Environmental compensation

Key conditions for increased and cost effective application

image of Environmental compensation

Environmental impacts are increasing due to human activities. The overuse of the benefits nature provides us is the direct result of our failure to put a price on these benefits. One way of addressing this is to require environmental compensation.

The purpose of the study is to provide Nordic Council of Ministers and national decision-makers with an overview of key conditions for increased, flexible and cost-effective application of compensation.

The study shows that for a relatively small cost society can make a significant investment in the provision of biodiversity and ecosystem services by requiring compensation.

The study outlines three main recommendations on how to increase the use of environmental compensation:

1. Stimulate supply of, and demand for, compensation

2. Clarify and supplement guidelines and legal framework

3. Strengthen Nordic cooperation on compensation




Impacts on the environment, including on ecosystem goods and services, are increasing due to human activities such as residential and commercial development, energy infrastructure, mines, rail and road construction, dredging, marinas, docks, piers as well as agriculture, forestry, fisheries, etc. Despite advanced planning frameworks and environmental standards in the Nordic countries, the cumulative environmental impacts over time are reaching unprecedented levels. Since most development projects have residual negative impacts and no environmental compensation is required, society is steadily losing important environmental resources and implicitly under-valuing these resources. This is costly from a social welfare point of view as it leads to a shortage of the valuable benefits that nature provides us, including biodiversity and ecosystem services (sometimes referred to as “natural capital”).


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