Environmental offsets | how to make a trade-off

Environmental offsets are a mechanism for guilt free development. If new infrastructure is built on land with environmental value the developers buys enough offset credit to compensate for any environmental value lost. Credits are created from protecting other parcels of land that are held on an offsets register. Ideally these parcels are equivalent in environmental value to the land cleared for development.

There are rules of course.

Detailed assessments are made about what values a parcel of land holds. Then ratios are applied to evaluate the land lost and gain equivalence in the areas protected. The goal is for development to happen and to have no net loss of value. 

The common currency to determine value is biodiversity. The combination of plant and animal species present on the development site, especially those that might be rare or endangered.

Unfortunately there will always be a like for like problem. Biodiversity has unique patterns across every landscape. Just because a parcel of eucalyptus woodland looks like the one you intend to cut down for a freeway extension this does not mean it has the same biodiversity content or value as the offset area. 

As ecologist Professor Richard Hobbs puts it  “To me it is akin to some guy going into that art gallery and pointing at the Mona Lisa on the wall and 'saying sorry mate we need that bit ... so the Mona Lisa has to go. But we will paint you another one'.” 

Just in case you were wondering, the Mona Lisa hangs in the Louvre in Paris.

Mine sites and major mining infrastructure like coal terminals are frequent candidates for environmental offsets. They have a hefty local footprint that is unavoidable and companies have the financial backing [and returns] to pay for offsets. Governments like to use offsets in these cases because they get both economic development and are seen to be providing environmental protection.

The problem is always finding the equivalent of the Mona Lisa.

Usually the rules are that if it’s a high value painting that will be lost, then multiple equivalent works must be protected indefinitely — 100 ha of endangered grassy white box woodland would need 300 ha of grassy white box woodland protected.

There are problems with this rule.

Given the habitat is endangered it is hard to find some to protect. Art masterpieces are not easy to come by and most are already well protected.

There is great temptation to label an offset area as grassy white box woodland even if it isn’t. There is many an art forgery.  

It is not easy to ensure that the offset is what it claims to be. Good forgeries are not easy to detect except by an expert.

There are also fewer and fewer areas that come into the masterpiece category. Sometimes offset areas are increasingly poorer quality land [cattle paddocks, former mine sites] selected with the idea that they will be rehabilitated — restored to the original masterpiece.

The experts at calibrating and labeling offsets are not disinterested parties. The ecological skills needed to define and map offsets confer an understanding of the flaws in offsets — these guys are not auditors.

It is easy for claim and counter-claim over offset efficacy to get very messy very quickly. 

In the end the trade-off is rarely like for like and is rarely a genuine gain for biodiversity or environmental values. It is usually ‘lots of almost like’ for ‘like’ and this is not quite true to the environmental offsets sales pitch. 

There is also the problem that cutting corners is attractive to governments. They can set up rigorous offset schemes but then fail to police any breaches or false claims for offset efficacy. The technical complexities make it quite easy to game the system.

when a new golf course is built, should the developer be asked to purchase offsets for the forested land that is cleared?

Pragmatology of environmental offsets

So here is the thing.

The whole premise of environmental offsets is the admission of a tradeoff. If I mess up a patch of land over here, I’ll ensure that another patch somewhere else is protected. I pay compensation to mess things up.

What about if we didn’t have to mess it up in the first place?

What if there were options for development and for the use of natural capital that maintained that capital?

Admittedly this can be a challenge. If a new hospital is needed then greenery is replaced with concrete whatever design is chosen. But whenever there is a choice of wealth creation from luxury waterfront apartments or retention of water bird habitat, it should not be automatic that wealth creation is allowable through an offset. 

Better understanding of the trade-off between natural capital exploitation and use should happen first.  

Environmental offsets are a smart option to create awareness of the true costs of development [the externalities that are so easily forgotten] and in places they make a good compromise between wealth creation and environmental protection.

The pragmatism is that there is actually a trade-off with any use of natural capital and it is this that needs more of our attention.



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what would you expect the offset to be if this upland wetland was drained as a result of coal mining?


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