Markets working to support sustainable development

Biodiversity offsets (Conservation Banking)

Biodiversity offsets are a form of conditional environmental financing. Like their more well-known cousin, carbon offsets, various parties (e.g. governments, companies or individuals) look to compensate the damage they cause in one location by benefitting bidoversity somewhere else. 

Biodiversity offsets are created and managed in a biodiversity ‘bank’ - this is an area where the land is managed to conserve biodiversity. Typically, in the US context, this is for wetland areas. Project developers wishing to offset the biodiversity impacts of particular projects may then purchase offset credits from the bank. The price of offsets is controlled by market forces – i.e. supply and demand.

Market coverage: 

Biodiversity offset schemes are found throughout the world, though they are currently concentrated in the US and Australia.

In the State of Biodiversity Markets Update (2011), the global annual market was estimated at US$2.4 – 4 billion (though this is likely to be an underestimate as less than 80% of schemes are transparent enough to provide market figures). Precise, up-to-date data is not clear but the number of banks is set to increase. 

Background information: 

Biodiversity offsets can have various names, including ‘compensatory mitigation programmes’, ‘mitigation or conservation banking’ or ‘BioBanking’. 

Funding source: 

Funding is variable depending on the scheme. Possible sources include:

  •  National governments
  • Conservation organisations 
  • private landowners
  • Multilateral organisations such as the European Union (EU) and United Nations Development Programme (UNDP) 

​Also, governments may act as brokers between the landowners and project developers, as seen in the US and Australia.