Introductory Info

Date introduced:  9 February 2022
House:  House of Representatives
Portfolio:  Agriculture, Water and the Environment
Commencement: The Act commences on the day after the Act receives Royal Assent.

Purpose of the Bill

The purpose of the Agriculture Biodiversity Stewardship Market Bill 2022 (the Bill) is to establish a legislative framework to support a national voluntary agricultural biodiversity stewardship market (the biodiversity market or the scheme).[1] This will enable agricultural landholders to undertake projects that enhance or protect biodiversity in native species and receive a tradeable biodiversity certificate to reward farmers for doing so.[2]

The Bill proposes to do this through:

• creating a new form of personal property – a biodiversity certificate – which is owned and traded separately from the land on which biodiversity exists
• permitting the Minister to make protocol determinations setting out the specific requirements for how distinct types of biodiversity projects will be managed on eligible land. They will also be ‘the legal mechanism through which certain rights and obligations are assigned to the project proponent’.[3]
• requiring the establishment of a registration scheme and allowing the Regulator to approve and register biodiversity projects in the Agriculture Biodiversity Stewardship Market Register (ABSMR)
• establishing the Agriculture Biodiversity Stewardship Market Advisory Committee (ABSMAC) to advise the Minister, including on whether protocol determinations are consistent with biodiversity integrity standards
• requiring the Regulator to maintain an online platform to facilitate trading in biodiversity certificates
• providing for the Clean Energy Regulator (CER) to administer and regulate the scheme
• providing for project assurance, compliance and enforcement of the regulatory framework to offer certainty in the biodiversity market[4] and
• providing for review of the operation of the regulatory framework, including consideration of whether the scheme is meeting its objectives.

Structure of the Bill

This Bill is divided into twenty Parts:

• Part 1: sets out the scope and object of the Act, including relevant definitions of key terms used throughout the Bill.
• Parts 2 and 3: allow for the registration, variation, and cancellation of biodiversity projects, and for the rules to specify excluded biodiversity projects. Part 8 sets out a fit and proper person test for participants in the scheme.
• Parts 4 and 5: allow for the Minister to make, vary or cancel protocol determinations, and sets out when the Minister must consult with the Agriculture Biodiversity Stewardship Market Advisory Committee (ABSMAC)
• Part 6: provides for the Commonwealth to purchase biodiversity certificates
• Part 7: defines eligible interests in land and provides for biodiversity projects, including biodiversity maintenance area requirements, to be noted in land titles
• Parts 9, 10 and 11: outline the reporting and notification requirements for biodiversity projects, the information gathering powers of the Regulator, and provide for audits of biodiversity projects. Part 16 provides relevant offence provisions
•  Parts 12 and 13: provide for the relinquishment of biodiversity certificates and for the declaration of biodiversity maintenance areas
• Parts 14 and 15: establish the Agriculture Biodiversity Stewardship Market Register and provide for the publication of information about biodiversity certificates
• Part 17: outlines the compliance and enforcement powers of the Regulator
• Part 18: establishes the Agriculture Biodiversity Stewardship Market Advisory Committee and sets out the Committee’s functions
• Parts 19 and 20: contains miscellaneous provisions, including internal and external review of decisions, the functions of the Regulator, what matters can be dealt with in the rules (which are yet to be made), and for review of the Act.

The Bills Digest does not examine all provisions of the Bill. Instead, a Quick Guide to each Part has been prepared to assist the reader in understanding what the Bill is intended to do and where the relevant provisions are located. For further information, the reader is referred to the Explanatory Memorandum to the Bill.[5]

Background

State of Australia’s biodiversity

Australia is one of 17 megadiverse countries across the globe and is renowned for its distinct ecosystems and high proportion of endemic species.[6] However, recent reports, inquiries and studies highlight the perilous state of Australia’s biodiversity.[7] For example, the recent review of Australia’s national environmental law, the Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act), found ‘Australia’s natural environment and iconic places are in an overall state of decline and under increasing threat’.[8] There are currently 1,918 species and 88 ecological communities listed as threatened under the EPBC Act.[9] Twenty-one key threatening processes, including land clearance, are listed under the Act.[10]

The EPBC Act is the principal law through which Australia’s obligations under the Convention on Biological Diversity are implemented.[11] These obligations include a requirement to develop national strategies, plans or programs for the conservation and sustainable use of biological diversity, and to integrate these strategies into relevant sector or cross-sectoral plans. The Convention promotes in situ conservation, including the protection of ecosystems and natural habitats and the maintenance of viable populations of species in natural surroundings, and the rehabilitation and restoration of degraded ecosystems.[12]

Conservation of biodiversity has traditionally been viewed as the responsibility of governments and the public sector.[13] Governments provide for the formal reservation of land and sea areas with high biodiversity values as part of Australia’s National Reserve System.[14] Over the last several decades, the Australian government, in partnership with state and territory governments, have funded agriculture stewardship programs such as Caring for our Country, and Phase One and Phase Two of the National Landcare Program. These programs have engaged with landholders to improve land management practices and biodiversity, as well as increase the resilience of farming operations to climate risks such as drought.

However, public funding to support existing biodiversity or sustain the level of restoration required is insufficient. A 2021 analysis by the Australian Conservation Foundation of federal government spending on biodiversity protection (threatened species and ecosystems) found that spending had fallen 28% since 2013[15] and it has been estimated that the government spends ‘about 15% of what is needed to avoid [species] extinctions and recover threatened species’.[16]

The contribution of the private sector to the conservation of biodiversity is thus also very important. Some private landholders have engaged in a range of voluntary conservation covenant programs, while conservation organisations have, with the support of philanthropic organisations and private donors, acquired and dedicated private and leasehold land for the management of biodiversity.[17]

Environment or natural capital markets

Biodiversity is one component of natural capital. Natural capital refers to ‘stocks of natural assets including geology, soil, air, water and all living things’.[18] Humans derive a wide range of ecosystem services from natural capital, for example, clean water, healthy soils, pollination of crops by insects, food and fibre, climate regulation, and cultural services.[19] Ecosystem services are a public good, underpinning human well-being, and are also exploited for private gain through activities such as agriculture or fishing.

