Evaluating offsetting as a component of biodiversity governance

Abstract

Biodiversity offsetting is considered to be an innovative policy instrument to balance land use changes with conservation priorities. Although advocates have pushed to establish biodiversity offset markets for over 20 years and critics have contested the social and ecological implications of such policy innovations, in practice, offsetting schemes have been difficult to set up, replicate, and sustain over time. Observing the underperformance of biodiversity offsetting, we argue that a critical analysis is urgently needed. We identify a need to analyze offsetting in relation to other features of biodiversity governance rather than focus on the merits and flaws of offsetting as a standalone policy instrument. Using a set‐theoretic model, we consider how different institutional arrangements determine if and when biodiversity offsetting produces positive environmental outcomes. We find that offsetting adds to biodiversity governance only when three thorny challenges are met—muscular enforcement of environmental regulations, rigorous impact management aligned with the mitigation hierarchy, and the existence of evidence‐based and cost‐effective platforms for offsetting. Short of these conditions, outcomes are either uncertain or outright harmful to biodiversity. Reflecting more broadly on the prospects of institutionalizing offsetting mechanisms for protecting biodiversity, we conclude a need to recenter attention toward the supportive role of the state in facilitating effective policy innovations.