Overview of the use of environmental offsets
This chapter provides an overview of the use of environmental offsets.
an explanation of the definition of offsets and the different
types of offsets;
the legal and policy framework relating to offsets, primarily at
the Commonwealth level; and
relevant past reviews and reports relating to offsets.
This report necessarily focuses on Commonwealth policies and regulation,
particularly the Environment Protection and Biodiversity Conservation Act
1999 (Cth) (EPBC Act) and its processes. However, state and territory
offsets regimes are also briefly outlined and discussed where appropriate and
Essentially, an environmental offset involves compensating for impacts
on the environment or biodiversity at one site through activities at another
At the Commonwealth level, offsets are defined as 'measures that compensate for
the residual adverse impacts of an action on the environment'.
However, the Department of the Environment (the department) noted that 'under
national environment standards all reasonable steps should first be taken to
avoid and then mitigate adverse impacts on the environment'.
The EPBC Act Environmental Offsets Policy (EPBC Act Offsets Policy)
Offsets do not mean proposals with unacceptable impacts will
be approved. They simply provide an additional tool that can be used during the
environmental impact assessment process.
The EPBC Act Offsets Policy requires that offsets be in place for the
duration of the impact.
Types of environmental offsets
The EPBC Act Offsets Policy notes that 'an offsets package is a suite of
actions that a proponent undertakes in order to compensate for the residual
significant impact of a project'.
The actions can comprise a combination of 'direct offsets' or 'other
compensatory action/indirect offsets'.
The department submitted that, in the past, direct offsets:
...have been defined as areas of land that are gazetted or
covenanted as protected areas as to avert a future loss and ensure continued
The department noted that this approach, while playing an important role
in securing remaining habitat in an ecosystem, had not always targeted the key
conservation priorities of a particular species, ecosystem or place. As a
consequence, in 2012, the offsets policy was amended so that 'direct' offsets
are those actions that provide a 'measurable conservation gain for an impacted
The EPBC Act Offsets Policy states that:
Conservation gain is the benefit that a direct offset
delivers to the protected matter, which maintains or increases its viability or
reduces any threats of damage, destruction or extinction.
Some examples whereby a 'conservation gain' may be achieved include:
improving existing habitat for the protected matter;
creating new habitat for the protected matter;
reducing threats to the protected matter;
increasing the values of a heritage place; and/or
averting the loss of a protected matter or its habitat that is
The department submitted that, under the EPBC Act Offsets Policy, direct
offsets may also include:
the improvement and creation of new habitat through regeneration
and rehabilitation activities across a landscape;
implementing feral animal control programs that reduce predation
of a particular threatened species;
improving the population of a species through captive breeding
and release programs; or
undertaking activities that improve the values of a heritage place
or wetland of international importance, such as upstream management activities
to improve estuarine water quality.
Under the EPBC Act Offsets Policy, a minimum of 90 per cent of the
offset requirements for any given impact must be met through direct offsets.
Indirect offsets or other
While many submissions refer to 'indirect offsets', the department advised
that the term 'indirect offsets' is 'terminology that we have moved on from,
because we tie things much more specifically to particular actions presently'.
The preferred term in the EPBC Act Offsets Policy is 'other compensatory
measures' – that is, actions that do not directly offset the impacts on the
protected matter but are anticipated to lead to benefits for the impacted protected
matter, for example, funding for research or education programs.
This report uses the term 'indirect offsets' interchangeably with 'other
Appendix A of the EPBC Act Offsets Policy outlines the criteria for
research or educational programs under the policy.
The department noted that the EPBC Act Offsets Policy encourages the
supply of offsets before an impact occurs, that is 'advanced offsets'. The EPBC
Act Offsets Policy describes 'advanced offsets' as offsets for potential future
use, transfer or sale, for example, protection or improvement of habitat for
the conservation of a protected matter before an impact is undertaken.
The EPBC Act Offsets Policy states that:
Advanced offsets are encouraged where practical, as a means
to better manage the risks associated with the time delay in realising the
conservation gain for a protected matter...
