“Failure by almost every measure:” Offsets under fire again after “damning” audit

The New South Wales Biodiversity Offsets Scheme has been slammed as a “failure by almost every measure,” after an audit determined its effectiveness so far has been “limited,” with key concerns remaining around its integrity, transparency, and sustainability.

The report from the Audit Office of New South Wales examines whether the NSW Department of Planning and Environment and the Biodiversity Conservation Trust have effectively designed and implemented the offset scheme to compensate for the loss of biodiversity in the state due to development.

The report concludes that the DPE has not effectively designed core elements of the scheme, such as a clear strategy to develop the biodiversity credit market, or methods to measure outcomes against the purposes of the Biodiversity Conservation Act.

“A market-based approach to biodiversity offsetting is central to the Scheme’s operation but credit supply is lacking and poorly matched to growing demand: this includes a potential undersupply of in-demand credits for numerous endangered species,” the report says.

“Key concerns around the Scheme’s integrity, transparency, and sustainability are also yet to be fully resolved.

“As such, there is a risk that biodiversity gains made through the Scheme will not be sufficient to offset losses resulting from the impacts of development, and that DPE will not be able to assess the Scheme’s overall effectiveness.”

The lengthy report, which the Nature Conservation Council on Tuesday described as “damning,” throws further doubt on the integrity of environmental offset schemes in general, including Australia’s fledgling carbon market.

Last month, federal climate and energy minister Chris Bowen launched an independent review into the troubled Emissions Reduction Fund, appointing a former chief scientist to investigate claims the scheme lacks environmental integrity.

The key criticisms against the NSW Biodiversity Scheme include that the market-based approach is not working, in that there are not enough biodiversity “credits” to meet the demands of development.

The Auditor-General’s report notes that while the Scheme has been in place for five years, most credit types have not yet been traded.

Despite this, the report cites DPE data that around 90% of demand cannot be matched to credit supply – and there is likely to be a substantial credit undersupply for at least seven endangered flora species, three endangered fauna species, and eight threatened ecological communities.

Meanwhile, credit demand is projected to grow in line with the NSW government’s $112.7 billion four-year infrastructure pipeline.

Further, the report finds that the practice of developers paying into the Biodiversity Conservation Fund, without proper information about whether sufficient credits for their project exist, is enabling damaging projects to progress while nature loses out.

“It is hard to imagine a more damning assessment of such an important scheme than the Auditor General has given the NSW Government’s Biodiversity Offsets Scheme today,” Nature Conservation Council CEO Jacqui Mumford said in a statement on Tuesday.

“It is failure by almost every measure. Essentially, the government’s biodiversity offsets scheme treats nature like a Magic Pudding that developers can keep eating forever if they throw some cash into the government’s tin.

“It reduces nature to a bunch of financial formulas that can never capture the true value of our unique and rapidly disappearing wildlife and bushland.
“After this report, offsets must be only used as an absolute last resort. Currently, they are handed out like lollies.”

Mumford notes that the most recent NSW State of the Environment Report found that more than 1,020 plants and animals were now threatened with extinction, about 20 more than when the scheme began.

“Offsetting must be used as a last resort and only when it adheres to best-practice principles,” she said.

Greens MP and spokesperson for the environment Sue Higginson also described the report as “damning” and said it confirmed that government policy was contributing significantly to the current environmental crisis.

“This broken scheme has failed to adequately identify and provide like-for-like offsets for many developments in NSW creating a situation where threatened species and ecological communities will likely go extinct due to the lack of appropriate and available offset credits,” Higginson said.

“The government needs to intervene now and halt projects that are relying on this offsets scheme until there is an accurate accounting of what offsets are available for developers and the government.

“Right now, the offsets scheme is trading biodiversity that doesn’t and can’t exist anywhere else,” she said.