Commonwealth Nature Repair Market update

The world’s first legislated, national, voluntary biodiversity credit market is one step closer to being established, with Department of Climate Change, Energy, the Environment and Water (DCCEEW) progressing Nature Repair Market project “methods”, announcing the inaugural members of the Nature Repair Committee on 22 August 2024, and progressing legislative rules that will support the operation of the Nature Repair Market.

With the market anticipated to open in 2025, DCCEEW is taking steps to finalise methods and rules that will define the conditions required for projects to be registered and put governance mechanisms in place.

Background

In December 2023, the Federal Government passed legislation establishing the framework for the Nature Repair Market (Natural Repair Legislation) , which is designed to provide a high integrity voluntary biodiversity credit market to help fund nature restoration projects and forms part of the Federal Government’s Nature Positive Plan.

The scheme establishes a marketplace where eligible individuals and organisations can undertake nature repair projects to generate a tradable certificate that can be sold to generate income. A wide variety of potential projects are being considered including those involved in pest and feral species control as well as re-establishing vegetation along waterways.

The Nature Repair Market is intended to complement other priority initiatives such as:

• protecting 30% of Australia’s land and seas by 2030 in accordance with Australia's commitment under the Global Biodiversity Framework;
• working towards no new extinctions; and
• driving voluntary disclosures and investment in nature through encouraging businesses to report on nature-based financial risks.

Along with the methods that set out the requirements for the eligible projects, DCCEEW is developing biodiversity assessment instruments to support consistency in how projects collect information and report on improvements in nature for each type of biodiversity project.

DCCEEW is also collaborating with the CSIRO to design and pilot an ecological knowledge system to support the Nature Repair Market.

Nature Repair Committee

As part of the accountability and assurance mechanisms designed to support the integrity of the Nature Repair Market, an independent advisory body known as the Nature Repair Committee is to be established under Part 19 of the Nature Repair Act 2023 (Cth), with its responsibilities to include, but not limited to:

• advising the Minister on the development, prioritisation and review of methods and biodiversity assessment instruments;
• consulting with the public on key instruments for the Nature Repair Market;
• monitoring compliance with methods using the biodiversity integrity standards;
• undertaking periodic reviews of the methods; and
• publishing material relevant to its functions, including review outcomes.

In accordance with section 198(2) of the Act, members of the Committee must have substantial experience or knowledge and a significant standing, in at least one of the following fields relevant to the functions of the Committee:

• agriculture;
• biological or ecological sciences;
• economics;
• environmental markets;
• Indigenous knowledge; and
• land management.

The Minister must ensure that, at all times, there is at least one member of the Committee that has substantial experience or knowledge and a significant standing in:

• biological or ecological science; and
• Indigenous knowledge.

On 22 August 2024, the DCCEEW announced the appointment of the inaugural members of the Committee, who will hold office on a part-time basis a period of no more than 5 years including Mr Stephen McCutcheon, Dr James Fitzsimons, Mr Brendan Foran, Mr Tyronne Garstone, Ms Fiona Simson and Ms Siobhan Toohill.

The Nature Repair Committee will review proposed methods and advise the Minister whether they comply with the biodiversity integrity standards specified in section 57 of the Act. These include that (amongst others):

• a biodiversity project must be designed to:
  • result in the enhancement or protection of biodiversity in native species that:
    • would be unlikely to occur if the project was not carried out;
    • is appropriate to the project area; and
    • can be measured, assessed, and verified.
  • prevent the project from having a significant adverse impact on biodiversity in a legally protected native species.

• any statements or information that could be included in: (i) an entry in the Register for a biodiversity project covered by the methodology determination; or (ii) a biodiversity certificate issued in relation to a biodiversity project covered by the methodology determination would be supported by clear and convincing evidence.

The Minister cannot approve a method if the Nature Repair Committee advises it does not meet the biodiversity integrity standards.

Methods for the Nature Repair Market

The market framework is designed to mirror and function alongside Australia’s existing carbon farming market, with eligible projects resulting in the issue of a biodiversity certificate by the Regulator (currently, the Clean Energy Regulator) that can be:

• tracked, and traded, through a national register; and/or
• use by certificate owners, or project stakeholders, to support claims about their investment in nature.

