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8.3 - Government-driven investment in restoration

8.3.1 - Current activities in restoration do not align with priorities for MNES

Investment in environmental restoration is required to reverse environmental decline and enable future development to be more easily accommodated in a sustainable way.

Grant programs and direct funding of restoration

Australian Government programs for investments in environmental restoration have been a constant feature of national environmental policy over the past 20 years. The majority of these have been traditional grant-style, project-by-project programs, including the National Heritage Trust, Caring for Country, the Environmental Stewardship Program, the National Landcare Program, the Green Army and the Threatened Species Recovery Fund. These programs may have achieved their designed objectives, but they have only stemmed, not stopped, the broader environmental decline.

Despite being aligned with MNES, program funding and other investments are not well coordinated to prioritise investment in a way that achieves the greatest possible biodiversity benefits. It is also difficult to discern the specific effect of the investment on the outcomes.

Over the past 20 years, funding of these restoration programs has been variable and often spread thinly across Australia. There is no clear plan for the prioritisation of current streams of Australian Government funding allocated to environmental protection, conservation and restoration.

Recent efforts to target and prioritise funds, albeit at a modest scale, are starting to deliver results. The Threatened Species Strategy has shown that the rate of increase has improved for some species – such as the Gilbert’s Potoroo, the Helmeted Honeyeater and the Mala – as a result of targeted, consistent effort at a national scale (DoEE 2019b).

Restoration delivered by offsets under the EPBC Act

Offsets are a tool that should limit environmental decline resulting from development and increase restoration. The different types of offsets are shown in Box 27.

Box 27 - Types of offsets

Averted loss offsets

These offsets are met by purchasing and improving an otherwise at-risk area of land with the same habitat as that which is destroyed or damaged by the development. The land is then protected from future development. The protection of land through an averted loss offset does not add to the amount of habitat. When considered with the habitat loss from the development, a net reduction of habitat results.

Restoration offsets

These offsets are met by creating new (or recovering old) habitat from highly degraded land. A development with a restoration offset can result in a net gain of habitat.

Advanced offsets

Advanced environmental offsets are those that are ‘supplied’ in advance of an impact occurring. The offset area is set aside for potential future use by the owner, or to sell to another developer. The current offset policy allows advanced offsets for:

  • protecting and improving existing habitat (averted loss)
  • creating new habitat from highly degraded land (restoration).

Offsets have the potential to aid environmental restoration, but the current EPBC Act environmental offsets policy (DSEWPAC 2012) contributes to environmental decline rather than active restoration. The EPBC Act environmental offsets policy  has major shortcomings in both its design and implementation.

The ‘avoid, mitigate, offset’ hierarchy is a stated intent of the policy. This is not how the policy has been applied in practice. Proponents see offsets as something to be negotiated from the outset, rather than making a commitment to fulsome exploration (and exhaustion) of options to avoid or mitigate impacts.

This is in part because the proponent has generally made the decision to develop a particular site before a referral is made under the EPBC Act. This limits real consideration of broadscale avoidance. Once a proposal is referred, assessment officers have limited scope and time to work with proponents to avoid and mitigate impacts. This becomes a ‘nice to do’, rather than a core focus of their efforts. An offset has become an expected condition of approval, rather than an exception.

The policy allows proponents to meet their offset condition by creating new habitat from highly degraded land – an approach the Review terms a ‘restoration offset’ – however, this rarely occurs. Most offsets are averted loss offsets that deliver only weak protection of remnant habitats of MNES that may have never been at risk of development. This is reinforced by the lack of a formal requirement to adequately demonstrate that the area set aside for the offset was sufficiently likely and able to be cleared for future development.

Although the policy allows restoration ahead of impacts (‘advanced offsets’), they are difficult to deliver under the current settings. There is no guarantee that the Environment Minister will accept an advanced offset, nor is it possible to accurately determine the area of offset required before an approval is granted. This makes investing in an advanced offset a risky proposition. Consequently, proponents focus on protecting what is left rather than promoting restoration.

Offset requirements are applied as a condition of approval. These conditions are not adequately monitored to ensure appropriate management and efforts to enforce compliance are weak (Chapter 9). There is no transparency of the location, quality or quantity of offsets. There is no register of offsets and, in the absence of such a tool, the same area of land may be ‘protected’ more than once.

The Review concludes that the EPBC Act environmental offsets policy requires fundamental change.

8.3.2 - The levers of Government, should align with National Environmental Standards and plans

Government funding is finite and needs to be targeted to achieve the best results. The reforms recommended by this Review will provide a foundation for more effective prioritisation and coordination of investments by governments. Specifically:

  • The adoption of National Environmental Standards for MNES will provide clarity on the environmental outcomes that should be targeted through investments in restoration.
  • National and regional plans will define how to most effectively and efficiently improve MNES in a landscape. Offsetting should also be guided by priorities identified in regional plans.
  • The quantum change in information and data will assist monitoring and evaluation of environmental improvement delivered through government investments.

