A New South Wales government environmental offsets scheme allows too much flexibility for threatened species to be “traded away for cash” and should be reformed to ensure offsetting is “genuinely used as a last resort only”, a parliamentary inquiry has found.
Triggered after reporting by Guardian Australia, the inquiry found multiple problems with the scheme, including “serious flaws in its design and operation that raise fundamental questions about whether it can achieve the stated goal of ‘no net loss’ of biodiversity”.
In theory, offsets should compensate for the destruction of habitat caused by development by protecting and improving equivalent habitat elsewhere.
But a series of stories by Guardian Australia revealed serious problems, including offsets that were promised but never delivered, so-called double-dipping on already protected land and conflict of interest concerns.
In a report tabled Thursday, the NSW Greens-led inquiry found that rather than being a last resort, the scheme made it too easy for developers to make a cash payment to a fund administered by the state’s Biodiversity Conservation Trust with “no guarantee that like-for-like offsets will ever be found”.
It found the state’s biodiversity market, which allows the trade of species and ecosystem credits, “does not appear to be working for anyone”, with developers facing uncertainty over the cost of offsets and whether the necessary credits would be available, and landowners not finding enough incentive to enter the scheme.
“These issues with the scheme’s operation, coupled with a lack of transparency, have led to a perception of many stakeholders that the scheme is profiting a few while failing to deliver meaningful protection for biodiversity,” the report said.
The committee’s chair, Greens MLC Sue Higginson, said reform of the scheme was “essential if we are to turn back the tide of destruction and prevent extinction of even more native species”.
Labor’s environment spokesperson, Penny Sharpe, said NSW had a biodiversity crisis and the tool the government was relying on was “fundamentally broken”.
“This inquiry has shone a light on how the scheme is failing and provides a cross-party consensus on what needs to be done to fix it.
“I urge the NSW government to take its recommendations seriously. If elected in March, Labor will require the recommendations of this review to be addressed as part of the long overdue statutory review of [the] Biodiversity Conservation Act.”
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Jacqui Mumford, the chief executive of the Nature Conservation Council of NSW, said the report “builds on a growing body of evidence that the scheme is deeply flawed, lacks transparency and is riddled with loopholes”.
She said the scheme’s design should be overhauled.
The committee made 19 recommendations, which include establishing clear thresholds for when offsets should not be permitted for ecosystems and species that were so threatened that damage to their habitat was impossible to offset.
It called for a review of some of the methods used to calculate environmental gains at offsets sites, and said counting rehabilitation of mining sites towards offsets for mining companies should be banned entirely.
It suggested more stringent criteria be established for developer payments to the BCT’s fund as well as continued review of the management of conflicts of interest within the biodiversity market.
While the committee said it had no evidence of actual wrongdoing by environmental
consultants who Guardian Australia previously reported made windfall gains from
the scheme, it found that the case did illustrate that when there is insufficient
transparency in the scheme, including how potential conflicts of interest are
managed, it is “open to the perception of collusion or insider trading between
consultants, their clients and/or the authorities managing it”.
The committee said there were multiple areas of the scheme in which conflicts of
interest could arise and recommended the planning and environment department
continue to review arrangements for managing conflicts of interest, in addition to
improvements already made over the past year.
The committee acknowledged the government had done some work in the past 18 months to make improvements to the offset scheme.
The NSW environment minister, James Griffin, said he welcomed the report and would respond in due course. The government’s response is due on 24 February 2023.
“Since taking on the responsibility for this scheme in December last year, I’ve tasked my department with making improvements to ensure it meets expectations, with a focus on improving integrity, transparency and supporting participation in the scheme,” he said.
Government members of the committee wrote a dissenting report saying the work to improve the scheme, as well as several other recent inquiries, had not been fully acknowledged in the findings.
That work included a new assurance program for the scheme with an independent monitor, including ecological monitoring requirements in all offset site agreements, and starting work on a record system for offset obligations.
They said the report also minimised evidence from officials, failed to give a balanced presentation of stakeholder evidence and contained “factual errors”, particularly in relation to the role of the BCT.
Guardian Australia’s reporting triggered several internal reviews by the government. The state’s auditor general also brought forward a review of the scheme. In a report delivered in August, the auditor found the scheme was failing to protect some of the state’s most endangered species and ecosystems and is riddled with integrity and transparency concerns.
• This article was amended on 22 December 2022 to make clear that the report of the parliamentary inquiry into the integrity of the NSW biodiversity offsets scheme said it had no evidence of actual wrongdoing by environmental consultants.