Australia on Friday published draft legislation for its planned voluntary biodiversity market, with the main elements unchanged since the initial draft was released in August, ignoring warnings that the scheme as designed is likely to be a commercial failure.

When launched, the nature repair market is intended to encourage investments in biodiversity and drive environmental improvements across Australia, the Department of Climate Change, Energy, the Environment, and Water (DCCEEW) said as it released the 240-page draft bill for a round of public consultation on Friday.

“Companies are looking at ways to achieve positive outcomes for nature through their investments but a national framework to facilitate that investment is not yet in place,” the department said.

“This [bill] will enable landholders who protect, manage, or restore local habitat … to receive biodiversity certificates which can then be sold to other parties. It will ensure the integrity of biodiversity certificates so the market can invest with confidence.”

The nature repair market will be set up independently of Australia’s existing regional biodiversity offset schemes, and there is no mention in the bill of these biodiversity certificates becoming eligible for compliance use in those offset schemes.

However, the DCCEEW did stress that the nature repair market will function in parallel with Australia’s carbon offset market, meaning land-owners will be eligible do earn both carbon and nature repair credits for activities on the same plots of land.

MARKET BASICS

The main elements of the proposed scheme are essentially the same as in the initial framework outlined earlier this year and which went through an initial consultation process.

Organisationally, the nature repair market will be more or less a carbon copy of the carbon offset market:

• The environment minister will have overall oversight and the power to approve, vary, or revoke methodologies, assisted by an expert committee consisting of 5-6 members that will provide advice
• The department will work with First Nations groups and others to develop a biodiversity assessment instrument and project methodologies, and also will have the authority to buy credits
• The Clean Energy Regulator will administer the scheme, with the responsibility to register and revoke projects, enforce scheme rules, issue credits, maintain a registry of projects and units, and publish market information

All landholders are eligible to run projects, including First Nations peoples, conservation groups, and farmers, and the scheme will encompass projects on land, in inland waters, and in marine and coastal environments, once relevant project methodologies have been approved.

Once a credit is issued it can be traded freely in a secondary market, and the draft legislation does not specify who can or cannot buy the credits, suggesting anyone is eligible to purchase the certificates.

However, each project will only be issued a single credit, which will contain information about the project’s achievements, regardless of project size or durability.

CONCERNS

The draft bill will be out for public consultation until Feb. 24 and it remains to be seen what potential market participants and observers will say once the holiday season is over.

However, the almost identical framework was subject to substantial doubt in the initial consultation process.

Stakeholders particularly questioned the proposal to only issue a single credit to each project, fitted with detailed information about everything the project has achieved, including potential co-benefits such as positive outcomes for First Nations peoples.

While that saves the Australian government from having to take a position on which specific metrics to base a biodiversity certificate on and how to measure it – a major hurdle for the emerging global voluntary biodiversity market – it also leaves project developers depending on a single buyer purchasing the entire outcome of the project, which some say will likely push down prices.

“While the standardisation is critical, we think that this project-based certificate approach will be commercially unsuccessful, Radha Kuppalli, managing director for impact and advocacy with Sydney-headquartered forest management firm New Forests, said in a submission to the previous consultation round.

“To commercialise the biodiversity project, we would need a way to unitise the project-based biodiversity certificate so that the values it represents could be sold to a variety of buyers … and to have those biodiversity units made available over time.”

Other critics, such as think-tank the Australia Institute, have argued that the proposed market framework will likely leave the government the main or sole buyer of credits from the scheme.

The specification in Friday’s bill and supporting documents that the DCCEEW will have the authority to buy nature repair certificates might be seen to underpin that view.

“Further consultation in 2023 will work through the details of how the scheme will operate. This will include the rules and methods for developing the market. It will also consider how people can participate in the market,” DCCEEW said Friday.

By Stian Reklev – stian@carbon-pulse.com

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