A pre-condition for Commonwealth funding of any restoration in a State or Territory should be that the State or Territory has agreed to implement the National Environmental Standards. This will ensure that restoration does not occur in areas where there is little protection of the environment and that the Commonwealth does not pay for restoration while the environment is being degraded in the same region.

Reforming the EPBC Act environmental offsets policy

Recent research has shown that even when sophisticated offset metrics are applied, restoring individual patches of land can still lead to poor outcomes for species if the wider landscape is not considered (Marshall et al. 2020). Regional recovery plans should help coordinate offsets by defining the areas where restoration would deliver the greatest environmental return within the region, including benefits to targeted species and ecological communities. The development and implementation of successful regional plans will reduce the need for offsets, because less species should be up-listed and more down-listed as the environment is restored.

A greater use of strategic assessments will also improve environmental restoration outcomes by balancing impacts and delivering offsets in a coordinated way across multiple projects in a region. However, major short-comings in the EPBC Act environmental offsets policy need to be addressed prior to widespread adoption in strategic assessments.

Changes are required to the policy to ensure that offsets do not contribute towards further environmental decline. Immediate changes need to be made to ensure that the existing policy is adequately implemented. Amendments are required to ensure the policy is aligned with the reform framework and that offsets required under the EPBC Act or accredited arrangements can effectively achieve net-benefit outcomes for the environment. These changes (Box 28) include only accepting offsets where:

  • they are permitted under the National Environmental Standards
  • they align with planning instruments
  • an offset plan demonstrates that they can be ecologically feasible
  • outcomes from offsets can be properly monitored and measured.

Proponents are generally not in the business of restoring and managing habitats. There are, however, expert land managers and specialist project managers who deliver these services. The right policy and legal settings would provide certainty for these parties to invest in landscapes, confident that proponents will be in the market to purchase offsets based on these investments down the track.

Ultimately, the foundations for offsets should be enshrined in legislation – either in the EPBC Act or a specific standalone Act. This will provide the right market certainty for investment to occur. Initially, however, the offsets policy should be amended, or a National Environmental Standard be developed for offsets. Either the amended policy or a Standard for offsets should be aligned with the changes outlined in Box 28.

To reduce the costs of restoration, future offsets legislation should also capture the recommended changes and consider the requirements of market participants. To incentivise early investment in restoration and encourage greater private investment, the legislation needs to improve the market settings, including consideration of market, depth, integrity and efficiency.

A public register of offsets should also be established for all Commonwealth, State and Territory offset sites. This register should be designated as a National Environmental Information Asset (Chapter 10).

Greater alignment between biodiversity and carbon markets

The Carbon Credits (Carbon Farming Initiative) Act 2011 (Carbon Credits Act), has supported substantial government investment in native forest restoration. Since the Carbon Credits Act came into force, the Australian Government has committed $2 billion in investment toward lowest cost carbon abatement through the Clean Energy Regulator’s Emissions Reduction Fund and Climate Solutions Fund (CER 2020). Much of the allocated funds have been put toward restoring forests or protecting them from clearing. These funds are an example of a more innovative investment mechanism that is restoring more than 2.3 million hectares of native forest (ERAC 2019).

Funding for carbon abatement has expanded the area of potential habitat that can support threatened species, but these projects have not been targeted at MNES. Multiple reviews have identified opportunities to better align carbon abatement with biodiversity benefits (CCA 2018, CCA 2020, King 2020). Despite this, restoration funded by carbon farming has not occurred in areas of high biodiversity. This opportunity still exists because progress in aligning carbon and biodiversity benefits has been limited.

There is potential to increase investment in threatened species habitat restoration by reducing barriers between carbon-focused and biodiversity-focused markets, where appropriate. When developing new offsets laws, government should reduce these barriers at both the Commonwealth and State or Territory level.

Greater alignment between the carbon and biodiversity markets could shift restoration efforts toward areas that will assist more threatened species. It could deliver the dual benefits of:

  • increasing the net carbon abatement and threatened species recovery, due to an increase in area being restored
  • reducing the overall cost of achieving carbon and threatened species outcomes because both benefits can be realised from one activity.

Recommendation 27

The Commonwealth should reform the application of environmental offsets under the EPBC Act to address decline and achieve restoration.

  1. The EPBC Act environmental offsets policy should be immediately amended (or a National Environmental Standard for restoration that includes offsets should be made) in accordance with the recommendations in Box 28.
  2. As part of the second tranche of reform, the Act should be amended or standalone legislation passed to legislate the revised offsetting arrangements, providing the certainty required to encourage investment in restoration.