New Economic Research Confirms the Value of Florida’s Wetland Mitigation Banking Market
A new study published in the May 2026 issue of The American Economic Review, “Conservation Priorities and Environmental Offsets: Markets for Florida Wetlands” by Daniel Aronoff (MIT) and Will Rafey (UCLA), provides the most comprehensive economic analysis to date of Florida’s wetland mitigation banking market. The findings reinforce what industry participants have long understood: mitigation banking delivers substantial economic value while supporting Florida’s regulatory framework for wetland conservation.
Key Findings from the Research
Drawing on transaction-level data from 1995 to 2018, Aronoff and Rafey document that Florida’s regional mitigation banking markets generated approximately $2.4 billion in private gains from trade relative to direct conservation alternatives. Cumulative offset sales totaled $1.1 billion across the study period, with annual sales growing an average of 9.8 percent year over year, reflecting Florida’s continued population growth and real estate development.
The study confirms several structural realities of the industry. Mitigation banks operate at significant scale, with the median bank producing about 200 offsets over its lifetime and the average bank covering 1,866 acres. Banks take time to build, with the regulator typically releasing 15 percent of offsets every three years, translating to roughly 18 years to fully build out a project. Markets are also regionally concentrated by design, with hydrological service area boundaries ensuring credits remain within the same drainage basin as the permitted impact.
What This Means for Florida Developers and Landowners
The research validates the core economic case for purchasing mitigation credits from established banks rather than pursuing alternative compliance paths. The authors find that offset trading substantially lowered private compliance costs for landowners, contradicting earlier assumptions, cited in multiple U.S. Supreme Court decisions, that wetland permitting was inherently and immovably burdensome.
For developers navigating Environmental Resource Permitting (ERP) and Section 404 compliance, the study reinforces that working with a fully permitted, established mitigation bank provides certainty around credit availability, pricing, and regulatory acceptance, all factors that translate directly into project timeline and budget predictability.
The Flood Protection Conversation
The paper also examines the local flood protection benefits of wetlands and proposes a Pigouvian tax framework that would account for these benefits in trading rules. While this policy discussion is academic, it underscores a point worth highlighting: the value of wetland conservation extends well beyond regulatory compliance, and the banking model continues to evolve as research deepens our understanding of wetland ecosystem services.
MBG’s Role
We represent active mitigation banks across all five Florida water management districts, helping clients identify the right credits for their basin and project type. The economic case for mitigation banking has been clear to industry participants for decades. It’s now backed by peer-reviewed research in one of the most rigorous economics journals in the world.
Citation:
Aronoff, Daniel, and Will Rafey. “Conservation Priorities and Environmental Offsets: Markets for Florida Wetlands.” American Economic Review 116, no. 5 (May 2026): 1723–1764. https://doi.org/10.1257/aer.20231016
