The NSW Department of Planning and Environment (DPE) has come under fire yet again from the Auditor General, this time for its management of a market-based program that is supposed to allow developers to offset biodiversity loss.
The Biodiversity Offsets Scheme is a market-based mechanism that allows farmers (and other landowners) to gain biodiversity credits in exchange for setting up Biodiversity Stewardship Agreements (BSAs) on their land, in perpetuity.
These biodiversity credits can then be sold to developers to offset the negative impact of their projects on biodiversity, enabling them to proceed with their applications.
The program, overseen by the DSE, is important because – without effective management – only half of NSW’s threatened species will still exist in 100 years, as the state’s 2020 Biodiversity Outlook Report estimates.
The big problem, according to the NSW Audit Office investigation, is that it’s not working:
- 96 per cent of developer demand for species credits is not met by the current supply
- 97 per cent of species credits that have never been traded on the biodiversity market
- only 60 per cent of the 226 Biodiversity Stewardship sites under active land management
- $90 million of developers’ obligations have been paid directly into the Biodiversity Conservation Fund, rather than buying credits
It also faces a host of major issues around transparency, sustainability and integrity.
“These factors create a risk that biodiversity gains made through the scheme will not be sufficient to offset losses resulting from development, and that the DPE will not be able to assess the scheme’s overall effectiveness,” the auditor said in a statement.
A pattern is emerging here…
The report, which was tabled on Tuesday, is the latest in the string of investigations in recent months that have found serious issues in the department, which is overseen by NSW Planning Minister Anthony Roberts.
In April, the auditor found that just 40 per cent of 1200 buildings identified as being at risk because of dodgy cladding have so far been either fixed, or reassessed.
A month later, the department came under fire for its mishandling of Aboriginal Land claims, with the Auditor General uncovering a massive backlog of 38,000 unresolved claims, which will take around 22 years to clear at the current rate.
Yet another report highlighted serious problems with the rollout of the state’s new e-planning portal, following widespread criticism from certifiers and leading architects.
Separately, issues within the department were further highlighted when the NSW upper house recently ordered the state government to hand over all the documents relating to its controversial decision to dump the Design and Place SEPP.
The documents revealed meetings between senior department officials and lobbyists representing developers, and orders from the minister’s office to scrub policy proposals from the department’s website, which were treated as a top priority by departmental staff.
What’s going wrong?
The offsets scheme was created in 2017 under the Biodiversity Conservation Act, following a 2014 review of the State’s biodiversity legislation.
Its purpose was to “maintain a healthy, productive and resilient environment for the greatest well-being of the community, now and into the future, consistent with the principles of ecologically sustainable development”.
The problem, according to the Audit Office, is that DPE didn’t effectively design core elements of the scheme, or establish a clear strategic plan to guide its implementation.
Under the state’s planning system, proposed developments that meet certain thresholds for clearing native vegetation have to undertake a Biodiversity Development Assessment Report. This determines how many credits, and what types, are needed to offset biodiversity loss.
These biodiversity losses need to be offset like-for-like as a condition of a planning application, and there are 1394 different types of ecosystem credits in the system.
But the department doesn’t have a public register of the credits, or information about their supply, demand and price. This means that landowners don’t have adequate information to decide whether they want to participate by setting up a BSA.
As a result, many types of credits have never been traded, and there are also major shortages of credits – more than 90 per cent of demand can’t be matched with supply.
The shortage of credits is likely to get worse, as a result of the NSW government’s $112.7 billion four-year infrastructure pipeline.
Developers also have the option to pay directly into the Biodiversity Conservation Fund, rather than purchase credits from the market, to meet their offset obligations. This transfers the obligations to offset to the department through its Biodiversity Conservation Trust (BCT).
As a result, the BCT is both a participant and operator of the market – and there aren’t adequate safeguards to prevent conflicts of interest from happening.
Also, the tool used to calculate how much developers need to pay into the BCF is inaccurate, leading to potential shortfalls. “There is a risk that the BCT will not have sufficient funds to acquit its growing obligations with like-for-like credits” the report states.
It gets worse.
The DPE doesn’t maintain consolidated information on what the developers’ offset obligations are or how they are meeting them.
The planning minister has the power to approve a reduction in the offset requirements for major projects. When that happens, the team that administers the program doesn’t have ready access to information about when this discounting occurs, or why.
On top of that, the DPE only introduced ecological monitoring requirements for new BSA sites in March 2021. That means that over 90 per cent of the current BSA sites aren’t being monitored.
While there are rules in place for accrediting assessors, the department doesn’t monitor the quality of their work. But the department doesn’t keep track of their conflict of interest disclosures, and assessors aren’t required to disclose any conflicts to their landowner clients.
The auditor general made 11 recommendations for improving the program, which include:
- implementing a long-term strategic plan for the Scheme
- improvements to the operation and transparency of the market and credit supply
- frameworks to ensure the financial and ecological sustainability of biodiversity stewardship sites
- enhanced public reporting and data management
- resolving issues in conflicting governance and oversight