart 1 at pp. 626–7.
24 BBOP, ‘Limits to What Can Be Offset’, 20 Mar. 2012, available at: http://bbop.forest-trends.org/guidelines/Resource_Paper_Limits.pdf.
25 Walker et al., n. 15 above; BBOP, n. 15 above; Salzman & Ruhl, n. 16 above.
26 Particularly for invertebrates and lower plants, the number of recorded species is often an indication more of the level of recording effort than of the number of species actually present. In the UK, a detailed study over 15 years has recorded 1,782 species of animal and 42 species of plant in one suburban garden in Leicester (Owen, J., The Ecology of a Garden: The First Fifteen Years (Cambridge University Press, 1991)), whilst a much shorter and less intensive study of a garden in Dundee has led to the recording of 52 species of hoverfly, 6 species of bumblebee and 170 species of moth (data from Anne Reid). A further consideration here can be an imbalance in the information available to the different parties in any market system: Shogren, J., Smith, R.B.W. & Tschirhart, J., ‘The Role of Private Information in Designing Conservation Incentives for Property Owners’, in Shogren, J.F. (ed.), Species at Risk: Using Economic Incentives to Shelter Endangered Species on Private Land (University of Texas Press, 2005), pp. 217–32.
27 Some insight into the factors to be taken into account is given in the guidance on compensatory measures required under the Habitats Directive when overriding considerations allow a Natura 2000 site to be damaged: European Commission, ‘Guidance Document on Article 6(4) of the “Habitats Directive” 92/43/EEC’, Jan. 2007, section 1.5, available at: http://ec.europa.eu/environment/nature/natura2000/management/docs/art6/guidance_art6_4_en.pdf.
28 Ibid., para. 1.5.4.
29 eftec, n. 8 above, Table 4.1.
30 See eftec, ibid., pp. 51–61, 162–8.
31 Department for Environment, Food and Rural Affairs (UK), ‘Biodiversity Offsetting Pilots: Guidance for Developers and Guidance for Offset Providers’, Mar. 2012 (Defra Guidance), available at: http://www.defra.gov.uk/publications/files/pb13742-bio-guide-offset-providers.pdf.
32 This scheme is very simple compared to some others, e.g. completion of a four-day training course on the BioBanking Credit Calculator is needed to become an assessor under the New South Wales BioBanking Scheme: see http://www.environment.nsw.gov.au/biobanking/calculator.htm.
33 There is a list of habitats and their distinctiveness ratings in an Appendix to the Defra Guidance, n. 31 above.
34 Given the certainty of the habitat loss and the lack of certainty over its successful replacement, one might argue that a strict application of the precautionary principle should rule out accepting any offsets except with retrospective effect.
35 Morris, R.K.A., Alonso, I., Jefferson, R.G. & Kirby, K.J., ‘The Creation of Compensatory Habitat: Can It Secure Sustainable Development?’ (2006) 14(2) Journal for Nature Conservation, pp. 106–16. The timing issue is what lies behind the concept of compensatory (as opposed to complementary) remediation under the EU Directive 2004/35/EC on Environmental Liability with Regard to the Prevention and Remedying of Environmental Damage  OJ L143/56.CrossRefGoogle Scholar
36 The very terminology, although long-established in taxonomy, embodies prejudices against certain forms of creature and plant.
37 Pandion haliaetus.
38 See http://www.iucnredlist.org/apps/redlist/details/106003324/0. Species of Least Concern are ‘widespread and abundant’: International Union for the Conservation of Nature (IUCN) Red List Categories and Criteria version 3.1, available at: http://www.iucnredlist.org/technical-documents/categories-and-criteria/2001-categories-criteria#categories.
40 Margaritifera margaritifera, listed as ‘Endangered’ on the IUCN Red List: see http://www.iucnredlist.org/apps/redlist/details/12799/0, and http://jncc.defra.gov.uk/protectedsites/sacselection/species.asp?FeatureIntCode=S1029.
41 Halichoerus grypus.
42 See Scottish Natural Heritage website at http://www.snh.org.uk/publications/on-line/naturallyscottish/seals/sealsandhumans.asp.
44 See Joint Nature Conservation Committee website at http://jncc.defra.gov.uk/protectedsites/sacselection/species.asp?featureintcode=s1364. Seals in the UK are protected by legislation, notably the Conservation of Seals Act 1970 and Part 6 of the Marine (Scotland) Act 2010.
46 For discussion in the context of perpetual conservation easements in the US (see n. 51 below), seeRichardson, J.J., Jnr, ‘Conservation Easements and Adaptive Management’ (2010) 3(1) Sea Grant Law & Policy Journal, pp. 31–57; Owley, J., ‘Conservation Easements at the Climate Change Crossroads’ (2011) 74 Law and Contemporary Problems, pp. 199–228.
