Mitigation Banking: A False Panacea?

by Dipro Bhowmik

 

Imagine an untouched wetland. The mangroves stand stilted over the murky water, critters crawl inside the mud and over the gnarled roots of the trees. Fish swim between the splayed roots of the mangrove trees, while shrimp and tiny crabs bide their time in and around the water. The wetland protects the land further inland from erosion, from flooding and wave action. It provides a home for a myriad of species from tiny plankton to large birds. It is productive in the most inclusive, life-affirming sense of the word.

 

And yet, the wetland is far from the nearest town. It is close to a highway, but because it lacks human development the land value of the area is low. Now imagine a developer wants to build a bottling facility nearby, the activities of which would damage the wetland and all the species that live in it. Effluent runoff, building secondary roads, the constant grind of industry. How do we reconcile the economic benefit of the facility with the ecological damage of the its processes?

 

Every time a lawmaker pushes for commercial development in a particularly picturesque part of the country, the debate between economic development and ecological protection arises. Institutions – the government, large corporations, banks – have attempted to create instruments that try to reconcile this divide since the Clinton administration in the 90s. These include cap-and-trade systems (which curb emissions at the lowest cost) and tax-subsidy programs, which attempt to change prices to better reflect the social costs or benefits of, say, coal energy. A particularly interesting instrument is mitigation banking, which may have promise in preventing critical wetland degradation.

 

Mitigation banking allows companies or agencies whose activities are associated with ecosystem degradation to offset the damages through the preservation, enhancement, restoration or conservation of an existing ecosystem. Theoretically, in doing so the developer offsets any losses in ecosystem or biodiversity services. Companies buy credits from special banks, agencies that oversee the renewal of large swathes of habitat, which they can then use on projects that affect wetlands or streams. In the case above, the facility owner would buy credits from a mitigation bank, offsetting the environmental damage of their activities by paying for the renewal of a wetland somewhere else (a bank site).

 

At first glance, this seems like an economist’s dream. Mitigation banking maximizes the development potential of lands while offsetting environmental degradation by creating habitat elsewhere. Instead of halting development in areas surrounding wetlands, it theoretically allows companies to proceed with their activities while minimizing ecosystem loss. But economic theory is often worlds apart from economic reality, and mitigation banking has a number of very concerning flaws.

 

At a fundamental level, mitigation banking (and compensatory mitigation more generally) does not fully compensate for local ecosystem services. If a wetland is preventing flood damage in one part of a coastline, building over it and then restoring a wetland in a completely different area is not equivalent, because there may be different species in that area and the flood prevention potential of the area may be less. Instruments that maximize resource allocation must not only consider aggregate ecosystem area or services, but also the local context of where these ecosystems are.

 

In addition to concerns about location, mitigation banks have come under fire for not valuing restored ecosystems properly. Often credits are given for acres of restored land, a practice that ignores both the specific ecosystem services of an area as well as the quality of restoration. Put reductively, the destruction of a biodiverse and mature plot of forest, destroying habitat for hundreds of species, is not properly offset simply by removing an invasive species of weed in another forest miles away. Mitigation banking on a whole also may result in a net loss in wetlands, as some banks preserve and enhance existing wetlands instead of restoring new ones.[1]

 

Many mitigation projects use different metrics for valuing the site to be developed over and the mitigation bank site. A study in 1993 found that land being developed over was assessed using the widely used “rapid assessment methods” while at bank sites they used a combination of RAMs and an assessor’s professional opinion.[2] A 2009 study into mitigation banks also found that only 40% had either reached their restoration target or were on track to reach it, while 17% were not on track to success.[3]

 

Even considering its shortcomings, mitigation banking does have some potential. It forces developers to incorporate an important ecological component into their project assessments. Research into creating global metrics for assessing ecosystem decline (like the IUCN’s nascent Red List of Ecosystems) could also prove useful for providing much needed insight into the aggregate health of particular ecosystem types. Tools that redistribute ecosystem services, like mitigation banking and compensatory mitigation, could be expanded to cover less ecologically critical habitats if there was a tool to assess the necessity of a habitat. If they had more robust information to estimate the benefits of ecosystems, future instruments could, say, require compensation for every plot of undeveloped land (whether undisturbed wetland or secondary forest).

