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This page is specially dedicated to the discussion on the concept of Biodiversity Offsets and Compensation Mechanisms for the members of the Working Group on Environment (Roundtable on Sustainable Biofuels).
As the discussion on Conservation is going on, several participants have pointed out the necessity to introduce the notion of Offsets and Compensation Mechanisms, as a realistic mean to incent industry toward sustainable production. It is said that the initiatives currently going on, in spite of their importance in the definition of clear sustainability rules, will prove unable to undermine the ongoing loss of biodiversity due to the increasing demand on biofuels. The main reasons evocated are the absence of constraint in the implementation of standards (voluntary approach) and impossibility for the supply to fulfill the demand for sustainable sources. Some Industries claim that the most effective mechanism to contain this growing biodiversity threat would include a compensatory approach, with for example taxation on products, tariff or conservation credits... Yet, the concept of offsets and compensation is not understood similarly by everyone, as seen during the recent 5th Virtual Meeting of the Working Group on Environment.
Definition of Offsets
In reference to ten Kate, K.., Bishop, J., and Bayon, R. (2004). Biodiversity offsets: Views, experience, and the business case (IUCN). ISBN: 2-8317-0854-0 Available at  and .
- "Offset or mitigate?
In some contexts – particularly in Europe– the term “mitigate” means to minimise harm or to make it less severe, whereas in the US, it is often used to refer to activities designed to compensate for unavoidable environmental damage. In the US, therefore, it is generally interchangeable with, and often preferred to, the term “offset”. (...) Although different meanings are ascribed to the terms used here, we understand “minimise” in this context to mean designing a project in such a way as to reduce harm, and “mitigate” to mean alleviating the residual harm, to the extent possible. “Offset” is thus interpreted as an activity to compensate for residual, unavoidable harm.
(...)The first priority is to minimise environmental damage.
- He [the author] describes offsets as a supplementary means to address the residual environmental impact of projects. Understood as firmly within the context of this mitigation hierarchy, biodiversity offsets cannot be used to reduce a developer’s obligation to avoid, minimise and mitigate harm. Moreover, biodiversity offsets are not appropriate in circumstances where development should not proceed in the first place. More detailed consideration of the controversial issue of “no go” criteria is beyond the scope of this report. However, it is an issue on which further dialogue between conservation groups, government and companies is urgently needed."
- Onsite or offsite?
Does “offset” refer to conservation activity undertaken on the development site itself, or elsewhere? “Offset” can be distinguished from “set-aside” or “rehabilitation”, which refer to avoidance and mitigation, respectively. In general, the term “offset” is understood to refer to conservation activity that takes place outside the geographic boundaries of a development site in order to compensate for unavoidable harm, in addition to any mitigation or rehabilitation that may take place on that site. However, some developers may own large plots of land and in some circumstances, it could be appropriate for biodiversity offsets to be undertaken on land that would not otherwise be conserved within a plot, as a way of offsetting development activity on another part of the plot.
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- Elements pointed out during the 5th Virtual Meeting of the Working Group on Environment (4th December):
- Offsets raise a lot of concerns about whether or not a valuable ecosystem that would have been lost could actually be replaced and whether or not compensation would be suitable for trying to replace or compensate companies for having removed this kind of habitat. As some participants understand the concept, a producer would be allowed to remove a particular area and put it into biomass production, and would then have to recreate or preserve an equivalent area somewhere else.
- Once HCV areas are identified, those should not be destroyed. Full stop. As we are looking for sustainability standards, we cannot consider clearing HCV areas as sustainable. Opening a gap on the fact some habitat, no matter how important, can be cleared if somehow compensated and create a whole system where you shift it around is very problematic. It is risky to introduce this concept at the criterion level, as it would give ways to less efforts in terms of non HCV land identification, but on the other hand, several considers that a too strict principle is not workable from a business perspective and that compensation mechanisms must be introduced somewhere.
- Some participants have troubles separating offsets from compensation. Does the problem reside in an offset program or a mitigation program or the idea of introducing some kind of financial compensation (money)? In fact, mitigation programs are well-known and can be well managed.
- Mitigation and compensation are two different things, at least in the European legislation context. Compensation means that one destroys a hectare somewhere and then you compensate by restoring a hectare somewhere else or by preserving or improving the quality of what is left. Mitigation is about minimizing negative impacts. Compensation can also be understood as paying a farmer in order to compensate him for maintaining an area as an offset. This would be more acceptable than the scenario where destroying some habitat is compensated somewhere else. There is no problem with mitigation, which should be used as often as possible. The question is about when there is no mitigation possible, as in the case of clearing a forest, is it allowed or not and would it be allowed if it is being compensated or offset somehow. This is the contentious point.
- From the business perspective, it looks like compensation is the last resort (avoid, minimize and mitigate before compensate). It has been hear often that we should leave this open, otherwise it will be unrealistic.
- Other existing certification systems (RSPO, FSC…) have not integrated this concept of compensation. Even industry-sponsored initiatives have recognized that there are ecological areas, which should be protected and this concept of allowing destruction in a given area if one can recreate another is not a formal component of any certification schemes so far.
- It should be clear that the forest offset program is not for planting trees to make up for trees you have cut. That is just business as usual and should be frowned on by NGO's. Tree planting is required in most countries as a requirement for getting logging concessions in the first place, and while it is rarely done in Southeast Asia, that is not an excuse to link it to "sustainability". The question would then come up of what trees? for what objective? It is difficult to plant a wild forest and it is equally not justified to provide this incentive to just plant trees for future wood supply.
The option be given to either go through this exercise to certify and annually audit the sustainability of your palm plantation,(procedures in RSPO) now being immortalized in various EU legislation which will cost much more than $60 per hectare, or to simply buy the logging rights for wild jungle and provide a guarantee that the wild forest remains unlogged and as virgin forest for at least 25 to 50 years. This offset of jungle land would be equal to the amount of land put into palm plantations and would thereby represent an "offset" This can be done within the context of current logging concessions and is simply a purchase of logging rights that then is translated into no logging and setting up of a conservation reserve.
Another interesting idea being done in Brazil is to plant native palm trees (babasu, macauba) in regions that were supposed to remain as conservation set asides but were illegally cleared for sugar plantations. This provides back some native biodiversity and an oil seed crop. I think it is OK to pay farmers to preserve forests. But this is weak because many countries already require a set aside of some of the land for conservation purposes to permit development of large plantations (for example Brazil). While this is changing in the US and EU as set aside land is used for increasing crop production, I am not sure that paying farmers works very well. But it is certainly an idea that I would support to insure there is some wild forest interspersed with fields globally. Bill Wason
- Business and Biodiversity Offsets Program - BBOP is a "partnership between companies, governments and conservation experts to explore biodiversity offsets."
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