In a speech delivered on Wednesday to free-market think tank Policy Exchange, Defra secretary Owen Paterson said the government is determined to pursue a "practical approach" to the environment.

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The speech came just days after the environment secretary was forced to defend the government's progress on green issues. A coalition of 41 wildlife and conservation groups released a review at the beginning of the week showing the government has been failing by its own standards on environmental commitments. The Defra secretary spoke of government initiatives and publications that have helped raise the profile of environmental issues in the UK and of policies he claimed will address problems facing the country's threatened habitats and rural communities.

Seeking to deflect criticism that his party's policy has returned to a strategy of 'growth at all costs', reviving the 1970s viewpoint that the environment is the enemy of business, Mr Paterson said he firmly believes that "a healthy environment and economic growth can go hand in hand."

He continued, "One policy which I believe has huge potential for improving the environment, and placing our biodiversity on a sustainable footing for the future, is that of biodiversity offsetting."

The government consultation on biodiversity offsetting, a controversial mechanism for dealing with conflicts between commercial and conservation concerns, opened in September and has recently concluded. Biodiversity offsetting trials are ongoing in six areas across the UK. Theoretically, offsetting means replacing biodiversity loss resulting from a development – once all other avenues have been exhausted – by creating new habitats of a 'higher value' elsewhere. The approach has been welcomed by business but attracted serious criticism from environmentalists who oppose the concept of 'like-for-like' trading of nature and argue it could amount to granting companies a "license to destroy."

Major farming groups have welcomed the new policy, which was first mooted in a 2011 government White Paper. Farmers stand to gain from the mechanism, which would provide income in the form of 'conservation credits' that they could earn and sell to developers for managing some or all of their land for wildlife.

Integral to the concept's success is the idea that there should be no attempt to offset 'irreplaceable' areas, such as ancient woodlands or habitats containing threatened species. Experts who have cautiously backed the idea have done so using strongly worded caveats that only resilient and common landscapes should be considered for offsetting. These people tend to think that development would happen anyway and that, by ensuring developers compensate for losses they cause, some positives could arise from destruction of habitat.

However, critics point out that natural processes and areas of relative wilderness are consistently undervalued, viewed in terms of the presence of a few key species, or of the 'ecosystem services' they provide. Many conservationists have pointed out that all biodiversity is unique and irreplaceable to an extent, and suggested that, as such, offsetting should never be considered a good idea. They also maintain that, under current plans, communities could lose cherished local habitats with no say in where new ones are developed.

Environment secretary declares support for offsetting

Nevertheless, speaking at Policy Exchange on Wednesday the environment secretary said, "Offsetting is a measurable way of ensuring that we make good the residual damage to nature caused by development which cannot be avoided or mitigated." He assured that, "[Offsetting] Guarantees that there is no net loss to biodiversity from development and can often lead to net gain. It will not change existing safeguards in the planning system but it makes it quicker and simpler to agree a development’s impacts to ensure losses are properly compensated for."

The think tank helped put biodiversity offsetting on the coalition government's political agenda through its Nurturing Nature report.

Mr Paterson continued, "Offsetting could help create a ready market for farmers, landowners and environmental organisations to supply compensation for residual damage to nature, providing long term opportunities for investing in our habitats and biodiversity. In a small and heavily-populated country such as ours, there will always be developments or infrastructure projects that require a trade-off between economic and social benefits and the natural environment."

International experience

The environment secretary said over 20 other countries are already successfully using offsetting, and added that UK advisers (including Ecosystems Market Task Force chair Ian Cheshire) had made the concept a priority recommendation.  He admitted, "Not all of these models would work here but we're looking closely at the US, Germany and Australia to see what lessons we can learn" and later added that "in Australia offsetting has reduced the number of applications to develop on native grassland by 80 per cent."

Talking at the Royal Society ahead of a high profile public debate last month, EJ Milner-Gulland, Professor in Conservation Science at Imperial College London and an expert on biodiversity offsetting, elaborated, "The big success [of the Australian experience] was quite counterintuitive – it was not that lots of native grassland was restored by developers, but instead that the offset regulations meant the number of planning applications for development in native grasslands dropped… So instead of offsetting, people were choosing to avoid causing damage to the grasslands in the first place. Which is a very good outcome." 

However, she continued, "Sadly another thing we can learn from experience abroad is how important it is to follow up on offsetting projects." Prof Milner-Gulland said that a follow-up review of biodiversity offsetting projects revealed that some had not been undertaken at all, some had not produced the expected biodiversity gains and others had been started but abandoned. Hardly a good advert for rolling out offsetting.

Even so, Mr Paterson said that offsetting would contribute to work under the Biodiversity Strategy published in 2011, which sets out the government's plan to halt the overall loss of England's biodiversity by 2020. The ultimate aim of the plan is to move from a net biodiversity loss to a net gain. It is being supported by cash injections under the Rural Development Programme (including investments of £400 million a year in agri-environment schemes), which are rewarding farmers for providing and improving habitats, according to the Defra secretary. He added, "I see offsetting as a potentially important tool to sit alongside this."

However, In October Professor Milner-Gulland warned, "The idea… that there should be 'no net loss' of biodiversity because of the development… sounds attractive in principle but is tricky to do, and to verify, in practice."

The government's plans for enacting its controversial policy were also slammed as overly simplistic by the Environmental Audit Committee (a committee of MPs that assesses government policy based on its green credentials). In its report, published earlier this month, the EAC criticised the proposed 20 minute assessment period for gauging the environmental value of a given area. The Wildlife Trust said in its evidence to the Committee, "Ecology is a complicated thing. At the moment, the metric is too simplistic even to capture effectively some of the value of those lower value habitats."

A further blow to the credibility of offsetting came in September 2012. Researchers at the University of East Anglia published the results of a five year study on salt marshes created under managed coastal realignment. They found these new habitats, either created by 'accident' or deliberately under the EU Habitats Directive (which dictates that new salt marsh must be created each time natural salt marsh is lost to coastal development or erosion caused by rising sea-levels), were devoid of many key species and were therefore failing to provide the "equivalent biological characteristics" to their natural counterparts demanded under EU law.

They stated plainly that their research "demonstrate[s] very clearly that marshes created by managed realignment are not biologically equivalent to natural ones" and said that current methods of biodiversity offsetting employed in the UK and throughout Europe are therefore "failing to satisfy the biodiversity requirements of the EU Habitats Directive."

Aside from the debate surrounding the mechanism itself, the biodiversity offsetting policy sits uncomfortably against the background of Defra's culls of badgers – Britain's largest surviving wild carnivore – which have involved three dramatic revisions of official population estimates in the past 12 months alone, and numerous missed targets. Questions should surely be asked around the plausibility of Defra and its associates' plans to successfully relocate complex natural systems that have evolved over thousands if not millions of years, and comprise a variety of interlinked species ranging from great to microscopic.