 

Mitigation banking, in theory, makes it seem like we can translocate wetlands from economically viable parts of the country to parts that are less developable. But there are significant flaws in the system, both in valuation and enforcement, making mitigation banking an imperfect way to reconcile the environment and economics.

Comments:

Grace: I agree with the apparent unfairness in the mitigation banking system’s current way of determining equivalent offsets for the environmentally-destructive actions of companies, as well as the idea that, in this case, a swath of land destroyed in one location can be neutralized by the mere conservation/preservation of a similar swath of land elsewhere. However, I would have liked to read at least one or two short accounts of instances where such judgment has been carried out (in fact, it would have made a great introductory hook). I would also have liked more explanation for some of the terms that you use—“rapid assessment methods” and “assessors,” to name a few. I can guess at the inefficiencies of “rapid assessment methods,” but I would still like to have a better idea of exactly what such methods entail, as well as how “assessors” actually operate.

This blog post also reminds me of a common problem that I see across many environmental issues—the lack of sufficient data to use in taking decisive action. At some point, it is no longer sufficient to merely acknowledge that we are facing environmental problems—we have to start dealing with specifics, with hard numbers. I wish we would see more incentives for scientists to research alternatives to our current environmentally-destructive practices, or at least to gather data to show us just how bad some situations are; this would do a great deal in justifying environmentalists’ concerns and encouraging/directing action.

 

Diana

I really liked your response—I thought you did a great job outlining the promise and drawbacks of mitigation banking. I’ve never heard of this technique before, but as you were describing it I realized that a very similar solution has been proposed to address climate change. In my Politics of Climate Change Class, we talked whether developed countries should be permitted to offset their carbon outputs by facilitating CO2 reducing projects in developing countries, rather than cutting their own domestic carbon emissions. To me, that seems to not address the root of the problem. It allows developing countries to continue to rely on carbon intensive industries and not learn how to make their development and production more sustainable. I think a similar problem exists with mitigation banking in general, as you’ve identified. While offsetting ecological harm somewhere else might seem to make some sort of net zero effect, I don’t think it’s really a long-term solution to learn how to live, develop, and produce sustainably. But perhaps it’s our best solution?

James

Nice article Dipro. I didn’t really know much about mitigation banking myself. It seems to me like there are two main issues facing the viability of mitigation as a practice: site evaluation and accountability. To maximize the effectiveness of this program in neutralizing the negative effects of land development it seems like there needs to be a better system of site evaluation. Specifically, both the site being built over and the bank’s site need to be compared. It’d be interesting to see if researchers can come up with more universally accepted functions which would evaluate the magnitude of land development impact and what habitats/resources were being affected. Then we could have more confidence that the mitigation banks could pick a site that would restore similar habitats.

Secondly, your article highlights a problem with accountability on the part of mitigation banks. There must be issues with the program if 17% of sites were not on track to being restored. Either the funds coming from the companies aren’t enough or the projects aren’t being managed properly. This does seem like a promising practice though.

Jessica

Thank you for this thoughtful piece about mitigation banking. I agree that theoretically this instrument could help resolve the conflict between environment and economy in terms of development projects. However, given the statistics provided in this post, it seems that the restoration projects are rarely effective, and in many cases work towards preserving an existing wetland as opposed to recovering a damaged one. For the time being, I would advocate against the use of mitigation banking, because it may provide a way for a company to claim they are causing no net environmental harm when in fact they are destroying irrecoverable ecosystems.

 

Delaney

This post does an excellent job of explaining mitigation banking to someone (like me) who is unfamiliar with the concept. I like the fact that you carefully trace the ways in which it seems like an appealing idea before explaining that there are some major pitfalls to the project of mitigation banking. I was specifically interested in your argument about the fact that enhancing or creating a wetland somewhere else does not equally offset the value of the damaged wetland, and it makes me think about so many projects today that seem environmentally friendly by “planting a tree” or “creating a pond” without thought to the specific species, food chain, or ecosystem that is trying to be made up for. What if the wetland has a specific set of species that cannot survive anywhere else? All to often we think about “wetlands” or “ecosystems” as comparable regardless of their location, but you’ve done a great job outlining the important differences regarding these environmental areas.