It has been argued that attaching a value to natural capital will help better conserve it, with environmental markets a policy approach which can be leveraged to fund and secure desired environmental outcomes. Environmental markets can also complement traditional conservation programs.[20]

Environment markets require the establishment of clear goals for the market to achieve and be monitored against, rules that are effective market drivers (these underpin the integrity of the market), the allocation of enforceable and tradeable property rights, effective enforcement, and secure participation by preventing potential participants circumventing market rules through the use of less demanding and/or more environmentally damaging options that reduce demand for, and hence the value of, tradable rights.[21]

With around 55.5% of Australia’s land managed for agriculture­,[22] farming groups have argued that farmers should be given greater recognition for the on-ground work they undertake to manage natural capital.[23] The creation of markets in natural capital—such as biodiversity—are argued to support farmers to manage the natural values of their land and enable them to diversify farm income in the face of increasing climate risks.[24]

Existing environment or ‘natural capital’ markets in Australia

There are already two existing natural capital markets in Australia:

• The Emissions Reduction Fund, implemented under the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) is a voluntary scheme that aims to provide incentives for entities to adopt new practices and technologies to reduce their emissions. Under the scheme, entities who implement eligible projects—including land managers—can earn Australian Carbon Credit Units (ACCUs) which may then be sold to the Commonwealth Government or traded in the voluntary market. Over 1.1 million projects have been registered under the scheme, including 558 for vegetation methods and 253 for agriculture methods, and 1.06 million ACCUs have been issued[25]
• The Reef Credit Scheme, delivered by Eco-Markets Australia on behalf of the Queensland Government, enables farmers and landholders to generate and sell ‘Reef Credits by taking actions on their land to reduce nutrient or sediment run-off flowing into the Reef’.[26] A Reef Credit is ‘a quantified and verified amount of Pollutant that has been prevented from entering the Great Barrier Reef lagoon’.[27] The scheme has been operating since 1 July 2017, with ten projects registered under one of two development methodologies.[28]

Recent policy announcements

The Australian Government’s Ag2030 Strategy seeks to grow the value of Australia’s agriculture sector to $100 billion by 2030, with Theme 7 of the Strategy—Stewardship—seeking to ensure that ‘Australian farmers are rewarded for their stewardship of land and water’.[29]

On 26 March 2019, the Australian Government announced $34 million for the Agriculture Biodiversity Stewardship Program.[30] As initially announced, the program comprised $30 million (over four years) for a pilot program to incentivise farmers to engage in projects that sequester carbon and boost biodiversity and $4 million (over three years) for development of an Australian Farm Biodiversity certification scheme.[31]

Further funding was announced in the 2021-22 budget, including:

• $22.3 million over four years ($45.6 million over ten years) for a pilot stewardship program to enhance existing high value native vegetation on farms
• $4.4 million over four years from 2021-22 to develop a biodiversity trading platform to support an emerging market in biodiversity services.[32]

Other components of the Agriculture Biodiversity Stewardship Program include: the preparation of an Agriculture Biodiversity Policy Statement to set out the role of Australian agriculture in protecting biodiversity; the development of an Australian farm biodiversity certification scheme; and the development of a unified, standardised metrics and measurement framework to support informed investment and development of Australia’s natural capital.

On 21 March 2022, the Government announced concessional tax treatment for primary producers who generate revenue from the sale of ACCUs and biodiversity certificates.[33]

Pilot schemes

Two pilot schemes are being implemented: the Carbon + Biodiversity Pilot and the Enhancing Remnant Native Vegetation Pilot.

The Carbon + Biodiversity Pilot (C+B Pilot) ‘trials market arrangements for farms to create new income from plantings that deliver biodiversity improvements and carbon abatement’.[34] Eligible farmers must undertake a new Emissions Reduction Fund (ERF) environmental plantings project to plant native trees and shrubs on land that has been clear of forests for five years, with the plantings to be maintained for 25 or 100 years. Farmers earn ACCUs—which can be sold—and receive a biodiversity payment. Project documentation provides limited information about the biodiversity payment:

The biodiversity payment offer will be calculated using a financial model that estimates:

• The projected carbon revenue a project could earn from credited carbon abatement and sale of credits (ACCUs),
• The costs of establishing and maintaining the planting/s (a pricing guide will be published to help estimate their costs),
• The cost of reporting associated with the project.

The model will consider the revenue and cost estimates to calculate a biodiversity payment offer, with the aim of providing efficient participants with an appropriate rate of return on their investment.[35]

The Enhancing Remnant Vegetation Pilot ‘trials a mechanism for farmers to provide biodiversity services by protecting and enhancing the condition of remnant vegetation on their properties’.[36] Remnant native vegetation is defined as:

uncleared native vegetation or regrowth native vegetation that, with appropriate management, could achieve the structure and composition of the original native vegetation community over at least two decades.[37]

However, participating farmers would only be required to enter into a 10-year agreement to protect and enhance that vegetation. Participating farmers would receive a payment comprising an annual rental component (calculated based on the estimated market value of the land comprising the project area) and a management activity component (covering the costs of additional management activities).[38]

Round 1 of the C+B Pilot and Enhancing Remnant Native Vegetation Pilot were offered in six natural resource management (NRM) regions, and Round 2 of the C+B Pilot is being offered in an additional six NRM regions.

