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Business.2010 newsletter: Agribusiness

Volume 3, Issue 2 - February 2008: Agribusiness

A role for biodiversity offsets in sustainable biofuels?

Nadine McCormick
Programme Officer, World Conservation Union
Sébastien Haye
Coordinator, Working Group on Environment, Roundtable on Sustainable Biofuels, Swiss Federal Institute of Technology
Development imperatives, rising energy demand, and concerns over security and climate change are leading societies around the world to re-examine their energy options. The pursuit of low-carbon energy has reinvigorated demand for renewable energy sources. Biofuels — liquid fuels derived from biomass — are, in particular, being promoted as a substitute for petroleum-based fuels in powering machines, including transport vehicles.

The biofuel equation
Whether biofuels have a positive or negative impact depends on the type of feedstock used, how it is grown, how and where it is processed and transported. On the positive side, if well-planned and managed, biofuel markets may create incentives for landscape restoration, such as developing abandoned and degraded lands, thereby promoting rural development. On the negative side, biofuel feedstock production may exacerbate existing adverse effects on biodiversity linked to agriculture, including land-use change and deforestation; soil degradation; water pollution and scarcity; introduction of invasive species; and increased GHG emissions.

Rural communities could potentially benefit from higher income resulting from local, regional and global biofuel markets, though weak tenure and access regimes and gender inequities may result in the further marginalisation of vulnerable groups such as indigenous people and their continued traditional use of nature.

Despite gaps in science and knowledge on potential impacts, investment in first generation crop-based biofuels carries on unabated, driven by government mandates and subsidies, thereby accelerating biodiversity loss through conversion of peat forests, rainforests, savannas and even ‘set-aside’ agricultural land.

Sustainability criteria
Governments, businesses and other organisations, realising that ambitious targets to increase biofuel production are unlikely to be met without significant imports, are calling for sustainability criteria for international biofuel trade. The European Commission’s target for a 10% share of biofuels in petrol and diesel by 2020, for example, is to be accompanied by the introduction of a sustainability scheme for biofuels.

The Roundtable on Sustainable Biofuels (RSB) — coordinated by the Energy Center at the Swiss Federal Institute of Technology, Lausanne (EPFL) — was established to develop global standards for sustainable biofuel production and processing, which can cover any possible feedstock and process in any region of the world. Principles and criteria are being developed with companies, governments, inter-governmental agencies and NGOs through the use of wikis and teleconferencing, as well as regional stakeholder workshops in producing countries. The aim is to create standards that are simple, generic, adaptable and efficient that consumers, policy-makers, companies, banks, and other actors can use to ensure that biofuels deliver on their promise of sustainability.

To accelerate the process, the Roundtable makes use, where possible, of criteria developed under existing initiatives such as the Forestry Stewardship Council, the Roundtable for Sustainable Palm Oil, the Renewable Transport Fuel Obligation (in the UK), and the Cramer criteria (The Netherlands).

The current environmental principles relate to conservation, soil, water air and biotechnologies. Up until now, discussions within the Working Group on Environment have primarily focused on biodiversity issues. After two rounds of consultation in 2007, the general principle on Conservation has been thoroughly debated and edited. It currently reads: “Biofuel production should avoid negative impacts on biodiversity and areas of High Conservation Values”.

Led by an Expert Panel on Conservation within the Working Group on Environment, a set of criteria on conservation has also been developed. Whilst the wording of several criteria remains to be finalized, a consensus was met on the general content of criteria — see table here.

A role for biodiversity offsets?
The time lag for effective implementation of the Roundtable’s criteria, due to be developed by mid-2008, means that more biodiversity will be lost through rapidly expanding biofuel markets. In answer to this, the Roundtable Working Group on Environment is currently debating the potential for using biodiversity offsets as an accompanying measure when biodiversity loss resulting from feedstock production cannot be avoided entirely. Just recently, New Forests, an Australian forestry investment firm, announced plans to offer biodiversity offset credits to palm oil producers in a conservation finance scheme for an area of Malaysian rainforest Yet, the issues surrounding this new concept are not straightforward.

The New Forests scheme simply offers credits to offset damage caused in producing 1 tonne of crude palm oil. For an effective offset, the challenge is to demonstrate ‘no net loss’ of biodiversity in a given location. This often requires substantial efforts to determine the baseline situation, quantify the impacts of the development as well as the offsetting conservation actions. Biodiversity offsets are currently applied to infrastructure projects: the question remains how relevant or feasible they are for agricultural developments for which impact assessments are rarely applied. The impacts of agriculture on biodiversity can be very hard to assess, particularly when production takes place across a large geographic area. While an individual farm’s impacts on biodiversity may not be significant, collectively, they can become nationally, regionally and even globally significant.

Furthermore, social impacts of biofuel developments remain a challenge to measure and compensate. Underlying issues of weak tenure and access regimes and gender inequities may prevent effective implementation of biodiversity offsets for impacts on the most vulnerable communities.

The Working Group has not reached consensus on the possible inclusion of biodiversity offsets in the wording of the criteria. Whereas several members from the Expert Panel promote the concept, others fear that an offset mechanism may be misapplied, enabling biofuel producers to reduce their efforts to avoid HCV areas and skip essential steps in the mitigation hierarchy. Another concern within the Group about biodiversity offsets is that once a valuable ecosystem is damaged, it cannot be replaced exactly, no matter how much effort is invested in the recreation of an ‘equivalent’ ecosystem. It is likely that a common understanding of the very definition of offsets and their potential for agriculture developments would bring more clarity to the Group’s discussions. The possible inclusion of market-based compensation mechanisms will be further debated at the implementation stage.

Recommendations to the CBD
the debate regarding the relevance of biodiversity offsets to the development of the principles and criteria for sustainable biofuels is ongoing, the pace of biofuel development worldwide continues to grow. Offsets may provide one vehicle for addressing the impacts of biofuels projects on biodiversity, but need to be complemented by other measures in order to address all of the sustainability questions associated with biofuels.

A principal recommendation, therefore, to SBSTTA and the CBD more generally is to encourage Parties and other Governments to support the development and application of biofuel production guidelines and standards, as part of a strategic environment and social impact assessment, alongside other measures such as biodiversity offsets where appropriate, to not only reduce the negative risks of liquid biofuel production on biodiversity but also to promote biofuel feedstock production that enhances ecosystems and livelihoods.

Nadine McCormick is Programme Officer, the World Conservation Union (IUCN) and Sébastien Haye is Coordinator, Working Group on Environment, Roundtable on Sustainable Biofuels, Swiss Federal Institute of Technology, Lausanne (EPFL).

Biodiversity Offsets are conservation actions designed to compensate for the unavoidable impact on biodiversity caused by infrastructure projects, to ensure “no net loss”, and preferably, a net gain of biodiversity. Offsets are only appropriate in the context of developments that are legal, and when the developer has first used best practice to avoid and minimize harm to biodiversity within a mitigation hierarchy. The Business and Biodiversity Offset Programme (BBOP) is currently developing a coherent, transparent and credible approach to biodiversity offsets. For more information, visit http://www.forest-trends.org/biodiversityoffsetprogram

See also: Wikipedia - Biodiversity Offsets