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Thursday morning’s Alternatives to Mitigation session found Craig Denisoff taking the podium to talk about habitat credit trading systems – a new species of mitigation program – and where they stand in relation to conservation banking.
A bit of background: “conservation banking” refers to banking for listed species under the ESA (a backgrounder is available here), whereas habitat credit trading (HCT) refers broadly to voluntary offsetting that seeks to protect imperiled species and habitat. HCT has been in the news a lot recently thanks to interest in incentive mechanisms to protect so-called ‘Candidate Species’, which may be eligible for listing under the Endangered Species Act but the listing hasn’t happened yet.
Denisoff offered a roundup of the “real and perceived issues” surrounding HCT. First off – how does it differ from conservation banking? Well, first off, the credits are administered by a 3rd party rather than a banker. Trading can take place transparently, on public exchanges. And unlike conservation banking, the mitigation action might not extend into perpetuity: temporary offsets for temporary impacts are possible.
The pros? HCTs, Denisoff said, have the potential to offer greater flexibility in protecting imperiled species and habitats where no listing exists. That flexibility extends to being able to focus on multiple species and whole ecosystems. Voluntary credits can be a way to leverage funding for larger linked projects. And – perhaps most importantly – these programs can get private landowners and other stakeholders to the table with the promise of financial incentives and regulatory assurances if the species ever is listed.
The cons? With all that flexibility, it can be pretty hard to agree on metrics or currencies. There are different rules at different levels. Stakeholder participation can lead to dilution of mitigation requirements. Since the programs are administered by government or some other third party, prices won’t reflect real market forces.
If you’re a banker, lower standards and the threat of being crowded out might make you a tad suspicious of HCTs.
If you’re a regulator, you might share the concerns about lower standards (especially those temporary offsets for temporary impacts).
Denisoff recognized the “inherent conflicts” between a centralized trading program like HCTs and the more individualized conservation banking system. But, he said, there are new opportunities for bankers in the arena: they’re in a great position to act as aggregators and experts. Rather than resisting HCTs, he said, bankers should take it on themselves to step in and find ways to drive up the quality of the work.
In the Friday morning plenary – a “Regulatory and Legislative Update” – Paul Souza of the US Fish & Wildlife Service (FWS) noted that the FWS had gotten quite a lot of feedback (presumably on many of these issues) during the comment period last year on proposed rulemaking on addressing candidate species. A big issue will be how those regulatory assurances work – in other words, how these habitat credits might carry over once a species is listed – so aligning standards is going to be critical.