The future of environmental offsets – a sneak peek at the National Environmental Standard

The Department of Climate Change, Energy, the Environment and Water (DCCEEW) has released the draft National Environmental Standard (NES) for Restoration Actions and Restoration Contributions, which is set to replace the existing concept of environmental offsets. The consultation papers from the Department’s stakeholder consultation session held in November 2023 are now available on the DCCEEW consultation hub.

Reframing environmental offsets

The Independent Review of the Environment Planning and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) – Final Report found that offsets were ineffective at compensating for habitat and biodiversity loss and, in some cases, were actively contributing to environmental decline. The review concluded that not enough effort is being made to avoid or mitigate impacts in the first instance.

In its response to the Independent Review, the government committed to reforming offset arrangements to deliver net positive outcomes for the environment. It is a key tenet of the Nature Positive Plan, which is aimed at shifting Australia’s environmental laws from being nature negative to nature positive, where nature is being regenerated at a faster rate than it is being lost.  ‘Nature positive’ has not been defined, but it appears from the draft NES that in order to be nature positive, the ‘projected gain’ of a restoration action or restoration contribution will be set as a percentage increase on the baseline (being the condition of the protected matter in the absence of the action).

Government has also announced that it will be auditing compliance with environmental offsets conditions for existing approvals, with that process currently underway.

The way forward

As part of the significant reform of the EPBC Act, the government is looking to reform and tighten offsets requirements, with a view that restoration actions will achieve a nature positive outcome.

Under the draft NES, environmental offsets will be rebranded as ‘restoration actions’ and ‘restoration contributions’. They will be seen as a last resort – proponents will have to demonstrate that they have taken all reasonable steps to avoid and mitigate impacts before restoration actions and contributions will be considered to address any residual significant impacts.

If residual significant impacts remain after efforts have been made to avoid and mitigate, a proponent will need to deliver a restoration action, make a restoration contribution, or provide both.

Restoration contributions will be available to proponents whose actions will impact threatened species, ecological communities, migratory species, or the Commonwealth marine environment. Proponents whose actions impact these protected matters can elect to make a restoration contribution into an independent conservation trust in lieu of carrying out the restoration action, or the EPA may set it as a condition of an approval. The government will establish an investment vehicle to oversee the collection and allocation of restoration contributions to improve the environment. Investments will need to comply with the NES.

Restoration actions

Restoration actions will be highly regulated. Importantly, the restoration action will need to have commenced and a restoration action management plan be in place before the impact from an approved action occurs. Restoration actions will need to be legally secured in perpetuity, or at least for the duration of the impact.

There must be ‘high certainty’ that the restoration action can contribute to the long-term viability of the impacted protected matter and deliver ‘like for like’ benefits. In addition, restoration actions must:

• deliver a ‘projected gain’ over what would have happened if the proposed action did not take place
• be located in the same bioregion as the impact, or if that is not possible, within an ecologically relevant bioregion for the protected matter
• provide direct restoration actions (i.e., that restore or manage protected matters) unless a higher priority for the protected matter has been identified (such as funding research)
• be based on suitable data and information (there will be a separate National environmental Standard for Data and Information)

A restoration action management plan will also be required, which sets out the method for projecting the gain, the actions, projected outcomes, and timeframes for achieving those outcomes (among other things). The restoration action management plan will need to be settled before the proponent takes the action that will impact protected matters.

Restoration contributions

Where an action will impact threatened species, ecological communities, migratory species or the Commonwealth marine environment, proponents will have the option of making a ‘restoration contribution’ before an action commences.

A restoration contribution is a payment into an independent conservation trust. The trustee will be responsible for investing in a restoration action for the project, or otherwise investing in a direct restoration action that will deliver the best overall environmental outcome for the protected matters within the same bioregion.

The current proposal would see a requirement for the restoration contribution to be invested within three years of the restoration contribution being made.

The draft under consideration does not specify a pricing mechanism, but the government’s response to the Independent Review of the EBPC Act indicated that conservation payments would provide an “effective incentive” to avoid and mitigate impacts. The government has indicated that the conservation payment will be calculated by reference to the cost of habitat restoration, land value, and a premium designed to address risk and deliver a nature positive outcome.

Consultation

DCCEEW will be accepting feedback on the proposed reforms until 30 March 2024. You can have your say here.

Written by Kathryn Pacey, Partner, and Jasmine Wood, Senior Associate