NSW plans for nature with net positive biodiversity offset reforms

Consistent with the Commonwealth Government’s proposed biodiversity reforms, the NSW Government is planning to overhaul the Biodiversity Conservation Act 2016 (NSW) (BC Act), with a focus on net positive biodiversity offsetting. What does this mean for project proponents? What are the key takeaways from the government’s latest report, the NSW plan for nature, and the new biodiversity offsets reform Bill?

The NSW Government recently released the NSW plan for nature (Plan for Nature), its response to the 2023 Independent Review of the Biodiversity Conservation Act 2016 led by Dr Ken Henry AC (Henry Review). To support the implementation of government actions proposed under the Plan for Nature, on 15 August 2024, the Minister for the Environment, Penny Sharpe, (Minister) introduced the Biodiversity Conservation Amendment (Biodiversity Offsets Scheme) Bill 2024 (Bill) to the NSW Legislative Council. The Bill reflects NSW’s approach to ‘net positive’ biodiversity offsetting, in line with the ‘nature positive’ approach under the Albanese Government’s staged Nature Positive Plan.

The Henry Review

In 2023, the Henry Review found, in short, that the BC Act is not doing its job:

“Biodiversity is not being conserved at bioregional or State scale. The diversity and quality of ecosystems is not being maintained, nor is their capacity to adapt to change and provide for the needs of future generations being enhanced. Yet these are the principal purposes of the legislation.”

It made 58 recommendations directed to overhauling biodiversity legislation in NSW, to achieve ‘nature positive’ outcomes, with an emphasis on biodiversity restoration and greater involvement in policy making from Aboriginal people.

The NSW Plan for Nature

In its Plan for Nature, the NSW Government proposes 22 government actions, both immediate and longer-term. Key actions include:

• amending and strengthening the BC Act, including revising the objects of the BC Act and other operative provisions to set nature on a path to recovery;
  
  
• strengthening the application of ecologically sustainable development, with a special focus on ensuring biodiversity conversation and intergenerational equity;
  
  
• preparing and implementing a ‘NSW Nature Strategy’, which will become a legal requirement under the BC Act. The strategy will set goals and targets for conservation and restoration, including landscape restoration, species recovery and addressing threats to nature;
  
  
• amending the Biodiversity Offsets Scheme (BOS) to transition to overall ‘net positive’ outcomes over time, beyond the current ‘no net loss’ standard. A new statutory standard will be introduced, requiring proponents to demonstrate how they have genuinely avoided and minimised impacts to biodiversity; and
  
  
• updating the NSW Biodiversity Offsets Policy for Major Projects to remove the option for major mining proponents to meet a credit obligation through a commitment to ecological mine site rehabilitation. Instead, the NSW Government has committed to working with industry to optimise the use of land after mining activities conclude.

Proposed amendments to the BC Act

The Bill proposes amendments to the BC Act to reform the BOS, with consequential amendments to be made to State Environmental Planning Policy (Biodiversity and Conservation) 2021 and regulatory amendments to follow. If passed, the Bill would:

1. Promote offsets as a last resort by: strengthening the ‘avoid, minimise and offset’ hierarchy; requiring proponents to demonstrate the genuine measures taken to avoid and minimise impacts to biodiversity; and imposing limits on proponents’ ability to meet offset obligations through payment into the Biodiversity Conservation Fund (Fund), in certain circumstances;
   
   
2. Require the concurrence of the Minister for any conditions imposed on granting state significant project approvals that deviate from the retirement of ‘like for like’ biodiversity credits, as calculated in a biodiversity development assessment report (except in certain circumstances);
   
   
3. Provide for the BOS to transition to ‘net positive’ biodiversity outcomes, with the Minister required to develop a transition strategy including targets, timeframes and actions;
   
   
4. Introduce a new public register to track commitments to avoid and minimise impacts to biodiversity for approved projects, to increase transparency and accountability; and
   
   
5. Reduce the regulatory burden on lower impact local development in exceptional circumstances, particularly in regional areas, by creating a formal review process for landholders whose land is mapped on the Biodiversity Values Map.

According to Minister Sharpe, the Bill is the ‘first step’ in a commitment to ‘fix’ the BOS. Given the number and scope of government actions proposed under the Plan for Nature, reforms will need to be staged, similar to what we are seeing with the federal government’s staged implementation of reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act).

