Considering the impact of Australia’s net zero reform agenda on property and infrastructure project delivery

A recent suite of proposed reforms by the Federal and New South Wales Governments aimed at achieving net zero targets will entrench environmental compliance and sustainable project delivery requirements for both the public and private sectors in Australia.

As these reforms are rolled out, proponents of property development and infrastructure projects should continue to review their project delivery processes to ensure compliance and reflect changing best practice.

In April 2024, the Federal Minister for the Environment and Water The Hon Tanya Plibersek MP announced the roadmap for implementation of the long-awaited reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). This announcement included the introduction of Australia’s first independent national environmental protection agency, Environment Protection Australia (EPA), more rigorous compliance and enforcement measures and significantly increased penalties for environmental breaches.

There is also significant change underway in New South Wales with the introduction of new assessment requirements for large emitters of greenhouse gases (GHG) by the NSW Environment Protection Authority (NSW EPA) and the implementation of a new policy by Infrastructure NSW focused on decarbonising infrastructure projects delivered by NSW Government agencies.

EPBC Act reform

Following the release of its Nature Positive Plan in December 2022, the Federal Government commenced its reform of the national environmental legal and regulatory framework. The Stage One reforms included the establishment of a Nature Repair Market, expected to open in 2025, which establishes a marketplace where individuals and organisations can undertake nature repair projects to generate a tradable certificate.

The recently announced Stage Two reforms include the introduction of three bills to Parliament, which will:

• establish the new Federal EPA;
  
  
• establish the head of the Environment Information Australia agency as a statutory officer within the Department of Climate Change, Energy, the Environment and Water;
  
  
• introduce stronger compliance and enforcement measures, including significantly increased civil and criminal penalties; and
  
  
• enshrine a statutory definition of ‘nature positive’ and require more regular reporting as to the state of Australia’s environment.

A new Federal EPA

The Nature Positive (Environment Protection Australia) Bill 2024 (Cth) will establish the Federal EPA, a statutory entity with considerable powers vesting in the office of the CEO of the EPA. The CEO of the new EPA is responsible for undertaking education, compliance and enforcement activities, and issuing various permits and licences.

The EPA’s powers will include delivery of guidance and education to businesses on Australia’s environment laws, enforcement of federal environment and other laws and auditing businesses to ensure compliance with EPBC Act environment approval conditions. The primary focus of the EPA in the first instance will be on illegal land clearing and offsets.

Additional enforcement powers

The Minister for the Environment and Water will obtain new powers to issue Environment Protection Orders (EPOs) where there is an imminent threat of serious damage to a protected matter, or where damage has already occurred and to require that works are stopped, or specific actions be taken within specified timeframes. In addition, the reforms will also increase the civil and criminal penalties for non-compliance with the EPBC Act, and courts can now impose penalties up to A$780 million for the most serious criminal offences and breaches of the civil provisions of the EPBC Act (such as breaching conditions of approval or undertaking a controlled action without approval).

These measures will bolster the enforceability of the EPBC Act and will require proponents to closely review their policies and procedures to:

• determine whether appropriate processes are in place to comply with the EPBC Act and any approvals issued under this legislation; and if not
  
  
• devise and implement new practices to ensure processes are in place to actively manage and ensure full compliance.

New controls to address climate change in planning decisions

On 20 May 2024, the NSW EPA released draft planning guidelines levelled at proponents of large-emitting projects. Under the draft EPA Climate Change Assessment Requirements (Assessment Requirements) and draft Greenhouse Gas Assessment Guide for Large Emitters (Guide), large emitters proposing new projects, or significant modifications to existing projects, will be required to prepare a ‘GHG Assessment’ and ‘GHG Mitigation Plan’ as part of their environmental impact assessments for planning approval.

The Assessment Requirements and Guide are only intended to apply to ‘large emitters’.^[1] However, the EPA has indicated that it will progressively implement GHG assessment requirements for all projects regulated by the EPA and will issue guidance for other projects that are expected to produce smaller quantities of GHG emissions. This means that while large emitters will be the first to be impacted by these reforms, proponents will increasingly be subject to these new assessment guidelines and information reporting requirements.

The guidelines specifically apply to development and infrastructure proposals in NSW. However, similar guidelines in relation to GHG emissions of proposed projects are being introduced in other states. For example, the latest version of the Environmental Factor Guideline – Greenhouse Gas Emissions published in Western Australia outlines how GHG emissions are to be considered by the environmental authority in the environmental impact assessment process. This guideline imposes requirements for projects to achieve net zero by 2050 and increases the number of large emitting projects to which stricter emissions management requirements apply.

Similarly, the Greenhouse Gas Emission Guideline was recently introduced in Queensland, and sets minimum expectations for the GHG emissions information that needs to be provided with applications for new environmental approvals and applications to amend existing environmental approvals. Applicants are required to outline the GHG emissions likely to be generated from a proposed activity and proposed measures to prevent or minimise emissions. Medium to high emitters (those with emissions over 25,000 tonnes of carbon equivalent per year) will also be required to provide a GHG abatement plan as part of their application.

Decarbonising infrastructure delivery

The NSW Government has also recently launched a policy for decarbonising infrastructure delivery as part of its Net Zero Plan. The policy is aimed at minimising carbon emissions created by public infrastructure projects and is accompanied by a technical guidance for ‘Embodied Carbon Measurement’.

Whilst the policy only applies to NSW Government infrastructure delivery agencies, at the Infrastructure and Transport Ministers’ Meeting, the Ministers provided in-principle support for the use of a nationally consistent set of carbon values in the assessment of business cases for transport infrastructure projects over A$100 million. This means that government transport infrastructure providers throughout Australia could soon be required to implement strategies to decarbonise their infrastructure projects.

The NSW Government has not explained whether this policy could apply to the private sector through, for example, public-private partnerships. Prudently, however, all proponents who engage with government agencies on public infrastructure projects should engage with these reforms as they are likely to inform future procurement and tender requirements.

Next steps for property and infrastructure project proponents

With significant environmental reforms on the horizon, there are clear advantages for proponents that plan ahead. Proponents that begin reviewing their policies and procedures now and take stock of their current data-gathering capabilities will be far better placed to navigate the incoming changes. In particular, proponents should:

• review their existing environmental compliance systems and identify opportunities to refine and update internal reporting requirements;
  
  
• update policies and procedures relating to reporting of environment-related breaches;
  
  
• review their existing measurement and data collection capabilities to ensure that they will be able to meet reporting requirements;
  
  
• carry out a risk assessment of dependencies on offsets both for specific projects and within the business more generally – the EPA’s focus on offsets is likely to attract scrutiny towards those proponents who rely too heavily on offsets to manage environmental harm;
  
  
• identify opportunities to reduce carbon emissions in their supply chains; and
  
  
• develop low carbon options for project delivery (such as in materials, structure and on-site emissions) that can be readily incorporated into government tenders.

^{[1]  Large emitters are entities whose activities will be/are carried out on premises with an existing environment protection licence under the Protection of the Environment Operations Act 1997 (NSW) and are likely to emit 25,000 tonnes or more of scope 1 and 2 emissions (CO2-e) in any financial year during the operational life of the project (based on planned operational throughput and as designed).}