There were 65 applicants under Round 1 of the C+B Pilot;[39] as at 15 February 2022, sixteen grants have been awarded for a total value of $1.15 million (range: $5,246 - $199,837; median: $40,327).[40] A further 100 applicants for the Enhancing Remnant Native Vegetation Pilot have been selected for site assessments.[41]

How the proposed scheme would work

The scheme, as proposed by the Bill, can be summarised as follows:

• an eligible person would apply to the Regulator to register an eligible biodiversity project that would be implemented on eligible land
• an eligible biodiversity project would be consistent with a biodiversity protocol determination
• biodiversity protocol determinations would be legislative instruments made by the Minister, after receiving advice of the Agriculture Biodiversity Stewardship Market Advisory Committee (ABSMAC) and public consultation
• the ABSMAC would endorse each biodiversity protocol determination as consistent with biodiversity integrity standards
• the project proponent of a registered biodiversity project would implement the nominated project
• the project proponent would apply to the Regulator for the issue of a unique biodiversity certificate which could then be sold to the Commonwealth Government or to private entities in in the Agriculture Biodiversity Stewardship Market (ABSM).

Committee consideration

At the time of writing, the Bill has not been referred to a committee for inquiry.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills made comments in relation to several provisions in the Main Bill and requested further advice from the Minister on a number of issues.[42] At the time of writing, the Minister has not provided a response. The Committee’s comments are discussed further in relation to the relevant provisions in the ‘Key issues and provisions’ section of the Digest.

Senate Standing Committee for the Selection of Bills

At its February meeting, the Senate Standing Committee for the Selection of Bills deferred consideration of the Bill to its next meeting.[43]

Policy position of non-government parties/independents

Following the announcement of the Agriculture Biodiversity Stewardship Program in 2019, the ALP’s then shadow Minister for Agriculture, Fisheries and Forestry, Joel Fitzgibbon, indicated qualified support for the program on the proviso that the program was supported by robust methodologies and any grant components were subject to a competitive tender arrangement.[44]

On 28 March 2022, The Australian Greens Senator Sarah Hanson-Young announced an intention to refer the Bill to a Senate Inquiry. Senator Hanson-Young said:

The Greens have major concerns with the large amount of discretion this bill gives the Minister for Agriculture to make long-term environmental decisions, without robust transparency or regulation.[45]

Position of major interest groups

According to the Explanatory Memorandum for the Bill:

The Department of Agriculture, Water and the Environment (the Department) undertook targeted consultation with select stakeholders in the agriculture, industry, environment and finance sectors, and state and territory governments from November 2021 to January 2022.

Consultation also occurred with appropriate Commonwealth agencies, including the Clean Energy Regulator, the Department of the Prime Minister and Cabinet, the Attorney-General’s Department, the Department of Finance, Treasury, the Department of Home Affairs, the Department of Foreign Affairs, the Australian Public Service Commission, the National Indigenous Australians Agency, and the Department of Industry, Science, Energy and Resources.[46]

A document outlining issues identified during these consultations does not appear to be available.

Farming sector

The farming sector has indicated support for the broader Agriculture Biodiversity Stewardship Package, with the National Farmers Federation (NFF) receiving a $4m grant to develop and trial the Australian Agriculture Sustainability Framework.[47]

With respect to eligible biodiversity projects, the NFF argues that these should not be limited to new biodiversity works or projects (that is, the projects should not have to be additional), and ‘must also recognise the value and existing habitat that farmers have voluntarily and responsibly maintained’.[48]

Environment and conservation groups

The Australian Conservation Foundation (ACF) has ‘cautiously welcomed’ the Bill, pointing out the need for the scheme to be aligned with existing environmental laws and to ‘genuinely and verifiably enhance environmental outcomes’.[49] The ACF argues that the scheme must ‘be open to a range of landholders – not just farmers, but also private land conservation organisations, traditional owners and community-based landscape restoration groups’.[50]

Financial implications

The Explanatory Memorandum indicates that the cost of establishing the ABSM are expected to be $13.2 million over two years from 2021-22 to 2022-23.[51] The Explanatory Memorandum continues:

Further costs of implementation will be subject to future appropriation. Options for cost recovery will also be subject to future decisions of Government.[52]

The Regulation Impact Statement accompanying the Explanatory Statement states:

Further costs of administration of the market over the longer term are estimated at $10m a year based on the experience of the CER [Clear Energy Regulator] in regulating the carbon market.[53]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[54]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights has not yet considered the Bill.

Key issues and provisions

Part 1—Preliminary

Key provisions

Definitions

Clause 7 defines key terms such as biodiversity, biodiversity outcome and biodiversity project, and provides relevant signposts to key terms defined in other parts of the Bill.

The definition of biodiversity is identical to the definition of biodiversity provided in section 528 of the EPBC Act.

A biodiversity project is defined to mean ‘a project, carried out in a particular area, that is designed to enhance or protect biodiversity in native species (whether the effect on biodiversity occurs within or outside the area’, while a biodiversity outcome is defined to mean ‘the enhancement or protection of biodiversity that the [biodiversity] project is designed to achieve’.[55]

No further elaboration is provided in the Explanatory Memorandum.

Eligible land

Clause 8 of the Bill defines eligible land as ‘agricultural land in Australia’, unless the rules provide for a different meaning of eligible land.

