New ‘nature positive’ definition to commence with Stage 2 of EPBC Act reforms

The federal government’s ongoing nature positive reforms will likely herald an important shift in the way that governments and boardrooms will account for and manage environmental impacts. The current Stage Two reforms will include enshrining a statutory definition of ‘nature positive’ and require more frequent ‘state of the environment’ reports.

The current and ongoing Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) reforms are the largest overhaul of Australia’s environmental laws since the Act’s introduction over twenty years ago. They reflect the current focus on environmental repair as Australia and the world continues to move beyond net-zero to nature positive.

In April 2024, the Minister for the Environment and Water, Hon Tanya Plibersek MP, placed the Federal Government’s Nature Positive reforms on a roadmap, retrospectively declaring ‘Stage One’, announcing ‘Stage Two’ – our current stage – and foreshadowing ‘Stage Three’.

In this Insight, we consider key components of the recently released, current Stage Two reforms, including the new definition of nature positive, and what is proposed under Stage Three of the reforms.

Stage One reforms – the road travelled so far

Stage One of the reforms included the establishment of a national, voluntary Nature Repair market, which has been completed. However, the development of the methodologies outlining the rules for eligible projects is still ongoing. Further information on this can be found in our previous Insight, Nature positive reforms: everything you need to know about Australia’s new biodiversity market.

Stage One also expanded the ‘water trigger’ under the EPBC Act. It added unconventional gas to the existing categories of coal seam gas and large coal mining developments. Those categories may require referral, assessment and approval if the action is likely to have a significant impact on water resources.

Stage Two reforms are currently being implemented

Stage Two of the reforms comprise the introduction of three bills to Parliament. If passed, these bills will:

• establish the head of the Environment Information Australia (EIA) as a statutory officer within the Department of Climate Change, Energy, the Environment and Water;
  
  
• enshrine a statutory definition of ‘nature positive’ and require the EIA to take over and more frequently report on the state of Australia’s environment;
  
  
• establish a new independent Commonwealth statutory agency called Environment Protection Australia (EPA); and
  
  
• introduce stronger compliance and enforcement measures, including significantly increased penalties.

Environment Information Australia (EIA)

The EIA Bill is proposed to commence on 1 July 2025 and will establish the Head of the EIA (HEIA) to improve the availability and accessibility of high quality, national, environmental data, and to deliver independent reporting on the state of the environment. While the HEIA can request and gather information from third parties to perform its functions, it has no coercive information-gathering powers.

New ‘Nature Positive’ definition and reporting

The HEIA is responsible for establishing a baseline from which to measure Australia’s progress towards nature positive, and must also publicly report on the extent to which nature positive is being achieved in Australia.

This is a long-awaited definition. Minister Plibersek has heralded it as “world first”, stating that this is the first time any country has defined ‘nature positive’ in legislation and put in place national reporting against this objective. While this precise terminology may not have been defined before, the concept has been part of the Australian regulatory landscape before, including under Victoria’s former Native Vegetation Management – A Framework for Action, which required “net gains” to be achieved, and also now in the EU under the Nature Restoration Law passed on 17 June 2024 by the European Union Environmental Council.

Increased State of the Environment Reporting

The EIA Bill also provides for more regular reporting on the State of the Environment at the national level, which will now be required every two years (instead of every five years as is currently the case). Further, the federal government is now required to respond to the State of the Environment Report within six months of the report being published.

Environmental economic accounts

The Head of the EIA will be also responsible for establishing and maintaining the ‘environmental economic accounts’, which must describe the condition of the environment and its relationship with the economy. A statement of these accounts must be provided to the Minister at least once every 12 months. The purpose of these accounts is to provide a clearer understanding of environmental impacts, both positive and negative, in economy-wide decision making. Precisely how granular these accounts will be remains to be seen.

