An environmental offset is an environmental project that is undertaken to compensate for environmental damage caused by some economic activity, such as establishing a mine or building some houses.

Policies that require developers to undertake or pay for environmental offsets are in place in many countries. Australia has offset schemes in each state and nationally.

Clearly, offset schemes have been popular with governments, but they have been controversial and unpopular with environmentalists. There are several reasons for this.

Firstly, some people reject the whole rationale for offsets, on the grounds that they allow firms to do environmental damage that should, instead, simply be prohibited. A problem with this uncompromising position is that, in most cases, if offset schemes were shut down, firms would still be allowed to make investments that result in environmental damage. Those investments have political support because they generate wealth and jobs and maybe votes. So, pragmatically, having an offset scheme can be better for the environment than not having one, provided that the offset scheme is effective.

A second concern is that many offset projects don’t actually deliver their intended benefits. For example, in their study of Western Australian offsets between 2004 and 2015, May et al. (2017) found that at most 39% of them could be considered effective.

If the failure rate is more reasonable than that obviously unacceptable example, then failure of individual offsets is not necessarily a fatal problem for a scheme, provided it is well designed. For example, the scheme might require that failed offsets be replaced, or that the required sizes of approved offsets be large enough to accommodate some failures.

The third concern arises from the fact that designing and implementing an offset scheme that is truly fully effective is a complex and challenging task. The high-level objectives of offset schemes are usually pretty good, but the various complexities and challenges mean that there are many ways in which schemes can fall short of meeting their objectives.

In subsequent posts in this series, I will outline a range of issues that sometimes hamper the success of offset schemes. I’ll try to suggest practical strategies that environmental agencies can use to address these issues.

In the past few years, there has been growing awareness of the complexities and challenges I will describe, and various Australian jurisdictions have been reviewing their schemes. Hopefully, these efforts to improve environmental offsets will be successful.

Further reading

May, J., Hobbs, R.J. and Valentine, L.E. (2017). Are offsets effective? An evaluation of recent environmental offsets in Western Australia, Biological Conservation 206, 249–257. Here

The offsets series

432. Environmental offsets 1. Introduction (this post)
434. Environmental offsets 2. The currency for measuring impacts and benefits
435. Environmental offsets 3. Risk of failure