Australia opens consultation on first of its kind biodiversity credits market

The Australian government has launched consultation on technicalities of its Nature Repair Market (NRM) scheme, also known as the biodiversity credits market, which will incentivize actions to restore and protect the environment, Sept 2.

The government aims to launch the NRM in 2025, which will be the world’s first government-run voluntary biodiversity market, after it was legislated Dec. 15, 2023.

“The rules currently being drafted will set the foundation of the market to operate with integrity and confidence, leaving potential innovation and evolution by scheme and market participants,” the government in the discussion paper said.

Biodiversity credits highly priced compared to carbon credits

Biodiversity credits, although nascent, are seen in a league of their own and not considered as regular carbon credits as the aim is to protect and enhance the biodiversity of the region and hence command a very high premium compared to any other environmental traded products.

Currently, the New South Wales government in Australia runs a voluntary program under their Biodiversity Offsets Scheme. Under it, biodiversity credits are generated when a landowner commits to protect and enhance the biodiversity values on their land in perpetuity through a Biodiversity Stewardship Agreement.

The scheme has two types of credits -- ecosystem credits and species credits.

According to NSW government's biodiversity credits market sales dashboard Sept. 2, ecosystem credits are currently priced around A$400 for White Box Blakely’s Red Gum Woodland projects to as high as A$41,000 for Cumberland Plain Woodland in the Sydney Basin Bioregion. On the other hand, the species credits range from A$500 to A$4,000 for Koala and Emu population, respectively.

In 2023, the UK government’s Department for Environment, Food & Rural Affairs had priced its biodiversity statutory credits around £42,000 each, ranging up to the most distinct habitats, e.g. peat lakes, costing £650,000.

Consultation to eye technicalities, borrow from ACCUs scheme

The consultation is seeking input on key elements including biodiversity projects and their registration, biodiversity certificates (BC) and their content, the register, assurance, and compliance, including biodiversity project reports, audits, and notification. It noted that separate consultation is occurring on the biodiversity assessment instruments and methodology determinations.

The NRM will take its structure from the Australian Carbon Credit Units (ACCU) scheme and will be administered by the Clean Energy Regulator (CER) which also administers the ACCU scheme. Similar to ACCUs, the market will have methodology determinations (methods) that outline the rules for eligible projects.

The most widely traded ACCUs in the market, Generic ACCUs, as per Platts was assessed A$35.30/mtCO2e ($23.87/mtCO2e) on Sept. 2, while premium categories in the nature-based sector were priced higher between A$35.6-A$47/mtCO2e.

The consultation states that current or former biodiversity or carbon abatement projects, such as projects that generate ACCUs, can participate in the NRM under two conditions. Either by transferring the existing project to be registered and regulated under the relevant NRM method or registering a project under a Nature Repair method wholly or partly on the same area as an existing or former project (known as project ‘stacking’).

However, the consultation noted that existing or former projects, such as those used for environmental offsetting purposes, could be barred from the NRM.

Meanwhile, the government has proposed that a biodiversity project cannot be registered where the project activity is already required under Commonwealth, state, or territory law, according to the paper.

While the consultation does not provide the detail on the proposed methods that would exist under the NRM, it did explore the rules of when a project would need to transition from one method to an updated or new one.

It said projects under the method would be generally required to transfer to new or varied methods, but a proponent could apply to the CER for an exemption under specific circumstances.

As per the consultation, biodiversity project reports are split into two categories, as laid out under the Act. Category A would be one submitted when a project proponent applies for a BC.

Category B would be required after the proponent initially registers a project that provides details of commencement of the registered activities and progress of the project to date.

Respondents have one-month to submit feedback to the Department of Climate Change, Energy, Environment, and Water, with the consultation closing Sept. 30, 2024.