Nature Repair Market Bill released for consultation

Exposure Draft released for Nature Repair Market and Biodiversity Certificate Scheme

Snapshot

The Nature Repair Market is intended to project proponents who protect, manage or restore local habitat to receive biodiversity certificates which can be sold to other parties. The certificates will be issued by the Clean Energy Regulator and can be sold or traded to businesses, organisations, governments or individuals.

Eligible projects include projects that protect waterways, provide habitat, reduce erosion, protect topsoil and improve drought resilience. Examples of projects that will be possible under the scheme include:

• Improving or restoring existing native vegetation (eg through fencing or weeding);
• Planting local species on a previously cleared area; or
• Protecting rare grasslands that provide habitat for endangered species.

Draft Legislation

The exposure draft of the Nature Repair Market Bill (Bill) is largely consistent with the legislation for the issue of the Australian Carbon Credit Units (ACCUs), and proposes to establish:

• An independent expert committee to advise the Minister on scheme integrity;
• Methodology determinations stipulating the requirements for different projects;
• An overarching biodiversity assessment instrument to measure improvements in biodiversity;
• Tradable biodiversity certificates;
• A public register of projects and certificates; and
• An assurance and compliance framework aiming to maintain integrity in the market.

The legislation is intended to be administered by the Minister and the Clean Energy Regulator, who will have a range of powers available to enforce the obligations of a project proponent, including a civil penalties regime.

Valuation of Biodiversity Certificates

A biodiversity certificate would be tradable personal property, able to be owned and traded separately from land. A single certificate will be issued for each project, which will contain standardised information to enable the market to compare and value projects. Buyers will be able to compare key attributes across different types of projects to decide how much the certificate is worth.

The information would include:

• The type of project and the activities that will be undertaken;
• The area, location and duration of the project;
• The type of habitat, its conservation priority and any threatened species;
• The initial condition of the habitat and the expected change in condition as a result of the project, including benefits for threatened species and ecological communities;
• Other matters such as First Nations engagement and community benefits.

Guidance materials will be developed to support buyers in the market, which will set out how much the management activities cost to implement and how well the project aligns with science-based conservation and management priorities.

Relationship with Australian Carbon Credit Units

The biodiversity certificates and trading scheme will operate in a similar manner to the existing Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) which provides a framework to generate and trade ACCUs. Importantly, both ACCUs and biodiversity credits can be generated for activities on the same land.

Whilst the Nature Repair Market will operate in parallel with the existing carbon market, there are important differences between a biodiversity certificate and ACCUs. ACCUs represent a tonne of carbon dioxide (or equivalent) that is avoided or removed from the atmosphere, and all have an equivalent environmental value. It is standard for multiple ACCUs to be issued per project, whereas only one biodiversity certificate would be issued per project and would therefore differ in value from certificates issued for other projects.

Scheme Rules

Participants in the markets will need to comply with scheme rules, including:

• Meeting and maintaining fit and proper person requirements;
• Being subject to audit requirements, depending on the project size and complexity;
• Proving regular reports to the Regulator to demonstrate the project is compliant with the relevant methodology and other scheme rules;
• Reporting on bushfires and other changes affecting the project; and
• Complying with legislative reporting and transparency provisions.

Methodology

Methodology determinations setting out the requirements for biodiversity projects have not yet been released. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) will develop methodologies with the help of stakeholders and relevant experts after public consultation. Public submissions on methodologies will generally be published.

There will be a different methodology for each type of biodiversity project, stipulating how projects must be undertaken, requirements for monitoring and what data must be collected to measure improvements in nature.

The methodologies will be legislative instruments made by the Minister and scrutinised by Parliament. Proposed methodologies will be reviewed by an expert technical committee (the Nature Repair Market Committee) established by the legislation, who will then advise the Minister whether they comply with biodiversity integrity standards as defined in the Bill. This advice will be made publicly available on the Ministers website.

International Obligations

The stated object of the Bill is to contribute to meeting Australia’s international obligations in relation to biodiversity.

The Nature Repair Market will be established in response to the findings of the 2021 State of the Environment Report, which confirmed that significant investment in conservation and restoration is required to reverse Australia’s declining environment. The Nature Repair Market will also contribute towards the Federal government’s commitment to protecting 30% of Australia’s land and seas by 2030. These goals have also been adopted under the United Nations Convention on Biological Diversity.

Next Steps

This round of consultation will close on 24 February 2023. The fact sheets and exposure draft of the Bill can be found here: https://consult.dcceew.gov.au/nature-repair-market-exposure-draft  Submissions can be emailed to the Biodiversity Market team at naturerepairmarket@dcceew.gov.au or online here - https://consult.dcceew.gov.au/nature-repair-market-exposure-draft/new-survey.

The Bill is expected to be introduced to Parliament before the end of 2023.

We expect some changes to the proposed Nature Repair Market Scheme as a result of the release of the Independent Review of Australian Carbon Credit Units and the Government Response on 9 January 2023 which accepted in principle all 16 recommendations of the Review.  The Government Response has indicated that there will be work to ensure alignment between the Nature Repair Market and the recommendations of the Review, which may include some changes to the proposed governance mechanisms as set out in the Bill

Prepared by Kathryn Pacey and Grace Hicks