Eligible projects can be carried out on land, water, or a combination of both, and must satisfy a series of requirements in order to be registered, including that they are covered by a methodology approved under the Nature Repair Legislation. ‘Methods’, as they are known, will be the legislative instruments that set out how eligible projects are to be carried out, including:

• the conditions that must be met for a project to be registered and for proponents to receive biodiversity certificates;
• the activities that project proponents can carry out, or any restricted or prohibited activities; and
• the project plan required to demonstrate how the project will be carried out in order to achieve its biodiversity outcome.

Method development

Over the past nine months, the Federal Government has run a series of workshops, and engaged with various technical experts and partner organisations to progress a pipeline of proposed methods including:

DCCEEW is also partnering with First Nations organisations to develop First Nations-led methods.

Excluded biodiversity project methods

The evolving risk of climate change litigation for Australian corporate entities in relation to environment and sustainability investment, particularly in the context of human rights, and agricultural land use; also demonstrates the importance of expert and industry collaboration to define what would constitute an “excluded biodiversity project”.

Significantly, section 33 of the Act allows for the development of discretionary rules that would require the Minister to have regard to whether, in respect of a particular kind of project, there is a material risk that that kind of project will have a material adverse impact on:

• the availability of water;
• biodiversity (other than the kinds of biodiversity to be addressed by the project);
• employment;
• the local community;
• a local community of Aboriginal persons, or Torres Strait Islanders, who have a connection to the project area;
• land access for agricultural production; and
• the environment.

While the Explanatory Memorandum to the Act provides that the decision-making process should ensure that considerations remain broad enough having regard to the evolving nature of research applicable to various environmental practices, the following examples were given:

• the scale of the agricultural production system that may be impacted and the resulting impact to the related agricultural production in the local community;
• the relevant national resource management regional plan, healthy country plan or other land and sea management plans where applicable; and
• cumulative societal impacts and intergenerational equity in regions.

To ensure that there is a pipeline of methods available for project proponents when the Nature Repair Market launches in 2025, the Federal Government has invited tenders to partner with them to:

• develop methods that enhance and protect existing environments, as well as establish or restore habitat; and
• the associated subordinate legislation and rules.

DCCEEW are already progressing the Enhancing Remnant Vegetation, Carbon + Biodiversity and Native Forest methods so the current round of tenders closing on 19 September 2024 focuses on:

• Invasive Pest Management,
• Permanent Protection; and
• Rangelands.

Nature Repair Market Rules

On 2 September 2024 DCCEEW released a discussion paper seeking feedback on the development of the legislative rules that will support the operation of the Nature Repair Market (Draft Rules).

The Draft Rules included in the discussion paper are requirements that would apply across all market participants in relation to:

• biodiversity projects and their registration,
• biodiversity certificates and their content,
• the Register; and
• assurance and compliance, including biodiversity project reports, audits, and notification.

The discussion paper sets out the relevant aspects of the Act, followed by commentary on the proposed Draft Rules, and questions on policy approaches and other feedback sought by DCCEEW, including:

• In relation to Biodiversity Projects:
  • whether existing projects should be eligible to participate;
  • how the project plan could facilitate the registration and implementation of a biodiversity project;
  • whether projects relating to the planting of a known weed species, or the establishment of a project on land that has been subject to illegal land clearing on native forest should be excluded; or
  • whether pre-registered projects would be required to transfer to a new method, if varied under the Act.
• In relation to biodiversity certificates and the Register:
  • whether the proposed information for inclusion is appropriate; and
  • what project attributes should be included on biodiversity certificates.
• In relation to assurance and notification:
  • whether the proposed content for biodiversity project reports, and audit reports, are appropriate;
  • how often project proponents would be required to submit a biodiversity project report, including what factors would determine the number and timing of reporting;
  • whether the Clean Energy Regulator should have authority to set additional audit requirements; and
  • whether stakeholders agree with the proposed definitions for notification of "significant reversals of biodiversity" outcomes and situations which would not constitute a "significant reversal of biodiversity".

DCCEEW is seeking feedback by Monday, 30 September 2024.