Recently, TruCost a U.K. based consultancy estimated that the negative footprints left by the world’s top 3,000 companies amounted to $2.2 trillion annually.
Typically, mornings are associated with the chirping of birds, a lingering nip in the air and a nice blue sky. But today, it is becoming difficult to evoke that image as we wake up to warmer mornings filled with the sound of vehicles. Habitat banking, a practice gaining prominence now, aims to change all that.
Simply put, an environment bank is a public or private protected area that is permanently marked off for the conservation of animal or plant species.
The concept originated in the United States. The Clean Water Act of 1972 and the Endangered Species Act of 1973 outlined several stringent regulations for projects pursued in wetland areas as well as for public and private lands tagged for residential, commercial and industrial development. Developers had to compensate for any damage or loss of species and biodiversity by recreating the destroyed ecosystems.
Since this was a highly time consuming exercise that caused delay to their core projects, developers and environmentalists alike hit upon the idea of habitat banking in the 1980s. Similar to carbon offsetting, landowners were encouraged to restore damaged land or preserve forest environments, and in turn were permitted to sell credits to domestic or foreign developers that assisted them in complying with their legal requirement for conservation.
Typically, one credit is equal to one acre of restored habitat or a few members from an endangered species. Municipalities, investors and landowners can form habitat banks by purchasing big swathes of land, restoring them and then selling parcels as credit to developers. Today, there are 122 habitat banks in the U.S. that cover 136,000 acres of land, with California having the largest tract. The size of the U.S. habitat banking market is estimated at around $3 billion and in North America the practice brings in $1.5 billion to $2.5 billion in compensation payments, according to a report from Forest Trends, a non-profit organization.
Forest Trends estimates that the global habitat banking annual market
size is worth between $1.8 billion and $2.9 billion at the very least. It is
likely to be worth much more, but since 80% of existing programs lack transparency it is difficult to calculate exact figures.
Wal-Mart is the most famous corporate proponent of habitat banking in the U.S. with its ‘Acres for America’ program. A few years ago, the company earmarked $35 million for land acquisition for conservation in order to offset its carbon footprint during development between 2005 and 2015. As of 2009, the company has conserved a total 412,000 acres in the U.S., says Forest Trends.
In Europe, habitat banking is slowly gaining prominence. The largest European offset program is Germany’s Impact Mitigation Regulation, which has around 2,600 hectares covered. More countries like the U.K. and France are showing keen interest in habitat banking and are contemplating regulations.
But it is Latin America that is currently in the habitat banking spotlight. A recent research report from PriceWaterhouse Coopers in collaboration with the United Nations Development Program (UNDP) says that Latin America and the Caribbean (LAC) markets have the potential to become “green superpowers”, because their environments are rich in biodiversity. The report, titled “Habitat Banking in Latin America and Caribbean: A Feasibility Assessment,” suggests that encouraging habitat banking models in countries like Brazil, Costa Rica, Chile, and Mexico could boost economic growth to a great extent. “Habitat banking holds great potential for protecting Latin America and the Caribbean’s threatened biodiversity and reducing rural poverty,” notes Chris Knight, head of PwC’s Forestry and Biodiversity team. But he also adds that “legislative and institutional reform will be needed to underpin future habitat banking initiatives in the region.”
That is one of the biggest drawbacks of habitat banking in general. Apart from an acute lack of clear regulations and transparency, the dearth of information also leaves many buyers and sellers in the cold. Habitat banking can also be misused. “I’ve seen Wal-Mart parking lots that left a wetland in the middle, and it was full of shopping carts and garbage. That met the letter of the law, but not the spirit of the law,” says Jeff Mathews, director of sales and marketing for Wildlands, a conservation banking firm in California.
Habitat banking may not be without its flaws. But it could be a beginning that has the potential to preserve our ecosystems. And who knows. We might just get those bucolic mornings back after all.