The Explanatory Memorandum states that ‘in the absence of further detail in the rules, it is intended that the ordinary meaning of agricultural land apply’ [emphasis added].[56] The Explanatory Memorandum continues:

The scheme seeks to facilitate the significant biodiversity gains that can be made on marginalised or underutilised areas of agricultural land. This definition would allow all agricultural land in Australia to be eligible land for the purposes of the agriculture biodiversity stewardship market, including pastural [sic] land used for grazing. It will also allow for other land, that is not agricultural land within the ordinary meaning of that term, to be prescribed as eligible land in the rules. [emphasis added][57]

There is a statutory definition of agricultural land, linked to the operation of a primary production business, in the Foreign Acquisitions and Takeovers Act 1975.[58] However, a term or phrase’s ordinary meaning is construed in accordance with its ‘ordinary usage of society’.[59] This may lead to the scheme being limited to landholders engaged in traditional farming activities (for example, horticulture, livestock raising).

However, environment sector stakeholders argue that the scheme should be open to a range of landholders, including ‘private land conservation organisations, traditional owners, and community-based landscape restoration groups’.[60]

The Explanatory Memorandum points to the complexity of zoning and land use information in Australia as justifying the use of rules to further define agricultural land.[61] However, this may result in the application of the scheme being limited.

Parts 2 and 3 – Registered biodiversity projects

Key provisions

Biodiversity projects

Clause 12 provides for an eligible person to apply to the Regulator for the Regulator to approve the registration of a biodiversity project on the Register. Clause 13 sets out the form of the application and clause 14 provides for Regulator to request further information.

Clause 16 provides for the Regulator to approve the registration, with subclause 16(4) setting out the criteria which the Regulator must be satisfied of before registering a project. The criteria include a requirement that the project proponent is an eligible person and passes the fit and proper person test (see Part 8 below), however other criteria relate to matters that may be established in rules.

Clause 17 provides for the Minister to, by legislative instrument, order the Regulator to not consider or make a decision with respect to an application if the Minister has been advised by the ABSMAC that the relevant protocol determination does not comply with one or more of the biodiversity integrity standards.

The Explanatory Memorandum indicates that a Clause 17 order would be an interim measure preceding the variation or revocation of the relevant protocol determination.[62]

Clauses 20 to 33 provide for a range of circumstances in which a project may be varied or cancelled at the request of the project proponent or the Regulator. Some of these clauses address circumstances in which a biodiversity certificate has already been issued, however the details are to be provided in the rules. The Explanatory Memorandum consistently points to the desirability of the details being provided in rules, to ‘allow for the flexibility of reasonable, effective and appropriate assurance and verification mechanisms’.[63]

Excluded biodiversity projects

Clause 34 provides for the Minister to make rules specifying that a particular kind of project is an excluded biodiversity project. In doing so, the Minister must have regard to whether there is a material risk that that kind of project will have a material adverse impact on the availability of water, biodiversity, employment, the local community, and land access for agricultural production.[64] The Clause essentially provides a Ministerial veto over certain individual, or kinds of, projects.

The Explanatory Memorandum provides:

The purpose of this provision would be to enable the Agriculture Minister to ensure that biodiversity projects do not have unintended, adverse impacts, and will instead deliver benefits, for landholders, rural communities and agricultural production. It would be appropriate for the rules to prescribe this level of detail.[65]

An identical provision is provided in the CFI Act, with amendments to the Carbon Credits (Carbon Farming Initiative) Rule 2015 in 2017 prescribing circumstances in which the Minister may make an adverse impact funding in relation to new plantation forest projects under the Emissions Reduction Fund (ERF).[66] The Government is also seeking to implement a similar provision in relation to two other ERF forestry methods—human-induced regeneration of a permanent even‑aged native forest and native forest from managed regrowth.[67]

However, media reporting indicates mixed reaction to the most recent proposal, with some stakeholders arguing that there is limited evidence to suggest that carbon projects are ‘locking up productive farmland’, that the veto creates uncertainty for applicants, and overrides the ability of landholders to make informed decisions about the management of their land.[68] The Minister has suggested that neighbouring landholders are left to deal with ‘pests and weeds emanating’ from land on which there are carbon projects.[69] However, in all states landholders and land managers have a general biosecurity obligation to manage pest animals and weeds on their land, and in all states and territories land management authorities have a range of regulatory options to engage the landholder in best management practices for pest and weed management.[70]

With the details to be provided in as-yet unmade rules, it is unclear whether the Minister would be required to publish details of material risk findings for particular types of project(s), or whether applicants would be able to seek review of a material risk finding decision.

Part 4 – Protocol determinations

Key provisions

Protocol determinations

Clause 45 provides for the Minister to, by legislative instrument, make a protocol determination for a particular type of biodiversity project. The clause sets out the matters which may be covered by the determination, including the type of activity to be undertaken (or are prohibited), the activity period and the permanence period, and reporting and notification requirements. Protocol determinations could be subject to a motion to disallow.

Clause 46 creates a civil penalty offence provision which applies if a project proponent fails to comply with the requirements of a protocol determination or fails to take all reasonable steps to ensure that an activity prohibited by the determination is not carried out. The maximum pecuniary penalty available for an individual is 2,000 penalty units ($440,000).[71]

The Explanatory Memorandum states that this quantum of penalty is ‘aimed at protecting an emerging market’ and is appropriate to provide strong deterrence and support the integrity of the scheme.[72]

Subclause 46(3) provides an exemption in circumstances in which the project proponent took all reasonable steps to ensure that the prohibited activity was not carried out. However, project proponent bears an evidential burden in this case.