Environment Protection Australia (EPA)

The EPA Bill will establish an independent EPA, whose CEO is responsible for undertaking education, compliance and enforcement activities, and issuing various permits and licences. The CEO of the EPA (CEO) can also undertake certain activities delegated to them by the Minister. The intention appears to be that such delegation may include assessments and decision making about development proposals, including approval conditions.

Despite the independence of the EPA and CEO, the Minister may still issue the CEO with a ‘Statement of Expectations’ for the CEO and the EPA, however this cannot direct the CEO in the performance or exercise of his/her functions or powers. Minister Plibersek has advised that initially her expectation for the EPA will be to focus on illegal land clearing and offsets. In response, the CEO is required to give the Minister a Statement of Intent, which outlines how the EPA would consider and apply the Minister’s Statement of Expectations and which would be made publicly available.

The CEO will also have the power to appoint an advisory body (comprised of persons with relevant skills, expertise or Indigenous cultural knowledge) to provide advice on any matters relevant to the CEO’s functions and powers. While the CEO must consider any advice provided by the advisory group, they are not bound to follow the advice.

The CEO is also required to prepare annual reports for the Minister (to be made publicly available), which must outline the EPA’s activities, including its performance and financial statements. In addition, an independent review of the EPA’s administration is to be undertaken every five years. This includes for the purpose of determining the extent to which the CEO/EPA have met the expectations set out in the relevant Statement of Expectations and whether the EPA has supported the delivery of accountable, efficient, outcomes-focused and transparent environmental regulatory decision-making.

The EPA Bill is also proposed to commence on 1 July 2025, with the EPA to be established on the same date. From this date, documents and records will be transferred from the Department of Climate Change, Energy, the Environment and Water to the EPA. Various transitional provisions also ensure that the CEO can effectively ‘step in’ to deal with matters which are still ongoing as at 1 July 2025 (such as any outstanding applications and ongoing compliance matters). The transitional provisions also make clear that existing permits, licences and approvals remain on foot, and can be subsequently dealt with by the CEO, as well as noting that references to decision makers in existing documents will now be read as a reference to the CEO. The Minister is also provided with the power to make rules regarding transitional arrangements.

Compliance and enforcement powers

Under the Stage Two EPBC Act reforms, with the introduction of Environment Protection Orders and an expanded remit for audits, compliance and enforcement powers have been significantly strengthened.

Environmental Protections Orders

The reforms provide the Minister with new powers to issue Environment Protection Orders, or EPOs. These EPOs are comparable with orders already used in various States and Territories. They are intended for use in response to urgent circumstances where there is an imminent threat of serious damage to a protected matter, or where damage has already occurred. Here, the Minister can require specific actions to be taken within stated timeframes where they reasonably believe there is non-compliance with the EPBC Act (or its regulations) or conditions of the relevant approval or permit.

Expanded audit powers

The reforms propose to expand audit powers by introducing ‘compliance audits’, whereby the Minister can require activities to be audited, for example, to monitor compliance with the relevant approval, exemption or order (or the EPBC Act more broadly). These compliance audits can be required at any time without notice nor any suspected non-compliance, and may include a single audit or a program of audits.

Additionally, the reforms also propose to expand the scope of persons required to undertake a directed environmental audit. Currently, the Minister may provide notice to the holder of an approval or permit to require them to conduct an environmental audit where there is suspected non-compliances or other prescribed circumstances are met. These reforms would allow directed environmental audits to apply to persons who are subject to an EPO, a conservation order, a remediation determination or a remediation order.

These compliance and enforcement powers will commence immediately the day after the Amendment Act receives Royal Assent, initially to be exercised by the Minister, and then handed over to the CEO on 1 July 2025.

Increased penalties

There are also significant increases in civil and criminal penalties for non-compliance under the Stage Two reforms. Courts can now impose penalties up to $780 million for non-compliance with the most serious criminal offences and civil provisions of the EPBC Act (such as breaching conditions of approval, or undertaking a controlled action without approval). The new civil penalty formula provides that breaching body corporates may be required to pay the higher of:

• 50,000 penalty units (approximately $15 million);
  
  
• the value of the benefit derived/detriment avoided by the breach multiplied by three; or
  
  
• 10% of their annual turner 12 months before the breach, (up to a maximum of approximately $780 million).

