The NSW Government has announced the establishment of a Biodiversity Credits Supply Fund and Taskforce aimed at increasing the supply of “in demand” biodiversity credits which are needed to support the State’s projected infrastructure, housing and manufacturing growth.
The problem with biodiversity offset credits
NSW could be approaching a biodiversity offset credit crunch.
Development in NSW which has prescribed impacts on biodiversity cannot be carried out without the development proponent delivering biodiversity offsets, usually in the form of retiring biodiversity credits which match the affected ecosystems and species or making compensatory cash payments into the NSW Biodiversity Conservation Fund (BCF).
The pipeline of approved major projects in NSW is expected to require the retirement of over 300,000 biodiversity credits for protected ecosystems and 1.6 million biodiversity credits for protected species within the next 2-5 years, to offset the biodiversity impacts of those projects.
Many of these biodiversity credits do not yet exist. The process of locating suitable sites which would enable the creation of these credits, having those sites assessed and then establishing them as biodiversity stewardship sites (BSSs) to create the credits can be complex, costly and time-consuming for both project proponents and the owners of potential credit-creating sites.
About $35 million in biodiversity offset payments (in lieu of retiring biodiversity credits) has been paid into the BCF by project proponents in the last 3 months alone, underscoring the difficulty that proponents have had in locating and sourcing suitable biodiversity credits for their offsets.
The NSW Biodiversity Conservation Trust (BCT), as administrator of the NSW Biodiversity Offset Scheme, is responsible for using those payments to purchase and retire equivalent biodiversity credits. However, the BCT has also had difficulty locating suitable credits, with more than 70% of the biodiversity credits necessary for the BCT to discharge its responsibilities yet to be secured.
The Taskforce is being established to proactively locate suitable offset sites and support landowners through the process of entering into biodiversity stewardship agreements (BSAs), the statutory arrangements which establish their sites as BSSs and enable the creation of in-demand credits. The Taskforce would then buy those credits from the landowner and resell them to the market.
Critically, the Taskforce will also take over responsibility for assessing BSA applications, a function that has been performed by the BCT to date. This gives the Taskforce the multiple roles of market participant, supporter of the BSA applicant, and assessor of BSA applications.
The Taskforce will be made up of staff from the Biodiversity, Conservation and Science sector (within the NSW Department of Planning and Environment), the National Parks and Wildlife Service and the BCT.
The Taskforce will be supplied with an injection of $107 million from the State Budget, and is directed towards unlocking the supply of biodiversity credits and enhancing confidence in the biodiversity credit market.
The NSW Government hopes that the operation of the Fund will reduce unnecessary delays and costs in key infrastructure, housing and manufacturing projects, without compromising environmental outcomes.
For potential credit purchasers
The NSW Government hopes that the Fund will begin selling biodiversity credits from September 2022. This is an ambitious timeframe given that the process of establishing a BSS has typically taken experienced and well-resourced market participants 6 to 12 months or more. However, it indicates the Government’s commitment to addressing the looming shortfall in biodiversity credit availability, and its proposals to streamline the BSA process.
The Fund is not intended to be “for profit” but it is intended to be self-sustaining. It will sell credits at a mark up to account for its costs of facilitating the creation of the credits. While the NSW Government anticipates the markup to be in the vicinity of 7-10% above the market value of the credits, the true extent of the price difference remains to be seen.
For landowners who do not currently have a BSA
The Taskforce will seek to streamline the process of applying for a BSA and establishing a BSS. It will do so by taking an active role in addressing barriers to entry and hurdles throughout the process.
The Fund will pay a price per credit which is determined by a variety of factors, including value for money considerations. A more detailed pricing strategy is expected from the NSW Government in the coming months.
For landowners who do currently have a BSA
Where a BSS already exists, the Taskforce will only become involved where there is a proposal to vary the existing BSA to recognise additional credit creating potential on site, or the Taskforce proposes to purchase the credits which are created on a site and have not yet been sold. The BCT will continue to administer the implementation of existing BSAs and the distribution of biodiversity management payments for the BSSs covered by those BSAs from the Biodiversity Stewardship Payments Fund.
Given that the Taskforce is targeted at the creation of in-demand credits, landowners who are party to existing BSAs which have the potential to create additional in-demand credits may be supported by the Taskforce to vary their BSAs to expand their creation.
If you would like some advice on biodiversity offsets, some help establishing an offset site or assistance in dealing in credits, please get in touch.
Presentation given by Louisa Mamouney, A/Executive Director, Biodiversity Credits Supply Task Force, NSW Department of Planning and Environment at the Environment Institute of Australia and New Zealand National Biodiversity Offsets Conference 2.0, Canberra, 27 July 2022.
Presentation given by Justin Williams, Manager, Biodiversity Offsets Program, Biodiversity Conservation Trust at the Environment Institute of Australia and New Zealand National Biodiversity Offsets Conference 2.0, Canberra, 27 July 2022.