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Environmental compensation using Resource Equivalency Analysis (REA) and Habitat Equivalency Analysis (HEA): is it just for the birds?


  • Cole, Scott


Environmental compensation is the provision of natural resources through a restoration project, which is scaled to ensure the public is compensated for the environmental damage. The European Union (EU) recently implemented the Environmental Liability Directive (ELD), requiring that environmental damage be remediated (restored) so that the affected environment returns to (or toward) its baseline condition and the public is compensated for the initial damage and the losses during the time it takes for the environment to recover (interim losses). Equivalency Analysis (EA) represents a method for scaling compensation to offset interim losses. Compensation is a human-centric concept aimed at society's well-being which, among other things, depends upon a flow of environmental services (e.g., biodiversity, nutrient and carbon cycling, provision of recreation, etc). This study considers compensation scaled using a non-monetary (ecologic) metric, as in a Habitat Equivalency Analysis (HEA) or a Resource Equivalency Analysis (REA). Both HEA and REA assume the utility change associated with environmental damage and subsequent restoration is proportional to changes in an ecologic metric (e.g., acres of habitat, number of birds, etc). This study's objective is to examine the social welfare implications of resource-based compensation, with a focus on the distributive impacts across society (intra-generational equity) and between generations (inter-generational equity). Paper I develops an illustrative and hypothetical case study to demonstrate how one might apply EA to the case of bird mortality associated with wind power development. Paper II argues for the use of EA to scale resource-based compensation within the existing Environmental Impact Assessment hierarchy of impacts: avoid-minimize-compensate, with a particular focus on wind power development.

Suggested Citation

  • Cole, Scott, 2010. "Environmental compensation using Resource Equivalency Analysis (REA) and Habitat Equivalency Analysis (HEA): is it just for the birds?," Department of Forest Economics publications 2281, Swedish University of Agricultural Sciences, Department of forest economics.
  • Handle: RePEc:sua:sekowp:2281

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