The Scrutiny of Bills Committee has generally raised concerns about provisions which require the defendant to raise evidence about a matter (reverse evidential burden).[73] The Explanatory Memorandum states ‘the reversal is justified and consistent with the Guide to Framing Commonwealth Offences, as the matter to be proved (that is, all reasonable steps have been taken) is a matter that would be peculiarly in the knowledge of the defendant’.[74]

Clause 47 sets out the matters that the Minister must have regard to in making a protocol determination, including whether the determination complies with the biodiversity integrity standards and advice of the ABSMAC. The Minister may however also have regard to ‘whether significant adverse environmental, agricultural, economic or social impacts are likely to arise from the carrying out of the kind of the project that the determination covers’, and other matters that the Minister considers relevant.[75]

While the Minister must not make a protocol determination if the ABSMAC advises the Minister that the determination does not comply with one or more of the biodiversity integrity standards,[76] the Minister has a wide discretion in determining whether to make a protocol determination.

Clauses 48 to 53 provide for variation or revocation of protocol determinations. Variations and revocations affect proposed projects (those still in the application stage), however, existing biodiversity projects would not affect existing biodiversity projects unless the project proponent seeks to vary the project.[77]

Clauses 54 and 55 provide for the ABSMAC to give advice to the Minister about making, varying or revoking a protocol determination. In giving that advice, the Committee is required to have regard to:

• the biodiversity integrity standards
• any matters that the Minister directs, by legislative instrument (which would not be subject to disallowance), the Committee to have regard to (Clause 55) and
• any relevant advice given by the Regulator to the Committee.

Clause 56 provides for the ABSMAC to publish a detailed outline of a proposed protocol determination or variation of an existing protocol determination, and outlines the requirements for public consultation. A minimum of 14 and maximum of 28 days are provided for public submissions, which must then be published on the Department’s website (except on request of the submittor on specified grounds) (subsection 56(5)).

Biodiversity integrity standards

Clause 57 provides for biodiversity integrity standards. These are the standards to which protocol determinations are held. The drafting of the provision mirrors the drafting of the ‘offsets integrity standards’ in the CFI Act.[78] The criteria can be summarised as follows:

• the project should result in enhancement or protection of biodiversity that would be unlikely to occur if the project was not carried out (that is, the outcome is additional)
• the biodiversity outcome achieved should be verifiable
• statements as to the biodiversity outcome should be supported by clear and convincing evidence
• any estimate, projection or assumption underlying the biodiversity outcome should be reasonably certain[79] and
• the protocol determination meets other standards prescribed in the rules.

The Explanatory Memorandum states:

The biodiversity integrity standards would form an important test for protocol determinations, providing assurance to the market that protocol determinations would provide for projects that deliver biodiversity outcomes, and that information about those outcomes could be relied upon by those who are purchasing biodiversity certificates.[80]

With respect to the requirement for additionality, the Explanatory Memorandum states:

Applying the requirements of the protocol determination should result in outcomes that are unlikely to occur in the absence of the project. This aspect of the standards is intended to ensure there is a connection between active management undertaken by the proponent and generation of the biodiversity outcome as described in the certificate and the register.[81]

It is unclear how the Bill would interact with existing carbon projects undertaken on agricultural land; that is, how a biodiversity project could be ‘stacked’ onto an existing carbon project, as the biodiversity outcome could be considered incidental to—rather than additional to—any outcomes being achieved by the carbon project.

It is also unclear how the Bill would interact with other existing schemes, such as existing projects funded through a range of Commonwealth and state grant programs (completed or on-going) or programs such as Land for Wildlife. For example, ‘approximately 5000 properties (more than 530,000ha of private land)’ are currently registered in Victoria’s Land for Wildlife program which ‘supports landholders or managers who provide habitat for native wildlife on their land’.[82]

Stakeholder comment

The NFF has stated ‘the Bill must not limit the scope of activity to new biodiversity works or projects, but must also recognise and value existing habitat that farmers have voluntarily and responsibly maintained’.[83] This would appear to be in conflict with the additionality requirement.

Scrutiny concerns

The Standing Committee for the Scrutiny of Bills commented on Clauses 45 and 197. The Committee outlined general scrutiny concerns where provisions in a bill allow the incorporation of legislative provisions by reference to other documents because of the prospect of changes being made in the law in the absence of Parliamentary scrutiny, creation of uncertainty in the law, and the potential for limited access to the incorporated documents. The Committee described a ‘consistent scrutiny view that where material is incorporated by reference into the law it should be freely and readily available to all those who may be interested in the law’.[84]

The Committee requested the Minister’s ’advice as to whether standards and any other documents incorporated into legislative instruments made under clauses 45 and 197 will be made freely available to all persons interested in the law’.[85]

The Committee also commented on Clause 55. The Committee noted its expectation ‘that any exemption of delegated legislation from the usual disallowance process should be fully justified in the explanatory memorandum’, including an ‘explanation of the exceptional circumstances that may justify an exemption’.[86] The Explanatory Memorandum does not provide a justification.

The Committee requested the Minister’s advice as to:

• why it is considered necessary and appropriate to provide that directions under clause 55 are not subject to disallowance; and
• whether the bill could be amended to provide that these directions are subject to disallowance to ensure that they are subject to appropriate parliamentary oversight.[87]

Part 5 – Biodiversity certificates

The certificate will remain valid for the duration of the project and will be required to set out the key features of the project and the kind of biodiversity that is being delivered and maintained.[88]

Key provisions

Clauses 59 to 61 provide for a person to make an application to the Regulator for the Regulator to issue a biodiversity certificate. The Regulator must issue the certificate if satisfied of the criteria set out in Clause 62.

Clause 63 outlines the basis on which a biodiversity certificate is issued; this includes that the ‘certificate may be cancelled, revoked, terminated or varied, or required to be relinquished, by or under later legislation’ and that no compensation is payable in those circumstances (subclauses 63(c) and (d)).

