8.1 - Environmental offsets do not offset impacts of developments

The offsets policy permits continued environmental decline

The EPBC Act offsets policy was implemented in 2012. The policy enables developers to compensate for unavoidable environmental impacts, mostly by protecting areas of habitat similar to the area that has been destroyed or damaged by the project.

The policy embeds a hierarchy of considerations when assessing the impacts of a proposal. In the first instance, impacts on matters of national environmental significance (MNES) should be avoided. Once all reasonable efforts are made to avoid, remaining impacts should be ‘mitigated’, with efforts made to reduce the impact(s) on MNES. The 'residual impacts'—those remaining after all reasonable efforts to avoid and mitigate have been exhausted—can then be offset, in accordance with the rules of the offsets policy.

The offsets policy is based on the notion that as suitable habitat becomes more scarce overtime, offsets become harder to find and secure, and therefore more expensive. Although this has played out, it has not resulted in projects avoiding increasingly scarce habitat. Rather, it has led to concern from business that the scarcity of some offsets creates an 'unworkable' cost of doing business¹²³.

While the avoid, mitigate, offset hierarchy is its stated intent, 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's decision to develop a particular site (or on a specific footprint within a site) has generally already been made before a referral is made under the EPBC Act. This limits real consideration of broadscale avoidance. Project cost and difficulty drives final decisions about siting of projects, rather than environmental considerations.

For example, the Review has noted proposals where proponents have placed linear infrastructure through habitat, rather than considering all opportunities to site it through adjacent already disturbed or cleared lands. In other cases, proponents have identified multiple prospective areas for extraction activities and have chosen sites for solely commercial reasons (such as lower costs due to proximity to transport hubs), despite generating potentially high environmental impacts.

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.

Further to problems with application, there are significant shortcomings with the design of the offsets policy. The current policy is based on the concept of ‘averted loss’. This means that proponents usually seek to meet the offset requirement by purchasing and improving land with the same habitat and protecting it from future development. However, there is no formal requirement for the proponent to demonstrate that the area set aside for the offset was sufficiently likely and able to be cleared for future development. Therefore, the environmental outcome achieved by the purchase of the offset may not be genuinely ‘additional’ to the outcome that would have been achieved anyway.

While 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) or by using an offset that has been delivered in advance of the impact occurring (an 'advanced offset'), most offset conditions are met by protecting areas of like habitat (an averted loss offset) (see Box 22).