The challenges of compensating for ecosystem and biodiversity loss in oil palm agriculture.

1. Palmoil:
The challenges of compensating for impacts on
ecosystems & biodiversity
Kerry ten Kate
Director, BBOP

2. No net loss: Why bother?
Terrestrial species
Aggregated by Class
All spec ies
1.20 Birds 500
Mammals
N values
1.00
400
0.80
300
Index Value
N
0.60
200
0.40
100
0.20
0.00 0
1970 1975 1980 1985 1990 1995 2000 2005
Year
Sources: MEA, IPCC, UNEP-WCMC, IUCN, WWF, Mace

3. The challenge
• Aichi Target 5 (Convention on Biological Diversity)
By 2020, the rate of loss of all natural
habitats, including forests, is at least
halved and where feasible brought
close to zero, and degradation and
fragmentation is significantly
reduced.
• Given continuing loss of habitat,
how can we achieve this Target
without biodiversity offsets?

4. New solutions needed

5. Challenges for compensation
• What is a biodiversity offset?
What is compensation?
• Technical challenges
• Political challenges
• Possible solutions for palmoil:
a first sketch

6. The mitigation hierarchy
and biodiversity offsets
Net Positive Impact, NPI
+ ve
ACA
Ofs Ofs
Biodiversity Value
PI PI PI PI
Rs
Residual Impact
Mt Mt PI = Predicted Impact
Av = Avoidance
Mt = Mitigation
- ve Av Av Av
Rs = Restoration
Ofs = Offsets
Elements of NPI
ACA = Additional Conservation Actions
Source: Rio Tinto and Govt of Australia

7. Definition of biodiversity offsets
Definition
Biodiversity offsets are measurable
conservation outcomes resulting from actions
designed to compensate for significant residual
adverse biodiversity impacts arising from project
development after appropriate prevention and
mitigation measures have been taken.
The goal of biodiversity offsets is to achieve
no net loss and preferably a net gain of
biodiversity on the ground with respect to species
composition, habitat structure, ecosystem function
and people’s use and cultural values associated
with biodiversity.

8. Principles for biodiversity offsets
Principles for biodiversity offsets
agreed by all the BBOP members
1. No net loss
2. Additional conservation outcomes
3. Adherence to the mitigation hierarchy
4. Limits to what can be offset
5. Landscape Context
6. Stakeholder participation
7. Equity
8. Long-term outcomes
9. Transparency
10. Science and traditional knowledge

9. Compensation compared withgoals
Two options for policy offsets
A biodiversity offset :
Designed to achieve no net loss,
according to the BBOP Principles
Compensatory conservation :
Doesn’t meet the principles for biodiversity offsets, e.g.:
– Not planned to achieve no net loss
– Doesn’t quantify loss/gain
– Not established for long term implementation
– Impossible to offset the impacts
(too severe or pre-impact data lacking)
– Financial payment, not biodiversity result

10. RSPO and compensation
Plantations established between Nov 2005 and Nov 2007:
“Where the high conservation value (HCV) status of the
land is unknown and/or disputed, are currently excluded
from the RSPO certification programme, until an
acceptable solution for HCV compensation has been
developed.”

11. Challenges for compensation
• What is a biodiversity offset?
What is compensation?
• Technical challenges
• Political challenges
• Possible solutions for palmoil:
a first sketch

12. Technical challenges
with compensation
• Quantifying biodiversity impacts, losses and gains: measures,
currency, accounting model, spatial info, retrospective.
• Non-offsetable impacts
• Quantifying ecosystem services
• Designing a ‘fair’ and workable system that enjoys support

13. Political challenges
• Business case and corporate will for offset/compensation
• Designing a ‘fair’ and workable system
• Multi-stakeholder support – including government
• Integration with policy drivers (govt regs, IFC-PS6)

14. Challenges for compensation
• What is a biodiversity offset?
What is compensation?
• Technical challenges
• Political challenges
• Possible solutions for palmoil:
a first sketch

