AbstractAichi Biodiversity Target 11 under the Convention on Biological Diversity sets out to conserve at least 17% of terrestrial area by 2020. However, few countries are on track to meet this target and it is uncertain whether developing countries have allocated sufficient resources to expand their protected areas. Biodiversity offsets could resolve this conservation shortfall if developers who affect biodiversity negatively at one locality are made responsible for its protection elsewhere. Here we simulate the use of biodiversity offsetting to expand protected area coverage in South Africa's grassland biome. South Africa's biodiversity offsets policy has been designed specifically to compensate for the residual loss of biodiversity caused by development, by establishing and managing protected areas within the same ecosystem type. We show that it is possible to meet protected area targets using only offsets, while facilitating economic development. However, doing so could slash the current extent of intact habitat by half. These losses could be reduced considerably should the gains in protected areas through offsetting supplement rather than supplant existing government commitments to protected area expansion. Moreover, supplementing existing government commitments would result in comparatively small reductions in potential economic gains, because the marginal economic benefit of transforming habitat decreases as more intact habitat is lost. Therefore, the intended role of biodiversity offsetting in achieving a country's protected area target should be made explicit to fully understand the associated trade-offs between conservation and economic development.