Agrithinking: nature repair market: Australia’s path to ‘nature positive’ is paved with opportunity

After an ambitious start to its term in office, the Federal Government is showing no signs of slowing down as it paves the way for significant environmental reform and a nature positive Australia.

In our previous alerts, we discussed the August 2022 announcement of a biodiversity certificates and trading scheme (BCTS) and the December 2022 delivery of the Nature Positive Plan, which included a proposal to establish a voluntary nature repair market (the new term for the BCTS). Now, the Federal Government must begin fleshing out the detail of its nature repair scheme, after recently closing consultation on draft exposure legislation.

With agricultural land uses covering approximately 55% of Australia, participants in the agriculture sector are among those best-placed to capitalise on the opportunities this scheme presents.

Proposed nature repair market

The exposure draft of the Nature Repair Market Bill 2023 (Exposure Bill) was released for consultation on 23 December 2022. While the Exposure Bill defers much of the operational detail to a set of ‘rules’ yet to be developed, the overarching framework it creates is similar to (and intended to operate alongside) the existing carbon market framework. 

Key elements of proposed nature repair scheme

1. Landholders can have projects which enhance or protect biodiversity in native species registered by the Clean Energy Regulator on the Biodiversity Market Register where:
   1. the landholder (as the project proponent) is ‘fit and proper’;
   2. the project will be carried out on Australian land or waters; and
   3. the project is covered by and compliant with a methodology determination.
2. Registered biodiversity projects which are sufficiently progressed and compliant with all requirements can receive a biodiversity certificate from the Clean Energy Regulator. The scheme proposes a trading platform through which proponents can sell certificates to other parties, enabling businesses, governments and individuals to invest in nature repair projects without having to own an interest in the land or carry out the project. Certificates will contain standardised information about the project to enable the market to compare and value different projects.

Opportunities for industry

A nature repair scheme presents unique opportunities for the agriculture sector, including:

1. rewarding landholders for their conservation efforts;
2. providing income streams (through the sale of certificates) during periods of drought; and
3. allowing particular landscapes which are less agriculturally profitable (such as hillsides and creek beds) to generate biodiversity improvements and income.

Landholders interested in carrying out projects as part of the scheme should note the following additional details proposed under the Exposure Bill:

1. projects will need to be carried out over 25 years unless otherwise specified in the relevant methodology determination;
2. project proponents will be subject to record-keeping, monitoring, reporting and auditing obligations (these may be quite onerous depending on the rules and further details);
3. if other parties hold an interest in the project land, their consent may be required before a certificate can be issued;
4. if a certificate is cancelled, revoked, terminated, varied or required to be relinquished, the proponent will not be entitled to any compensation; and
5. proponents will be subject to a range of enforcement measures, including civil penalties for certain non-compliance.

The proposed scheme is separate to the Agriculture Biodiversity Stewardship Package, which is trialling market arrangements that encourage private investment in biodiversity and other sustainability opportunities.

The push for nature positive

Since the Exposure Bill was released, there has been debate about whether the private sector has the appetite for a nature repair market, whether government will need to drive it, and whether a voluntary market of this kind is capable of ‘repairing’ decades of nature decline. However, this proposal is just one part of a larger, global shift towards protecting and investing in nature.

1. Since January 2021, over 100 countries have joined the High Ambition Coalition for Nature and People and formally supported the protection of at least 30% of the world’s land and ocean by 2030 (30x30 target).
2. In December 2022, representatives from 188 governments 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 and 23 shorter term targets aimed at halting and reversing nature loss (including a 30x30 target).
3. Sustainability-related financial disclosure obligations are expanding beyond climate and into nature, with a nature-related risk management and disclosure framework due to be finalised by the Task Force on Nature-related Financial Disclosures by September 2023 (see our previous alert here). We expect this will pressure businesses to address nature-related risks, and perhaps even compel them to do so in the future (given the Federal Government’s current proposal to make climate-related financial disclosures mandatory).
4. More broadly, the ‘nature rights’ movement (which seeks to give nature legal status) is gaining popularity, with countries including New Zealand giving legal rights to nature – there are calls for Australia to do the same, particularly for the Great Barrier Reef.

Against this backdrop, and coupled with the Federal Government’s broader environmental reforms under the Nature Positive Plan and the increasing pressure on businesses to meet broader environmental, social and governance expectations, a nature repair scheme certainly has a role to play in Australia’s push to become nature positive and achieve its 30x30 target.

Next steps

While consultation on the Exposure Bill closed on 3 March 2023, further consultation is expected throughout 2023 as the Federal Government develops the rules and works through the operational details of the scheme.

Landholders should identify potential biodiversity projects for their land, review the framework proposed by the Exposure Bill and monitor further developments to the scheme. We encourage landholders to participate in future consultation processes, particularly in relation to the rules (given they will significantly influence the obligations placed on proponents and how the scheme operates in practice).