bank—form an attractive alternative solution (Bekessy et al. 2010), with US wetland mitigation banking providing established examples. However, for certain biodiversity values, such as old-growth forests, and for averted-loss credits, the very long accrual time of such credits can be an economic limitation for offset providers (Gibbons et al. 2015). Carefully structured, stable policy that incentivizes the development of banks can help overcome this limitation. Along with appropriate trading rules, accounting approaches must be Accounting approach. designed to reflect the desired net outcomes of a given trade. Estimating equivalence in an offset trade requires drawing together information about the aforementioned technical elements—but this must be done in a mathematically appropriate way. For example, on calculated offset requirements undermine rigor and can result in inappropriate “discounts” even the best-run offset scheme failing to achieve no net loss. Crucially, impacts and offset proposals are still routinely assessed on a project-by-project or site-by-site basis, meaning that systemic failures of offset accounting and shortfalls in offset gains will be compounded across multiple trades and through time. Estimates of both losses and gains in units of appropriate currencies should be adjusted for scenario uncertainty and time preference (Overton et al. 2013, Gibbons et al. 2015). We know of no government schemes that do all of this, although some approximate the process (e.g., Miller et al. 2015). More often, the approach used to calculate the equivalence (in kind and amount) of biodiversity losses and gains is complex and obscure or based on simple multipliers, with no suggestion of an explicit attempt to capture uncertainty, time lags, and additionality (Box 1; Bull et al. 2013), although guidance on these aspects is increasibly becoming available (Overton et al. 2013, Gibbons et al. 2015).
bank—form an attractive alternative solution (Bekessy et al. 2010), with US wetland mitigation banking providing established examples. However, for certain biodiversity values, such as old-growth forests, and for averted-loss credits, the very long accrual time of such credits can be an economic limitation for offset providers (Gibbons et al. 2015). Carefully structured, stable policy that incentivizes the development of banks can help overcome this limitation. Accounting approach. Along with appropriate trading rules, accounting approaches must be designed to reflect the desired net outcomes of a given trade. Estimating equivalence in an offset trade requires drawing together information about the aforementioned technical elements—but this must be done in a mathematically appropriate way. For example, inappropriate “discounts” on calculated offset requirements undermine rigor and can result in even the best-run offset scheme failing to achieve no net loss. Crucially, impacts and offset proposals are still routinely assessed on a project-by-project or site-by-site basis, meaning that systemic failures of offset accounting and shortfalls in offset gains will be compounded across multiple trades and through time. Estimates of both losses and gains in units of appropriate currencies should be adjusted for scenario uncertainty and time preference (Overton et al. 2013, Gibbons et al. 2015). We know of no government schemes that do all of this, although some approximate the process (e.g., Miller et al. 2015). More often, the approach used to calculate the equivalence (in kind and amount) of biodiversity losses and gains is complex and obscure or based on simple multipliers, with no suggestion of an explicit attempt to capture uncertainty, time lags, and additionality (Box 1; Bull et al. 2013), although guidance on these aspects is increasibly becoming available (Overton et al. 2013, Gibbons et al. 2015).