Saturday Extra

Biodiversity Banking is the latest economic tool, along with salinity trading and carbon credits, which, it is claimed, has the power to protect the environment without deterring developers.

Transcript

This transcript was typed from a recording of the program. The ABC cannot guarantee its complete accuracy because of the possibility of mishearing and occasional difficulty in identifying speakers.

Geraldine Doogue:Today we're going to start a special two-part series on a new idea in environmental protection: biodiversity banking.

This is the idea that you can use economic tools as a way of balancing development against environmental protection. Now supporters of biodiversity banking, claim that it's a win-win solution, but where have we heard that before?

Well Abbie Thomas, our producer, has been investigating, and this week she looks at how tools such as credits, trading and banking can be harnessed to the benefit of the environment, and she looks at cases where it has worked. Next week we'll hear from some of the critics.

Here's Abbie Thomas.

Abbie Thomas: Want to build a resort on a pristine patch of parkland? In future, you may be able to get away with it, as long as you deposit some cash into a biodiversity bank first. In these days of hard-nosed economic rationalism, it seems that the market may be coming to the rescue of the environment. While we continue to lose species apace, a new approach to conservation has emerged, which attempts to repackage biodiversity as a tradeable commodity.

TRADING FLOOR

Simon Smith: I think we've got some people in the community who will be apprehensive about taking this kind of approach, but on the other hand, the people who know most about biodiversity, know we've got to change what we're doing because our current approaches where we make decisions bit by bit, and someone comes up with an idea about how land should change, those bit by bit approaches are not delivering for us. We need a systematic approach.

Stuart Whitten:Marketplace instruments work well particularly where there are real costs incurred by farmers, by developers in producing these environmental services, but the other incentives aren't really well directed at solving. A good example is in rural landscapes where there is a real cost, a real and ongoing cost to a landholder from changing their management, that may reduce their viability and even more importantly, if you can design your incentives so that they get an ongoing message that this is really important, that society really values the contribution that you're making, it's important for you to think about how you can do that better, and you're rewarded for that.

In the marketplace, instruments work that we're trying to do. What we're critically really trying to link is the incentive to what society wants, rather than simply 'Have a new fence', or 'Have a new this', or 'Have a new that'.

Hugh Possingham: My main concerns will be these really about the fact that if you don't involve reconstruction of habitat, if you just say, 'I'm going to conserve this thousand hectares if you let me destroy that thousand hectares.' In the end that just means we destroy half of everything, which is not at all acceptable. So Australia's got to make a choice: how much more biodiversity does it want to lose? At the moment we're losing biodiversity as fast as we've ever lost it. Because there's an extinction debt, so the rule of thumb says that if you destroy 90% of the vegetation in a region, you'll eventually lose 50% of all species. But most of those species are still hanging on, but they will not hang on forever.
So there's this enormous time lag, and I say this is where both the time lag of restoration and the time lag of the extinction is where standard business practices of economics and market forces doesn't seem to deal with time lags. We're talking about time lags of hundreds or two-hundred or three-hundred years.

So what we know as ecologists, is that there is an extinction debt that we have to pay, by clearing so much native vegetation and degrading so much habitat, the number of species currently in the remnants still left, will decline, even if we do no more clearing. And they will decline over the next 100 or 200 years, and we could well lose say in the heavily cleared areas of the wheat and sheep belts for example, we would expect to lose 50% of all species, but we may have only lost 2% or 3% now. So we're actually on a very slow, it's like turning the Titanic around, basically. We can see the iceberg, we know we're going towards it, and we're going to sustain some damage whether or not we can save the whole ship, I don't know.

Abbie Thomas: Before we explore what biodiversity banking is all about, here's a quick Dummy's Guide to market-based instruments, which are the building blocks of environmental economics.

Stuart Whitten from CSIRO Sustainable Ecosystems.

Stuart Whitten: Marketplace instruments are one option that we can use to ensure protection of our environmental goods and services. What we're looking at here is looking at the signals that markets provide to people in order to encourage them to change the way they manage lands in order to protect these valuable services that we'd like to get.

Abbie Thomas: What sort of signals are you talking about?

Stuart Whitten: Well typically when a farmer for example, decides what they're going to do on their property, they'll look around at the sorts of crops and livestock management options that they can undertake; they'll think about what the beef market's doing, what the wheat market's doing, they'll think about what their land's capable of, and they'll make a decision about what they'd like to produce. Now what we want to do is to introduce into that range of decisions they can make, some environmental services that we value as a community in order to encourage them to think about how they might integrate those into their types of activities they undertake on their property.

