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Stacking And Unstacking: The Conservation And The Conversation

Wayne White and Jemma Penelope

Stacking And Unstacking: The Conservation And The Conversation

To build ecosystem markets, we’ve tended to break holistic nature into incomplete but measurable chunks of nature – and then we wonder why it’s difficult to bundle those chunks into something holistic. Maybe instead of stacking existing credits, we should be creating more holistic instruments.

12 March 2013 | Common sense would dictate that properties generating the greatest environmental benefit should also command the highest price in the ecosystem marketplace, and that one way to do that might be to let people stack different ecosystem values on the same patch of land. Attempts to implement this idea, however, often bog down on technicalities and charges that the user is trying to double-dip rather than earn fair compensation for ecosystem services delivered.

This is unfortunate, because we now have enough real-world examples to launch a real-world discussion about stacking and unstacking – as well as about whether the entire system needs to be reformed and rethought.

Wayne White of mitigation banking group Wildlands, Inc, and Jemma Peneloped of W2Consulting recently launched that discussion in an article in the National Wetlands Newsletter. We asked White to recap some of the issues they explored in that piece.

EM: We’ve discussed stacking before in Ecosystem Marketplace, why does it continue to be a topical issue? What’s happened on this topic since the term was first coined?

WW: I think it’s important to remind ourselves of the potential in stacking, and make progress elevating the idea of unstacking to next on the agenda. We wanted to refresh the dialogue and better capitalize or re-focus on those opportunities we were searching for decades ago when stacking was first discussed. By this I mean more comprehensive conservation, more private sector investment in mitigation, with greater ecosystem services. We feel that with more bankers credibly unstacking credits we’ll see greater investment and conservation – more than is currently flowing to stacked credits alone right now.

First you deal with the jargon used - what are some of the key terms within this discussion?

Bundling equals stacking: both refer to only the act of having approved credits occurring on the same unit of land or water. Now, conversely, unbundling equals unstacking. Here, bundled or stacked credits on the same unit of land or water are separated out and critically sold to separate buyers. Nothing actually explicitly forbid stacking credits, but when these credits come to being sold separately there are often concerns over double-dipping. This is where one unit of mitigation action is sold once, and then sold again, whereby that second buyer doesn’t actually compensate for their impact. And it’s this fear of double dipping – impacts going unmitigated - that has made unstacking so contentious.

We’re seeing stacked credits for sale on occasion, so the existing regulations have been able to allow this. What do the regulations say about unstacking?

In my/our article in National Wetlands Newsletter (NWL), I/we discuss how our early Californian trials with stacking assumed an indivisible ecological link. Even under separate regulatory authorities (ie CWA 404 and Endangered Species Act - ESA) there was an irrefutable overlap between the wetlands and the species’ habitats we were dealing with, so selling credits separately would be selling the same thing twice. These projects in California were carefully developed with accounting rules credits so both wetland mitigation and species could be conserved in a single bank. This overcame any double dipping risk, but also preventing any unstacking, which both Steve Martin and Valerie Lane discuss in their previous NWL articles.

Currently, RIBITS (Regulatory In-Lieu Fee and Bank Information Tracking System) records do show several stacked credits for sale out of banks in California and Florida, but in areas with ‘emerging markets’ for wetland and species mitigation such as the mid-west – we aren’t seeing the same kinds of banks being set up. The majority of credits being listed aren’t stacked, despite the benefits being well communicated within the industry. Given you’ve been able to watch this for a few years now, can you comment why we aren’t seeing it picking up the way some thought it would?

I think one component is that the typical example with wetland and Endangered Species just can’t be used everywhere. As you say, the newest markets for mitigation currently are in the South or the Midwest where few wetland-dependent species naturally occur, so even with the regulatory or economic tools in place from California or Florida simple biology can be a bit of a barrier. Some feel looking at wetland/species overlay is interesting, but that maybe California just got “lucky,” and it’s harder to take those lessons elsewhere than originally thought.

Fox’s 2008 Survey was somewhat of a benchmark within the mitigation industry as it demonstrated a consensus of recognition - legitimate stacking is possible (as desirable), with double-dipping being inappropriate, but clearly distinct from each other. What is likely to be the next stage of this debate?

More stacked credits on the market now means more examples to draw from so I think we’re now able to have a more critical, sophisticated discussion. We can talk specifically about policy, regulation and implementation and this will be key to identify where there are indeed real opportunities to take the next step and unstack, without double dipping.

We need to look at some of the assumptions that were made when interpreting the regulations during the early Californian trials. The agencies established the necessary accounting assures that stacked credits are not over-sold or sold to offset more than one impact, and these have shown to be as strong as they need to be so we know we can safely stack credits now.

By looking carefully at intent of the regulations, we’ll be able to move towards legitimately unstacking credits when the right ecological and regulatory conditions occur and allowing bankers to create stacked credits on more potential bank sites.

Your article suggests there hasn’t been the growth many have expected. With policies still evolving in many areas it seems the idea of stacking ecosystem credits hasn’t yet reached full potential as many people and companies continue to be very interested in stacking components such as carbon sequestration and water nutrient reduction. Why do you believe that despite the motivation, no-one has yet gone on to sell commercially-viable credits?

