The nature repair market is sold as a good news story: willing land managers benefiting nature with support from the private sector. But if offsets are part of it, the reality could be very different.
This week鈥檚 federal budget reiterated the government鈥檚 plan to establish a new scheme for encouraging private investment in conservation, called a (now, rebranded to a 鈥溾 market).
A biodiversity market would see landholders granted for restoring or managing local habitats. Landholders could then sell these certificates to, for instance, businesses.
But the effectiveness of such schemes overseas and in Australia can at best be described as . Whether biodiversity markets can actually improve the dire trajectory of our native plants and animals depends heavily on two things:
Unfortunately, the government is on this critical issue. Federal Environment Minister Tanya Plibersek while the market 鈥渋s not designed to be an offset scheme鈥, companies could still buy certificates to compensate for damage they cause to nature.
In submissions to the recent public consultation on the proposed market, and argued the scheme should explicitly rule out the use of certificates as compliance offsets for biodiversity damage. Here, we give three major reasons why this is important.
The term 鈥渂iodiversity market鈥 refers to a range of approaches that can operate quite differently.
For example, 鈥溾 reward land managers who benefit native ecosystems, such as by planting trees and restoring rivers.
鈥溾 similarly offer financial incentives to land managers, but with a critical difference: on-ground work to benefit nature is used to offset, or compensate for, biodiversity losses elsewhere.
This means offsets don鈥檛 usually result in overall improvements to nature, but rather .
Introduction to biodiversity offsetting. Video: Threatened Species Recovery Hub
The government hopes voluntary private sector demand will drive this biodiversity market. This is because the government says it cannot afford the to adequately protect Australia鈥檚 natural environments and reverse biodiversity decline.
This sounds like a lot, but let鈥檚 put $1 billion into perspective.
It鈥檚 about one-tenth of the public money spent every year fossil fuel extraction in this country. It鈥檚 about of the cost of cancelling the submarine contract with France.
And it鈥檚 about of the annual cost of the stage three tax cuts promised in this week鈥檚 federal budget.
It is completely unknown, however, whether businesses will want to voluntarily purchase enough biodiversity certificates purely for to make the market work.
On the other hand, allowing businesses to use the certificates for legally-required offsets now 鈥 or sometime in the future 鈥 will certainly generate more immediate market demand. But this would open up the market to a host of problems, and ultimately undermine its very purpose: to improve biodiversity.
First, almost all biodiversity offsets in Australia are legally required as conditions of approving new developments, under environmental policies and laws. These policies have strict requirements 鈥 and for good reason.
For example, offsets must be 鈥溾. In other words, the compensation must be for the same type of biodiversity as the loss.
Such like-for-like requirements limit the number of possible trades in a market, to protect Australia鈥檚 most threatened species. Otherwise, for instance, allowing replanted koala habitat to count as compensation for the loss of cassowary habitat simply means cassowaries are more likely to become extinct.
The problem is that biodiversity certificates will certify activities (such as tree planting or fencing), rather than specific outcomes (such as increased population size) for particular species or ecosystems.
So it鈥檚 not clear how these certificates could be used to compensate for biodiversity losses in line with the .
Second, the new biodiversity market is sold as a good news story: willing land managers creating benefits to nature that the private sector wants to support, to help turn around Australia鈥檚 atrocious environmental record.
But in practice, offsets have never been a good news story, with , and regularly making headlines. Including offsets in the mix might scare off buyers and sellers.
Third, offsets are legal requirements, so a market that encourages a land manager to supply them for the environment through that trade. It may become cheaper for businesses to acquit their current or future compliance obligations 鈥 but it would be a zero sum game for biodiversity.
The proposed biodiversity market is a central response to Australia鈥檚 damning earlier this year.
But previous government attempts to attract private investment to encourage biodiversity have , so it would be wise to learn from these experiences.
A better way to stimulate market demand is for the federal government to make an initial public investment in protecting biodiversity to . The did this in 2020, when it announced a $500 million Land Restoration Fund.
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Another source of risk is that the government the Clean Energy Regulator would be responsible for the biodiversity market, as well as for Australia鈥檚 carbon credit scheme. It seems wise to await the findings of the current into Australia鈥檚 carbon scheme before loading complex new responsibilities onto the carbon market regulator.
We argue that instead, the biodiversity market should be administered by a specialised regulator 鈥 such as the proposed new .
This market is . It is also no substitute for or to stop nature declining in the first place.
But if it鈥檚 carefully designed, with an initial investment from the federal government as a kick-start, a biodiversity market for genuine additional benefits to nature could prove its worth.
, Senior Lecturer and ARC DECRA Fellow, and , Professor of Environmental Management,
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