Clause 64 provides that a biodiversity certificate is personal property and clause 65 provides that the holder of a biodiversity certificate is its’ the legal owner and may deal with the certificate as provided for in the Act. Subclause 65(2) provides a ‘good faith’ protection for a person dealing with a biodiversity certificate.

Part 6 – Purchase of biodiversity certificates by the Commonwealth

Key provisions

Clause 74 defines a biodiversity conservation purchasing process as ‘a tender process, a reverse auction or any other process for the purchase by the Commonwealth of biodiversity certificates’.

This Part is modelled on the provisions in Part 2A the CFI Act; however, under the CFI Act, it is the Regulator who may enter into carbon abatement contracts and may conduct carbon abatement purchasing process(es).

This Part essentially provides for the Commonwealth to be a buyer of last resort in the event that there is limited private sector interest for biodiversity certificates.[89]

Part 7 – Interests in land

This provides prospective buyers of land with notice of a registered biodiversity project and any attached obligations, as well as whether the land is subject to a biodiversity maintenance declaration (Clause 120).

Part 8 – Fit and proper person test

Scrutiny concerns

The Standing Committee for the Scrutiny of Bills commented on Clause 87. Subclauses 87(1) and 87(2) provide for the rules to specify events and such other matters that the Regulator must have regard to in determining whether the individual, body corporate or trust passes the fit and proper person test. The Committee stated its view that significant matters ‘should be included in primary legislation unless a sound justification for the use of delegated legislation is provided’.[90] The Committee considered a desire for flexibility, as outlined in the Explanatory Memorandum, to be an insufficient justification. The Committee requested the Minister’s advice as to:

• why it is considered necessary and appropriate to provide to leave key details of the fit and proper person test set out in clause 87 to delegated legislation; and
• whether the bill could be amended to include at least high-level guidance regarding these matters on the face of the primary legislation.[91]

Part 9 – Reporting and notification requirements

Key provisions

Biodiversity project reports

Clauses 89 and 90 require the project proponent to provide a biodiversity project report to the Regulator:

• when the project proponent applies to the Regulator for the Regulator to issue a biodiversity certificate (per clause 59) (a first report)[92]
• if a biodiversity certificate has been issued, in accordance with the reporting period established for that biodiversity project (a subsequent report).[93]

Clause 91 sets out the requirements for biodiversity project reports, with particular matters that must be included in reports to be provided by the rules and protocol determinations. A biodiversity project report may be required to include an audit report.

The first report covers the period from the project’s registration through until six months prior to the application for the issue of a biodiversity certificate,[94] while a subsequent report covers the period from the beginning of the reporting period and up to five years later.[95]

The Explanatory Memorandum states:

it is expected that most project proponents would report every five years (the maximum reporting period) as this is likely to be most cost effective for those project proponents. This section would provide for flexibility with reporting …[96]

Notification of certain events

Division 3, Clauses 92 to 97 and 99 provide for certain events of which a project proponent is required to notify the Regulator. These include:

• the project proponent ceases to have the right to carry out the project[97]
• a regulatory approval that was required for the project is withdrawn or otherwise ceases to have effect[98]
• a project proponent dies[99]
• a protocol determination requires a project proponent to notify the Regulator of certain matters[100]
• the project proponent becomes aware a significant reversal of the biodiversity outcome to which the project relates[101]
• the project proponent becomes aware of an event (such as a natural disturbance) or conduct that causes or is likely to cause a significant reversal of biodiversity outcome[102]
• an event occurs that is likely to mean the project proponent no longer passes the fit and proper person test.[103]

Part 10 – Information-gathering powers

Part 11 – Audits

Part 12 – Relinquishment requirements

Key provisions

Circumstances in which the Regulator can give a notice of relinquishment

Clauses 110 to 113 set out the circumstances in which the Regulator can give a person a relinquishment notice if a biodiversity certificate has been issued. Clause 110 relates to the provision of false and misleading information. Clauses 111 to 113 relate to circumstances in which the permanence period of the project has not ended and:

• the registered biodiversity project has been cancelled
• there has been a significant reversal of the biodiversity outcome not related to natural disturbance, reasonable actions taken to reduce the risk of bushfire, or conduct engaged in by a person other than the project proponent
• there has been a significant reversal of the biodiversity outcome attributable to natural disturbance, or conduct engaged in by a person other than the project proponent, and the Regulator is not satisfied that the project proponent took reasonable steps to mitigate the damage.

Relinquished biodiversity certificates are cancelled.

Failure to comply with a relinquishment notice

Subclause 116(5) creates an offence of failing to comply with the requirements of a relinquishment notice. The provision is a civil penalty provision, with a maximum pecuniary penalty of not more than 2,000 penalty units ($440,000) and where the court can determine the market value, twice the market value of the biodiversity certificate to which the relinquishment notice relates.

