TWN Info Service on Biodiversity and Traditional Knowledge (Aug25/05)
15 August 2025
Third World Network

Dear Friends and Colleagues

Fundamental flaws in biodiversity offsetting schemes

A recently published paper offers a comprehensive critique of biodiversity offset schemes and sheds new light on the current drivers of deforestation in Indonesia, a global biodiversity hotspot. The paper starts by acknowledging the global biodiversity crisis. It stresses that despite the urgent need for systemic solutions, the global policy response has increasingly favored market-based instruments, particularly biodiversity offsets.

However, from a broad meta-analysis of international studies, the paper finds that there is limited empirical evidence of the effectiveness of biodiversity offsets. They lack transparency, rely on arbitrary ratios, and do not genuinely compensate for biodiversity losses, especially those impacting local communities. Five key aspects with major failures are identified: data (e.g., simplification of the metrics for biodiversity value and poorly defined offset requirements), institutions (e.g., poor regulation and lack of transparency), ecology (e.g., lack of support of ecosystem mapping and failure to provide additionality), economics (e.g., further privatization, commodification and financialization of nature), and society (e.g., forest access restriction and unequal impacts for local communities).

The study further provides an evidence-based analysis of factors driving deforestation in Indonesia, like the mining of coal and other minerals such as copper, nickel, and bauxite, palm oil production, rice production, and infrastructure development. The discussion emphasizes the need for Indonesia to adopt an ecosystem approach, which would involve comprehensive mapping of ecosystem functions, excluding high biodiversity value zones from development, redefining the economic framework towards one of ecological economics, and moving away from flawed offsetting schemes.

With best wishes,
Third World Network

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Biodiversity Offset Schemes for Indonesia: Pro et Contra

Stanislav Edward Shmelev
Sustainability 2025, 17(14), 6283; https://doi.org/10.3390/su17146283

Abstract

Global biodiversity is in crisis, with wildlife populations declining 69% since 1970 (WWF). Preserving and restoring ecosystems is essential for sustaining life on Earth. However, many countries rely on market-based instruments like biodiversity offsets, despite little evidence of their effectiveness. This study critically examines biodiversity offsets, identifying institutional, data, ecological, economic, and social failures that undermine their success. Using Indonesia, a global biodiversity hotspot, as a case study, we develop an econometric model to analyze key drivers of deforestation. The findings reveal that biodiversity offset schemes are fundamentally flawed: they lack scientific credibility, rely on arbitrary ratios, lack auditing and transparency, create value conflicts, and fail to achieve “No Net Loss” even over a 100-year timeframe. Offsets do not compensate for lost biodiversity, especially for affected communities, and are rarely supported by ecosystem mapping or robust valuation metrics. Without major reforms, they cannot halt or reverse biodiversity loss. A stronger, evidence-based approach is urgently needed. Rather than relying on ineffective offset schemes, the global community must prioritize genuine ecosystem restoration and sustainable conservation strategies to protect biodiversity for future generations.