I think we’ll need to broaden the outlook and in the article I mention the different ecosystem elements people are becoming interested in stacking - forest species and carbon, water quality or streams and associated watershed species. Others are quietly looking at these other resources such as water quality or carbon as well and we can see how much interest and potential there could be in water-quality trading with the new Ohio Basin River Trading System, and the Chesapeake Bay programs. Even so we’re still waiting for the legal framework to make it possible in many places. Carbon credits are a good example - currently only the voluntary carbon offset market is quantifiable plus the economic value for a carbon credit is much less than wetlands, water quality or species/habitat credit.

While recognizing potential limits of biological suitability some have suggested a template or clear stacking protocol could offer the certainty to regulators and investors, and encourage more to create stacked banks? You mention how Layne’s article demonstrates that the accounting is technically feasible, but there is a level of potential complexity and technicality that you think needs greater consideration.

In the article we/I wanted to encourage readers to recognize the challenges involved when trying to implement a generalized-enough approach accessible to all regions and ecosystems, while being specific enough to adequately demonstrate double dipping hasn’t occurred. The accounting depends on the biology of the species involved, but then there is a conflict between consistency in policy across agencies and authorities, and the biological diversity across regions. Even with a resolution to that challenge, the economic argument is also important - there’s danger we design guidelines or templates that are simply too expensive to develop, implement or regulate compared to the biological or financial gain at the end. There are many more elements to balance in a ‘template’ approach, which might be why it has yet to be fully pursued.

Earlier stacking articles have discussed that a stack of credits can be marketed and sold to a wider range of buyers, lending a certain economic stability to project finance and ideally, this kind of diversity can flow through to mitigation project developers investing in a wider range of ecological services to restore and conserve.

The original thesis was that when stacked credits were legitimately generated from the same acre, then that single acre would generate a higher return, so attracting more investment, but also greater interest in restoring more components of that ecosystem. More, better restoration might result if stacking was mainstream.

But you’re quite clear in your article that despite this driving interest in stacking credits to date, it is the UN-stacking that is the most important part of really achieving the diversity required – for investment and for conservation alike. Can you explain this distinction you make a little more?

When it comes to selling credits, we can see that in the marketplace stacked credits give bank owners an opportunity to diversify. But with a few years of observation the economic benefit has proved a little more complex and it’s becoming clearer that we need to be able to unstack to tap into the true economic benefits.

Your article describes how when stacking in California, both credit types within a stacked bank may be purchased as one mitigation unit. If only one of the available types is needed, the other is retired and this avoids double dipping. From watching these transactions take place, your article talks about how this could be updated, to expand the market.

In California, until now we’ve typically seen that stacked credit sell for about as much as the most expensive credit. You could say this is really only marketing – it gives the bank access to that other mitigation market and greater potential buyers but it doesn’t seem to offer ability to price a credit to truly encourage greater investment. And by investment I mean both financially, and in the range of ecological services restored.

In the article you describe stacking as theoretically “creating larger conservation pie overall” but that in practice stacking might instead only be slicing the pie in a different way?

Yes, stacked credits may lend a competitive advantage in that there are two kinds of mitigation covered (species and wetlands, for example), to attract buyers with, but looking at sales overall, it could just mean dividing up the sale of that acre, not adding to it. We see bankers less willing to invest more in a stacked credit as they are unsure they can price any differently, and that competitive advantage isn’t enough to tip the balance.

You make some suggestions, and highlight some ideas being circulated as to how to make the change and take the industry into Phase II: Un-stacking. The idea of an “ecological” credit has been discussed in a number of contexts – i.e. one credit metric encompassing the ecological attributes and functions of the area concerned. How does this relate to stacking and unstacking?

Introducing an ecological credit might be able to expand the ecological restoration within mitigation and conservation credits. If such a new credit type could identify all the ecological aspects within one ecosystem metric credit from the outset, then appropriate aspects could be reliably ‘unstacked’ and sold to buyers according to their specific impact. Ideally, this would be a more tangible incentive to invest more and restore more, because you can sell more when you do. That’s the key to an effective incentive – aligning more restoration with more return.

Recognising that ecosystem metric credits would be very expensive to develop and require unprecedented interagency collaboration, as well as a highly sophisticated tracking system, your article introduces another approach, can you describe it?

Yes, efforts were made towards the Ecosystem Credit Metric in Oregon to better account for the ecological layers, but it had difficulty achieving this level of coordination. Learning from this, some of us have been investigating the possibility of establishing credits by separating out ecosystem services based on interpretation of each governing regulations, under each agencies natural resource authority. This could allow crediting of ecosystem services more specifically and make it possible to both properly account overlapping credit attributes and prevent risk of double dipping. We’ve started this discussion with such examples as the 404 CWA water quality regulation, and a possibility for additional Carbon Crediting.

One example would be a nutrient loading credit with a stacked species credit. If the nutrient credit is used to offset a point-source discharge that had no impact on the species with the stacked credit then unstacking and using the species credit to offset an impact elsewhere would not be double dipping.

As you put it, the “success stories and cautionary tales behind ecosystem services” have grown over the past decade or more, and you feel it is time to move past conserving multiple ecosystem services on one piece of land and onto the next stage with unstacking.

Yes, it’s time to discuss unstacking as the path to ensuring each aspect of the ecosystems we deal with gets optimum investment and so optimum ecological outcomes. We wanted to emphasize that the opportunity to really expand both conservation and financial backing necessitates that all this remain an important discussion.


Wayne White is a 30-year veteran of the US Fish and Wildlife Service (FWS) and now serves as the Director of Business Development for Wildlands, Inc. He can be reached at
Jemma Penelope is a private consultant to the Conservation and Species Banking industry and can be reached at

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