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Fachgebiet Umweltprüfung und UmweltplanungThe use of marked-based instruments for biodiversity protection - the case of habitat banking


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The use of market-based instruments for biodiversity protection - the case of habitat banking

Project Details
European Commission - Directorate-General Environment
Project Management:
Prof. Dr. Wolfgang Wende
Research Associate:
Dipl.-Ing. Holger Ohlenburg
eftec (Lead partner) & IEEP

International Union for the Conservation of Nature (IUCN)

Pels Rijken Droogleever Fortuijn (PRDF), Netherlands

Stratus Consulting, Washington DC, USA

Kerry ten Kate

Jo Treweek

Jon Ekstrom
January 2009 - February 2010
Final reports:
Technical Report (2,8 MB, 269 pages)

Case study appendix (3,8 MB, 152 pages)

Summary report (0,8 MB, 43 pages)


Halting the loss of biodiversity and preserving natural resources that are under pressure requires urgent action. As part of policy development, the potential use of market-based instruments (MBIs) to protect biodiversity is being given increasing consideration around the world. Academic research interest on the subject has recently led to a special issue of Ecological Economics to be devoted to this topic (Vol. 65, Iss. 4, 2008). MBIs potentially offer a means of integrating conservation into the decision-making of economic actors, and cost-effectively reaching objectives for conservation and sustainable exploitation of resources. Such objectives exist in the EU Biodiversity Action Plan, commitments to tackle biodiversity loss at global (e.g. Convention on Biodiversity), European (e.g. Gothenburg agreement to halt biodiversity loss by 2010), and national levels (e.g. the England Biodiversity Strategy).Three types of MBIs are currently in use for biodiversity protection: taxes/charges/fees, tradable permits and subsidies. Examples of their use include: 

  • Rights-base management tools in fisheries;
  • Fees for natural resource extraction (e.g. hunting);
  • Payments for ecosystem services delivery through agri-environment schemes under the CAP;
  • Biodiversity offsets, whereby actions taken to enhance biodiversity are purchased as compensation for unavoidable damage, ensuring no net loss, and
  • Habitat banking (especially in the US), whereby offsets are delivered through habitat ‘credits’ that are stored and traded over time.

MBIs, in the EU policy context, are also seen as a way to link several legislative drivers that require compensation of environmental damage (e.g. Habitats and Wild Birds Directives, and Environmental Liability Directive (HD & ELD)) with other policy targets (such as land use planning guidelines). The EC notes biodiversity offsets as possible options to “encourage landowners to maintain forests or wetlands, or to compensate for the unavoidable harm that development projects do to biodiversity by creating similar habitats elsewhere to ensure no net loss of biodiversity” (EC,COM (2007) 140). As well as having specific legal implications in relation to the HD and ELD, offsetting measures are applicable in other instances, which raise the possibility of creating an integrated system, which could achieve efficiencies in the delivery of offsets through economies of scale, and by allowing their exchange over time – a habitat banking system.However, habitat banking needs to be considered carefully as there are potential downsides including the difficulty of ensuring ‘additionality’ and banking causing unintended biodiversity damage during offset creation. Only through such careful consideration, a habitat banking system that fits within, and does not undermine, the current legal requirements and policy objectives can be designed.On the basis of this background, this research project will examine the potential use of habitat banking in the EU in the context of alternative economic instruments for biodiversity protection. Its specific objectives are to:

  • Investigate whether habitat banking can be managed so that it benefits biodiversity protection and could be expanded into an EU-wide system;
  • Compare habitat banking to other market instruments as a means of delivering biodiversity protection;
  • Identify the tools and components of such a system, to practically deal with challenging issues such as equivalency, efficiency and location;
  • Analyse the conditions and limitations for the development of habitat banking at the Community level, and
  • Develop guidance on how habitat banking could be implemented in keeping with the requirements of relevant laws, policies, institutions and stakeholders.

The research will identify myriad of opinions and experience with habitat banking from around the world, from economic theory and institutional analysis to provide the best advice for the European Commission on future policy options.



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