Department of Climate Change, Energy, the Environment and Water releases Discussion Paper on development of Rules for the Nature Repair Market

Introduction

Consultation is currently underway on rules to support the operation of the Nature Repair Market following the commencement of the Nature Repair Act 2023 (Cth) (the Act) on 15 December 2023. The Nature Repair Market is anticipated to launch in January 2025 and is being lauded by the Government as a world-first legislated, national, voluntary biodiversity market.

On 4 September 2024, the Department of Climate Change, Energy, the Environment and Water (the Department) released its Discussion Paper: Nature Repair Market (Discussion Paper) to test various proposals and policy positions relating to proposed legislative rules necessary for giving effect to the Act.

Submissions close on 30 September 2024 and will assist with the Department’s development of legislative rules – to be known as the Nature Repair Rules (Rules).

In our recent article we provided an overview of the Nature Repair Market, its objectives and how it is intended to operate. In this article we discuss the Department’s policy positions and proposals for the creation of the Rules.

Key proposals and policy positions in the Discussion Paper

The Discussion Paper covers the following themes:

	1. Biodiversity projects and their registration.
	2. Biodiversity certificates (Biodiversity Certificates) and their content.
	3. The Biodiversity Market Register (Register).
	4. Assurance and notification, including biodiversity project reports, audits, and notifications.

The key policy positions and proposals in the Discussion Paper are outlined below.

Project eligibility and additionality

Under the Act, a project must comply with the biodiversity integrity standards specified in the Act to be approved for registration. Biodiversity integrity standards are intended to ensure that projects registered under an approved method are likely to result in a genuine and verifiable biodiversity outcome. The first biodiversity integrity standard specified in the Act relates to additionality and states that a project “must be designed to result in enhancement or protection of biodiversity in native species … that would be unlikely to occur if the project was not carried out.”¹

The Department proposes that the Rules should specify a requirement that a project cannot be registered where it is required under a Commonwealth, State, or Territory law as this would indicate that the project is not additional. The Discussion Paper asks several questions in relation to this policy position, including whether existing projects should be eligible to participate in the Nature Repair Market, and whether it is agreed that registered projects must include activities beyond those required under a Commonwealth, State or Territory law.

Proposed requirements for registration

The Act sets out various information that is required to accompany a project registration application. The Rules may establish additional information requirements to support the CER’s consideration of a registration application. The Discussion Paper lists examples of the type of information that would satisfy the requirements of the Act and additional information requirements. Key proposals include providing:

• Specific information on the intended biodiversity outcome for the project and demonstration of how it will be achieved, in accordance with the proposed method requirements and its applicable biodiversity assessment instrument (BAI).
• Details of a baseline assessment of the project area, in accordance with requirements of the proposed method and its applicable BAI(s).
• A permanence plan, which must be updated throughout the life of the project.
• Details of proposed project-level monitoring, in accordance with the proposed method and its applicable BAI(s).
• Details of any natural resource management plans or Healthy Country Plans that cover the project area and how the project has considered those plans.
• Details of the bioregion that applies to the project area.
• Details of the knowledge, skills and expertise of the project proponent and any other person engaged, or proposed to be engaged, to design and implement the project.
• Details on stakeholder consultation and engagement, including any advice obtained for the project.
• Information on relevant Indigenous knowledge and values relating to biodiversity and cultural heritage that have been, or are intended to be, incorporated in the project, as appropriate.
• Details of any regulatory or voluntary program requirements that are applicable to the project area or related to the proposed project activities.
• Details on whether the activities to be implemented under the project are already required by law.
• Details of any risks to achievement and maintenance of the proposed biodiversity outcome for the project, and the steps proposed to be undertaken to ensure that the project is maintained throughout the permanence period.
• Details of any persons to which consent requirements apply under subsection 15(6) or Part 7 of the Act.
• Details of any regulatory approvals that are necessary to conduct the project.

Information accompanying a project registration application is generally intended to be publicly available on the Register to increase transparency and confidence in the Market.

Project plans

Methods developed under the Act may set a condition that a project must have a project plan. If such a condition is set, a project registration application must be accompanied by a project plan. A project plan is to detail how the project is intended to be carried out to achieve the biodiversity outcome in accordance with the method. The Discussion Paper seeks feedback on the ways in which a project plan can facilitate the registration and implementation of a biodiversity project. The Department has proposed certain content as an example of what could be included in a project plan, including:

• A project activity and management schedule.
• Adaptive management activities.
• Steps to meet permanence obligations.
• Record management requirements for the purpose of project reports.

Excluded projects

The Department’s proposes to exclude from registration under the Nature Repair Market, projects that are excluded from registration as an ACCU² generating project under the Carbon Credits (Carbon Farming Initiative) Rule 2015. As such, the Department is proposing the following projects could not be registered on the Register or generate Biodiversity Certificates under the Act:

• Where the project relates to the planting of species in an area where it is a known weed species; or
• Where the project relates to land on which illegal clearing of native forests or illegal draining of a wetland has occurred.

Transitioning for varied or ceased methods

All projects registered under the Act will need to comply with a method. A method is a set of rules for undertaking Nature Repair Market projects, which will define the conditions that must be met for a project to be registered and for proponents to receive Biodiversity Certificates. Methods also specify the activities that project proponents can carry out and any restricted or prohibited activities.

The Department is currently collaborating with technical experts and other stakeholders to progress a pipeline of methods including:

• An Enhancing Remnant Vegetation method to encourage protection and enhancement of existing native vegetation.
• A Carbon + Biodiversity method to enable environmental restoration to create Biodiversity Certificates and carbon credits.
• A Native Forest method to protect, restore and manage native forests.
• An Invasive Pest Management method that focusses on the control of specific feral pests or weeds.
• A Permanent Protection method to protect and conserve biodiversity in line with Australia’s national goal of protecting 30 percent of land by 2030.
• A Rangelands method to manage and enhance habitat in the arid and semi-arid areas of Australia.