Abbie Thomas: So where you say services, you mean things like what?

Stuart Whitten: Typically, we're talking about biodiversity, we're talking about salt movement in our landscapes, so salinity problems; we're talking about nutrients in our rivers; these are the things that cause our rivers to turn green when we'd rather them to be clean and blue, and we're also in some cases talking about carbon. They're the primary ones; there are some other important environmental services, particularly close to our cities, such as how views look to people who live in cities, and things like that. They're the primary ones that we're concerned with.

David Freudenberger: The concept behind biodiversity banking is Hey, wait a minute, every time we clear a patch of bush we're creating a debt. We're losing biodiversity, we're losing some of the services, can we create some credits by the private sector supporting revegetation efforts and efforts to conserve and enhance existing native vegetation in other places.

Abbie Thomas: That was David Freudenberger, and before him, Stuart Whitten, both from CSIRO Sustainable Ecosystems.

One example of a market-based instrument for environmental services is salinity trading. In the Hunter region of New South Wales, the State's Environment Protection Authority had a problem: too much salt from the local coalmines being discharged into the river. Deputy Director, Simon Smith.

Simon Smith: One of the most outstanding resolutions of a big problem that was upsetting a lot of people and causing harm was in the Hunter Valley. So over decades, mining had expanded and mining in that area produces excess saline water, and in the past the mines were discharging that water into the Hunter River and that caused the water to be too salty for farming and it was unhealthy for the river. And it got to the point where the community was divided because people were so negative, and so opposed to mining expansion that this was causing big problems for establishment of new mines which are very valuable from an economic perspective. So the way that problem was solved was to set up a scheme whereby we had real time monitoring all down the river, and we worked out calculations to say how fresh did we want the river to be.

Abbie Thomas: So this is real time monitoring as in what's the concentration of salt going by, that particular point at that particular time?

Simon Smith: That's right, yes. And monitoring stations at every single mine that recorded moment-to-moment whatever discharge if any would be permitted. And then we had a community building process; we decided how fresh the river needed to be, we set a specific measurable objective, and that's actually fresher than bottled mineral water, and then day by day we work out how much salty water could be put into the river and still be sure that the river would be fresher than that objective. And that turns into a calculation, a certain number of tonnes of salt on any particular day, and we had a credit scheme so there are 1,000 shares of that total, and people who operated mines or power stations, needed to buy some of those shares, and they were able to trade those shares. So the point is, that people who can find ways to avoid the need to discharge, they can sell their shares and people who can't avoid the need to discharge can purchase these shares. And since we put the scheme in, river salinity has halved and four big new mines have been established, and everyone's happy.

Abbie Thomas: So the credits aren't worth a specific amount?

Simon Smith: No, they're just traded at value, whatever it's worth the balance between supply and demand.

Abbie Thomas: But how did they actually do that? Like did they go through the Stock Market?

Simon Smith: No, we have an online registry where mining companies or members of the public can go in and register trades that they do. So we had a recent auction where we sold some credits, and that was open to the public, and to any of the mining companies or the other companies who wanted to bid, people registered and they had an auction and they purchased all of those, and then at the end of that, we updated our register on the web. So members of the public can look on our website now and go and see who owns what credits, what discharge is occurring and so forth. So in the beginning people were very apprehensive in the community, they thought, 'How can you buy and sell to do with the environment?' But I think what we've shown in this scheme is that by using that tool, making the market work for the environment, we can resolve big problems.

Abbie Thomas: Simon Smith also argues that you can apply the same basic economic principles that were used in salinity trading to managing biodiversity.

Simon Smith: We've recently released our plans talking about setting up a biodiversity banking scheme, and the limited market intelligence we have is that developers are now suddenly seeing the value of bushland areas as potential biodiversity bank sites, and some of them actively out there looking to buy them up in advance of their value increasing.

Abbie Thomas: So that's kind of biodiversity speculation.

Simon Smith: Well, absolutely, yes. And we welcome that, because what it means is the market recognises the ecological value of bushland, just like the rest of the community recognises it. So it brings those forces into harmony.

Abbie Thomas: These areas that are I mean these are potentially big enough to be national parks, are we talking about small areas? What kinds of areas?

