The long-awaited Nature Repair Market Bill 2023 (Cth) (“Bill”) passed both houses of the Commonwealth Parliament on 7 December 2023, opening the gateway for another potential income stream for landholders.
Once it receives Royal Assent and becomes law, the Bill will establish a new voluntary “Nature Repair Market” which incentivises landholders to participate in projects that manage, restore and protect their local habitat.
The Nature Repair Market is envisaged to operate in parallel with the Australian Carbon Market established under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) for the issue of Australian Carbon Credit Units (“ACCUs”). You can read more about the Bill, the Nature Repair Market and its interaction with the Australian Carbon Market here.
Under the Nature Repair Market, landholders who participate in an eligible project will receive one “biodiversity certificate” in respect of their project. These certificates can be sold to businesses, individuals or the government to help meet biodiversity targets.
Methodologies
Like the Australian Carbon Market, there will be various “methodologies” (which set out the rules for each type of biodiversity project). These methodologies are not set out in the Bill and are yet to be released. Once they are released, it will be important for market participants to carefully consider their requirements, and whether any will be suitable for their intended project.
Offsetting Environmental Harm
The Bill was subject to considerable debate as to whether biodiversity certificates could be used (and therefore purchased by third parties) to offset environmental harm. Before passing the Commonwealth Parliament the Bill was amended to include an absolute prohibition on using biodiversity certificates to offset against environmental harm. In other words, a person/entity cannot cause environmental harm and then seek to rely on (and purchase) a biodiversity certificate to negate the effects of that harm “on paper”.
This represents a fundamental difference between the Nature Repair Market and the Australian Carbon Market. Under the Australian Carbon Market ACCUs can be purchased to offset carbon emissions, and consequently the Australian Carbon Market has been subject to scrutiny by some commentators that it can be used to permit “green washing”.
The final amendments to the Bill mean this will not be the case with the Nature Repair Market. Industry participants including investors and large corporates will need to be very careful as to the reasons for purchasing, and how they apply, their biodiversity certificates.
Valuation
One of the concerns raised during public consultation on the Bill was how the value of a biodiversity certificate will be determined, given that only one biodiversity certificate is issued in respect of each biodiversity project.
Again, this represents a fundamental difference with the Australian Carbon Market where multiple ACCUs can be issued in respect of a single carbon project – as one ACCU represents the avoidance/sequestration of one tonne of carbon emissions by a carbon project. Under the Nature Repair Market there is no standardised or similar measure. This concern has not been directly addressed in the Bill. Coupling this with the inability to use biodiversity certificates to offset against environmental harm (as noted above) it will be interesting to see how the market values biodiversity certificates under the Nature Repair Market.
For more information, please contact Sam Richardson and Deanna Riebolge of our specialist Agribusiness team.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.