47 Brooker, R., Britton, A., Gimona, A., Lennon, J. & Littlewood, N., Literature Review: Species Translocations as a Tool for Biodiversity Conservation During Climate Change (Scottish Natural Heritage, 2011 – Commissioned Report No. 440).Google Scholar
48 Morris et al., n. 35 above; H.L. Mossman, A.J. Davy & A. Grant, ‘Does Managed Coastal Realignment Create Saltmarshes with “Equivalent Biological Characteristics” to Natural Reference Sites?’ Journal of Applied Ecology, Early View online publication 19 Sept. 2012, doi: 10.1111/j.1365-2664.2012.02198.x.
49 Griffith, B., Scott, J.M., Carpenter, J.W. & Reed, C., ‘Translocation as a Species Conservation Tool: Status and Strategy’ (1989) 245(4917) Science, pp. 477–80; Edgar, P.W., Griffiths, R.A. & Foster, J.P., ‘Evaluation of Translocation as a Tool for Mitigating Development Threats to Great Crested Newts (Triturus cristatus) in England, 1990–2001’ (2005) 122(1) Biological Conservation, pp. 45–52.
51 This issue has been the subject of considerable attention in relation to conservation easements in the US, where imposing restrictions on land use in perpetuity has been a condition of receiving the tax breaks which have been a main incentive to using this legal mechanism. For examples of the literature see n. 46 above, and Mahoney, J.D., ‘Perpetual Restrictions on Land and the Problem of the Future’ (2002) 88 Virginia Law Review, pp. 739–88; McLaughlin, N.A., ‘Conservation Easements: Perpetuity and Beyond’ (2007) 34 Ecology Law Quarterly, pp. 673–712; Brewer, R., ‘Conservation Easements and Perpetuity: Till Legislation Do Us Part’ (2011) 74 Law and Contemporary Problems, pp. 249–78.
52 As examples, bio-banking agreements under the New South Wales bio-banking are perpetual but can be terminated with ministerial approval (Threatened Species Conservation Act 1995, s. 127G) and conservation burdens in Scotland can be terminated by agreement of the parties or by judgment of the Lands Tribunal (Title Conditions (Scotland) Act 2003, ss. 48, 90–104). In the US, Owley has called for a change from conservation easements in perpetuity to ones which are granted for renewable terms: see Owley, J., ‘Changing Property in a Changing World: A Call for the End of Perpetual Conservation Easements’ (2011) 30 Stanford Environmental Law Journal, pp. 121–73.Google Scholar
53 Convention on Biological Diversity, COP 5 (2000), Decision V/6, para 1. See generally the Ecosystem Approach pages on the CBD website at http://www.cbd.int/ecosystem.
54 A further dimension is coherence with other policies affecting land; e.g., if a site is ‘locked in’ to certain restrictions to provide a biodiversity offset, this may thwart other land use policies that may contribute to a more sustainable future.
55 Cf. the way in which ‘technology-neutral’ incentives for renewable energy in the UK led to a concentration on onshore wind farms as the most mature and easily installed technology: Scottish Executive, ‘2005–06 Review of the Renewables Obligation (Scotland) Order: Preliminary Consultation’ (2005), p. 4.
56 ‘[Payments for Ecosystem Services] are not first of all about moving from public policies to market allocations. It is more about a reconfiguration of state-market-community relationships’: Vatn, A., ‘An Institutional Analysis of Payments for Environmental Services’ (2010) 69(6) Ecological Economics, pp. 1245–52, at 1251.CrossRefGoogle Scholar
57 Bennett, K., ‘Additionality: The Next Steps for Ecosystem Services Markets’ (2010) 20 Duke Environmental Law & Policy Forum, pp. 417–38; eftec, n. 8 above, pp. 76–9.Google Scholar
58 Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol), Kyoto (Japan), 10 Dec. 1997, in force 16 Feb. 2005, available at: http://unfccc.int/kyoto_protocol/items/2830.php.
59 B. Müller, ‘Additionality in the Clean Development Mechanism’, Oxford Institute for Energy Studies EV 44 (2009).
60 Framework Convention on Climate Change – Meeting of the Parties (2005) 3/CMP.1 Annex para. 43; FCCC/KP/CMP/2005/8/Add.1.
61 The definitions and procedures for different forms of project can be conveniently found in the CDM Rulebook, a database prepared by Baker & McKenzie (look under ‘Additionality’ in the A–Z index), available at: http://cdmrulebook.org/home. This source also provides useful links to the original documents.
