The federal government risks repeating grievous mistakes made in NSW with its proposals to change the way developers compensate for damage to the environment, scientists and legal experts have warned.
As the Coalition tears itself apart again over climate, Labor’s plan to overhaul biodiversity offsets – and nature laws more broadly – has coasted under the radar with comparatively little scrutiny.
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The plan includes a proposal to establish a “restoration contributions” fund that developers could pay into rather than doing their own work to find a suitable project to compensate for harm their projects cause.
The legislation before parliament would also overturn a ban on offsets forming part of the federal nature market under a deal reached with the Greens two years ago.
But Rachel Walmsley, deputy director of policy and law reform at the Environmental Defenders Office, said the proposals would replicate a flawed system at the national level despite “so much evidence of the problems” in NSW and other jurisdictions.
Environmental offsets allow developers to compensate for the damage they cause by restoring habitat for the same species or ecosystem elsewhere.
It is a system of balance sheet calculations – literally – where harm to habitat is approved on a promise to even the ledger with actions that deliver an equal or greater benefit.
Offsets are meant to be a last resort after all efforts to avoid or mitigate damage to nature have been attempted.
But as the former competition watchdog chief Graeme Samuel found in his 2020 review of national environmental laws, they have become the default policy by which most developments with significant affects on endangered species are approved.
Problems with the system include offsets that are never delivered or are insufficient, offsets on land that already had environmental protections and restoration activities (meaning there is little to no extra benefit derived from the offset), and integrity and conflict of interest concerns that have largely escaped the watch of corporate regulators.
In NSW developers have the option of finding and securing an offset themselves or buying offsets on a market where “credits” for specific ecosystems and species are attached to properties where the landholder is undertaking conservation work.
Developers can also pay into a fund managed by the state’s Biodiversity Conservation Trust, which then inherits the task of finding offsets that meet the developer’s obligations.
In 2021, Guardian Australia exposed a litany of failures in this NSW scheme, triggering several investigations.
An auditor general report found the government had no strategy for ensuring the offset market delivered the required environmental outcomes. The auditor and a separate parliamentary inquiry found the money developers were paying into the fund managed by the trust was outstripping the supply of available offsets or credits.
In plain terms, development was occurring that harmed nature, money was accumulating in the fund because there were not enough offsets to compensate for that harm and species were being pushed closer to extinction.
Subsequent reviews by the NSW Independent Pricing and Regulatory Tribunal have made similar findings and the NSW government has now taken steps to limit the circumstances in which developers can pay into the fund.
Dr Megan Evans, an expert on offsetting at the University of NSW, warned the federal legislation in its current form would replicate the problems seen at state level.
“We know from experience … that pay-and-go offset schemes do not work because impacts to threatened biodiversity continue to be approved and then the state is liable for spending the money to buy offsets which are then too scarce, nonexistent – because there’s no habitat left – or expensive”.
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The Clean Energy Council on Friday told a Senate hearing examining the government’s bills it supported the establishment of a restoration contributions fund.
The council’s policy and impact officer William Churchill said the proposed fund would give developers of renewable projects who might not be best placed to undertake on-ground restoration the “flexibility” to “discharge their offset obligations through a payment, while allowing contribution holders to deliver landscape scale restoration”.
The federal government is also proposing to relax “like-for-like” rules for offsets delivered through the fund. Like-for-like rules require an environmental benefit to be delivered for the same species or ecosystem harmed by a development.
Prof Brendan Wintle from the Biodiversity Council said last week the proposal was “absurd”.
“You’re basically saying you can trade koalas with a land snail in Tasmania or a small plant in north Queensland,” Wintle said.
Another element of the legislation would create a “top-up” provision to draw on taxpayer funds where contributions from developers fall short. Wintle’s colleague at the council, Prof Martine Maron, said this would leave taxpayers holding the bill for environmental destruction when the responsibility for that cost should fall to the developers that cause it.
Some ecosystems and species were so endangered there were “serious limits to what we can actually offset”, Maron said.
She said the use of offsets should be limited to cases where their environmental benefits were guaranteed and they would not simply facilitate further decline of species and ecosystems to a point that they cannot recover.
“Turning offsets into an easy payment option flips the whole logic of environmental protection on its head,” she said.
Guardian Australia sought comment from the environment minister Murray Watt.
