Species on the Move: Considering the Future of Conservation Banking in the Face of Climate Change

Duke Master of Environmental Management and MBA candidate Bryan Graybill has spent the past year as a research assistant with the Restoration Economy Center, consulting on projects relating to mitigation for the impacts to species and habitat. In this blog, Bryan touches on the current state of compensatory mitigation policy and synthesizes academic proposals to adapt the system of conservation banking to a changing climate.

“A map showing the different pathways wildlife could use to migrate northward or higher in elevation as the climate warms (red=mammals, blue=birds, yellow=amphibians).“ Credit: The Nature Conservancy

Conservation Banking Background

Conservation banking has provided a market based mechanism for endangered species protection for over 30 years now by allowing landowners to develop habitat for endangered species on private land and sell credits to developers. Purchasing habitat credits for an endangered species in turn allows developers to offset the destruction of endangered species habitat in nearby locations. To incorporate a margin of error, habitat credits are sold at a ratio such that the habitat restored is always greater than the habitat removed (at a 2:1 or 3:1 ratio for example) and only after options for avoiding and minimizing impacts of development have been exhausted. 

As EPIC has previously noted, “...consolidated mitigation like conservation banks creates mitigation in advance of impacts and has been recognized in state and federal policies as a preferred alternative to ‘postage stamp’ offset projects (USACE 2008, USFWS 2023, CDFW 1995).” Under current federal policy (FWS Endangered Species Act Compensatory Mitigation Policy, 2023), land designated for conservation banks must be put in a conservation easement and protected into perpetuity, or in other words, forever. 

An Inconvenient Forecast

In a stable climate, placing conservation banks into permanent easements is pretty logical as this places permanent restrictions on the future development of that land, ensuring the long-term protection of endangered species habitat. As shifts in weather and temperature due to climate change continue however, the suitability of any given landscape to provide habitat for a given species will accordingly also shift, though it should be noted that the timescale of this process is highly uncertain. This presents a conceptual problem in that the conservation banks that provide essential habitat for endangered species today eventually may eventually no longer support habitat for these same species.

Current Policy

Fish and Wildlife have made it clear they are aware of the risk of climate change in their 2023 Endangered Species Act Compensatory Mitigation Policy. Specifically, FWS highlights how climate change may promote the adoption of compensatory mitigation in specific cases where mitigation and minimization may be difficult to maintain. For example in cases where “climate-change impacts (e.g., increased erosion rates from sea level rise [lead] to extensive coastal wetlands loss locally or regionally)” (FWS 2023, 4.1.2.1). Additionally, when considering the siting of conservation banks, FWS policy prescribes that, “The Service will rely upon existing conservation plans that incorporate the best available scientific information, consider climate change adaptation, and contain specific objectives aimed at the biological needs of the affected resources. When conservation plans incorporating all these elements are unavailable or outdated, Service personnel will incorporate the best available science into mitigation siting decisions and recommendations” (FWS 2023, 5.1). The inclusion of language around climate change is promising as it demonstrates that FWS will actively consider the impacts of climate change and the need for adaptation as they work with conservation bankers to develop successfully while maintaining a high degree of flexibility.

Proposed Solutions in the Literature

The need for policy change in light of climate change has not gone unnoticed in the academic sphere and there have been several scholars who have published ideas on how to adapt conservation banking. However it should be noted that these solutions all were published before the release of FWS’ 2023 ESA Compensatory Mitigation Policy and presents major alterations to current policy frameworks and as such are all theoretical as they need further research to evaluate their implementation. 

One solution published in a report in the Fordham Environmental Law Review has proposed a potential solution in the form of “stepping stone” habitats, in which conservation banks would be obligated to purchase additional land in exchange for additional credits if it is discovered their current property no longer serves as functional habitat. This approach has received criticism due to the significant capital costs this would incur in the form of new land purchases that may force conservation bankers to sell their historic conservation bank, a decision that many bankers may not want to take. Returning to the language with the FWS 2023 policy however, if federal biologists consider climate change adaptation as part of siting process for new conservation banks, it may be possible to organically fold this “stepping stone” connectivity into the current framework, reducing friction.

Another more radical alteration to the conservation banking framework proposed by environmental lawyer Nicholas Whipps in the Hastings Law Journal introduces the concept of “climate banking” (Whipps, 2015). A “climate banking” framework recognizes that species will migrate and suggests that bankers generate credits by following a specific species as it migrates, establishing habitat not just on one purchased piece of land but instead by identifying viable habitat the species may migrate to and working with private landowners through incentives to generate habitat for said species. The author suggests federal agencies/state governments would work with a “climate banker” who would be the designated entity managing the development of habitat and the accompanying sale of credits for an endangered species as they follow species migration across the landscape (Whipps, 2015). In this model, the “climate banker” would have the flexibility to observe where target endangered species are shifting to, and use the financial incentives of credits among other appeals to work with private property owners to allow establishment of suitable habitat. This solution is appealing for its flexibility and its potential for cost-savings as the banker would not have to invest in purchasing additional land, a fixed cost that affects the financial viability of conservation banks, especially when the value of land is high. Whipps notes that some flaws in this framework include that some private landowners may not be interested in participating, and that the cost of continuously restoring new landscapes to high habitat quality may prove financially nonviable.

The Need for Adaptation

While current compensatory mitigation policy includes promising language that signals the awareness of policy makers to incorporate climate-change adaptation into conservation banking policy, more concrete measures will need to be developed in the coming decades if we are to design a system that effectively protects species. As a recent report by EPIC on the difficulties of permitting conservation banks demonstrates, the conservation banking framework is already in need of a systemic update. In the process of addressing these issues, there is also an opportunity for policy makers and conservation bankers to collaboratively adapt the conservation banking system to address the implications of climate change and facilitate the development of banks that effectively conserve species on the move and efficiently compensate conservation bankers for doing so.