Is Spain ready to bank on nature?

Developers may pay to offset environmental damage by boosting a habitat elsewhere under a new credit system

Juana Viúdez
How much is a beech forest worth? Biodiversity banks are to be set up for Spanish habitats.
How much is a beech forest worth? Biodiversity banks are to be set up for Spanish habitats.ANGELO GANDOLFI (CORDON PRESS)

Can you put a price tag on a beech grove? What about a prairie of Posidonia oceanica seagrass? How much money is a bee's pollination work worth? The Spanish government wants to encourage something called habitat banking, or biodiversity banking. It is a controversial concept because it allows developers to offset the environmental impact of their road, building or factory by purchasing an environmental recovery project elsewhere. Similar projects have been underway in the United States since the 1980s.

These banks would work like carbon emission markets, with the raw materials coming from nature. For now they will focus on habitats and species.

The system is as follows. On the one hand there are individuals or businesses who perform environmental work, such as reforesting a park, bringing an endangered species back from the brink, or cleaning up a contaminated lake. This work gets recorded in a register kept by the Environment Ministry, and a monetary value is assigned to it through credits. On the other hand, developers may purchase these credits on a voluntary basis to make up for damage wrought by their own activity.

Insect pollination in cropland is worth an estimated three billion euros a year

There are around 540 biodiversity banks in the world, of which over 400 are in the United States, and many of the rest in Australia. Most focus on reducing damage to wetlands, brooks, forests and riverbanks. A few pilot projects are underway in Europe, including France and Britain, although Germany was the first to adopt the system in 2002 and has made the greatest headway of any European country.

Spain's Environment Ministry extols the virtues of the formula but has yet to decide on the specifics for its introduction. For now, an Environmental Impact Bill is making its way through Congress, although the text says that buying credits will be voluntary. According to the Popular Party government, it will create access to "a significant pool of money" because some environmental compensation projects take a long time getting underway.

Germany follows US lead

J. V., Madrid

Conservation banking was born in the United States in the 1980s. It derived from the 1972 Federal Water Law, which established compensation policies for damaged wetlands. These compensation schemes are channeled through so-called mitigation banks. In 2011, banks of this nature were present in 37 of the 56 states. Up until that date, 182,108 hectares of natural space had been protected through this tool, creating an annual market of 1.6 billion euros, according to a report by Spain's Industrial Organization School (EOI), citing figures by the US non-profit Forest Trends. The value of those credits has ranged between 2,215 and 443,084 euros.

In the 1990s, also in the US, other conservation banks were created for endangered species. The basis for this was the 1973 Endangered Species Law. The system is present in 11 states, generating a market of around 147 million euros. Credit prices ranged from 1,846 to 221,000 euros. This system helped protect 43,977 hectares of natural space. In 2006, a concept called biobanking was created in New South Wales (Australia) using a very similar system to the US conservation banks. So far, 2,300 hectares have been protected.

There have been pilot projects in France and Britain, although Germany has made greater advances, having incorporated the tool into its 2002 Nature Conservation Law, which allows länder governments to introduce conservation banks to offset the impact of urban development. The United Nations is also working on programs that evaluate the viability of habitat banking in Latin America and the Caribbean.

In recent years a new type of business has sprung up specializing in environmental projects and defending habitat banks as a necessary tool. Spain's five most important green groups - WWF, Greenpeace, SEO BirdLife, Friends of the Earth and Ecologists in Action - are demanding that these banks be set up independently of the secondary markets, and that their sole goal be to ensure zero biodiversity loss. For now, though, the bill contemplates credit transfers in a free market system.

"Independently of whether they are created or not, we need to address the implementation of compensation measures so they can be carried out effectively," one environmentalist puts it. A report by Cedex (Center for the Study and Experimentation of Public Works) cited by WWF concludes that between 1990 and 2011, compensatory measures were either not applied in Spain or else they were erroneously designed and implemented.