62 Clean Development Mechanism: Validation and Verification Manual (Version 01.2): FCCC CDM-EB 55, Annex 1, especially para. 94.
63 Michaelowa, A., ‘Interpreting the Additionality of CDM Projects: Changes in Additionality Definition and Regulatory Practices over Time’, in Freestone, D. & Streck, C. (eds.), Legal Aspects of Carbon Trading: Kyoto, Copenhagen and Beyond (Oxford University Press, 2009), pp. 248–71, and C. Figueras & C. Streck, ‘A Post-2012 Vision for the Clean Development Mechanism’, in Freestone & Streck, ibid, pp. 562–82, at 564; L. Schneider, ‘Is the CDM Fulfilling Its Environmental and Sustainable Development Objectives? An Evaluation of the CDM and Options for Improvement’, report prepared for WWF, 2007, pp. 27–45, 58–61, available at: http://www.thebigask.eu/oekodoc/622/2007-162-en.pdf.Google Scholar
64 That the offset adds something more than is required under other conservation measures is an explicit requirement of the bio-banking scheme in New South Wales: Threatened Species Conservation (Biodiversity Banking) Regulation 2008, reg. 4.
65 Halperin, D., ‘Incentives for Conservation Easements: The Charitable Deduction or a Better Way’ (2011) 74 Law and Contemporary Problems, pp. 29–50, at 43. The payments in such cases may be direct or through tax breaks which have been identified as the main incentive for such easements to be granted: ibid.Google Scholar
67 Scottish Office, People and Nature: A New Approach to SSSI Designations in Scotland (1998), at p. 28.
68 The example given in discussion at the Surrey Workshop was of a farmer growing wheat but receiving income separately for the grain and the straw, sold to different buyers.
69 Wayburn, L.A., ‘Conservation Easements as Tools to Achieve Regulatory Environmental Goals’ (2011) 74(4) Law and Contemporary Problems, pp. 175–97, at 196.Google Scholar
70 Such a problem may arise where an initial scheme has been designed to include some implicit recognition for the incidental benefits that come with the main ‘service’ that is being paid for and subsequently some of those incidental benefits themselves become the subject of distinct schemes: for instance, if direct payments for carbon sequestration are introduced after the establishment of a scheme that pays for conserving habitat that was motivated not only by a narrowly focused assessment of biodiversity benefits but also by an awareness of how such habitats can further wider environmental goals.
71 Reid, n. 4 above, at pp. 225–8.
72 Sunstein, C.R., Free Markets and Social Justice (Oxford University Press, 1999), at p. 5; Prosser, T., Law and the Regulators (Oxford University Press, 1997), at p. 5.
73 Salzman & Ruhl, n. 16 above, from p. 642; Walker et al., n. 15 above, at pp. 152–4.
74 Macrory, R., Regulatory Justice: Making Sanctions Effective (Better Regulation Executive, 2006), Chap. 5. The report’s proposals have been enacted as Part 3 of the Regulatory Sanctions and Enforcement Act 2008.Google Scholar
75 UNECE Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, Aarhus (Denmark), 25 June 1998, in force 30 Oct. 2001, available at: http://www.unece.org/env/pp/welcome.html, Arts. 4 and 5.
76 E.g., Directive 2003/4/EC on Public Access to Environmental Information and Repealing Council Directive 90/313/EEC  OJ L41/26.
77 Ibid., Art. 4(2)(d).
78 E.g., in order to be enforceable against successors in title, even fairly short-term management agreements in Scotland have to be registered (Countryside (Scotland) Act 1967, s. 49A), as well as enduring conservation burdens (Title Conditions (Scotland) Act 2003, s. 4). Contrast the position in the US in relation to conservation easements: Olmsted, J.L., ‘The Invisible Forest: Conservation Easement Databases and the End of the Clandestine Conservation of Natural Lands’ (2011) 74 ( 4) Law and Contemporary Problems, pp. 51–82.Google Scholar
79 E.g., in the Defra scheme discussed at n. 31 above, the ‘rating’ of the habitats and discounting rates applied will make a huge difference to how the scheme operates in practice.
80 Walker et al., n. 15 above, at p. 152.
81 See n. 63 above.
82 Reporting, monitoring and audit requirements are expressly listed as among the contents of bio-banking agreements in New South Wales (Threatened Species Conservation Act 1995, s. 127E), while the BushBroker and BushTender schemes in Victoria require annual reports from the landowner. See http://www.dse.vic.gov.au/__data/assets/pdf_file/0004/97294/BB_Info_sheet_18_-_Annual_reporting.pdf, and http://www.dse.vic.gov.au/__data/assets/pdf_file/0014/113234/BTInformationsheet16-annualreporting.pdf.