Advanced offsets must satisfy all requirements in this
policy, including those relating to offsets being additional to other
legislation and schemes...
Offsets: the legal and policy framework
This section provides a brief background of the legal and policy
framework relating to use of environmental offsets in federal environmental
approvals in Australia.
Overview of the EPBC Act
Federal environmental approvals in Australia occur under the EPBC
Act. The objects of the EPBC Act include:
to provide for the protection of the environment, especially
those aspects which are a matter of national environmental significance;
to promote ecologically sustainable development through the
conservation and ecologically sustainable use of natural resources;
to promote the conservation of biodiversity;
to provide for the protection and conservation of heritage; and
to promote a co-operative approach to the protection and
management of the environment involving governments, the community, landholders
and indigenous peoples.
The EPBC Act also contains the following principles of ecologically
- decision-making processes should effectively integrate both long-term
and short-term economic, environmental, social and equitable considerations;
- if there are threats of serious or irreversible environmental damage,
lack of full scientific certainty should not be used as a reason for postponing
measures to prevent environmental degradation;
the principle, inter-generational equity—that the present generation
should ensure that the health, diversity and productivity of the environment is
maintained or enhanced for the benefit of future generations;
- the conservation of biological diversity and ecological integrity should
be a fundamental consideration in decision making;
improved valuation, pricing and incentive mechanisms should be promoted.
In general, the EPBC Act requires a person taking an 'action' that is
likely to have a significant impact on a matter of national environmental
significance to obtain approval from the Minister for the Environment.
The nine matters of national environmental significance protected under
the EPBC Act
world heritage properties;
national heritage places;
wetlands of international importance (listed under the Ramsar
listed threatened species and ecological communities;
migratory species protected under international agreements;
Commonwealth marine areas;
the Great Barrier Reef Marine Park;
nuclear actions (including uranium mines); and
water resources, in relation to coal seam gas and large coal mine
Actions that may have a significant impact on one of these matters are
referred to the environment minister and, if they are considered to be a
'controlled action', undergo environmental assessment in accordance with the
EPBC Act. The proponent of the action is responsible for the preparation of
assessment documentation. At the completion of an assessment, the minister must
decide whether to approve the action, and may approve the action subject to
conditions. These conditions can include offsets.
Consideration of offsets under the
The department advised that environmental offsets have been included in
conditions of approval since the EPBC Act was enacted in 2000, but their
application has evolved and grown over the past decade. However, as water
resources in relation to coal seam gas and large coal mine developments was added
as a new matter of national environmental significance after the release of the
EPBC Act Offsets Policy, the policy does not apply.
Offsets are not required for all approvals under the EPBC Act—only where
residual, unavoidable, impacts are considered to be significant.
The department stated that:
Environmental offsets are considered during the detailed
environmental impact assessment process of an action undertaken through Part 8
of the EPBC Act, following the exploration of all potential avoidance and
Offsets can also be considered as part of strategic assessments, which
consider matters of national environmental significance at a landscape or regional
scale, rather than on a project-by-project basis.
Commonwealth policy on
The development of the Offsets Policy was part of a package of reforms
to the EPBC Act as part of the Government's response to the independent review
(Hawke review) of the EPBC Act led by Dr Allan Hawke which reported in 2009.
The Hawke review contained a discussion of 'biobanking' schemes, and recommended,
amongst other matters, that national biodiversity banking systems and standards
be developed, and that the EPBC Act be amended to 'facilitate and promote the
use of biobanking as part of project approvals'.
The Government agreed in principle to this recommendation and indicated that it
would be releasing an Environmental Offsets Policy.
The EPBC Act Offsets Policy and Offsets Assessment Guide were finalised
and released in October 2012, following 'detailed research and stakeholder
The then Minister, the Hon Tony Burke, stated that the policy would 'better
explain to proponents and the community how offsets are assessed and what would
be acceptable under specific proposals'.
In addition to the Hawke review, the development of the EPBC Act Offsets
Policy also considered the Business and Biodiversity Offsets Program (BBOP) Standard
on Biodiversity Offsets, published in 2012.
