Risks and regulation within conservation banking in the USA

Biodiversity offset regulations are imposed to developers as the obligation to compensate biodiversity losses that their action may produce by some form of biodiversity gain in the vicinity of the damages. Among several forms of economic systems, environmental banks including habitat/ conservation banks and mitigation banks are acknowledged by public regulators for their ability to lower ecological risks. This preference is justified by the idea that the development of banks and thus of a market for environmental credits (instead of internalized or demand-driven projects) reduces ecological risks by insuring the restoration of biodiversity before the making of damages. Studies on the US case show that environmental banks allow reducing ecological risks but enhance entrepreneurial risks (BenDor et al, 2011). This paper pushes further such an analysis by questioning the way risks are expressed within the US banking system. Through the analysis of tools developed and used by the bankers and the regulators, the US case shows how risks are regulated and what type of assemblage is produced for this matter. Gathering data on the US environmental banking system has been carried out through four mains ways: first, participating in the 20th Annual National Environmental and Mitigation Banking Conference, second following a training course for regulators on the making of environmental banks; third conducting interviews with regulators and bankers; and fourth by in-depth examination of quantification methodologies. The paper explores how scientific tools (quantification methodologies, performance indicators), legal instruments (conservation easements), financial instruments (long-term endowments, insurance contracts) and institutional ones (federal agencies' templates and permits) are brought together among a network of economic actors, scientists and regulators aiming at the production of environmental assets. It explains how federal and State agencies are the central institutions of risk management as they are in charge of controlling the economic viability as well as the ecological performance of the banks. This double mission bears an inherent discrepancy as the regulators seek to favor a fluid market made of affordable environmental credits while aiming at the maximization of ecological value at the same time.