Claire

Hi Dipro,

Great article. I think the conversation about mitigation banking is very often simplified to the transferring of dollars from one place (the company) to another (the land) without taking into account how difficult it is to actually restore an ecosystem in an area that has been heavily developed. I think the greatest advantage of mitigation banking is that the land itself holds the value, and not the company who is thinking of developing; for instance, if the EPA might deem some parcels of land particularly valuable, and place a mitigation requirement on that land. Thus in perpetuity, any developer who holds responsibility for that land must pay for its’ preservation, a quality that is passed from landowner to landowner.

That said, I do think that this process is heavily flawed, in that there simply aren’t enough resources go around and do in-depth, longitudinal studies of every at-risk piece of land that needs to be conserved. If we were truly able to predict and plan on how to best preserve an incredibly complex ecosystem, and then assess how industry of any kind might affect that ecosystem, we wouldn’t be having this problem at all. Yet as the debate of mitigation banking goes on, I certainly do think we need more independent modeling of how an ecosystem will react to development, and we need it to be the first step before any industry becomes involved.
 
Bryce
 
“No net loss.” Those are the words propagated by the U.S. Army Corps of Engineers (USACE). The statement is clear as day, but the results are not always so. Section 404 of the Clean Water Act requires that discharging into or dredging (more technical terms that usually ends up meaning “develop over”) a wetland be a last resort option for a developer, an act that can only be permitted with the issuance with a Permit after a lengthy process of hearings and opportunity for public discourse. The specific acreage of wetlands (or endangered species habitat — a separate form of credit permitted by the USFWS) to be disturbed must then be compensated for via the purchase of credits from a mitigation bank. As you note, there can be problems with this. However, I also think that one should be careful not to present mitigation banking as a “willy-nilly” operation where every proposed restoration and subsequent disturbance is easily permitted. The process of approval is tough and lengthy, requiring an IRT (interagency review team) to review all materials separately and then together. These IRTs can consist of anywhere from 2-5 different agencies depending on the state and the type of habitat.

One issue you presented is quite warranted, and that is the issue of location. Should a wetland be developed over in one area, who is to say that this disturbance will be offset by mitigation in the same general locus? The USACE has delineated particular watershed basins throughout the US so as to keep mitigation credits and proposed developments within the same region. However, as you note, even with this in mind, a developer might put a factory on one tributary of a river while buying credits made on an entirely different tributary 20 miles upstream. The purchase of credits (from whom and where) is something discussed by the IRT, but there is no hard policy regarding the proximity of the credit to the area of disturbance. This is something the USACE could consider in the future to further augment its “no net loss” policy.

Another issue that has recently come up in North Carolina is “credit stacking”. NC offers two types of mitigation credits — wetland and nutrient banking. However, banks are permitted to resell the same acreage for one type of credit after having already sold it for the other. In effect, this means that there is a net loss in restored habitat since the same site is reused for multiple mitigation purposes. This is in direct conflict with the “no net loss policy” and is something that threatens the already shaky ground of mitigation banking’s effectiveness.

 

[1] Brown, Phillip H., and Christopher L. Lant. 1999. “The Effect of Wetland Mitigation Banking on the Achievement of No-Net- Loss.” Environmental Management 23 (3): 333–45. doi:10.1007/s002679900190.

[2] Robertson, Morgan M. 2004. “The Neoliberalization of Ecosystem Services: Wetland Mitigation Banking and Problems in Environmental Governance.” Geoforum 35 (3): 361–73. doi:10.1016/j.geoforum.2003.06.002.

[3] Reiss, Kelly Chinners, Erica Hernandez, and Mark T. Brown. 2009. “Evaluation of Permit Success in Wetland Mitigation Banking: A Florida Case Study.” Wetlands 29 (3): 907–18. doi:10.1672/08-148.1.

 

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