The BBOP is an international collaboration between companies, financial
institutions, government agencies and civil society organisations. The members
are developing best practice in following the mitigation hierarchy (avoid,
minimise, restore, offset) to achieve no net loss or a net gain of biodiversity.
The department submitted that the EPBC Act Offsets Policy now
'articulates the role offsets play under the EPBC Act and how suitable offsets
are determined' and the Offsets Assessment Guide is a metric that 'measures an
offset against a relevant impact to determine whether the offsets proposal is
The policy 'provides additional detail and guidance regarding how the
department determines what constitutes a suitable offset' and 'an increased
focus on the conservation gain that is delivered by an offset'.
The EPBC Act Offsets Policy states that its five key aims are to:
the efficient, effective, timely, transparent, proportionate, scientifically robust
and reasonable use of offsets under the EPBC Act
proponents, the community and other stakeholders with greater certainty and
guidance on how offsets are determined and when they may be considered under
the EPBC Act
improved environmental outcomes by consistently applying the policy
the appropriate nature and scale of offsets and how they are determined
guidance on acceptable delivery mechanisms for offsets.
Principles in the Commonwealth EPBC
Act Offsets Policy
The EPBC Act Offsets Policy sets out a number of principles that are
applied in determining the suitability offsets. That is, suitable offsets must:
deliver an overall conservation outcome that improves or
maintains the viability of the aspect of the environment that is protected by
national environment law and affected by the proposed action;
be built around direct offsets but may include other compensatory
be in proportion to the level of statutory protection that
applies to the protected matter;
be of a size and scale proportionate to the residual impacts on
the protected matter;
effectively account for and manage the risks of the offset not
be additional to what is already required, determined by law or
planning regulations or agreed to under other schemes or programs;
be efficient, effective, timely, transparent, scientifically
robust and reasonable; and
have transparent governance arrangements, including being able to
be readily measured, monitored, audited and enforced.
Application of the policy
As noted above, the EPBC Act Offsets Policy can be applied in relation
to all protected matters of national environmental significance, with the
exception of water resources in relation to coal seam gas and large coal mine
developments. The EPBC Act Offsets Policy applies to offsetting requirements in
both terrestrial and aquatic (including marine) environments and for both
project-by-project assessments and strategic assessments approved under the EPBC Act.
The policy has effect for all referrals made since 2 October 2012, and applies to
projects that were undergoing assessment and had not had a proposed approval
decision made by 2 October 2012.
Offsets Assessment Guide
The EPBC Act Offsets Policy is accompanied by an Offsets Assessment Guide,
which is described as a decision support tool used by regulators within the department
'to determine the suitability of offsets for listed threatened species and
ecological communities'. The department noted that the offset assessment only applies
to assessing offsets for threatened species and ecological communities, which
form the majority of offset requirements under the EPBC Act.
The department went on to note that an important feature of the
assessment guide is that it accounts for delays in the delivery of any
Size and scale of offsets
The department stated that the EPBC Act Offsets Policy and guide were
developed to 'systemise the judgments that go into determining suitable
offsets'. The size and scale of an offset under the EPBC Act are determined by
a number of different variables, including:
the overall size of the residual impact on the matter of national
the specific attributes of the protected matter, or its habitat,
being impacted, including its listing status;
the quality or importance of the habitat or area attributes being
impacted with regard to ongoing viability of the relevant matter of national
the duration of any impacts, that is, permanent or temporary;
the level of threat that a proposed offset site may be under;
the time it may take for any management, rehabilitation or
restoration activities to deliver a benefit; and
the risk of any conservation gain not being delivered, including
scientific certainty in relation to the proposed activities.
So, for example, the Offsets Assessment Guide uses data on the annual
probability of extinction for different threatened species categories to ensure
that 'the more threatened a species or community is the larger the offset
The department also noted that:
The principle of 'additionality' ensures that a particular
offset cannot be used for more than one action, and that activities already
required by law cannot be used to meet offset obligations under the EPBC
Act...Environmental offsets must also be additional to what has been paid for
under other schemes or programs on a pro rata basis, for example, an
environmental grant program funded by the Australia Government.
