THE ROLE OF THE AGRICULTURAL SECTOR IN BIODIVERSITY OFFSETTING

Transcription

1 THE ROLE OF THE AGRICULTURAL SECTOR IN BIODIVERSITY OFFSETTING Jussi Lankoski OECD Trade and Agriculture Directorate Environment Division Biodiversity Offsets: Opportunities and challenges for their effective design and implementation. International Expert Workshop 6-7 November 2013 OECD Conference Centre Paris, France

2 1. Agriculture and biodiversity Agriculture and biodiversity interconnections: Agriculture is dependent on ecosystem services Soil structure and fertility maintenance, nutrient cycling, pollination, and regulation of pests and diseases Agriculture has created diverse semi-natural habitats Extensive pastures and meadows, field margins etc. Modern agriculture Intensification, specialisation, concentration, and rationalisation has contributed to a loss of both semi-natural habitats and species richness

3 2. Environmental markets and quasi-markets in agriculture Information asymmetry: Farmers have better information about their compliance costs than policy makers and they do not have incentives to reveal this info Conservation auctions (quasi-markets): Competitive bidding for conservation contracts reveal compliance costs, reduces information rents and enhances the budgetary cost-effectiveness Environmental credits trading Offers a mechanism for achieving a cost-effective allocation of environmental efforts across farms without knowledge of individual compliance costs Trading applications involving agriculture: (i) water-quality trading (e.g. Canada, NZ, and US) (ii) biodiversity offsets (e.g. Australia and US)

4 3. Agricultural wetland banking in Minnesota (i) National goal: no net loss of wetlands Wetland banking: wetland impacts can be offset through purchase of credits created by through restoration, creation, enhancement, and preservation of wetlands The Agricultural Wetland Bank (established 2012): a single user subset of the State s wetland banks dedicated to offset impacts to wetlands in cultivated fields, thus credits can only be used by agricultural producers targets to replace wetlands functions commonly lost to agricultural impacts: wildlife habitat, water quality protection and floodwater attenuation

5 4. Agricultural wetland banking in Minnesota (ii) Eligibility for the agriculture bank: the site must contain a wetland that has been drained, filled or degraded by cropping, that can now be restored restoration through tile breaks, ditch plugs and establishment of native vegetation wetlands restored under conservation programs (CRP) can be eligible the restored wetland should provide an increase in wetland function over the impacted farmed wetlands Bank service areas: watershed-based geographic areas in which a bank can be expected to provide replacement for impacted wetlands offset close to the impact site preferred

6 5. Agricultural wetland banking in Minnesota (iii) Number of credits depends on the condition of the site before and after restoration: Restoration of completely drained or filled wetland up to 100% credit Up to 75% credit for the area restored under conservation easement Upland buffers up to 25% credit for native vegetation Process: (i) planning, (ii) construction, (iii) monitoring and credit release, (iv) long term maintenance The price of wetland credits is negotiated between the buyer and seller Typical timeline from planning to credits release up to 8 years New offset scheme: some credits available on the website of Minnesota Board of Water and Soil Resources, no information about credit prices

7 6. BushBroker in the State of Victoria (AUS) (i) To comply with Native Vegetation Act developers need to purchase native vegetation offsets through government regulated trading system Trading unit is the Native Vegetation Credit and it can be defined by vegetation or habitat, large old trees, or new tree planting Offset supply mainly from agricultural landowners and demand from road building and housing development The offsets sites are legally secured in perpetuity, but land management contract lasts 10 years The offset price is negotiated between landowner and the developer and is paid into a trust fund administered by the regulator Regulator pays the landowner in instalments over 10 years period

8 7. BushBroker in the State of Victoria (AUS) (ii) Madsen et al. 2011: Between 2007 and 2011 the cumulative monetary value of offsets AUS$ 34 million (USD 32 million) 3420 hectares Price of credits: average price varies over bioregions from AUS$ to (price range from AUS$ to ) BushBroker links with BushTender conservation auction Unsuccesful bids in BushTender can be purchased by the government broker as credits in the BushBroker, TCs savings

9 8. Biodiversity offsets in agriculture: some preliminary remarks (i) As a major user of land agriculture should play a role in both demand for and supply of biodiversity offsets Some complicating issues as regards key offset design features: Ecological equivalence Government farm income support programs Government conservation and cross-compliance programs

10 9. Biodiversity offsets in agriculture: some preliminary remarks (ii) The role of co-benefits: Most environmental conservation practices simultaneously address several environmental objectives Conversion of cropland to grassland: in addition to biodiversity benefits also improved water quality, reduced GHG emissions, increased soil carbon sequestration If the value of these co-benefits is large should they be explicitly taken into account in biodiversity offset metrics and price? Do we have metrics that addresses several environmental outputs simultaneously (e.g. EBI)? If there are other environmental credits markets (e.g. water quality and carbon sequestration) is landowner allowed to sell these co-credits separately to these markets? That is, is stacking of credits allowed? Who has property rights of co-benefits?

11 10. Interlinked offset markets Feedbacks via interlinked offset markets Supply of water quality and biodiversity offsets are correlated due to jointness: supply: β (h,o) and η (o,h) The strength of the cross-effects may impact the functioning of the offset markets h 2 h 1 o 1 o2 o 3 β 1 β 2 η 1 η 2 η 2 1. Demand curve for water quality offsets rises and so does price and equilibrium quantity of water offsets 2. Supply curve of biodiversity shifts outwards and depending on the degree of jointness, this shift is either small or large causing either a small or large decrease in the price of biodiversity offsets

12 11. A couple of general questions Ecological equivalence vs. social value equivalence? Are there social cost-benefit studies conducted on No Net Loss principle, ecological equivalence and Mitigation Hierarchy?