"Environmental groups accuse us of reducing nature to a purely monetary and economic asset, but it's not like we are killing the poetry or the inspiration that nature supplies," said Federico Ramos, secretary of state for the environment, during a seminar organized by the Association of Forestry Scientists. His presentation was backed up by a wealth of statistics, such as the fact that 40 percent of the world economy depends on the health of ecosystems, or that insect pollination in cropland is worth an estimated three billion euros a year.

"Natural capital is a generator of wealth [...] Insects don't charge, but their services are there," added Ramos. The carbon market, with all its shortcomings and benefits, is always there in the background. "Twenty years ago it was unthinkable that a ton of carbon would have a price, and yet it has." In 2008 it reached 30 euros a metric ton, while in September of this year it was down to three euros.

Forestry experts feel it is necessary for each country to create its own national market - for forest carbon, water quality, biodiversity and so on - all of which would necessitate setting a price on things and assessing the cost of services that we all consider free, and which all citizens benefit from. "We want to put our natural capital to work, and that is why the numbers are important," says José María Rábade, an expert in environmental economy.

One of the problems is where that capital is to be applied; who gains and in compensation for what environmental damage? The ministry headed by Miguel Arias Cañete is sanguine about the idea of compensation in a different place from where the impact took place. But the environment commissioner for the Andalusian government, María Jesús Serrano, criticized this view earlier this month. "A project with an impact in Andalusia can get compensation in Galicia? That is of no use to us, and we don't like it," she said, following a meeting of environment officials on October 7.

One of the biggest challenges up ahead is how to assess the economic value of environmental damage. "You cannot preserve a wetland by creating another habitat of lesser quality," notes a former UK environment chief, Barry Gardiner. The former junior minister feels that priority for a compensation project should be given to an area that is contiguous to the damaged spot, before moving on to other potential candidates. Britain, which is home to several pilot projects, has created a Natural Capital Committee to ensure that the market values provided by nature are taken into account by decision makers.

"You have to be very careful when you come up with these markets, because there cannot be a net loss of ecosystems," explains Miguel Ángel de la Calle, who teaches a master's degree in environmental engineering and management at the Industrial Organization School (EOI). This expert feels that these tools can help create jobs and make people stay in the countryside, although he adds that special care should be taken when developing the credit calculation system. "It won't do to simply compensate one hectare with another hectare because they might occupy land with different environmental values."

You cannot preserve a wetland by creating a habitat of lesser quality"

Meanwhile, environmental groups - as well as the opposition Socialist Party - lament that the government failed to consult with the scientific community on this initiative. "Beyond the issue of mercantilization, what's opening up here is an abyss of impunity that could result in certain habitats being destroyed to benefit private interests, in exchange for environmental improvements that may not make up for the negative effects of the project in question," warns Hugo Morán, the Socialist environment secretary.

"We do not share this mercantilist vision because it carries significant risks; they should have learned from the results of other markets such as carbon, or else address the issue of who, really, will ultimately benefit from this," underscores Laia Ortiz, a deputy from the Plural Left parliamentary bloc. The ecology scholar Fernando Prieto wonders how the profits generated by these ecosystems will be shared out and distributed - an issue that has yet to be determined.

The main green groups have stressed the fact that the US, which functions as a role model of biodiversity banking, has very different territorial, legal and economic realities to those of the European Union and Spain in particular. Instead, they suggest alternative or complementary models that do not use market systems, and demand that administrative oversight of compensation mechanisms be improved.

Prieto, the ecologist, lists several resounding failures, including proposals to displace a Special Bird Protection Zone for bustards a few kilometers east of Madrid to make way for one of the city's beltways, or the old habit of reforesting a significant part of Spain with eucalyptus and conifers, a policy that has been carried out since the 1950s and has fed many of the forest fires that ravage the country every summer.

"It's very difficult to offset damage in the same location"

J. V., Madrid

Miguel Ángel de la Calle teaches the master's degree in environmental engineering and management at Spain's EOI Industrial Organization School, a center of reference when it comes to energy and environmental management issues.

