Ecological and economic conditions and associated institutional challenges for conservation banking in dynamic landscapes

Protected areas are a cornerstone of current biodiversity policy. The continued loss of biodiversity, however, as well as the limited scope to extend protected area networks necessitates a conservation perspective that encompasses both protected areas and the wider landscape. This calls for policy instruments that can govern land use dynamics, simultaneously meeting demands for conservation (i.e. no net loss of biodiversity) and economic development. Conservation banking could be such an instrument, but only when certain criteria are met. Building on the theory of ecological networks, we combine ecological, economic and institutional perspectives on conservation banking to identify when and where conservation banking could be feasible. Economic prerequisites include sufficient market activity to match demand and supply. Adequate regulatory capacity is needed to design and enforce trading rules. From an ecological perspective, habitat turnover is least detrimental in large and well-connected networks. For many ecosystem types, those prerequisites will be rarely met in practice: sufficient market activity implies sufficient habitat turnover, but most ecological networks are not robust enough to buffer frequent habitat turnover. Therefore, banking is best limited to common and fast-regenerating ecosystem types (e.g. certain coastal systems, wetlands, nutrient-rich grasslands). Furthermore, conservation banking could be applied to a subset of the network only, i.e. the wider landscape, as a complementary instrument to protected area policy. With appropriate trading rules and institutional arrangements, the loss and gain of habitat could be governed to improve the spatial cohesion and size of ecological networks and the capacity of landscapes to support biodiversity.