Potential for Biodiversity Offsets as a Biodiversity Finance Mechanism in India - a presentation made at the CBD workshop on 'the role of private sector in achieving national biodiversity finance targets' at CII's 10th National Sustainability Summit in New Delhi on Sep. 16th 2015

1. Potential of Biodiversity Offsets
as a Biodiversity Finance Mechanism
in India
Divya Narain
CBD Workshop on
‘The Role of Private Sector in Achieving National Biodiversity Finance Targets’
10th Sustainability Summit, New Delhi

2. Key Points
 What are biodiversity offsets: types of biodiversity offsets
 Biodiversity Offsets as a Biodiversity Finance Mechanism(BFM)
 Principles and best practices of biodiversity offsetting
 Does India have offsetting in any form: Compensatory Afforestation
 Is compensatory afforestation biodiversity offsetting?
 Biodiversity Finance Gap in India
 Compensatory Afforestation Funds as a source of Biodiversity Finance:
Recommendations
 Potential for voluntary biodiversity offsets in India

3. What are Biodiversity Offsets
“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.” - BBOP
High biodiversity-footprint
development projects
• mining
• oil & gas
• large infra (ports, dams,
power plants refineries, oil
rigs)
• linear infra (roads, railways,
powerlines and pipelines)
Conservation Actions
• strengthening of ineffective protected
areas
• according protection to critical
unprotected sites
• establishing corridors and buffer zones
• reintroduction of species
• removal of invasives
Types of Biodiversity Offsets
 Regulatory
 Voluntary
 Restoration
 Averted Loss
 One-off
 In-lieu Fees
 Biobanking
 In-kind
 Out-of-kind
(trading up)
Impacts
• Loss of habitat
• Reduction in
abundance/diversity of
species
• Damage to ecosystem
structure and function

4. Offset
Last resort option to
compensate for
residual impacts
Avoid impacts on irreplaceable habitats, rare
or threatened species and sacred groves
Avoid
Part of The Mitigation Hierarchy
Minimize
Minimize impact through
design and management
Restore

5. • 45 laws, policies and programs active 20 under development
• more than 86,000 hectares of land conserved or restored
Source: speciesbanking.com
On the Ground

6. Principles and Best Practices
 Adherence to the Mitigation Hierarchy – irreplaceable and vulnerable habitats are a ‘no go’
 No Net Loss or Net Positive Impact - time-lag effects, and the uncertainties and risks
associated with actions such as revegetation
 ‘Like for Like’ or better – ecological equivalence
 Additionality – should not count existing initiatives
 Permanence – biodiversity benefits maintained over time
Source: BBOP; NSW Govt. Office of Environment Heritage

7.  Global Funding Requirements (Some Estimates)
 Global Shortfall in Protected Area (Terrestrial) Financing – USD 45 billion per year (Balmford et al. 2002)
 Funding a comprehensive Marine Protected Area System (20% - 30% oceans) – USD 5-19 billion per year
(Balmford et al. 2004)
 Conservation outside Protected Areas – USD 290 billion (James et al. 2001)
 Climate Change Adaptation of Protected Areas - USD 355-385 billion (Berry 2007)
 At COP 10 in Nagoya, 20 Aichi Targets set for 2020 – estimated finance needs USD 150 - 440 billion
per year
(Source: High Level Panel on Global Assessment of Resources for Implementing the Strategic Plan for Biodiversity 2011-2020)
 At COP 11 in Hyderabad, pledged funding for Aichi Targets doubled from USD 6 billion to USD 12
billion - still falls short by an entire order of magnitude
 Emphasis on exploring
 Innovative Financial Mechanisms
 Private Sector Funding
Global Biodiversity Funding Gap
Biodiversity Offsets as a Biodiversity Finance Mechanism

8. Conventional Mechanisms
Domestic Budgets
Official development assistance (ODA) - Bilateral
Multilateral agencies and International Financial Insitutions
International NGOs
Innovative Financial
Mechanisms
Biodiversity Offsets
Payment for Ecosystem Services
Environmental Fiscal Reforms
Markets for Green Products
Biodiversity in Development Finance
Biodiversity in climate change funding (e.g. REDD+)
As one of CBD’s Innovative Financial Mechanisms
• Goal 4 of the ‘Strategy for Resource Mobilization (adopted in COP 9) – explore
Innovative Financial Mechanisms
‘To consider biodiversity offset mechanisms where relevant and appropriate while ensuring that they are not
used to undermine unique components of biodiversity’
• Key mechanism to mobilize private-sector financing for biodiversity
 Allows for mainstreaming of biodiversity finance concerns in the corporate sector