The department commented that additionality policy requirements do not
preclude the recognition of state or territory offsets that may be suitable as
offsets under the EPBC Act for the same action.
Past reviews and inquiries in relation to offsets
This section considers a number of reviews and inquiries that are
relevant to the issue of offsets.
Inquiry into the operation of the
This committee has been considering the issue of environmental offsets
for some time. In 2009, the committee undertook an inquiry into the operation
of the EPBC Act and concerns were raised about the increasing use of
environmental offsets under the EPBC Act. The committee noted that there was a
'degree of disquiet amongst submitters about offsets'. The committee recognised
...the use of offsets must only be applied as an adjunct to
avoidance and mitigation. Offsets must not be used as a tool to get projects,
which would otherwise be unacceptable, 'over the line'.
The committee recommended that government policy regarding the use of offsets
for habitation conservation state that the use of offsets:
is a last resort;
must deliver a net environmental
should not be accepted as a
mitigating mechanism in instances where other policies or legislation (such as
state vegetation protection laws) are already protecting the habitat proposed
for use as an offset.
The Government agreed in part to this recommendation and stated that it
would 'release a policy on environmental offsets to provide greater certainty
for business and improve environmental outcomes'.
Inquiry into the effectiveness of
threatened species and ecological communities' protection in Australia, August
During its inquiry into the effective of threatened species and
ecological communities, one of the two key issues raised with the committee
relating to environmental assessment and approval processes was the use of
offsets. Submitters raised the use of biodiversity offsets and expressed
concern about their potential to adversely impact on threatened species and communities. It was noted that offsets are 'not specifically
addressed within the EPBC Act', but that their use 'has developed as an
administrative practice over a number of years'.
The then Department of Sustainability, Environment, Water, Population
and Communities (SEWPAC) told the committee that EPBC Act Offsets Policy was
'proving useful', by 'giving a clear guide as to how to calculate offsets and
when, and how to determine where they would best deliver the broader ecological
and biodiversity outcome'. This was compared to the past practice, which SEWPAC
representatives described as 'ad hoc and project specific'.
In its report on the inquiry, the committee:
welcomed the publication of a formal policy guiding the use of
offsets under the EPBC Act, acknowledging evidence that it was designed to
improve transparency around how offsets are determined;
considered that offsets should be used with great caution where
threatened species and ecological communities are involved; and
noted with concern that SEWPAC is only now reviewing offsets that
have been granted in the past.
The committee recommended that SEWPAC:
...conduct an audit and evaluation of the offsets granted under
the Environment Protection and Biodiversity Conservation Act 1999 to
date, and make the results of this audit publicly available.
In additional comments to the report, the Australian Greens added:
We are also supportive of the proposal of an audit of all
offsets granted under the EPBC Act to date – and we urge that this audit be
independent, subject to public input, and result in a public register of
offsets that is kept up to date. The Greens have serious concerns about the use
of offsets to wave through otherwise inappropriate developments, and hope that
a thorough audit will bring more credibility to the system, and clearly
identify where offsetting should not be allowed.
In a related recommendation (given that offsets are often a condition of
approval under the EPBC Act), the committee recommended that the Australian
National Audit Office (ANAO) conduct an audit of monitoring of compliance with
approval conditions under the EPBC Act.
The committee notes that the ANAO has conducted this audit, and the report was
published in June 2014.
The report identified a number of concerns with the Department of the
Environment's compliance monitoring activities. The ANAO found that:
...compliance monitoring undertaken by the department has,
generally, been insufficient to provide an appropriate level of assurance of
proponents' ongoing compliance with their conditions of approval.
The ANAO further noted that:
The increasing workload on compliance monitoring staff over
time has resulted in Environment adopting a generally passive approach to
monitoring proponents' compliance with most approval conditions.