Ultimately, wholesale reform of the kind proposed under the Plan for Nature is likely to unfold over a number of years. The Plan for Nature is framed at a high level, and many of the reforms are underpinned by the ‘NSW Nature Strategy’, which is yet to be developed. The emphasis on keeping and modernising cultural, social and economic interests, focussing first on First Nations engagement and climate-related risks for biodiversity, means that a significant amount of work and consultation will be needed to inform the Strategy.

How will ‘net positive’ outcomes be achieved?

The Bill proposes that the Minister would be required to develop a transition strategy ‘as soon as practicable’ following its commencement, to underpin the transition to ‘net positive’ biodiversity offsetting. 

Notably, the Bill uses the term ‘net positive’, which is not defined, rather than ‘nature positive’. The Plan for Nature contained the following definition of ‘nature positive’ in its Executive Summary:

“Nature positive means the environment is being repaired and regenerated. This contrasts with traditional sustainability approaches, which have sought to minimise negative impacts by slowing or stabilising the rate of biodiversity loss.”

At a federal level, in May 2024, the Commonwealth Minister for the Environment introduced the legislative framework behind the second stage of the Albanese Government’s Nature Positive Plan. The Nature Positive (Environmental Information Australia) Bill 2024 (Cth) (EIA Bill) provides a ‘world-first’ legislative definition of the term ‘nature positive’, as follows:

’Nature positive is an improvement in the diversity, abundance, resilience and integrity of ecosystems from a baseline.’

Environment Information Australia, a new federal independent body, has been tasked with setting the nature positive ‘baseline’ by no later than 31 December 2025. The EIA Bill was referred by the Federal Parliament to the Senate Environment and Communications Legislation Committee on 27 June 2024, with the Report from the Committee due in early September 2024. Further information on the Australian Government’s Nature Positive Plan can be found in our previous Insight, New ‘nature positive’ definition to commence with Stage 2 of the EPBC Act reforms.

It will be interesting to see whether and how the definition of ‘net positive’ is refined with the development of the Minister’s transition strategy, and whether reforms at the state level will follow the lead of the Commonwealth. The NSW Assessment Bilateral Agreement currently permits the NSW Government to undertake environmental assessments where projects require both state and Commonwealth approvals, but this could change if the state and Commonwealth regimes are not sufficiently aligned in their approach to biodiversity restoration and achieving nature positive outcomes.

What is not proposed?

Whilst the NSW Government is supportive of the majority of the Henry Review recommendations (49 of 58), it has notably decided against implementation of the following:

• ‘Primacy of nature’ laws – the BC Act will not override competing development and planning laws, as recommended by the Henry Review. Instead, the government has committed to identifying opportunities to improve biodiversity outcomes under other relevant laws.
  
  
• Upfront protections for nature – the government has explicitly ruled out ‘no-go’ zone mapping. Rather, the government will identify and map areas of high biodiversity value whose details will be incorporated into strategic planning processes.
  
  
• Minister for the Environment call-in powers – the government has not committed to giving the Minister for the Environment a call-in power for certain projects to determine if they would give rise to a ‘serious and irreversible impact’, as recommended by the Henry Review.

Reporting, data collection and natural capital accounting

There is a strong emphasis on data collection and disclosure, in line with developments in corporate climate and nature-related financial disclosure regimes and Pillar One of the Commonwealth Treasury’s Sustainable Finance Roadmap.

Government action 4 of the Plan for Nature proposes identifying and disclosing nature-related risks by government agencies, and establishing new processes to report on potential biodiversity impacts from government decision-making.

Through government action 19, NSW will reportedly become the first Australian jurisdiction to establish local and statewide natural capital accounting frameworks. The NSW Government will work closely with the Australian Government on the development of the national Nature Repair Market (as announced in the first stage of the Albanese Government’s Nature Positive Plan in late 2023) and national carbon market, to design NSW natural capital programs and projects to leverage national schemes.

Implications for project proponents and investors

The Plan for Nature foreshadows significant changes to biodiversity laws in NSW. Offsetting is set to become ‘net positive’ under the Bill and blanket ‘no go’ zones are unlikely to be implemented. 

Though wholesale reform will occur over a number of years, the Bill signals the NSW Government’s commitment to implementing priority reforms to biodiversity offsetting in the short term. 

Changes to the BOS could present challenges for projects in NSW, including in relation to investor confidence, securing offsets (particularly where payments into the Fund are to be limited by regulatory amendments) and variability in price of credits. However, there will be opportunities arising from increasing demand for investment in natural capital, and the potential to participate in nature repair and carbon market schemes.