Incentivising biodiversity net gain with an offset market

Simpson, K. , Hanley, N. , Armsworth, P., de Vries, F. and Dallimer, M. (2021) Incentivising biodiversity net gain with an offset market. Q Open, 1(1), qoab004. (doi: 10.1093/qopen/qoab004)

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Abstract

Most programmes which incentivise the supply of public goods such as biodiversity conservation on private land in Europe are financed through the public purse. However, new ideas for how to fund biodiversity conservation are urgently needed, given recent reviews of the poor state of global biodiversity. In this paper, we investigate the use of private funding for biodiversity conservation through an offset market. The environmental objective is to increase some measure of biodiversity in a region (‘net gain’) despite the loss of land for new housing. Farmers create biodiversity credits by changing their land management, then sell these credits to housing developers who are required to more-than offset the impacts of new housing development on a specific indicator of biodiversity. Combining an economic model of market operation with an ecological model linking land management to bird populations, we examine the operation, costs and biodiversity impacts of such a (hypothetical) market as the target level of net gain is increased. A general result is established for the impacts on price and quantity in the offset market as the net gain target is made more ambitious. For a case study site in Scotland, we find that as the net gain target is increased, the number of offsets traded in equilibrium falls, as does the market clearing offset price. Changes in the spatial pattern of gains and losses in our biodiversity index also occur as the net gain target is raised.

Item Type:Articles
Additional Information:We thank the Leverhulme Trust and the European Commission (under the EFFECT project) for part-funding this work.
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Simpson, Dr Katherine and Hanley, Professor Nicholas
Authors: Simpson, K., Hanley, N., Armsworth, P., de Vries, F., and Dallimer, M.
College/School:College of Medical Veterinary and Life Sciences > School of Biodiversity, One Health & Veterinary Medicine
Journal Name:Q Open
Publisher:Oxford University Press
ISSN:2633-9048
ISSN (Online):2633-9048
Published Online:26 February 2021
Copyright Holders:Copyright © 2021 The Authors
First Published:First published in Q Open 1(1): goab004
Publisher Policy:Reproduced under a Creative Commons License

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