On the perils of putting a price on nature

With all that’s going on in the biodiversity space now, from the Task Force for Nature-related Disclosures to the Environmental Protection and Biodiversity Conservation Act (EPBC) reforms and the Nature Repair Bill, you would be forgiven for being a little overwhelmed.

While the Nature Repair Bill announcement was all the rage in March, the Department of Environment has since appeared to shift its focus to proposed changes to the EPBC Act. This month it has been consulting experts on the first tranche of six National Environmental Standards to be included in the Act, concerning Matters of National Environmental Significance (MNES).

The department will consult more widely later in the year before it finalises its proposals, but for now the MNES updates are getting environmental policy experts hot under the collar, and it’s not just because of climate change.

Experts tell The Fifth Estate they are alarmed by a lack of clarity and specificity in what the government is trying to achieve.

The terms “nature positive” and “net positive” are being used interchangeably in the department’s working draft.

University of New South Wales senior lecturer in public sector management, Megan Evans, says this implies a lack of understanding of the difference between the two and is concerned that aiming for “net positive” lowers the bar because it is already effectively enshrined in current biodiversity legislation.

“In short, nature positive SHOULD mean we have more nature in 2030 compared to a historical baseline, fixed at 2020,” Evans writes in a recent LinkedIN. “Net positive COULD mean the same but could ALSO mean slightly better than business as usual.”

What gets measured gets managed

Moreover, the outcomes of the policy are not specified – there is no quantified measure or outcome to achieve.

“The department should be more specific about what they mean by nature positive. In the Objects of the Act, they could say something like by 2030 we will have an increase in the extent of nature of X amount,” Evans adds.

“One of the core issues with the EPBC act is that there is so much wordiness and this draft just adds on more wordiness,” Evans says.

If nothing can be undertaken to improve the outlook for an affected species, should the development be approved in the first place?

Another cause for concern is a regression from the insistence on “like for like” offsets, which means an offset must be specifically related to the species loss or negative impact that the action (such as land use change) is creating. Instead, the government is planning to allow people to pay “conservation payments” into a fund where a specific offsetting action can’t be found.

But as Evans notes in her post, if nothing can be undertaken to improve the outlook for an affected species, should the development be approved in the first place?

What does ‘better overall’ mean anyway?

The idea that more development could be justified in environmentally sensitive areas because developers are willing to make conservation payments is an unsettling one.

They will judged against whether they deliver a “better overall” outcome for the environment. Again, this vague motherhood statement is concerning – who decides what is “better overall”? It could lead to some harsh value judgements on threatened species.

Some observers suspect that the department is charging ahead with the EPBC Act changes as a funnel for activity in the Nature Repair Market. The government consulted briefly on its proposed Nature Repair Bill earlier this year, but despite a positive PR campaign, the response from stakeholders was not universally supportive.

What’s happening with the Nature Repair Market?

Briefly, the Nature Repair Market will enable the creation and trading of biodiversity offsets, where landholders can receive credits for action they take on their land to improve biodiversity outcomes, such as providing habitat for a threatened species.

The government will do well to demonstrate that it has learned from the experiences in the carbon credit market, following the Chubb Review of the Australian Carbon Credit Unit scheme. This includes separating responsibility of the scheme’s regulator, assurance provider and policymaker.

What the bankers think

The Australian Bankers’ Association is concerned that a biodiversity offsets market would suffer similar issues that plagued the ACCU market, and wrote in a submission that because a single project will only generate a single offset certificate, the market will invariably be small.

The association also points to issues with transaction costs and the lack of a common methodology for valuing certificates.

There will also be comparability issues – this was not a problem with carbon markets because a unit of carbon is universal, no matter the location it has been emitted from. Biodiversity offsets will not be comparable, and therefore fungible across regions and ecosystems.

Other criticism of the Nature Repair Market stems from fears that it will be used to justify actions which harm nature, because they can be “made good” by a conservation payment.

Australian Ethical Investment suggested in its submission that companies be forced to pay for their nature dependencies, and not just in situations where they take action that negatively impacts nature. The ethical super fund is also concerned about a lack of buyers for nature-based offsets.

“Even in best case 1.5 degree-aligned scenarios there is an expectation that hard to abate sectors will need to rely on carbon offsetting for the foreseeable future. The same may not be able to be said for nature at the scale required to support a largely private sector driven market… it is not clear to us whether a ‘nature price’ is theoretically possible,” the submission reads.

Again, with the numbers

As with most things nature and biodiversity, data and metrics will the lynchpin of the scheme’s success.

Climateworks has been doing some heavy lifting in this area, with its studies on natural capital. It has developed a draft version of. Natural Capital Measurement Catalogue (NCMC) which is a comprehensive set of natural capital measures and metrics for properties that are designed to be used by a variety of stakeholders including farmers, government and financial market participants.

Until we see the other five National Environmental Standards and the government digests the feedback it receives about the Matters of National Environmental Significance and the Nature Repair Market, it’s very much a “watch this space”.

But as Evans points out, solutions may be more obvious than we think.

“If you want more nature in the future than we do now, you need to stop impacting nature at some point. And by making it easier to impact nature and pay for it later, you’re not sending the right message.”