These reforms align penalties for environmental offences with the civil penalty regimes for serious corporate and financial crimes under the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). The increased penalties reflect a significant shift in recognising the potential seriousness of environmental crime.

Stage Three reforms are yet to be finalised

The substantive ‘Stage Three’ reforms are yet to be finalised, and targeted consultation on these reforms is ongoing.

However, the key components for this last tranche of reforms are proposed to include the legislative basis for:

• new National Environmental Standards, which will apply to all decision-making under the EPBC Act, and also apply to Regional Forest Agreements. These standards will include those relating to Matters of National Environmental Significance (MNES), First Nations engagement and participation in decision-making and environmental offsets;
  
  
• Regional Plans, designed to pre-identify areas for protection, restoration and sustainable development, and also identify priority areas for action and investment. The first of these plans will be ready by 2028; and
  
  
• Conservation Planning, which will include ‘recovery strategies’ – a new statutory document for protected species and ecological communities.

The Stage Three reforms are also proposed to include significant changes to:

• offsets, which will be rebranded as restoration actions or restoration contributions, and will only be available where impacts are not unacceptable; and
  
  
• the application and approval process for proposals that may impact MNES, including the current accreditation arrangements for States/Territories.

While climate change is recognised as an area requiring further attention under the Stage Three reforms, it currently does not appear that a ‘climate trigger’ will be included as a new MNES. However, the disclosure of scope 1 and 2 greenhouse gas emissions generated by an action is proposed to become a mandatory consideration in the preparation of Regional Plans, applications for approval and other decision-making processes.

The government is also specifically gathering stakeholder feedback on separate climate-related reforms, including the interaction between environment and climate laws. Therefore, further climate change reforms may well be forthcoming.

Consultation is also focused on EPBC Act exemptions for taking an action without approval in circumstances where the action was lawful prior to the commencement of the EPBC Act. Stakeholders should consider whether these circumstances should be amended given the effluxion of time and increasing concern about the state of the environment.

Broader implications of the EPBC Act reforms

The Stage Two reforms herald an important shift in the way that governments and boardrooms will account for and manage environmental impacts.

In particular, increased regularity of environmental reporting against established baselines will help to ensure that environmental issues remain front of mind in policy and statutory decision making. They will continue to raise stakeholder awareness around the state of Australia’s environment, and the role organisations can play in halting (and reversing) environmental degradation and biodiversity loss. Further, the collection and availability of more accurate and timely environmental data will likely lead to more informed and improved environmental decision-making, particularly the cumulative impacts across at the landscape level, as well as assist proponents to access data for environmental applications.

The federal government’s continued emphasis on ‘nature positive’ is consistent with our previous observations about nature positive reforms, and Australia’s biodiversity market. It is yet another reminder for boards to ensure that their corporate ESG frameworks and goals reflect this shift to nature positive and accommodate biodiversity risks, impacts, dependencies and opportunities.

The focus on nature positive is only likely to accelerate with the upcoming Stage Three reforms and Australia hosting the first ever Global Nature Positive Summit in Sydney in October 2024. The summit will focus on increasing private sector investment to protect and repair the environment.

It also important to keep in mind that the soon to be passed mandatory climate-related financial disclosure framework specifically contemplates that the proposed climate-related reporting requirements will be expanded to other sustainability topics in the future. Given the federal government’s current focus on nature positive, it seems likely that such expansion could occur sooner rather than later, and organisations that are proactively building their capabilities in biodiversity and adopting a nature positive focus will be well placed to adapt to any expanded environmental disclosures. For further on this, see our Insights Mandatory climate-related financial disclosure: government releases draft framework and Climate-Related Financial Disclosures Bill: five key takeaways.