In an environmental offset scheme, the environmental impacts of a development project and the benefits of an offset project need to be compared quantitatively. To do that, it is necessary to decide on a “currency” or a unit of measure that will be used.

Different offset schemes define their currencies in different ways. Some schemes require strict like-for-like accounting. For example, if a specific area of habitat for a particular threatened species of fauna is cleared, the developer is required to implement, or fund, an offset project that generates equivalent benefits for that species (allowing for several other factors that I’ll describe in future posts). For example, this is the approach taken in the Australian Government’s scheme.

This approach is relatively inflexible, but if it works properly (a big “if”), it ensures that every type of protected matter is not adversely affected by development.

Some other schemes instead use an environmental benefits index of some sort. The benefits lost, measured using this index, have to be at least matched by the benefits gained in the offset project. For example, the Significant Environmental Benefit scheme in South Australia measures environmental losses and gains using quite a complex system that encompasses landscape context, vegetation condition and conservation significance.

This approach allows more flexibility in which projects can be done to offset particular losses. However, it comes with a risk that a critically endangered species is lost at a development site, but the developer finds it cheaper and easier to protect relatively common vegetation types, albeit over a larger area. Additional rules are required to avoid a race to the bottom.

I don’t have a strong view about which of these two approaches is better. They both have pro’s and cons. However, I do have a strong view that an offset scheme needs to have a well-considered currency for measuring losses and gains and environmental values. Unfortunately, not every offset scheme includes a clearly defined currency. Those schemes are unable to assess whether they are successfully offsetting the losses that occur, or to make rigorous judgments about how much a developer should be charged to relieve them of the responsibility of delivering an offset.

The offsets series

432. Environmental offsets 1. Introduction
434. Environmental offsets 2. The currency for measuring impacts and benefits (this post)