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Biodiversity offsetting has quickly gained political support all around the world. Avoided loss (averted risk) offsetting means compensation for ecological damage via averted loss of anticipated impacts through the removal of threatening processes in compensation areas. Leakage means the phenomenon of environmentally damaging activity relocating elsewhere after being stopped locally by avoided loss offsetting. Indirect leakage means that locally avoided losses displace to other administrative areas or spread around diffusely via market effects. Synthesis and applications. Indirect leakage can lead to high net biodiversity loss. It is difficult to measure or prevent, raising doubts about the value of avoided loss offsetting. Market demand for commodities is on the rise, following increasing human population size and per capita consumption, implying that indirect leakage will be a rule rather than an exception. Leakage should be accounted for when determining offset multipliers (ratios) even if multipliers become extremely high. ; Peer reviewed

Biodiversity offsetting, which means compensation for ecological and environmental damage caused by development activity, has recently been gaining strong political support around the world. One common criticism levelled at offsets is that they exchange certain and almost immediate losses for uncertain future gains. In the case of restoration offsets, gains may be realized after a time delay of decades, and with considerable uncertainty. Here we focus on offset multipliers, which are ratios between damaged and compensated amounts (areas) of biodiversity. Multipliers have the attraction of being an easily understandable way of deciding the amount of offsetting needed. On the other hand, exact values of multipliers are very difficult to compute in practice if at all possible. We introduce a mathematical method for deriving minimum levels for offset multipliers under the assumption that offsetting gains must compensate for the losses (no net loss offsetting). We calculate absolute minimum multipliers that arise from time discounting and delayed emergence of offsetting gains for a one-dimensional measure of biodiversity. Despite the highly simplified model, we show that even the absolute minimum multipliers may easily be quite large, in the order of dozens, and theoretically arbitrarily large, contradicting the relatively low multipliers found in literature and in practice. While our results inform policy makers about realistic minimal offsetting requirements, they also challenge many current policies and show the importance of rigorous models for computing (minimum) offset multipliers. The strength of the presented method is that it requires minimal underlying information. We include a supplementary spreadsheet tool for calculating multipliers to facilitate application.