The ANAO made five recommendations to address the identified
shortcomings in the department's compliance monitoring activities. The
Department of the Environment agreed to all the recommendations. More
specifically, the ANAO recommended that the department:
...develop a compliance intelligence capability and undertake
periodic risk assessments; develop and implement annual compliance monitoring
programs that target the greatest risk areas; update investigation procedures
and improve the documentation of enforcement responses; and improve record‐keeping and
performance reporting related to the compliance monitoring function.
Productivity Commission research report
on Major Project Development Assessment Processes
In December 2013, the Productivity Commission released a research report
on its study to benchmark Australia's major project development assessment processes.
The study considered the extent to which major project development assessment
processes across all levels of government affect the costs incurred by
business, deliver good regulatory outcomes for the public and provide
transparency and certainty to promote business investment.
The Commission considered offsets as part of Australia's project
development assessment processes and made a number of relevant recommendations,
including a review of environment assessment policies and practices,
legislation to enable amendments to offsets, and monitoring and compliance
activities for offsets:
COAG should commission an independent and public national
review of environmental offset policies and practices to report by the end of
2014. The review should:
- survey the consistency of offset
policy objectives against the principles of ecologically sustainable development
- critically assess the
methodologies used for measuring and valuing offsets
examine the role of market-based
offset approaches, including offset funds
consider the case for greater
national consistency and linkages between offset regimes, including the
potential for a single national scheme.
Governments should ensure legislation enables regulatory
agencies to amend conditions and offsets, provided that there is a strong case,
the proponent is consulted and the proposed change is publicly announced.
Regulators should produce an annual major projects compliance
statement that reviews monitoring and compliance activities and identifies
redundant or ineffective conditions on approvals.
Relationship between Commonwealth, state and territory offset regimes
The Commonwealth EPBC Act Offsets Policy explains the relationship
between Commonwealth, state and territory legislation and the use of
environmental offsets. The policy notes that:
The majority of proposed actions that need approval under the
EPBC Act also require environmental approval from the relevant state or
territory government before they can proceed.
The policy further states that:
...while there are many similarities between the environmental
laws of the states and territories and the EPBC Act, they also differ in a
fundamental way. The EPBC Act focuses on protecting matters of national
environmental significance and only protects the broader environment in certain
circumstances. State and territory laws on the other hand usually protect the
environment as a whole (for example air quality, noise pollution, water
quality, biodiversity, and heritage values). These differing legislative
objectives result in different assessment processes and can result in different
As a consequence of different assessment processes and offset requirements,
it is noted that:
...some proponents may need to provide offsets under both state
or territory laws and the EPBC Act for the same action. A state or territory
offset will count toward an offset under the EPBC Act to the extent that it
compensates for the residual impact to the protected matter identified under
the EPBC Act.
'One stop shop' proposal
In addition, the Commonwealth Government is committed to delivering a
'one stop shop' for environmental approvals. The department stated that the
delivery of a 'one stop shop' will accredit state and territory approval
processes to meet environmental standards required by the Commonwealth.
The 'one stop shop':
...will accredit state planning systems under national
environmental law, to create a single environmental assessment and approval
process for nationally protected matters. The one stop shop policy aims to
simplify the approvals process for businesses, lead to swifter decisions and
improve Australia's investment climate, while maintaining high environmental
Part 5 of Chapter 3 of the EPBC Act makes provision for the Commonwealth
environment minister to enter into bilateral agreements subject to conditions
set out in the Act. The EPBC Act provides for two types of bilateral agreement:
an assessment agreement – where state or territory processes are
used to assess the environmental impacts of a proposed action, but the approval
decision is made by the minister under the EPBC Act;
an approval agreement – where actions that are subject to a
bilaterally accredited management arrangement or authorisation process in place
under state or territory law do not require further assessment or approval under
the EPBC Act.
The department explained that the 'one stop shop' will be achieved
through a three-stage process with each willing state/territory. First, memoranda
of understanding have been signed with all states and territories before assessment
bilateral agreements will be agreed or updated. This will be followed by the
negotiation of an approval bilateral agreement, which would 'enable states and
territories to be the sole approver of projects'.