15. BBOP’scurrent priorities
BBOP work 2009-2011:
• STANDARD: Draft standard (July 2012) on
biodiversity offsets, with auditing protocols.
Improved through broader company experience &
internationally agreed by ? July 2015.
• PILOTS: More & varied pilots (sectors, countries)
• GUIDELINES: Improved guidelines on offset
design and implementation.
• POLICY: Country-level partnerships, advice on
offset policy development, land-use /bioregional
planning, aggregated offsets, conservation
banking.
• TRAINING: Training & capacity building
• COMMUNICATIONS: Communications and
BBOP’s work as a global forum

16. Possible solutions for palmoil
A system with 3 components:
• Compensation scheme for 2005-7
Indonesia and Malaysia
• Compensation scheme for 2008+
Clearer requirements
International, avoiding perverse incentives
• ‘No net loss’/ ‘Net gain’ (offsets)
for future clearing of non-HCV
from (?) 2013 onwards
integrated into RSPO PCI.

17. From compensation to offsets
for palmoil
Compensation • Can’t meet ‘offset’ standard ,as unknown impacts and retrospective
scheme • But scheme designed in sympathy with BBOP offset principles
• ‘Like for like or better’
2005-7 • Simple area x condition metrics that would deliver NNL if biodiversity
(Indonesia and known
Malaysia) • Focus on conservation rather than socioeconomic and cultural values?
• Implementation, including through bioregional conservation banking. A
range of different stakeholders could set up such conservation banks.
Compensation • AS ABOVE PLUS:
scheme • Ensure no perverse incentive to continue to clear in breach of RSPO 7.3
2008+ then compensate for less than the commercial gains of clearing
• Factor biodiversity livelihood and cultural losses into ‘compensation’?
(International)
• Offsets following BBOP Principles and Standard.
NNL offsets • Emphasis on landscape level planning.
(?) 2013 + • Companies follow mitigation hierarchy and RSPO guidance and do not
clear HCV biodiversity.
future clearing • Companies quantify the loss of biodiversity from residual impacts of non-
of non-HCV HCV biodiversity and undertake offset activities to achieve NNL/NG
• Implementation as above.

18. Outline method
Compile best available spatial and non-spatial data at landscape-scale, for impact sites and
potential offset sites / conservation banks
• landscape-scale eco- / bio- regions using contextual and biodiversity data
• pre-impact biodiversity at impact sites and neighboring proxy sites [incl. livelihoods]
• info at potential offset/conservation banking sites [incl. livelihoods]
Assess pre-impact biodiversity at impact sites (and/or neighbouring proxy sites)
Precautionary application of mitigation hierarchy (eg set aside areas, avoid fragmentation)
Define basis & criteria for like-for-like or better exchanges and metrics for compensation system
Identify offset / banking sites that meet like-for-like or better criteria for specific impacts. (Use
info on: threats, potential conservation gain activities, tenure, interaction with local
communities, historical rate of forest loss.)
Calculate residual biodiversity losses incurred at impact sites (area x condition basis).
Characterise biodiversity baseline at potential offset / banking sites. Explore conservation
activities that can provide biodiversity gains.
Define precise activities required at offset/banking sites to deliver the gains required. Establish
additionality tests and permanence requirements.
Establish compensation ratios and provide justification.
Cost the required activities and establish a credit pricing for offset providers.
Supporting brokerage system, performance standards/management contracts, auditing.

19. Thanks for listening!
www.
forest–trends.org/biodiversityoffsetprogram/
or contact: bbop@forest-trends.org

20. Biodiversity Offsets
SPARE SLIDES

21. BBOP structure
BBOP: Structure
Learning Network ≥1000 members
Advisory Group ~ 60 members
Country
Pilot Partner Pilot 7 ExComm:
Company Company
1
1 2 2 companies,
1 govt, 2 NGOs,
Country
Executive Country 1 bank, 1
Partner Committee Partner
Secretariat
2 Secretariat 4
Pilot Country Pilot
Company Partner Company 2 Secretariat:
4 3
3