83 Reid, n. 4 above, pp. 226–8.
84 Echeverria, J.D., ‘Regulating Versus Paying Land Owners to Protect the Environment’ (2006) 26 Journal of Land, Resources & Environmental Law, pp. 1–46.Google Scholar
85 Reid, n. 2 above, pp. 25–7.
86 E.g., in New South Wales legislation provides that ‘[a]ny person may bring proceedings in the Land and Environment Court for an order to remedy or restrain a breach of a bio-banking agreement, whether or not any right of the person has been or may be infringed by or as a consequence of the breach’: Threatened Species Conservation Act 1995, s. 127L(1).
87 This is without going into the more specific conflicts that can arise, e.g., over the spread or reintroduction of carnivores such as the wolf or other species which are thought to have a negative impact on aspects of existing land or fisheries management, e.g., the beaver in Scotland.
88 See, e.g., the leader in The Times (London, 4 Jan. 1991) and subsequent letters when the adder (Vipera berus) was first given statutory protection.
89 On the balance between scientific paternalism and popular preferences, see Royal Commission on Environmental Pollution, Setting Environmental Standards (21st Report, Cm 4053, 1998), especially Chap. 7.
90 See generally the work of The Economics of Ecosystems and Biodiversity project, available at: http://teebweb.org.
91 See n. 7 above.
92 E.g., the whole of (2011) 74(1) Law and Contemporary Problems was devoted to ten articles offering critical analyses of conservation easements in the US.
93 ‘Commercialization feeds on itself in a way that may retard rather than advance social welfare’: Hirsch, F., Social Limits to Growth (Routledge & Kegan Paul, 1997), at p. 94.Google Scholar
94 M. Sagoff, n. 6, above, at p. 1418. See also Echeverria, n. 84 above.
96 ‘[M]arkets change the character of the goods and social practices they govern’: ibid., at p. 120.
97 The example given is of collecting children from nursery care later than the scheduled time; the introduction of a ‘late fee’ actually increased the number of late collections as parents saw this as an extra charge for an extra service that was being provided, not as a penalty for an unfair imposition on the staff, an attitude to lateness that persisted even after the payments were removed: ibid., at p. 119, citing Gneezy, U. & Rustichini, A., ‘A Fine is a Price’ (2000) 29(1) Journal of Legal Studies, pp. 1–18.CrossRefGoogle Scholar
98 His discussion of tradable emissions permits reveals the ambiguities here, since he accepts that emitting carbon is not in itself objectionable, whereas excessive emissions are, and argues that allowing large emitters to buy their way out of changing their wasteful habits reinforces bad attitudes, even though in atmospheric terms it is the total level of emissions, not who is producing them and why, that matters: ibid, pp. 72–9.
99 Ibid., p. 89.
100 In the environmental field Sandel discusses tradable pollution permits, carbon offsets and payments to hunt animals that are endangered (ibid., pp. 72–84). Other examples include priority queues at airports, incentives to lose weight and payments to donate blood and human organs.
101 Para. 1 of the preamble to Directive 2000/60/EC Establishing a Framework for Community Action in the Field of Water Policy (Water Framework Directive)  OJ L327/1.
102 Dublin Statement on Water and Sustainable Development prepared by the International Conference on Water and the Environment (1992), available at: http://www.gdrc.org/uem/water/dublin-statement.html.
103 Convention on Biological Diversity (CBD), Rio de Janeiro (Brazil), 5 June 1992, in force 29 Dec. 1993, available at: http://www.cbd.int/convention/text/, Preamble, para. 3. Cf Brown Weiss, E., ‘The Coming Water Crisis: A Common Concern of Humankind’ (2012) 1(1) Transnational Environmental Law, pp. 158–68.Google Scholar
105 Salzman & Ruhl, n. 16 above, at pp. 693–4. Indeed, to Walker et al. (n. 15 above, at p. 155) the task is so challenging that they conclude that ‘[a]lthough compensation and no net loss are laudable ideals, ecological and political problems appear intractable, and mean that bartering is likely to achieve more harm than good for biodiversity’.
106 Tax systems can play a major role here; e.g., it is tax breaks which have driven the rapid increase in the use of conservation easements in the US: Halperin, n. 65 above.
107 E.g., anecdotally it is reported that the successors to the landowners who agreed conservation easements in the US are often less supportive of these arrangements than their original creators, who both had the personal motivation to create them and who may have received considerable benefits (usually in the form of tax breaks) in return. The next generation may not share the same motivation and will not themselves be in direct receipt of any tangible benefit in exchange for the restrictions they face, so that more testing challenges to the operation of this mechanism can be expected than during the early years of its widespread use.