The Explanatory Memorandum provides:

... for the purposes of the subsection 82(5) of the Regulatory Powers Act, the pecuniary penalty for the civil penalty would be the greater of 2,000 penalty units and twice the market value if the court was able to determine the market value of the biodiversity certificate in relation to the relinquishment notice that was given.[104]

The drafting of this provision may raise concerns, as in general ‘each offence should have its own single maximum penalty that is adequate to deter and punish a worst case scenario’.[105] As this is a new scheme, there is no information available about the market value of biodiversity certificates and it may be several years before biodiversity certificates are issued. Alternate penalty provisions for offences involving dishonest conduct and failure to comply with legislative schemes are provided in other legislative regimes; however, the relevant multiplier is usually three times the value of the benefit or 10 per cent of annual turnover during the 12 months prior to the commission of the offence.[106] The Explanatory Memorandum does not provide an explanation of the multiplier in subclause 116(5). The continuing contravention provisions of the Regulatory Powers Act do not apply to this provision.[107]

Part 13 – Biodiversity Maintenance Declarations

Key provisions

Declaration of biodiversity maintenance declaration

Clause 120 provides for the Regulator to, by legislative instrument, declare that a specified area of land is a biodiversity maintenance area. The Regulator may make a declaration if:

• the area is or has been the project area of a registered biodiversity project and
• a biodiversity certificate has been issued and
• a relinquishment notice has been issued under clause 116 and not complied with, or the Regulator is satisfied that the notice is likely to not be complied with or
• the Regulator is satisfied that a relinquishment notice is likely to be given and it is likely that the notice will not be complied with or
• the Regulator is satisfied that it would be appropriate to give a relinquishment notice but the person to whom the notice should be given cannot be located or no longer exists.[108]

Scrutiny concerns

The Standing Committee for the Scrutiny of Bills commented on Clause 125, which provides for the Regulator to delegate a power to make, vary or revoke a biodiversity maintenance declaration to a member of the Regulator. The Committee noted that it ‘has consistently drawn attention to legislation that allows the delegation of administrative powers to a relatively large class of people, with little or no specificity as to their qualifications or attributes’. The Committee stated its preference for a limit to be set on either the scope of powers that might be delegated or on the categories of people to whom those powers might be delegated.

The Explanatory Memorandum indicates that ‘the delegates would be senior officials of the Regulator, who have knowledge and expertise in biodiversity functions or responsibility and direct oversight of the scheme’ and describes the delegation as necessary to ‘improve the efficiency of the administration and management of the scheme’.[109]

However, the Committee did not consider a ‘desire for administrative efficiency’ sufficient justification and requested the Minister’s advice as to:

... why it is considered necessary and appropriate to allow the Clean Energy Regulator’s powers to make, vary or revoke a biodiversity maintenance declaration under clause 125 to be delegated to any member of the Regulator.[110]

The Committee also commented on subclauses 120(7), 123(7) and 124(5). These subclauses provide that a failure to provide the requisite notice in subclauses 120(6), 123(6) and 124(4) relating to the making, varying or revocation of a biodiversity maintenance declaration does not affect the validity of the relevant action or decision. These are known as ‘no-invalidity’ clauses.

The Committee stated that there ‘are significant scrutiny concerns with no-invalidity clauses, as these clauses may limit the practical efficacy of judicial review to provide a remedy for legal errors’.[111] The Committee noted that the Explanatory Memorandum did not adequately address this issue and requested the Minister’s advice as to why it is considered necessary and appropriate to include the no-invalidity clauses in the bill.[112]

Part 14 – Registers

Key provisions

Type of information to be recorded in the Register and public accessibility

Clauses 128 and 130 set out the type of information that is to be recorded in the Register. This includes:

• in relation to biodiversity projects: the project area, project description, protocol determination and any information required by that determination to be recorded, conditions attached to the registration, and other information as may be required by the rules.
• in relation to biodiversity certificates: the biodiversity project to which the certificate relates, date of issue, holder of the certificate, any information required by a protocol determination to be recorded, and other information as may be required by the rules.

The Explanatory Memorandum provides:

The publication of information on the Register would be necessary to ensure that relevant information is accessible and available to participants under the scheme. This would ensure that participants are able to obtain accurate and up-to-date information about the status of registered biodiversity projects [or registered biodiversity certificates], and can have confidence in conducting their business affairs.[113]

The Explanatory Memorandum notes that the publication of information would be consistent with the requirements of the Privacy Act 1988.

An online trading platform

Clause 133 provides for the rules to make provision for the Regulator to maintain an online trading platform for any of several purposes. Subclause 133(1)(a)(i) and subclause 133(1)(b) provide that the platform may facilitate trading of biodiversity certificates and facilitate arrangements between buyers and seller of biodiversity certificates. However, subclause 133(1)(a)(ii) and subclause 133(1)(c) provide that the platform may facilitate trading of ‘other certificates, units or credits (however described, and whether issued under a law of the Commonwealth, a State or a Territory, or in some other way), that would relate to biodiversity projects’, and to facilitate ‘arrangements relating to biodiversity projects that are not, or are not intended to be registered under this Act’.[114]

The Explanatory Memorandum does not provide information about these types of ‘other certificates, units or credits’ pertaining to biodiversity projects that are not registered under the Act.

The inclusion of these clauses may demonstrate an intention to facilitate a broader market in biodiversity services. However, the inclusion of these ‘other certificates, units or credits’ in the same Register as registered biodiversity projects and biodiversity certificates regulated under the Act may be counter-productive to the aims of the scheme given that these ‘other certificates, units or credits’ may not be subject to the same integrity and assurance mechanisms as registered biodiversity projects.

