Mitigation banking is the preservation, enhancement, restoration or creation (PERC) of a wetland, stream, or habitat conservation area which offsets, or compensates for, expected adverse impacts to similar nearby ecosystems. The goal is to replace the exact function and value of specific habitats (i.e. biodiversity, or other ecosystem services) that would be adversely affected by a proposed activity or project. The public interest is served when enforcement agencies require more habitat as mitigation, often referred to as a mitigation ratio, than is adversely impacted by management or development of nearby acreage.
Mitigation banking around the world
In the United States, federal agencies (under section 404 of the Clean Water Act), as well as many state and local governments, require mitigation for the disturbance or destruction of wetland, stream, or endangered species habitat. Once approved by regulatory agencies, a mitigation bank may sell credits to developers whose projects will impact these various ecosystems.
Credits are units of exchange defined as the ecological value associated with converting a naturally occurring wetland or other specific habitat type, for economic purposes. Mitigation credits to compensate for riparian impacts may be assigned in relation to the linear distance of a stream functioning at the highest possible capacity within the watershed of the bank.
Credits are designated by an interagency Mitigation Bank Review Team (MBRT). The MBRT evaluates and permits a proposed Mitigation Bank. The MBRT may include representatives of various federal, state and/or local government agencies, including: U.S. Army Corps of Engineers, National Marine Fisheries Service, Environmental Protection Agency, US Fish and Wildlife Service, State Environmental Protection Divisions, Local Water Management Districts, County Environmental Departments and the Soil Conservation Service.
There are several advantages to drawing on mitigation bank credits. For example:
- Mitigation banks place a perpetual conservation easement on the land, with a trust fund specifically dedicated to long term management of natural resources inherent to the bank. By securing mitigation credits from neighboring ecosystems many large landowners, including the government, are able to maintain a property in its current management state (e.g. grazing, timber removal, low-impact recreation or education) while retaining ecological functionality, also called ecosystem services, important to the public interest.
- Mitigation banks usually provide greater benefits than on-site or small parcel mitigation efforts. Landowners PERC properties that are of higher ecological quality than the small parcel impacts they compensate for. By consolidating activities necessary to create, maintain, and monitor mitigation, banks are able to provide superior ecosystem services at a reduced cost.
- Mitigation banks provide many functional business advantages, allowing for ease of development. They allow a developer to maximize the use of a preferred development site rather than breaking up the site into sub-optimal property uses. Because mitigation bank credits are negotiated prior to development, hence prior to impact, purchasing credits from a mitigation bank decreases permitting time while also ensuring no net loss of habitat. The cost is often lower than other alternatives. Both regulatory and long term management risk is passed from developer to mitigation banker.
Despite policies mandating no net loss of habitat value and function, agencies have had difficulty ensuring that mitigation programs are managed to this outcome. Wetlands mitigation programs, for example, have in some cases been approved based on total numbers of acres rather than in terms of equivalence in ecological value or function. Merely assuming that the compensation involves a similar number of acres falls short of true equivalence unless the replacement ecological functions supplied by those acres are also the same.
- Enrivronmental & Natural Resource Economics 8th edition. Tom Tietenberg, Lynne Lewis. 2009 Pearson Education