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The rates of ecosystem degradation and biodiversity loss are alarming and current conservation efforts are not sufficient to stop them. The need for new tools is urgent. One approach is biodiversity offsetting: a developer causing habitat degradation provides an improvement in biodiversity so that the lost ecological value is compensated for. Accurate and ecologically meaningful measurement of losses and estimation of gains are essential in reaching the no net loss goal or any other desired outcome of biodiversity offsetting. The chosen calculation method strongly influences biodiversity outcomes. We compare a multiplicative method, which is based on a habitat condition index developed for measuring the state of ecosystems in Finland to two alternative approaches for building a calculation method: an additive function and a simpler matrix tool. We examine the different logic of each method by comparing the resulting trade ratios and examine the costs of offsetting for developers, which allows us to compare the cost-effectiveness of different types of offsets. The results show that the outcomes of the calculation methods differ in many aspects. The matrix approach is not able to consider small changes in the ecological state. The additive method gives always higher biodiversity values compared to the multiplicative method. The multiplicative method tends to require larger trade ratios than the additive method when trade ratios are larger than one. Using scoring intervals instead of using continuous components may increase the difference between the methods. In addition, the calculation methods have differences in dealing with the issue of substitutability.

Precision, Applicability, and Economic Implications: A Comparison of Alternative Biodiversity Offset Indexes