22. BBOP Advisory Group
AngloGold Ashanti, Ambatovy Project, Arup, Cemex, CDC Biodiversité, Environmental Banc
& Exchange, Golder Associates, Inmet Mining, Markit Environmental Registry, New Britain
Group, Newcrest, Newmont, New Forests, Nollen Group, Rio Tinto, Response Ability, Inc.,
SLR Consulting, Solid Energy New Zealand, Sveaskog, Wildlands Inc., Winstone Aggregates;
Citi; European Bank for Reconstruction and Development; Global Environment Fund; Inter-
American Development Bank; International Finance Corporation ; KfW Bankengruppe;
Mizuho Corporate Bank
Dept of Conservation, New Zealand; Dept of Sustainability & Environment, Government of
Victoria, Australia; Defra, UK; Forestry Commission, Government of Ghana; Forestry Dept,
Sabah, Malaysia; International Union for the Conservation of Nature (IUCN); Ministry of
Agricultural and Rural Development (MARD), Viet Nam Directorate of Forestry; Ministry of
Ecology, Energy, Sustainable Development, and Spatial Planning, France; Ministry of
Environment and Tourism, Government of Namibia; Ministry of Housing, Spatial Planning,
and the Environment, The Netherlands; Ministry of Mines and Energy, Namibia; Ministry of
Natural Resources and the Environment (MONRE), Government of Viet Nam; Ministry of
Nature, Environment and Tourism, Government of Mongolia; National Ecology Institute,
Mexico; National Environment Management Authority, Uganda; Ramsar Convention on
Wetlands; South African National Biodiversity Institute; United Nations Development
Programme (Footprint Neutral Initiative); United Nations Environment Programme – World
Conservation Monitoring Centre; United States Agency for International Development
BirdLife International; Biodiversity Neutral Initiative; Brazilian Biodiversity Fund (FUNBIO);
Centre for Research-Information-Action for Development in Africa; Conservation
International; Ecoagriculture Partners; EcoTopia Science Institute Nagoya University; Fauna
& Flora International; Forest Trends; International Institute of Environment & Development;
Rainforest Alliance; Royal Botanic Gardens, Kew; The Nature Conservancy; Tulalip Tribes,
US; Wildlife Conservation Society; WWF-UK; Zoological Society of London

23. What is BBOP?
Aim:
Working collaboratively, to develop best practice in biodiversity
offset design and implementation based on agreed principles
and on-the-ground experience.

24. Products from Phase 1:
Available guidance:
www.forest-trends.org/
biodiversityoffsetprogram

25. Benefits of offsets for society
Benefits for government and society
• Balance economic development with biodiversity protection
• Support national conservation goals and targets.
• ‘No net loss’ is a better conservation outcome than typically results
from EIA.
• Help with land-use planning.
• Business takes responsibility for its impacts.
• Developers clear on what is expected of them: legal
certainty, efficiency and cost savings. Flexibility in
achieving conservation goals.
• New and additional financial investments in conservation.
• Livelihood options for local people, who will support
development projects.

26. Why should companies implement
biodiversity offsets ?
1. Legal requirements:
• Law requiring offsets (e.g. 30+ countries,
including US, EU, Brazil, Australia)
• Law enabling offsets (e.g. EIA, planning
law)
2. The business case
3. Investor Requirements

27. Elements of the Business Case
Biodiversity Offsets
e.g. Rio Tinto
Maintaining Access to Land and Resources is a key
driver in the Biodiversity Strategy Business case
• Access to land, sea and related natural resources
(directly, or through supply chains)
• Legal and social (functional) license to operate
• Access to capital and insurance
• Access to markets for products (old & new)
• Access to human capital
• A seat at policy development table

28. New lender requirements
Revisions to IFC Performance Standard 6
Equator
Principles
Natural habitat:
67 Banks & • Avoid (no viable alternatives within region on modified habitat),
Financial minimise, restore, then no net loss through habitat restoration
Institutions and implementation of biodiversity offsets.
Operating Critical habitat:
in 100 • No project unless client demonstrates net positive gains of
Countries biodiversity values for which critical habitat was designated.
• Mitigation strategy (described in Biodiversity Action Plan) must
90% of demonstrate:
global • No measurable adverse impacts on biodiversity values for
project which critical habitat was designated, and supporting
finance ecological processes;
• No net reduction in global and/or national/regional population
Project of any Critically Endangered or Endangered species; and
finance • Long-term biodiversity monitoring program.
over $10m

