One of Australia’s largest carbon project developers says nature repair certificates should initially be barred from being used as offsets, as part of a wide-ranging list of recommendations and concerns it raised on the government’s nature repair market bill.

The government’s legislation on its world-first nature repair market is currently before a senate committee, tasked with scrutinising the bill before it progresses further, and is currently accepting stakeholder submissions.

Writing to the committee, Climate Friendly said it supported the primary purpose of the legislation to provide a framework for a voluntary national market that delivers improved biodiversity outcomes.

Climate Friendly has delivered over 150 carbon farming projects in partnership with land managers that also seek to restore nature.

It made a number of recommendations to improve the legislation, stressing that certificates issued under the scheme should not be allowed for offsetting purposes at either a state or federal level, arguing it would undermine the primary purpose of the scheme.

“The inclusion of offsets initially, without at least additional legislative changes is our key area of concern,” the submission said.

It said that some land managers would be unwilling to participate in the market if certificates could be used for offsetting, because they understand it would mean the destruction of land elsewhere.

“This perception of offsetting enabling nature degradation will potentially impact participation and supply of certificates to the nature repair markets. Similar concerns are likely to arise for environmental conservation organisation and Traditional Owners,” it said.

The submission called on the government to explicitly exclude offsetting at the commencement of the scheme, at least until the long-awaited reforms to the federal Environmental Protection and Biodiversity Conservation (EPBC) Act are implemented, and the development of a “truly nature positive” offsetting standard is developed.

It said if offsetting is initially included, the legislation should allow participants to decide if their nature repair certificates can be used for voluntary nature repair only, or also for offsetting.

The government has indicated that it is looking to resolve this issue by developing a separate methodology for certificates that are used for offsetting, compared to those used for nature repair.

However, Climate Friendly said separate certification types should be legislated in the Act, which it said would provide greater certainty to landholders and improve market participation.

The submission also noted that while the use of contracts between buyers and sellers has been proposed as a way for landholders to restrict certificates being used for offsets.

However, it said this placed an unfair burden on land managers, given that contracts would likely require them to monitor any transfer of certificates for the lifetime of the project, which could be over 100 years or in perpetuity.

DOUBLE TROUBLE

Climate Friendly went on to say the legislation does not adequately address the risk of double counting nature benefits that deliver both carbon credits with a nature price premium and the sale of certificates for the same nature outcome.

This had been a chief concern for biodiversity and conservation groups, as well as others who are against market-based mechanisms to conserve and restore nature in general.

The government believes that the market will initially gain traction from companies that invest in Australian Carbon Credit Unit (ACCU) projects that have biodiversity outcomes associated with them.

However, Climate Friendly said without adequate cross labelling of units across carbon and nature repair markets, there is likely to be double counting of nature benefits by buyers of nature repair certificates and premium ACCUs.

“Without adequate labelling in both carbon and nature repair public registries, it will not be possible for buyers to ascertain if they are accidentally claiming nature improvements that have been sold to another party,” it said.

This risk would be heightened if transactions occurred via brokers, who are not directly involved in on-ground activities of the project, it added.

“Addressing this risk is important to stem potential future greenwashing.”

The submission also said third party independent project-specific audits should be a mandatory requirement across the entire scheme from the beginning, rather than left to a decision during method development.

Climate Friendly was also critical of the market legislation’s over-reliance on the existing carbon market legislation, the Carbon Farming Initiative (CFI) Act.

While it noted both pieces of legislation sought to achieve similar outcomes on the ground, the nature repair market needed to be developed with detailed consideration of regulatory efficiency for market participants.

“As the draft Nature Repair Market Bill stands, it is not sufficiently aligned with the CFI Act, and will result in inefficient regulation that will drive higher costs in delivering nature repair,” it said.

The developer suggested the CFI Act and the nature repair market bill could be compressed into a single, combined piece of legislation to avoid unnecessary regulatory duplication.

Another option could be a review to consider where legislative elements can be mirrored, tasks mutually recognised, and timing aligned.

FUNGIBILITY

Addressing another key question in the market, Climate Friendly said the bill should be amended to explicitly include options for both single project certificates and unitised certificates to address fungibility concerns.

The company said it could see benefits in both enabling single certificates for individual projects, and more fungible unitised certificates that are issued when project outcomes are achieved.

Clear legislative drafting that enables both may be “prudent”, it said.

Despite the extent of the changes Climate Friendly put forward to the legislation, it said it supported the development of a high integrity nature repair market as a key contributor to solving Australia’s biodiversity crisis.

It also said alignment of the nature repair and carbon markets would be mutually beneficial, as delivering both together would help lower costs and enable scale to tackle both the biodiversity and climate crisis in Australia.

The committee’s submission period on the legislation closes on Thursday, with a final report expected by Aug. 1.

The government has indicated it would like to see the nature repair market up and running as soon as next year.

By Mark Tilly – mark@carbon-pulse.com

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