Simon Smith: Well here's an example, so say for example there's someone who owns some land on the sort of fringe of a growing big city, and it might have some very high quality bushland, and say if it's in Sydney, that type of bushland is very much under threat because they've got 4-million people all trying to find a place to work and to live. And the farmer might not want to sell up. The market's telling him he should sell up because the land could be worth a lot of money for housing, and under this scheme, what would happen instead is he might meet up with a consultant specialist who could identify what type of ecological community was on the land.

And they might recognise that it's quite a valuable and rare type, and so they could enter into a partnership to permanently protect that and receive payment for the landowner to stay on the land and to care for it, to reduce weeds and pests and manage fire and so forth, but he could still live there, he can still do compatible activities, and then they're able to gain income from all of that by selling a biodiversity credit to somebody who's going to be developing another area.

Stuart Whitten: One example that myself and my team at CSIRO have been involved with, is examining the potential for using offsets to protect environmental services where a lot of hobby farms are being developed from previously fairly large farms in a shire in Victoria, that's Murrindindi Shire, not far from Melbourne.

Abbie Thomas: It seems Melbourne doctors are taking over the rural landscape, but Stuart Whitten believes they should be brought into line too.

Stuart Whitten: In that situation, these new smallholdings are fragmenting the landscape. You're getting lots and lots of little farmlets, hobby farms if you like, where previously you may have had one large block.

Abbie Thomas: With lots of bush on it, I presume?

Stuart Whitten: In some cases, a lot of bush. More importantly you're getting roads going across between the little bits of bush that are left, you're getting new fences put in place, you're getting variations; these new hobby farmers and so on, some of them like to really heavily graze their land, some of them do nothing on it, overall it's probably a fairly good mix, but you're fragmenting your landscape. Now what we're interested in here is that not all of the landscape is going to become hobby farms. There are some parts that are not suitable for various reasons; maybe they're flood plain, maybe they're higher ridges, maybe they're just not really near the current access roads.

But in terms of maintaining a mix of biodiversity across that landscape, we may be able to use some of those areas to protect and provide that where it's been damaged by the actual hobby farm development process. So we're looking at basically things like if you put in a new road, if you have to knock down a couple of trees as part of the hobby farm process, you have to plant others within a set portion of the landscape in order to maintain the services. And the critical thing there is knowing what you're maintaining and measuring it.

Abbie Thomas: But not everyone is happy with the idea of biodiversity banking. The New South Wales Environmental Defenders' Office put a submission into the New South Wales Department of Environment and Conservation's discussion paper on biodiversity banking.

EDO lawyer, Rachel Walmsley explains.

Rachel Walmsley: The EDO does support innovative tools and innovative new ways of looking after threatened species, because previous regimes haven't worked. However, the lack of detail was one of our main concerns about this proposal. Our basic concerns were first and foremost, offsets, which biodiversity banking is going to implement, should only ever be used as a last resort. Secondly, there really wasn't much information in what we were given by the government; it was kind of a glossy brochure.

Abbie Thomas: So with offsets, what were your concerns about offsets?

Rachel Walmsley: Our concern with that is that the mechanisms they use, it's not directly transferable to biodiversity. For instance, it's easy to measure how much salt or how much pollutant is in a point of water at a given point, but that doesn't transfer directly to biodiversity when you try and value or quantify the biodiversity value say of a little rainforest, or a patch of wetland.

Abbie Thomas: The idea of offering landholders and developers incentives to protect biodiversity by trading off one parcel of land for another, has much appeal to the market economy. But biodiversity is a complex thing, and trying to put a dollar value on different types of ecosystems, and the species they contain, is a brand-new challenge for biologists and environmental economists.

Next week, we look at how the number crunchers are going about turning biodiversity into tradeable units, and we also look at some criticisms of the scheme. Ultimately we ask will biodiversity banking actually save species?

Geraldine Doogue: And that was producer, Abbie Thomas, and more from her next week, when we'll hear some of the critics of these bold new schemes.

Guests

Simon Smith
Deputy Director-General, NSW Department of Environment and Conservation

David Freudenberger
Scientist, CSIRO Sustainable Ecosystems

Hugh Possingham
Professor at the Ecology Centre, University of Queensland

Stuart Whitten
Economist, CSIRO Sustainable Ecosystems

Rachel Walmsley
lawer, NSW Environmental Defenders Office