29. What is an aggregated offset?
A co-ordinated set of offset activities undertaken in one or more
locations to compensate for the combined, cumulative impacts of more
than one development project in a specific area.
Ecological advantages:
• Greater ecological value
• Strategic placement
• Avoid temporal loss of habitat
• Turns a liability into an asset
Administrative advantages:
• Easier ecological monitoring
• Reduces offset costs
• Transfer of legal liability
• Reduces permitting time Overlap between Galba Gobi IBA and
exploration & mining licenses
Source: World Bank, 2009

30. Phase 1 1 BBOP pilot projects
Phase BBOP pilot projects
• Shell International, GTL project, Qatar
• Newmont Ghana Gold, Ghana
• Anglo American platinum mine, South
Africa
• Sherritt Int’nal nickel mine, Madagascar
• Residential construction, USA
• Solid Energy coal mine, New Zealand
Ntronang
Akyem Deposit

31. How do you design
a biodiversity offset? Key steps:
Review project scope and activities (understand impacts) in context of regional
or landscape-level assessment)
Review the policy framework and context for the offset
Initiate stakeholder participation
Follow the mitigation hierarchy and identify the residual adverse effects
Decide on ‘metrics’ and quantify the residual losses *
Within the context of a regional or landscape level plan,
assess potential offset locations and activities
and the biodiversity gains they could achieve
Calculate offset gains and select appropriate offset
locations and activities (whether individual or
aggregate) *
Finalise and record the offset design (who, where, what)
and move into offset implementation

32. Three ways to implement offsets or
compensatory conservation:
• Developer and/or partners
(NGO, consultant, multi-stakeholder group)
undertake the offset
• Payment to a government authority ‘in lieu’
• Developer buys sufficient ‘credits’ from a
landowner or conservation bank to offset its
impacts.

33. COP10 Decision X/21
"Business Engagement”
• Invites Parties "to identify a range of options for incorporating biodiversity
into business practices that take into account existing developments under
various forums, including relevant institutions and non-governmental
organizations, such as BBOP".
• Encourages businesses and the private sector "to adopt commitments to
support the achievement of the three objectives of the Convention, for instance,
through the approaches set out in the Jakarta Charter and other initiatives at
both national and global levels".
• The Jakarta Charter states: "The concept of no-net-loss of biodiversity and net-
positive impact, as articulated by the Business and Biodiversity Offsets
Programme, is a practical framework for assessing efforts to implement the
Convention on Biological Diversity".
• Requests the Executive Secretary "to encourage the development and
application of tools and mechanisms that can further facilitate the engagement
of businesses in integrating biodiversity concerns into their work, such as,
consistent and in harmony with the Convention and other relevant international
obligations, certification, verification, the valuation of biodiversity and ecosystem
services, incentive measures, biodiversity offsets, etc".

34. An example:
Ambatovy project, Madagascar
• Large-tonnage nickel project
• Shareholders: Sherritt Incorporated,
Sumitomo Incorporated, Kores, SNC Lavalin
• Components:
– Mine site (approx 1,336 ha)
– 218km largely buried slurry pipeline
– Industrial complex: processing plant 2.6km2,
refinery, tailings 14km2, harbour 300m pier
• Construction began early 2007. Expected
life-cycle 27(+) years/
• Proposed composite offset:
• Off-site at Ankerana (endangered forest
ecologically equivalent to mine site);
• Improve conservation status of two forest
conservation areas within mine lease;
• Conserve forest area around mine footprint;
• Establish forest corridor between mine area
forests and nearby corridor;
• Support implementation of management plan
of the neighbouring wetland.

35. Direct and indirect impacts
Indirect Impacts
Unplanned settlement
Mine
Road
Road
Primary impacts
Direct impacts
Planned town
Planned town
Factory
Factory
Access to new
Access to new Expanded
Expanded
land e.g. forest
land e.g. forest Town
Town

36. Offsets compared with Environmental
Can’t EIA take care of it?
Impact Assessment (EIA)
• EIA rarely planned to achieve ‘no net loss’.
• Typically only requires avoidance/minimisation for some
impacts.
• Usually does not address residual impacts.
• Does not address all components of biodiversity affected.
• Often very site specific, without proper landscape scale.
• Often fails to address indirect and cumulative impacts.
• HOWEVER an offset can be integrated with the EIA process
to deliver ‘no net loss’!

