The Biodiversity Conservation Amendment (Biodiversity Offsets Scheme) Bill 2024 (Bill) was introduced to the NSW Parliament last Thursday to reform the State’s biodiversity offset scheme. If passed, the Bill would establish a hierarchy of ‘avoid, minimise and offset’ for biodiversity offsets, and shift the scheme from the current approach of ‘no net loss’ to ‘net positive’ biodiversity outcomes.
This shift to a ‘net positive’ approach to environmental protection reflects a growing global awareness of the importance of addressing biodiversity loss alongside efforts to tackle climate change and moving towards nature positivity.
In this alert, we break down what the reforms would mean for developers, and how they reflect a broader shift towards a ‘nature positive’ approach to environmental protection.
Background/context
The Bill forms part of the NSW Government’s response to statutory reviews of the Biodiversity Conservation Act 2016 (NSW) (Biodiversity Act), led by Ken Henry (the Henry Review) and the native vegetation provisions of the Local Land Services Act 2013 (NSW).
The Henry Review, published in August 2023, concluded that the Biodiversity Act ‘is not meeting its primary purpose of maintaining a healthy, productive and resilient environment, and is never likely to do so’ (p 1). The review made 58 recommendations, including recommending an overall shift toward ‘nature positive development’.
On 17 July 2024 the NSW Government released its response to the Henry Review, the NSW Plan for Nature, confirming that it would adopt 49 out of 58 of the recommendations. The response signals a shift in the way the NSW Government protects the environment and manages native vegetation, with an increased focus on leaving nature ‘better off than we found it’.
The NSW Government is not alone in the shift towards a ‘net positive’ approach to biodiversity restoration. With growing awareness of the world’s reliance on the environment and the connection between biodiversity and climate change, there has been a global move to focus on nature, ‘nature positive’ policy, and nature-based solutions.
- In December 2022, representatives from 188 governments (including Australia) attended the 15th meeting of the Conference of Parties to the United Nations Convention on Biological Diversity. The ‘Kunming-Montreal Global Biodiversity Framework’ was passed, providing 4 longer term goals for 2050 and 23 shorter term targets aimed at halting and reversing nature loss by 2030.
- At the start of this year, the United Kingdom introduced a 10% Biodiversity Net Gain requirement (which must be delivered over 30 years) to ensure that all new developments result in more, or better quality, natural habitat than existed before.
- The European Union (EU) has recently adopted the Corporate Sustainability Due Diligence Directive (known as the CS3D), which requires in-scope companies (both EU and non-EU based) to identify, assess, mitigate and remediate actual or potential adverse human rights and environmental impacts throughout a company’s entire value chain.
Biodiversity loss is a critical global issue, requiring urgent solutions. The introduction of the Bill less than one month after the release of the NSW Plan for Nature is a sign of this urgency.
Substance of the reforms
The Bill has five key aspects:
- It requires that steps be taken to avoid impacts of development, establishing the avoid, minimise, offset hierarchy as a key principle;
- Requires the scheme to transition to delivering an overall net positive outcome over time;
- Reduces the circumstances where developers can pay into the Biodiversity Conservation Fund and, ensures that when the fund is used, there is quicker investment in impacted species and ecosystems;
- Increases transparency through new public registers (including to record conditions of approval that require biodiversity offsets and the measures to be taken to minimise the impact of any development) and increases accountability for biodiversity impact assessors; and
- Allows for regulatory burden on lower impact local development to be reduced in exceptional circumstances, particularly in regional areas.
Further regulatory amendments not contained in the Bill but committed to in the NSW Plan for Nature will refine the rules for trading ecosystem credits; amend the scheme entry thresholds so that small, low‑impact local development does not come into the scheme; and remove the option for major mining proponents to meet a credit obligation through a commitment to ecological mine site rehabilitation.
Genuine measures to avoid and minimise impact
Under proposed new section 6.3A, developers will be required to take ‘all reasonable measures to avoid the impacts of the action on biodiversity values’ before attempting to minimise, and then turning (as a last resort) to offsetting ‘any residual impact’.
