The Nature Repair Market Bill 2023 has passed the Australian Senate, meaning the Nature Repair Market is likely to commence operation in 2024
The goal of the new Nature Repair Market Act is to promote the enhancement and protection of biodiversity across the country and assist Australia in meeting its obligations under the Convention on Biological Diversity and the Kunming-Montreal Global Biodiversity Framework.
The Government is looking for the Nature Repair Market to promote investment in projects that restore and repair nature across Australia by providing a mechanism for landholders to undertake projects that protect and enhance biodiversity and get paid for this work.
So how will it work?
Under the new Act, the Minister can make a methodology determination which sets out how a registered biodiversity project is to be carried out. The methodology determinations must align with the biodiversity integrity standards, requiring projects to result in the enhancement and protection of biodiversity. Methodology determinations may also need to comply with a biodiversity assessment instrument which provides a measure of biodiversity, enhancement of biodiversity or protection of biodiversity.
The Nature Repair Market Committee, established under the Act, will advise the Minister around issues such as methodology determinations, biodiversity assessment instruments and matters that relate to biodiversity projects.
An application for a biodiversity certificate can be made to the Clean Energy Regulator (the Regulator). The application must include information specified in the methodology determination and be accompanied by a biodiversity project report. Once the Regulator is satisfied that the project meets requirements around regulatory approvals, eligible interest holders, native title and that the project has or will result in a positive biodiversity outcome, the project is registered, and a biodiversity certificate is issued. Biodiversity projects will have a permanency period applied of either 25 years, 100 years or a period determined by the relevant methodology.
In line with other schemes, biodiversity projects can be audited and are subject to regular reporting requirements.
How will the market operate?
Once issued, biodiversity certificates can be traded. The Commonwealth and private investors will be able to purchase and trade biodiversity certificates. This means that a landowner can seek a biodiversity certificate and can then trade this certificate with other entities, although the pricing structure for biodiversity certificates is yet to be established and will be subject to commercial terms.
Organisations likely to buy biodiversity certificates include businesses looking to address ESG and sustainability goals, including those under the Taskforce for Nature Related Disclosures (TNFD), and for philanthropic reasons.
Currently, biodiversity certificates could be used for environmental offsetting purposeshowever, the Greens are looking to remove this measure and the Government is expected to support this (ABC News, 5 December 2023). This will mean that biodiversity certificates will not be able to be used to offset impacts of development.
Given the amendments will remove the ability to use biodiversity certificates for environmental offsetting purposes we are likely to see dual markets emerge, particularly as the Government progresses the reforms to the EPBC Act under the Nature Positive Plan, including the establishment of a new Environmental Offsetting Standards and the proposed Restoration Actions and Contributions.
Aligning carbon and biodiversity markets
The new Act is intended to operate alongside carbon markets and will permit landowners to generate both biodiversity certificates and carbon credits from the same land. This will ensure co-benefits for biodiversity and carbon can be achieved. It is likely that this area will be closely regulated by the Clean Energy Regulator given concerns around “double-dipping” raised by conservation organisations and issues raised around human-induced regeneration carbon credits.
What next?
Many of the subordinate legislation, rules and methodologies around the new Nature Repair Market Act are yet to be provided. This information will be critical to generating interest in the Nature Repair Market as landowners assess whether biodiversity projects on their land are eligible and worth progressing. It will also be important to ensuring the right checks and balances are in place to avoid some of the issues with validity and sustainability of carbon and environmental offsets that have been raised, and to avoid concerns around the Nature Repair Market being used for greenwashing.
Secondly, we need to understand the pricing structure for biodiversity certificates. Unlike carbon and biodiversity credits, where multiple credits are issued for a single parcel of land, a single biodiversity certificate will be issued for a project. It is therefore unclear how a biodiversity certificate will be priced. This aspect is likely to be important to landowners who will be interested in the financial outcomes that can be achieved. If we want to encourage a transition in land use towards conservation, this will be a key driver.
Lastly, we need to understand the market. To make the Nature Repair Market successful, substantial private investment will be required. With no regulatory imperative to purchase biodiversity certificates, there will be a reliance on organisations seeking to meet ESG objectives and TNFD requirements as well as philanthropic investment. With a strong global movement towards nature positive and schemes such as TNFD, there is a stronger driver for private investment than ever before.
If successful, the Nature Repair Market will provide an additional incentive for landowners to see value in nature and consider a transition from more intensive land uses, such as agriculture, to conservation. This transition is important if we want to reverse global declines in biodiversity – a goal I think many (if not most) will support.
_______________________________________
Nathan Garvey
Associate Director | Strategic Advisor - Biodiversity and Natural Capital