In terms of progress towards the 'one stop shop' proposal, memoranda of
understanding have been signed with each state and territory. The Commonwealth
Government has entered into assessment bilateral agreements with all state and
Draft approval bilateral agreements have been published for Queensland and News
South Wales, and were open for public comment until 13 June 2014.
State and territory regimes
State and territory legislation and policy also provides for use of environmental
offsets in certain circumstances. These are outlined briefly for each state and
New South Wales
The public consultation for the Draft NSW Biodiversity Offsets Policy
for Major Projects closed on 9 May 2014. The policy will apply to state
significant development and state significant infrastructure under the Environmental
Planning and Assessment Act 1979 (NSW). The policy, which is accompanied by
a Biodiversity Offsets Credit Calculator, aims to 'strike an effective balance
between the needs of proponents, communities and the environment' by:
providing clear, efficient and certain guidance for stakeholders;
improving outcomes for the environment and communities; and
providing a practical and achievable offset scheme for proponents.
For other projects, the 'Principles for the use of biodiversity offsets
in NSW' continue to apply and provide a framework for assessing offset
proposals for other approvals under the Environmental Planning and
Assessment Act 1979.
In NSW, formal offset arrangements are already a feature of:
the NSW Biodiversity Banking and Offsets Scheme, introduced in
land-use planning through biodiversity certification of land
under the Threatened Species Conservation Amendment (Biodiversity
Certification) Act 2010 (NSW);
the regulation of native vegetation under the Native
Vegetation Act 2003.
On 23 May 2014, the Queensland Parliament passed the Environmental
Offsets Bill 2014
which had the purpose of coordinating Queensland's environmental offsets
framework. The five separate previous Queensland offsets policies are to be replaced
with a single Queensland offsets policy.
In Victoria, an offset can be required if a permit to remove native
vegetation is granted. Offset requirements are determined in accordance with the
Permitted clearing of native vegetation – Biodiversity assessment guidelines.
A 'native vegetation gain scoring manual' contains standards for first- and
Victoria also has a 'BushBroker' scheme which 'helps landowners to
generate native vegetation credits by permanently protecting and managing their
native vegetation and assists permit holders clearing native vegetation to find
a matching third party offset site'.
In South Australia, the Department of Environment, Water and Natural
Resources (DEWNR) and the Native Vegetation Council assess all applications to
clear native vegetation in line with the Native Vegetation Act 1991
(SA). The DEWNR website states that, in most situations, when a clearance
application is approved, conditions are attached to ensure that the clearance
is offset by restoration work that provides a 'significant environmental
It also states that the government is 'committed to protecting native
vegetation as part of a broader nature conservation strategy' which includes
the No Species Loss strategy.
The Western Australian Government's Environmental Offsets Policy has
been in place since September 2011. The policy explains that:
Environmental offsets are most often applied to proposals
subject to environmental impact assessment and as a condition of permits for
clearing of native vegetation under the Environmental Protection Act 1986,
but may be considered in relation to other legislation, including planning
developments under the Planning and Development Act 2005 and mining
proposals under the Mining Act 1978.
In Tasmania, the website of the Department of Primary Industries, Parks,
Water and Environment states that development planning should consider the
mitigation hierarchy (avoid, minimise, mitigate, offset), and that 'where
impacts on natural values are unavoidable an appropriate form of offset may be
required from the proponent'. Any proposed offsets must be developed in
consultation with DPIPWE and will be assessed against the principles outlined
in their General Offset Principles.
The Northern Territory's Environmental Assessment Act makes no provision
for imposition of an environmental offset, or social or other community
benefit, as a part of an assessment or approval process. The Northern Territory
Environment Protection Authority provides 'Guidelines on environmental offsets
and associated approval conditions' which are 'confined to generic matters'
rather than 'more proposal-specific issues'.
Australian Capital Territory
The ACT Government is currently developing an environmental offsets policy.
Offsets have also been identified in the ACT as part of approvals under the
EPBC Act. Some of these offsets fall on land managed by the ACT Government.
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