Legislating for nature positive – NSW Government proposes major changes to biodiversity laws

The NSW Government has taken a significant step towards a nature positive future, by proposing major legislative changes to the Biodiversity Offsets Scheme.

The Biodiversity Conservation Amendment (Biodiversity Offsets Scheme) Bill 2024, if passed, will address some of the key criticisms of the Scheme and will mandate a transition to nature positive outcomes.

In this article, we look at the key reforms which the Bill proposes and highlight some additional areas for much-needed reform.

The need for reform

It’s widely acknowledged that biodiversity in Australia is in crisis. Many Australian governments accept that radical steps are needed to halt the rapid decline in nature, and some agree that action should be taken to reverse the decline and instead strive for nature positive outcomes. One of the key areas which demands attention if the biodiversity crisis is to be addressed is the biodiversity impacts of development.

The NSW Biodiversity Offsets Scheme (BOS), established by the Biodiversity Conservation Act 2016 (BC Act), is a highly sophisticated scheme for dealing with those biodiversity impacts. Its goals include avoiding and mitigating those impacts, and it provides a market-based mechanism which is intended to provide compensatory offsets for biodiversity impacts in an efficient way.

However, several reviews of the BOS in the last few years have identified considerable concerns with the effectiveness of the BOS and have called for a reset. The 2023 statutory review of the BC Act by Ken Henry AC recommended sweeping reform of the BOS to ensure it delivers on its promise. The NSW Government’s response, in July 2024, entitled a Plan for Nature, accepted most of the Henry review’s recommendations. The Bill provides a key step in implementing those recommendations.

Active transition to nature positive

One of the primary criticisms of the BOS is that its foundational objective is “no net loss”. Many reviewers of the BOS have expressed concern is that this actually leads to a steady decline in nature, and have proposed that the objective should be “net gain” instead.

The Bill states that the BOS “will transition to net positive biodiversity outcomes”. It requires the Environment Minister to publish a strategy for the transition “as soon as practicable”. The strategy must specify the actions required to achieve the transition, and must include targets and time frames. Once published, the strategy must be reviewed annually.

It is not yet clear when the transition will occur or what it will look like. Almost certainly, it will increase biodiversity offset obligations in some way.

The Government has proposed extensive stakeholder engagement in developing the transition strategy. Genuine and careful engagement will be critical for a successful transition.

Locking in the “avoid, minimise, offset” hierarchy

The BC Act currently requires development proponents to apply the “avoid, minimise, offset” hierarchy in designing and assessing their proposals. This provides that a proponent must design their proposal to avoid biodiversity impacts, then minimise the impacts which cannot be avoided, and offset any residual impacts.

While the Courts have refused approval for developments which do not properly apply this hierarchy, there is widespread concern that the hierarchy is not applied rigorously and consistently.

The Bill proposes to lock in the hierarchy in several ways:

• it proposes a clear explanation of the hierarchy;
• it explicitly requires biodiversity development assessment reports which accompany applications for planning approval (BDARs) to set out and assess “genuine measures” which the proponent has taken, and proposes to take, to avoid and minimise the biodiversity impacts of their proposal; and
• it provides for regulations to specify:
  • principles which apply to the taking of “genuine measures” to avoid and minimise the biodiversity impacts;
  • standards for the assessment of those genuine measures; and
  • requirements for BDARs to include information demonstrating whether those genuine measures meet the assessment standards.
• it provides for a public register of:
  • planning approval conditions which require biodiversity offset measures; and
  • measures to avoid and minimise biodiversity impacts which are recorded in a BDAR or a planning approval; and
• it allows the Environment agency head to give a direction to the accredited person preparing a BDAR for a development proposal if satisfied that the person is not complying with a requirement of their accreditation in relation to that BDAR, and prevents the finalisation of the BDAR until that direction is resolved.

Similar requirements apply to assessments for a proposal for biodiversity certification of a development area.

It is expected that this will drive an improved application of the hierarchy with greater avoidance of biodiversity impacts, provide more opportunities for approval authorities to scrutinise biodiversity assessments, and cause proponents to address biodiversity issue earlier in their proposal design and assessment.

The Government has emphasised a desire to provide more clarity for proponents about the prospects of their proposal, and to do so earlier in the planning process, in order to reduce development delays and costs. While these reforms, especially the focus on “early avoidance” and up-front information about biodiversity risks, should help to achieve these goals, their success will depend also on a corresponding focus by approval authorities on delivering more confidence in planning approval outcomes earlier in the process.

Offset options

Currently, the BOS provides for the delivery of biodiversity offsets primarily in two ways:

• the acquisition and “retirement” of biodiversity credits of specified types, and in specified numbers, to enable “like for like” offsets – virtually all planning approvals which require offsets will include a condition specifying the credit requirements for the offset; or
• payment into the Biodiversity Conservation Fund (BCF) of a sum equivalent to the forecast market value of the credits which would be required for the offset plus a calculated premium, with the expectation that the Government will use that money to deliver equivalent offsets.

Proponents view the BCF payment option as an important (albeit costly) safeguard if they are unable to source the credits needed to offset their projects.

However, the ready availability of the BCF payment option has been criticised for leading to deferral of offsets in real terms, risking insufficient funds for offsets if the payments aren’t used promptly for offsetting, and eroding the policy of “like for like” offsets.

The Bill proposes three key measures to address this:

• allowing regulations to restrict the circumstances in which BCF payments can be made;
• providing a clearer pathway for satisfying offset obligations via “prescribed biodiversity conservation measures”, determined in accordance with regulations, instead of retiring the biodiversity credits required in the planning approval conditions; and
• imposing a three year time frame for the Biodiversity Conservation Trust to apply BCF funds for offsets, otherwise it must enter into an agreement with the Environment Minister for the delivery of those offsets.

It also formalises an opportunity for planning approvals for State significant development or infrastructure to require offsets in a form other than biodiversity credits, if the Environment Minster provides concurrence for that course.