Question. Do you think that habitat banking is a good conservation tool?

Answer. In my opinion, it is a useful tool for conservation, and this seems to be confirmed by the experience of countries where this is a reality.

Q. Do you support introducing it in Spain?

A. As long as it is done with the necessary technical rigor, I am in favor. I think it would give visibility to the real value that ecosystems represent for society, and it would enable an effective implementation of compensation measures without a net loss of damaged environmental resources and services. Besides, it would help create jobs and keep the countryside populated.

Q. What are the main challenges up ahead?

A. There are many, but I would like to highlight two of them: in the first place, drafting good regulation to make it a useful tool for conservation, and the compensation of residual damage to prevent the system from being used for speculation with natural resources. Secondly, creating a debit and credit evaluation system that guarantees revenues and ensures the indefinite conservation of the natural capital created. On this point, it is essential for the scientific and business communities to work together.

Q. Which model, of those in operation in different countries, do you think is best?

A. Each country's model is linked to the particular needs and ends that it pursues. In the US the banks are linked to the mitigation of damage to wetlands and to compensation of damage to endangered species, while in Australia they focus more on the conservation of native vegetation. In Spain, I think we should clearly define what their use would be, and later we can select the model we consider most appropriate, with the necessary variations.

Q. Are there ecosystems that should not become part of these banks?

A. All natural spaces that already enjoy a high protection level should not be part of a habitat bank, as in their case additionality would be scant or nonexistent.

Q. Should compensation in the same location be the first option?

A. The habitat banks are built before the damage is done, which makes it very difficult for compensation to take place in the same spot. But it can take place in nearby surroundings.

Q. Who should be in charge of oversight of the system?

A. In the countries with banks, oversight falls to government agencies. But I believe we could create some kind of national commission to regulate and authorize the new banks and keep tabs on their operations.

"Some things are too important to be left in the market's hands"

J. V., Madrid

Fernando Prieto holds a doctorate in ecology from Madrid's Autónoma University. He was one of the founders of the Spanish Sustainability Observatory in 2004, although the research center has since disappeared.

Question. Do you think habitat banking is a good conservation tool?

Answer. Theoretically, it might be a good idea, but the reality is that the environment markets have not worked well. One of the biggest ones, the CO2 market in Europe, has so far been a fiasco. Some things are too important to be left in the hands of the market.

Q. Are you in favor of implementing it in Spain?

A. No. In Spain, environmental impact studies, government requisites and follow-up work have all been very deficient. And now an even less stringent piece of legislation is being debated in Congress. I doubt that habitat banking is going to change the scene much. On the other hand, this formula is used most especially when infrastructure is being built, and in this crisis scenario it doesn't make much sense.

Q. What are the main challenges up ahead?

A. The main challenges are lack of knowledge about the way ecosystems work, due to a lack of applied research. It is also important to specify the kind of management involved and long-term governance. Universities, private enterprise and government agencies are not ready for these challenges. There is practically no environmental oversight once an infrastructure project has been completed. Finally, the main and greatest challenge of all is a lack of economic resources.

Q. Which country's model do you feel is the best?

A. It looks like Spain wants to implement the California model, which was modified in January 2013. But it is obvious that California is not Spain. That model corresponds to a different type of university, government and business culture.

Q. Do you think there are ecosystems that should not become part of these banks?

A. Yes, especially those that require a great many years to achieve high levels of diversity, stability and maturity. Also areas with endangered species, protected areas and those with important ecological processes, such as aquifer replenishment.

Q. Should compensation in the same location be the first option?

A. Compensation should be the last option in any type of project. It is much more important to conduct a real preventive approach than to apply corrective measures later.

Q. Who should be in charge of oversight?

A. Scientists and non-profits that do not get direct state subsidies. We need independent criteria. Scientists must also be supervised. But above all, we need to assess the policies, which is something that this government does not do.

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