Part 15 – Publication of information

According to the Explanatory Memorandum:

• the requirements in Division 2 are aimed at ‘ensuring that there is regular and accurate information to the market about ... biodiversity certificates’.[115]
• the Secretary’s power to publish information about the Commonwealth’s purchase of biodiversity certificates is discretionary because if only a small number of purchases are made ‘it may be difficult to publish a meaningful report that does not disclose commercially sensitive information about the purchasing process, seller and sellers of the certificates’.[116]

Part 16 – Record-keeping and project monitoring requirements

Part 17 – Enforcement

The Regulatory Powers Act commenced on 1 October 2014 and ‘provides for a standard suite of provisions in relation to monitoring and investigation powers, as well as enforcement provisions through the use of monitoring, investigation, civil penalties, infringement notices, cancellation of projects, enforceable undertakings and injunctions’.[117]

The Regulatory Powers Act only has effect where Commonwealth Acts are drafted or amended to trigger its provisions. The Attorney-General’s Department advises that:

New or amending Acts that require monitoring, investigation or enforcement powers of the kind available under the Regulator Powers Act should be drafted to trigger the relevant provisions of the Act, unless there are compelling policy reasons to the contrary.[118]

Part 18 – Agriculture Biodiversity Stewardship Market Advisory Committee

Part 19 – Review of decisions

Key provisions

Review of decisions

Clause 173 provides for certain decisions made by the Regulator’s delegate under the Act, or rules, to be reviewable decisions. These include the decision to approve or refuse to approve registration of a biodiversity project, decisions relating to the variation or cancellation of the registration of a registered biodiversity certificate, decisions relating to the issue or refusal to issue a biodiversity certificate, and other prescribed decisions made under the rules. The Explanatory Memorandum notes several types of decisions which are not reviewable decisions.[119]

The delegate is required to notify an affected person of their right to review of the decision and the Regulator may on application reconsider the decision.[120]

Clause 178 provides for review of the Regulator’s reconsideration decision, and review of a reviewable decision made by the Regulator, in the Administrative Appeals Tribunal.

Part 20 – Miscellaneous

Key provisions

Voluntary accreditation of advisers

Clause 181 provides for the rules to make provision for the voluntary accreditation of persons who give advice, or otherwise provide assistance, in relation to the operation of the Act, the carrying out of biodiversity projects or the trading of biodiversity certificates.

This approach differs from the CFI Act, where a voluntary Australian Carbon Industry Code of Conduct has been developed to ‘promote market integrity, consumer protection and accountability for industry practitioners and service providers’.[121] The Code was developed by the Carbon Market Institute with the support of stakeholders from the industry, government and the community. The Clean Energy Regulator has expressed its support for the Code, while the Queensland Government has limited investment in the Land Restoration Program to Code signatories or parties engaging Code signatories.[122]

The voluntary accreditation of advisers may similarly serve to support the integrity of the Agriculture Biodiversity Stewardship Market scheme.

Review of the operation of the Act

Clause 196 provides for the Agriculture Minister to cause a review of the operation of the Act and the rules within five years from the day on which applications under the Act can first be made.[123] The review must include a review of the extent to which the Act has achieved the objects of the Act, and any other matters that the Agriculture Minister directs.[124] The review must make provision for public comment.[125]

The Agriculture Minister is required to table a copy of the report in each House of Parliament within 15 sitting days of that House after the report is given to the Minister and to publish the report on the Department’s website.[126] If the report makes recommendations to the Commonwealth Government, the Agriculture Minister is required to prepare a statement setting out the Commonwealth Government’s response to each of the recommendations. The statement must be prepared as soon as practicable, but must be tabled in each House of Parliament within 6 months after receiving the report.[127]

Delegation of legislated power

Clause 197 gives the Agriculture Minister the power to make rules which may prescribe matters:

• required or permitted by the Act to be prescribed by the rules
• necessary or convenient to be prescribed for carrying out or giving effect to the Act.[128]

The scope of the rules is limited in that the rules cannot create an offence or penalty, provide powers of arrest or detention or entry, search or seizure, impose a tax, appropriate funds from the Consolidated Revenue Fund, or directly amend the text of the Act.[129]

The Explanatory Memorandum states that the ‘flexibility is necessary to allow the market to develop organically and to ensure that the matters, processes and circumstances can be accommodated quickly and effectively’.[130]

Subclause 197(3), overriding subsection 14(2) of the Legislation Act 2003, would allow the rules to make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in any other instrument or other writing as in force or existing from time to time. The Standing Committee for the Scrutiny of Bills concerns with respect to the incorporation of legislative provisions by reference to other documents were discussed in relation to Clause 45 (above – Part 4).

Scrutiny concerns

The Standing Committee for the Scrutiny of Bills also commented on Clause 188. This clause provides that certain listed persons (including the Minister, the Secretary, the Regulator and their delegates) are protected from civil liability for damages for, or in relation to, an act or matter done or omitted to be done, in good faith in the performance of functions or the exercise of powers under the bill. The Committee notes ‘the immunities provide for under clause 188 would remove any common law right to bring an action to enforce legal rights ... unless it can be demonstrated that lack of good faith is shown’.[131] The Committee noted that ‘the courts have taken the position that bad faith can only be shown in very limited circumstances’,[132] and expressed an expectation that explanatory materials should provide a sound justification for such clauses.

The Explanatory Memorandum simply provides that this type of provision is used in other Commonwealth legislation.[133] The Committee considered a desire for administrative efficiency or consistency with other legislative regimes to be insufficient justification. The Committee requested detailed advice from the Minister as to why it is considered necessary and appropriate to confer immunity on certain listed persons.[134]

Concluding comments

The Government proposes to leave substantial detail about how the scheme will operate to the discretion of the Minister, in the making of protocol determinations, and the rules. It is also not clear from the Bill or the Explanatory Memorandum how the value of a biodiversity certificate will be created. Notably, in contrast to the market for Australian Carbon Credit Units—each of which represents one tonne of carbon dioxide equivalent stored or avoided by a project—each biodiversity certificate is unique. Approved projects under the Government’s pilot scheme are in their infancy and it is too early to evaluate whether they are achieving biodiversity outcomes.

As the Bill allows the Commonwealth to participate in the market by buying and selling biodiversity certificates, it is unclear to what extent an open market would develop under the criteria established by the Bill.