Correction: a previous version of this story incorrectly attributed a quote in par. 14 to DCCEEW official Ryan Wilson. The person quoted was Climate Friendly general manager Jay Hender. 

Australia could split biodiversity certificates into separate offsetting and non-offsetting methodologies in its nature repair market (NRM), to give buyers and landholders broader choice and confidence in how they engage with the scheme, according to a government official.

Ryan Wilson, general manager of biodiversity markets, economics, and environmental science at the governmental department tasked with overseeing the nature repair market’s development, acknowledged the issue of offsetting was a controversial one, particularly for environmental groups, when speaking at the Carbon Farming Industry Forum in Cairns on Tuesday.

Many stakeholders responding to the government’s two rounds of consultation on the draft legislation said project proponents should be able to restrict the use and further trade of a biodiversity certificate generated under the scheme for offsetting purposes.

A parliamentary digest published last week lay out the extensive issues a large number of stakeholders responding to the government’s two rounds of consultation had with the draft legislation.

As part of its work developing the market’s framework, Wilson said the government was working on a dedicated nature positive offset standard to act separately from other forms of conservation methodologies in the market.

“The current thinking is that you can potentially have a dedicated method which deals with those much higher benchmarks that you need for an offset,” he told the conference.

He said creating an offset methodology would allow landholders to choose if they wanted their land to be used for offsetting purposes under the NRM framework, and would also give buyers the choice of how they invested in nature restoration.

“If I don’t want to buy something that could be used as an offset, then I don’t buy anything from the offset method, so I think that’s the thinking to deal with that situation, and that gives you that trust and confidence in what happens with your certificate,” he said.

Wilson said splitting offsetting and non-offsetting certificates would also provide transparency in the market, with the difference made explicitly clear in the market’s public register.

He emphasised that the offset standard still needed to be developed, and there was still more thinking to be done on the government’s part about how that would work.

Amendments to the bill are specifically focussed on ensuring First Nations involvement in the development of certain methodologies, he added.

Representatives on the market side of the scheme have sought to query how certificates would be presented for fungibility purposes, with Wilson saying this could be delineated in the methodology.

“A method can have a process in it where it can be represented as units, fundamentally it’s still the certificate, but that doesn’t stop people from representing it, in some transparent way, as units in the market,” he said.

Jay Hender, executive manager of Climate Friendly said: “I think you need a mixture of both [units and certificates] and I think the laws might enable it via the methods, we might just have to sit back and see that subordinate legislation first before we lay judgement.”

NAVIGATIONAL HAZARDS

Laura Waterford, director at advisory firm Pollination, told the panel discussion that the novel nature of the scheme meant that it was challenging for both potential buyers and sellers to navigate, particularly on the subject of the unitisation of the certificates.

That included the proposed approach for the government to issue just a single credit to all projects, regardless of their size or achievements.

“A single certificate might not necessarily be exactly what the private sector [want]. When they do their due diligence and think about how they want to use a product, [they] might not want to participate as a buyer,” she said.

“Being really clear on what approach to potentially unitising the certificate is, is likely going to be very important to help people navigate (the scheme).”

The Australian Sustainable Finance Institute noted in its submission to the consultation that there were “significant complexities that arise from an attempt to unitise nature for the purpose of comparing, pricing, and trading”.

“If the scheme is too complex and costly it will deter both supply and demand. Likewise, if the market perceives that the scheme is not scientifically credible, it will not participate in it,” it was quoted in the parliamentary digest as saying.

However, Pollination’s Waterford said three globally established standards – the Science-based Target Initiative, and the Taskforce for Nature-related Financial Disclosures (TNFD), and the mitigation hierarchy – were acting as an investment signal to corporates to invest in biodiversity schemes as a way of making positive impacts on the natural environment.

Waterford said these standards were increasingly asking corporates to invest in work beyond the scope of their immediate impacts and supply chains, meaning there was growing demand for effective biodiversity schemes, as opposed to offsetting-based work.

“[These standards] are going to drive this sort of positive investment perspective, and it’s something we’re already working on with quite a few corporates in Australia … on understanding how they address all elements of that mitigation hierarchy, and how biodiversity credits can help … articulate the actions they’re taking under the TFND,” she said.

“When you really break down the way those three frameworks interact with each other, there’s not a lot of controversy in the discussion, everyone can see the case for the need for investment in nature that’s just absolutely positive and not about offsetting.”

However, the parliamentary digest paper highlighted the risk that organisations may purchase biodiversity certificates to support ESG claims made in other markets – dubbed green-credentialing.

“Both purchasers, and the general community, cannot be sure that holding a bespoke biodiversity certificate in any way accurately reflects the nature-related dependencies and impacts of a particular business’s practices,” it said.

Environment Minister Tanya Plibersek has flagged that she would like to see the nature repair market up and running as soon as next year, leaving little time for the government to figure out how these elements of the scheme would interact, and what their potential consequences would be.

Many argue that the government should prioritise reforms to the nation’s environmental, protection and biodiversity laws, rather than focus on market-based solutions.

By Mark Tilly – mark@carbon-pulse.com

*** Click here to sign up to our weekly biodiversity newsletter ***