9. • Biodiversity Finance Mobilized through Biodiversity Offsets – some estimates
 USD 2.4-4 billion in 2011 (Madsen et al, 2011)
 USD 1.8-2.9 billion (speciesbanking.com)
Examples of National(regulatory) Biodiversity Offsets
Programmes and the annual finance mobilized by them
Source: Scaling-up Finance Mechanisms for Biodiversity By OECD

10.  India has done pioneering work (among CBD signatories) – detailed assessment of domestic
biodiversity funding carried out
 Biodiversity Funding in India has hitherto been largely public ~ 2 billion per year
 Not enough to meet 12 national targets identified in the NBSAP – National Biodiversity Authority
under the process of estimating exact finance requirements under BIOFIN
Biodiversity Finance Gap in India
Total Estimated Funding for Biodiversity in India in 2013-14
Source: India’s 5th National Report to CBD 2014

11. ? Can Biodiversity Offsets bridge the Biodiversity Finance Gap in India?

12.  Compensatory Afforestation stipulated under the Forest Conservation Act, 1980
 In lieu of diversion of forestland for non-forest purposes by project proponents (user
agencies)
 User agencies deposit cost of compensatory afforestation (as per the rate fixed by the state)
of equivalent area of forestland or twice the area of degraded forestland
 Deposted with the Compensatory Afforestation Fund Management and Planning Authority
(CAMPA)
 In addition, NPV of the diverted land to compensate for the loss of ecosystem services
(recently-revised figure of NPV of a hectare of forestland ranges from a Rs 4.38 lakh to Rs 10.43 lakh)
 Rs. 38,000 crore (and accured interest to the tune of Rs. 6000 crore) collected from the user
agencies are lying unutilized with the ad-hoc CAMPA
 Proposed Compensatory Afforestation Fund Bill or CAF Bill, 2015
 Utilize the accumulated funds
 Institutionalize the process
Regulatory Compensatory Mitigation in India

13. Principle of Biodiversity
Offsetting
Does Compensatory
Afforestation Adhere
Description
Mitigation Hierarchy
• Through EIA and EMP
• PAs as no-go areas
Like for Like or better
(Ecological Equivalence)
• Only afforestation in place of old-growth
forests(usually artificial commercial plantations of
non-native trees)
• Tree plantation in lieu of other ecosystems e.g.
grasslands
• Misuse of funds for purchase of equipment and
building infrastructure
Additionality
Under new CAF Bill, govt. planning to use funds for
Green India mission (which is a part of NAPCC)
No net Loss
Afforestation record poor – most plantations fail , 40%
forests remain degraded
Non-forest land unavailable for plantation
Permanence
Afforestation site ownership to be transferred to state
FD and declared as reserved/protected forest
Is Compensatory Afforestation Biodiversity Offsetting?

14. Compensatory Afforestation Funds should be used for:
 Defragmentation and consolidation of existing blocks of old-growth forests – improve
connectivity and reduce edge effects
 ‘(i) Strategic land acquisitions (ii) Extinguishment of old leased lands in thickly forested areas (iii)
Voluntary resettlement of people from PAs (iv) Creation of wildlife corridors, and (v) Facilitating
natural regeneration of degraded forests’
 Mitigation of project impacts around PAs
 Traffic underpasses/Wildlife overpasses
 Assisted Natural Regeneration (trenching, fencing, fire prevention)
(Bhargav and Dattatri, 2015 in conservationindia.org)
 Additionality – Should Compensatory Afforestation funds be used to fund national
biodiversity targets?
 If yes, then there should be separate accounting – compensatory afforestation funding should not
replace government funding (Maron et al. 2015 in Nature)
Compensatory Afforestation as a source of Biodiversity Finance:
Recommendations

15. Voluntary Biodiversity Offsets in India
An increasingly important investor requirement – International Financial
Institutions and Private Banks
IFC Performance Standards
 Performance Standard 6 (PS6) –
 ‘In critical habitats, any significant residual impacts must be mitigated using
biodiversity offsets’
 India receives the 5th highest IFC investment in Extractive Industries (Oil, Gas
and Mining – high biodiversity footprint)
 Total Committed EI Portfolio in India in 2010 - US$ 205.3 M
 This investment is subject to the PS6
Voluntary Offsets will soon become the norm?
Afforestation activities carried out by corporates but as a part of CSR – not to
offset impact