Biodiversity offsets didn’t work in NSW. Will Labor make the same mistake nationwide? | Endangered habitats

Scientists and legal experts have warned the federal government risks repeating grave mistakes made in NSW with proposals to change the way developers compensate for environmental damage.

As the coalition splinters again over climate, Labour’s plan to overhaul biodiversity balances and the laws of nature more generally has gone unnoticed with relatively little scrutiny.

_{Sign up: AÜ Breaking News email}

The plan includes a proposal to establish a fund of “restoration contributions” that developers can pay into instead of doing their own work to find a suitable project to compensate for the damage caused by their projects.

The legislation before parliament would also lift the ban on offsets that form part of the federal nature market under a deal reached with the Greens two years ago.

But Rachel Walmsley, deputy director of policy and law reform at the Environmental Defenders Office, said the proposals would replicate a flawed system nationally despite “so much evidence of the problems” in NSW and other jurisdictions.

Environmental offsets allow developers to compensate for the damage they have caused by restoring the same species’ habitat or ecosystem elsewhere.

This is literally a system of balance sheet calculation where damage to habitats is acknowledged by even promising on the ledger basis actions that will provide equal or greater benefit.

Offsets are intended to be a last resort after all efforts to prevent or reduce damage to nature.

But as former competition watchdog chief Graeme Samuel noted in his 2020 review of national environmental laws, they have become the default policy by which most developments with significant impacts on endangered species are approved.

Problems with the system include offsets that are never delivered or are insufficient, offsets on lands that already have environmental protection and restoration activities (meaning little or no extra benefit is derived from the offset), and integrity and conflict of interest concerns that have largely escaped the oversight of corporate regulators.

In NSW, developers have the option of finding and securing offsets themselves or purchasing offsets in a market where “credits” for specific ecosystems and species are tied to properties where the landowner has undertaken conservation work.

Developers can also pay into a fund managed by the state’s Biodiversity Conservation Trust, which then takes over the task of finding offsets that cover the developer’s obligations.

In 2021, Guardian Australia exposed a series of failures in this NSW plan, triggering multiple investigations.

The auditor general’s report found that the government had no strategy to ensure that the offset market delivered the required environmental outcomes. The auditor and a separate parliamentary inquiry found that the money developers paid into the trust-managed fund exceeded the available supply of offsets or loans.

To put it plainly, there were developments that harmed nature, and since sufficient compensation could not be provided to compensate for this damage, money was accumulating in the fund and species were being dragged towards extinction.

Subsequent reviews by the NSW Independent Pricing and Regulatory Tribunal revealed similar findings, and the NSW government has now taken steps to limit the circumstances in which developers can pay into the fund.

Dr D., an expert on balancing at the University of NSW. Megan Evans warned that federal legislation in its current form would repeat problems seen at the state level.

“We know from experience that…pay-for-go offset schemes do not work because impacts to threatened biodiversity continue to be certified and the state is then obliged to spend money to buy offsets that are either very scarce, non-existent – ​​because there is no habitat left – or are expensive.”

The Clean Energy Council said Friday at a Senate hearing examining the government’s bills that it supports establishing a restoration contribution fund.

The council’s policy and impact officer, William Churchill, said the proposed fund would provide developers of renewable projects who may not be best placed to undertake on-site restoration with the “flexibility” to “meet their offsetting obligations through a payment while allowing contributors to undertake landscape-scale restoration”.

The federal government is also proposing to relax “like-for-like” rules for offsets provided through the fund. Similar rules require an environmental benefit to be provided for the same species or ecosystem harmed by a development.

Prof Brendan Wintle of the Biodiversity Council said last week the proposal was “ridiculous”.

“You’re basically saying you could trade koalas for a land snail in Tasmania or a small plant in north Queensland,” Wintle said.

Another element of the legislation would create a “top-up” provision to tap taxpayer funds where developers’ contributions fall short. Wintle’s council colleague Prof Martine Maron said if responsibility for this cost fell on the developers who caused it, it would leave taxpayers picking up the tab for environmental destruction.

Some ecosystems and species are so endangered that “there are severe limits to what we can actually compensate for,” Maron said.

He said the use of offsets should be limited to situations where their environmental benefits are warranted and that they would not facilitate the decline of species and ecosystems beyond recovery.

“Turning subsidies into an easy payment option subverts the entire logic of environmental protection,” he said.

Guardian Australia has sought comment from environment minister Murray Watt.