3.4. Compensation

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Last update: June 2023
RATIONALE. Compensation

Scientific evidence shows that compensation as currently applied do not deliver the expected results (Curran et al., 2014; Gelot & Bigard, 2021; Maron et al., 2016). Offsets measures are complex and difficult to achieve (Gonçalves et al., 2015). The ecological outcome is uncertain for many management measures or ecological restoration, suggesting a need to narrow the gap between expectation associated with offset policies and the practice of restoration (Maron et al., 2012).

Given these limitations, over the years, impact mitigation science has been exploring other compensation alternatives such as for example, target based ecological compensation (Simmonds et al., 2020), the mitigation and conservation hierarchy (Milner-Gulland et al., 2021) or new methods in development led by the Science Based Targets Network (https://sciencebasedtargetsnetwork.org/). These alternatives rely on strategic spatial planning of restoration potential associated with ecological strategy defined at a broad scale (Kiesecker et al., 2009; Kujala et al., 2015). These approaches highlight the importance of master plan and spatial planning.

This evolution in the application of the compensation step should be thoroughly considered as good practices in the application of the mitigation hierarchy.

Definition and principle

Compensation is the last step in the hierarchy and has been introduced worldwide as a tool to balance the impacts of projects and reach the goals of NNL or NG. However, there is much disparity in the application of compensation amongst different countries. For example, in Europe, the regulation context varies across Member States but compensation is mainly applied through offset measures, in a like-for-like approach. Offset measures involve management of biodiversity to obtain measurable conservation outcomes and demonstrate that ecological gain has been achieved through the restoration or creation of the same habitat that has been impacted. The NG assessment must be equivalent to the NNL, both in value and type.

Additional accompaniment measures are often applied to improve the efficiency of the mitigation hierarchy implementation, but they do not count when documenting NG and NNL. Accompaniment measures can be proposed voluntarily by a project owner in addition to avoidance, reduction, and offset measures to reinforce the relevance and effectiveness of deploying the hierarchy.

The compensation step should be considered as the final resort and when all reduction measures have been applied and it is fundamental to achieve a NNL or NG goal. However, in practice, compensation planning commences early in the development process and the measures start with implementation. Several key principles govern the application of offsets and must be considered when implementing these measures, either by the infrastructure developer or offset operator:

  • Ecological equivalence (see Section 3.4.1 – Equivalence assessment methods for more details): the NNL associated with the impacts and the NG generated by any measure must be equal. In the EU, equality is undertaken by the compensation designer with any method deemed appropriate. National guidelines exist but are not generalised across the EU or adapted to any circumstances of implementation. Development of prescriptive guidelines would be of benefit to the efficiency of designing offset measures. For most Member States and depending on the national regulatory context, compensation must be implemented ‘like-for- like’, and ecological equivalence must be assessed comparing the NG and NNL.
  • Efficiency: the implementation of compensation measures must be efficient, meaning that prior to the commencement of any project, the NG to be generated by the measure are justified by the compensation designer, who is expected to use operative or scientific experience to demonstrate the expected success.
  • Longevity: in keeping with the principle of equivalence, measures to provide ecological NGs must continue to deliver these benefits for as long as the project´s impacts last. A classic way to ensure the longevity of offset measures is to secure the control of land and property adjacent to the infrastructure either via outright ownership or the participation of owners. However, this solution can create conflicts of land use and generate an economic toll because of the cost of implementing the measures. Ensuring a transparent and participatory process with landowners is one way to promote cooperation around compensation measures and ensure longevity as a result.
  • Additionality, both technically and financially: compensation measures are implemented with both the technical and financial means in additional to the current and projected management of the area. To ensure this additionality, cooperation with local stakeholders, public, private is strongly recommended.
  • Proximity: offset measures are designed in association with a given impact to ensure that they function close enough to the location of the impact. This proximity ensures, for example, that species present in the impacted area can reach the compensation location and therefore maintain their ecological function. This proximity is currently often assessed geographically, while good practice is to integrate functional connectivity in the assessment. Functional connectivity provides a description of the ability of species to explore the landscape, in order to reach habitat where they can reproduce, find shelter and feed. Ideally these assessments should be done in early stages of compensation design measures so that the probability of success can be also evaluated.
  • Sustainability: the minimisation of supplementary impacts must be respected to ensure the sustainability criteria of compensation measures. This sustainability must be demonstrated and justified during the design of compensation measure and be observed during their execution.

Two systems exist concerning the implementation of offset measures, either ‘on-demand’ or through ‘compensation banking’.

  • On-demand compensation relies on the developer’s own initiative. According to the ecological assessment, the developer (or a compensation operator working for them), design compensation measures with respect to the different key principles listed above. This then justifies their designs to the regulators and their permission to implement them. This process is integrated within the environmental assessment as part of the mitigation hierarchy, in cooperation with the stakeholders, and is subject to authorisation by the regulator. Here the developer is responsible for the success of the measure (as required by the efficiency principle) as well as its longevity. To date, compensation is mostly implemented on demand as ‘stand-alone’ operations.
  • Offset banking (further developed in Section 3.5.1 – Cumulative impact management in Strategic Planning) is an alternate system where measures are executed in advance by an offset operator. The operator generates justified ecological gains, demonstrating longevity, additionality, and sustainability to the regulator, and the measures are made available ‘for sale’ to developers. In respect to equivalence and proximity, the developer can ensure ecological gains using a financial mechanism which takes into account the wider area and is supported on a long-term basis by the supervision of authorities. The implementation of compensation banking is, however, highly dependent on the national regulatory environment.

Finally, accompaniment measures are considered part of compensation as long as they occur within the context of the mitigation hierarchy and are expected to enhance the efficiency of other measures or improve biodiversity gains. Accompaniment actions should not count towards NNL/NG quantification because they are not specific to the impact generated by the project. Nevertheless, they are important because they create the enabling environment for offsets to succeed.

Some examples include:

  • Land preservation,
  • Financing or participation in the financing of various actions or structures,
  • Implementation of experimental actions or actions with strong uncertainties of results,
  • Governance,
  • Awareness-raising,
  • Experimental ecological engineering action,
  • Landscaping to accompany the project within and outside the right-of-way, and,

Communication or knowledge dissemination actions carried out by the project owner.


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