The Department has indicated that where a method is varied under the Act, projects approved under that method will need to transfer to the varied method (within the time frame set out in the method) unless an exemption is applied for and obtained from the Clean Energy Regulator (CER).

Where a method is remade (i.e. a method is revoked and a new one made), projects would need to transition to a new method unless there is no method for which the project would meet eligibility requirements, or an exemption is applied for and obtained from the CER.

The specific circumstances for an exemption could include that:

• Changing to the varied method would materially risk the biodiversity outcomes of the project.
• The project is too advanced to practically transition.
• New costs would be required that are not commensurate with the benefit.

The approach of requiring project proponents to transition to updated methods has emerged from the Chubb Review of the ACCU Scheme.

Content of a Biodiversity Certificate

Biodiversity certificates may contain both qualitative and quantitative information but should be limited to information that is within the regulatory responsibility of the CER. This is so that the accuracy and integrity of a Biodiversity Certificate can be verified and maintained for the life of a project.

Biodiversity certificates are only intended to be varied in limited circumstances and therefore the content will need to reflect information that is unlikely to change over the life of the certificate. The Department’s proposal is that a Biodiversity Certificate should specify only the following:

• Biodiversity Certificate ID
• Date of issue
• Project ID
• Method
• Permanence period length and start and finish dates
• Project size in hectares
• Project location (including State/Territory and local government area)
• Biodiversity outcome defined by a set of project attributes

In terms of the information relating to ‘project attributes,’ the Department seeks comment on what these should be and has proposed a list of attributes including:

• Whether it is a land and/or marine based project.
• Ecosystem type (e.g. IBRA region or marine bioregion), including the species or ecological community that is being protected or enhanced.
• Measures of biodiversity outcomes, for example:
  • Ecosystem condition/state, and how it will change due to the project.
  • Level of protection and how it will change due to the project.
  • Presence and status of threats, and how they will change due to the project.
  • The certainty or confidence associated with the biodiversity outcome.

Content of the Register

The Act requires the CER to keep a Register that will be a publicly available electronic repository of information held by the CER about biodiversity projects and Biodiversity Certificates. The Discussion Paper specifies the proposed information to be prescribed by the Rules for inclusion in the Register; this includes various information relating to project details, registration details, method details, compliance details, project plans, reporting details, project status details, and information about Biodiversity Certificates.

Biodiversity project reports

Regular reporting to the CER is required under the Act. Reporting includes the submission of biodiversity project reports, which will form a key feature in ensuring confidence in the Nature Repair Market. These biodiversity project reports will allow the CER to understand progress and compliance of a registered project. The Act contemplates two types of biodiversity project reports: Category A and Category B reports.

A Category A report must accompany an application for registration of a project, and must be provided to the CER at least every 5 years during the permanence period of the project where a Biodiversity Certificate has been issued in respect of the project. The Discussion Paper indicates that a Category A report will need to include, amongst other things:

• Details of any audits required, reasons for those audits, and findings of those audits.
• The condition of the project.
• Activities that have been undertaken (or not undertaken) in the project area.
• Details on whether the expected biodiversity outcome has been achieved or is likely to be achieved and the milestones towards that achievement.
• Adaptive management actions required to achieve the expected biodiversity outcome.

Where a Biodiversity Certificate has not been issued or an application for a certificate has not been made, a project proponent must provide a Category B biodiversity project report at or within 6 months of the 5-year period since project registration. Such a report would inform whether the CER cancels a project registration where the project has not commenced within 5 years or is unlikely to result in issuing of a Biodiversity Certificate. The Department proposes in the Discussion Paper that a Category B biodiversity project report should be required every 5 years.

Audits

The Act allows for audits to be undertaken ap project registration, certificate application and issuance, and to accompany a biodiversity project report.

It is proposed that the Rules will specify when an audit will be required, which will ordinarily take place in connection with an application for a Biodiversity Certificate. It is proposed that there may be different audit requirements for Category A and Category B biodiversity project reports.

Notification - Significant reversal of biodiversity outcome

The Act requires a project proponent to notify the CER of any significant reversal of biodiversity outcome. A reversal of biodiversity outcome is the decline in environmental condition that is substantial and affects the ability to achieve or maintain the biodiversity outcome of the biodiversity project. The Act specifies that the Rules can prescribe the circumstances in which a reversal is deemed to be significant reversal. The Department proposes in the Discussion Paper that the Rules will define a significant reversal as one where:

• The size of the project area in which the reversal occurs is at least 10% of the total project area; or
• The effect on the project area is important, notable or of consequence to the biodiversity outcome to which the project relates.

In deciding whether a reversal is significant, the Rules will require a project proponent to have regard to the context or intensity of the reversal event or conduct as well as how important, notable or of consequence the effects caused or likely to be caused to the biodiversity outcome of the project.

It is also proposed for the Rules to define a reversal as not a significant reversal where:

• Less than 5% of the total project area is affected;
• The effect on the project area in which the reversal occurs is minor and likely to be resolved within a short period of time and without the need for any actions/intervention by the project proponent; or
• It involves an action that is consistent with a variation to the registered biodiversity project that has been approved by the CER and taken effect.

Next steps

Feedback on the Discussion Paper is due by 6:00pm 30 September 2024.

The Department’s consultation page on the Discussion Paper can be accessed here.

Please contact our team if you require assistance in preparing submissions to the Department or are interesting in finding out more about the Discussion Paper or the operation of the Nature Repair Market.