37. Drivers of biodiversity offsets
Trends:
• More governments introducing or exploring policy on biodiversity offsets;
• More companies undertaking offsets voluntarily for business reasons;
• More banks and investors requiring biodiversity offsets as a condition for access
to credit or investment;
• More NGOs and civil society groups encouraging developers to undertake
biodiversity offsets; and
• BBOP set up to develop, share and encourage the use of best practice
Motivation: Business case:
1. Legal requirements in 30-50 • Access to land, sea and related natural
countries and EIA/planning law resources (directly, or through supply
in many more chains)
• Legal and social (functional) license to
2. The business case operate
3. Investor Requirements • Access to capital and insurance
• Access to markets for products (old & new)
• Access to human capital
• A seat at policy development table

38. How to measure loss and gain?
Metrics
(‘Amount’)
Even within ‘like for like’, not all hectares are equal!
Area alone is not a good measure
of ‘amount’ of biodiversity

39. Why you generally need a
Why you generally need a
bigger area for the offset
bigger area for the offset
Area of residual impact: 80 hectares
Condition before project: 90% of potential Condition before offset: 60%
Each hectare:
LOSS: 90% GAIN: 20%
Condition after project: 0% Condition after offset: 80%
Loss = 90% x 80 ha Area needed for offset =
= 72 habitat hectares
72 habitat hectares ÷ 20% = 360 hectares

40. Thresholds for offsets
Thresholds
High Impacts too severe to be
offset
Severity of impact on
biodiversity
What is the threshold?
Impacts can and should be
offset
Impacts too small to be
Low worth offsetting
What is the threshold?

41. Offsets and
Landscape level planning:
Landscape Vital! Planning
Level
• Landscape level planning is one of the BBOP Principles.
• Important for understanding the significance of areas affected by
impacts.
• Important for understanding how
to apply the mitigation hierarchy.
• Underpins offset site selection.
• Supports aggregated offsets and
conservation banking.

42. How to obtain conservation
How can offset ‘gain’ be delivered?
gains
Benefit-sharing possibilities….
• New or upgraded protected areas
• Community protected areas and contracts with
landholders (including payments for ecosystem services)
• Change in land-use (national or local level)
Benefit-sharing with local
communities: a good way to
improve conservation on
land outside protected areas!

43. Offsetting in Victoria: Overview
Offsetting in Victoria: Overview
Developers
Native Vegetation Credit
Register
Planning authorities
small impacts – ratios
─ local govt BushBroker
larger impacts – full metrics
─ state agency
Landowners Offset Banks

44. Key issues
How to establish whether and when an offset is appropriate?
Go/No Go Offsetable/Not Offsetable
Values Mitigation Hierarchy
Metrics: how to quantify impact losses and offset gains?
Structure & Composition Ecological Process and Function
Socioeconomic and Cultural aspects
Offset activities and location
Landscape level planning Delivery Out of kind and trading up
Implementation: how to make an offset succeed in practice?
Roles & responsibilities Legal structures, institutional arrangements
Financial assurance Monitoring, enforcement

45. Some impacts cannot be offset
Vulnerable:
High rate of loss, Little loss,
Imminent threat
degradation, degradation,
of extinction
fragmentation fragmentation
Irreplaceable:
No options for
conservation
Like-for-like or
‘in kind’ offset
Limited extent,
highly localised,
only
few/ no options Trading up
may be
Relatively appropriate
widespread,
many options

46. ( ) (
I z J c − K c = O z P c − Qc )
Thresholds for offsets
Metrics
• Biodiversity counts and measures
(what - is being exchanged, or lost and gained)
• A currency constructed from these data
(how much of what is being exchanged)
• An accounting model defining offset specifications
(how much of what is needed)
• Spatial information to identify potential offset locations
(where)
Need equity in type, space and time
Lots of loss/gain methods and measures, e.g.:
• direct or proxy (surrogate) measures
• site-level or context-dependent measures
• aggregated or disaggregated measures.

47. Benchmark approach: an illustrative example
Component Max. Value
(%)
Large Trees 10
1
Tree Canopy Cover 5
Understorey 25
'Site Lack of Weeds 15
Condition' Regeneration (woody) 10
2
Component Organic Litter 5
Logs 5
'Landscape Context' Component 25 3
Total 100
1: Benchmark site 2: Pre-impact site
3: Post-impact site 4: Post-offset site
4