As the Convention’s 2010 target rapidly draws near there is an urgent need to focus our attention on developing international instruments that can help achieve a significant reduction of the rate of biodiversity loss. One of the mechanisms gaining increased attention is compensation. In response, The Netherlands, in cooperation with UNEP, intend to provide a proposal for such an instrument and engage the discussion on this issue with its ‘Balancing Biodiversity’ concept.

Development unchecked
If left unchecked, the coming decades will see a vast increase in the clearance of natural areas and a corresponding decline in biodiversity and important ecosystem services in a growing number of areas. The Netherlands Environmental Assessment Agency (MNP) has estimated that while at present 45% of economically attractive area in the world is in use for development (excluding agriculture, construction, etc. and already protected area), this figure is set to rise to 55% by 2050. Balancing Biodiversity proposes a concept of conservation through international compensation based on land use and sets a baseline for biodiversity by assuming a set amount of global area to be reserved for nature.

Several arguments warrant the creation of an international mechanism that is able to address biodiversity loss as well as safeguard important ecosystem services. There is, of course, the moral responsibility to preserve biodiversity for the future. There is also the benefit the whole world is able to enjoy from having such a diverse natural environment. More tangible is the importance of conserving certain ecosystem services in order to secure livelihoods of people in both urban and rural environments. At the international level, the internalization of environmental costs into the costs of production is something that is in its infancy. Since impacts also occur outside the country where consumption takes place, internalization is needed to balance environmental costs and economic benefits. Compensation mechanisms are a step further.

Global compensation
‘Balancing Biodiversity’ is a method of global compensation based on an equal division of all economically usable area between development and nature (1). Accordingly, any impact caused by the use or development of land is to be compensated for by the conservation of an equal area. In addition, land use is calculated taking into consideration the entire supply chain: for example, by assessing the total area necessary for meat consumption in The Netherlands (including, for instance, the land needed to produce the fodder) (2). The method therefore balances land use between economic development and nature and brings natural areas in closer competition with land clearing and development. In doing so, Balancing Biodiversity:

1. Enables companies, consumers and governments to assess and compensate their impact on biodiversity based on their land use nationally as well as internationally;
2. Vastly increases available funds for conservation and sustainable development of areas, and;
3. Increases competition between economic development of land and conservation of biodiversity and important ecosystem services.

Concrete proposals and guidance
Several companies are also devising pilot projects that should advance insights in the concept and the practicalities associated with indirect compensation. These companies process or trade raw materials and goods produced elsewhere which results in indirect impacts and a shared responsibility in the supply chain to prevent, mitigate or compensate these impacts. This project will deal with the opportunities and dilemmas a company faces when compensating for an indirect impact. In addition to VROM, MNP and UNEP, the project convenes two consultancies (CREM and Sustainability consulting), Shell International and a number of NGOs. The experiences of the Business and Biodiversity Offsets Programme (BBOP) network on direct offsets will function as preliminary guidance.

The project will deliver concrete compensation plans for the participating companies (including preconditions and incentives), as well as guidance for other pro-active companies in order to familiarize them with the compensation mechanism.

Conservation of areas can, or even should include services that can be provided and harvested without compromising biodiversity and ecosystem services (e.g. sustainable harvesting of resources, watershed functions); the method is therefore additional to and not a substitute for instruments such as Payments for Ecosystem Services (PES). A large number of issues still remains. Both conceptual — how far can ‘like for like’ be extended, should compensation be effectuated in the production region, how to translate land use, biodiversity quality and degradation into a suitable compensation measure, how to provide for additionality, etc. — as well as practical: issues of property rights and production chain traceability for example. In addition to working on conceptual issues and investigating the effects on biodiversity, the choice has been made to address these hurdles through a ‘learning by doing approach’ in the pilot projects.

The first results of the pilots as well as a more complete account of the methodology, background and contribution to the 2010 goal will be presented during a side-event at COP-9.

Stefan van der Esch is a policy advisor at The Netherlands Ministry of Housing, Spatial Planning and the Environment (VROM).

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(1) Thereby leaving out economically unusable areas like the poles, deserts, mountains, etc.
(2) This is referred to as indirect compensation, as opposed to compensation of direct impacts locally.