Sections 6.12 and 6.13 are proposed to be amended to provide that a biodiversity development or certification assessment report must set out and assess, in accordance with the biodiversity assessment method and the regulations, the genuine measures that the proponent of a proposed development or applicant for biodiversity certification has taken and proposes to take to avoid and minimise the impact of the proposed development on biodiversity values of the land. The proposed amendments mean that it will no longer be sufficient to commit only to future action – developers will be required to outline steps already taken (for example, how they have designed the project to avoid impacts on areas with high biodiversity values).
Questions will no doubt arise about what constitutes ‘all reasonable measures’, which will likely depend on the context and circumstances of the development site and the proposed development application.
This may be clarified by the regulations: section 6.16 is proposed to be amended to enable the regulations to provide for principles and assessment standards that apply in relation to measures to avoid and minimise biodiversity impacts. But it will nevertheless mean that developers will need to identify biodiversity risks and opportunities at the project design stage in order to demonstrate that genuine measures have been and will be implemented. This will likely include such measures as moving development away from areas of high biodiversity value which brings with it a potentially significant reduction in development footprint, fostering on-site biodiversity enhancement and collaborating with neighbouring communities to enhance local biodiversity.
Transition to ‘nature positive’ in NSW
The move towards ‘net positive’ will not be immediate: proposed new section 6.2A requires the Minister to develop a strategy setting out how the scheme will transition to net positive, including targets, time frames and actions.
This will allow the NSW Government time to work with experts, stakeholders and the public on the development of the strategy, and to consider the views of scheme participants and impacts on the biodiversity credit market. Proposed Schedule 9, Part 4, clause 5 requires the Minister make the strategy ‘as soon as practicable’ and proposed new section 9.1(1)(d) provides that public consultation must take place in relation to the strategy.
Alignment with proposed federal reforms
As we covered in previous alerts, the Federal Government’s ‘nature positive’ reform package, arising out of its Nature Positive Plan published in December 2022, continues to progress.
- Stage 1 occurred in December 2023, with the passing of the Nature Repair Act 2023 (Cth) and Nature Repair (Consequential Amendments) Act 2023 (Cth). This legislation created the framework for a ‘world-first’ voluntary Nature Repair Market, under which ‘biodiversity certificates’ can be issued (and subsequently traded) for ‘biodiversity projects’ which enhance or protect nature.
- Stage 2 is in motion, with 3 bills currently before Federal Parliament which, among other things, seek to provide Australia’s first legislative definition of ‘nature positivity’, being ‘an improvement in the diversity, abundance, resilience and integrity of ecosystems from a baseline’.
- Stage 3 has been deferred while further consultation occurs. From what we have seen, the Stage 3 reforms are set to include a new approach to offsets (set to be renamed ‘restoration actions and restoration contributions’ (RARCs)).
Similar to the Bill, the federal reforms are set to:
- require project proponents to take steps to avoid and mitigate impacts of development;
- require RARCs to deliver an [X]% biodiversity gain relative to a baseline (i.e. deliver a ‘net positive’ outcome); and
- reduce the circumstances where proponents can pay a restoration contribution.
We note that, according to the consultation material for the proposed federal reforms, there will be a new process whereby States and Territories apply to the CEO of the new Environment Protection Australia for accreditation, replacing the current bilateral agreements. States and Territories will need to demonstrate how their environmental assessment methods give effect to the new federal environmental legislation. If the application is approved, an accreditation arrangement will be made.
Given its similarities to the proposed federal reforms, the NSW Government’s transition to a ‘net positive’ offsets regime will no doubt provide an advantage for the State to obtain accreditation, post-Federal reforms. For project proponents, this will not only allow shared environmental assessment between the NSW and Federal Government to continue but will also assist in ensuring compliance with offset conditions in both State and Federal approvals.
Next steps
The Bill has been referred to Portfolio Committee No. 7 – Planning and Environment for inquiry and report, with submissions to close on 6 September 2024 and a report to be completed by 11 October 2024.
Given developments at the federal level and a growing awareness of the urgency of preventing biodiversity loss, we expect the Bill will be passed by NSW Parliament in a substantially similar form to the version introduced last week.
We nevertheless recommend that industry engage in any public consultation processes to ensure that the implications of the proposed reform are considered carefully and balanced against the aims of the legislation.
