Habitat Bank – Finland

Smart innovation governance. A novel payment scheme for biodiversity conservation.

Actors degrading biodiversity compensate the loss they generate by buying offsets from landowners who restore and/or protect sites.

Biodiversity is a public good and has thus far been conserved with public funds and regulation. Yet biodiversity loss is generated by economic activities and actors. This innovation shifts the payment responsibility to the actors who generate loss. Ideally, this instrument generates new business opportunities for offset providers and develops into a market.

The case study idea and its early development are national. Finland is located in the north-eastern corner of Europe, with 2/3 of its land-surface covered with forests. These forests host a great share of Finland’s biodiversity, and also a majority of the country’ endangered species dwell in forests.

The idea of the Habitat Bank of Finland originates in an innovation Helsinki University launched science application competition in 2015, Helsinki Challenge, in which the idea was awarded second prize. The idea was led by Markku Ollikainen from the University of Helsinki with a strong team from the Finnish Environment Institute (SYKE), with Olli Ojala, Eeva Primmer and Minna Pekkonen. Since then, several companies and ministries, as well as many other intermediaries in Finland have taken on the idea and have commissioned small studies and pilots, mostly collaborating with the Habitat Bank team. The idea of the case is to generate offset supply for the Habitat Bank of Finland and piloting companies.

Biodiversity degradation must be halted. As government steering has not managed to stop degrading activities and public funds have not generated enough conservation activities, a novel solution is needed.

The innovation offers opportunities for companies degrading biodiversity, as they can compensate the degradation and reap responsible reputation benefits. Land-owners who can offer sites for restoration (and possibly do the restoration work themselves) have a new income opportunity, without having to undertake logging. Intermediaries supporting site assessment can gain business opportunities. Local people who might lose recreation areas because of e.g. building, can get new areas for recreation. Eventually, the innovation benefits forest biodiversity by increasing the amount of suitable habitat for species, and supports the provision of other jointly produced ecosystem services. Through these public good type ecosystem services, the entire society benefits.

As regards compensating degradation, this works only for activities that generate measurable degradation, e.g. through construction on a site with nature values (or road construction, mining, peat mining or drainage). Offering offsets works on sites where nature values can be improved with restoration.

Commercial forest management in Finland relies largely on a silvicultural practice that includes clear-cuts and thinnings, regeneration (with drainage), using native tree-species and additional natural seeding. Pressure on biodiversity is generated by the even-age management practices, which result in uniform forest structure (lacking structural heterogeneity, older forest stands, large deciduous trees, burnt wood, traditional open habitats and near-natural amounts of dead wood).

The idea of the Habitat Bank is so new that its fit with the Finnish legislation is only being processed at the moment. A recent study (Similä et al., 2017, In Finnish) showed that the current legislation allows the use of compensation in permit processes but there is no regulatory support for establishing offset markets.

An analytical challenge is calculating and matching the biodiversity losses and benefits across time, space and habitat types. A practical challenge is to find the matching sites.

Functioning habitat markets that support biodiversity conservation and restoration targets and steer private sector activities to avoid, mitigate and compensate their degrading activities, and shift the costs of conservation to their value chains.

InnoForESt is the first platform that allows systematic engagement of offset supply development. The case study joins an understanding of the Finnish forestry, forest nature management and forest biodiversity as well as the development of public-private collaboration in new policy instruments.

Please visit:
http://www.syke.fi/en-US/Research__Development/Research_and_development_projects/
Projects/Habitat_Bank/The_Habitat_Bank_of_Finland(39809)