Scheme Overview This information booklet has been prepared to provide an overview of the Banking and Offsets Scheme. The scheme is implemented through: • Part 7A of the Threatened Species Conservation Act 1995 • Threatened Species Conservation (Biodiversity Banking) Regulation • BioBanking Assessment Methodology The legislation can be downloaded from: www.legislation.nsw.gov.au. More information on the scheme is available on the website of the Department of Environment and Climate Change at: www.environment.nsw.gov.au/threatspec/biobankscheme.htm

Published by: Department of Environment and Climate Change 59–61 Goulburn Street PO Box A290 Sydney South 1232 Ph: (02) 9995 5000 (switchboard) Ph: 1300 361 967 (environment information and publications requests) Fax: (02) 9995 5999 TTY: (02) 9211 4723 Email: [email protected] Website: www.environment.nsw.gov.au

DECC 2007/528 ISBN 978 1 74122 642 3 November 2007 Printed on environmentally sustainable paper Scheme Overview

Contents

1. Addressing 2

2. Biodiversity offsets 3

3. How does BioBanking work? 4

4. Biobank sites 6

5. The biodiversity credit market 7

6. BioBanking for developers 8

7. BioBanking for conservation 9

8. Credit calculations using the BioBanking Assessment Methodology 10

9. The price of credits 12

10. The BioBanking Trust Fund 14

11. What will make this scheme a success? 15 Scheme Overview

1. Addressing biodiversity loss New South Wales Department of Environment and Climate Change (DECC) The conservation of our endangered animals, to help address the loss of biodiversity and plants and is one of the greatest environmental challenges facing threatened species. today. The key reason for our historically Creating a market in biodiversity credits gives high extinction rates is habitat degradation incentives to protect biodiversity values. and loss, initially from over-grazing and BioBanking will: clearing for agriculture, and more recently • provide a transparent, consistent and from the clearing of native vegetation for robust framework for the assessment and urban development. management of biodiversity offsets Innovative approaches are needed to tackle • create new opportunities for conservation the challenge of balancing development on privately owned land needs (to provide the community with new housing, jobs and amenities), while also • provide permanent security and conserving biodiversity for the future. management for biodiversity offsets The Biodiversity Banking and Offsets Scheme • provide a secure mechanism for investment (BioBanking) has been established by the in biodiversity conservation.

BioBanking provides new opportunities for conservation on privately-owned land. Photo: A. Remnant/DECC

2 2. Biodiversity off sets • Secure. The biodiversity offset is provided by the biobank site from which the credits Biodiversity offsets have commonly been used are generated. to counterbalance the impact of development on biodiversity, but they have been organised • Transparent. Biobanking statements and on a case-by-case basis until now. credit transactions are on the public register. While this flexibility has resulted in some good • Strategic. Establishing a biodiversity biodiversity outcomes, there is generally no credit market enables offsets to be more guarantee that the offset will be managed for strategically located. This encourages conservation or that there will not be pressure participants to locate offsets on large to develop the land in the future. BioBanking parcels of land, in areas better for provides a consistent, robust and transparent conservation that can compensate for approach for offsets. Under BioBanking, offsets a number of developments, rather than will be: piecemeal efforts negotiated individually. • Measurable. Offset requirements will be Without a market framework, offset sites must known up-front, allowing developers to be negotiated and established separately for minimise the impacts of development and each development. There is no incentive for plan for offsets. the offset area to be better than the minimum • Consistent. A rule-based approach required, and there are few options for ensuring determines credit requirements. the long-term management of such areas.

Figure 1 Using offsets to help address biodiversity loss

Development can have ... but by developing ... and by using + a negative impact on with proper care and offsets we can biodiversity... control, the impact maintain biodiversity can be reduced ... outcomes

biodiversity offsets Impact on biodiversity -

3 Scheme Overview

3. How does BioBanking work? income and fund the future management of the site. Developers can buy the credits to The Biodiversity Banking and Offsets Scheme offset impacts from their development and to helps to address the loss of biodiversity in NSW. meet the improve or maintain test. It achieves this by enabling landowners in NSW to establish biobank sites to secure conservation Developers will need to source particular outcomes and offset impacts on biodiversity types of credits in accordance with the offset values. rules in the methodology:

BioBanking establishes an ‘improve or • credits can only be used to maintain’ test for biodiversity values. offset biodiversity impacts in the same Improving or maintaining biodiversity ecological community, or in another values means avoiding important areas for community of the same formation that conservation of biodiversity values, and has an equal or greater percentage of offsetting impacts on other areas. The offsets land cleared and the same predicted are measured in terms of credits, using the threatened species. BioBanking Assessment Methodology. The • Species credits can only be used to scheme requires participating developers to offset biodiversity impacts on the same meet this improve or maintain test based on threatened species. the impact of their proposed development. Credits are created by the landowner, who There may also be demand for the credits establishes a biobank site and commits to from organisations seeking to secure enhancing and protecting biodiversity values. conservation outcomes. Those buying credits The credits represent an improvement in the are securing the conservation of biodiversity condition of biodiversity values such as an in perpetuity. improvement in the habitat or an increase in the If participants fail to meet their commitments habitat or population of a threatened species. under the scheme, penalties can be applied. The scheme creates a market for the credits. The performance of participants is monitored Landowners can sell the credits to provide by DECC.

4 Scheme administration The scope of the scheme BioBanking will be managed by DECC. BioBanking will commence in 2008. The core functions of DECC will be to: The scheme will only address biodiversity values • register biobank agreements including threatened species listed under the • issue biobanking statements Threatened Species Conservation Act 1995.

• manage the public registers BioBanking does not affect local government’s • audit biobank sites role in land use planning and development • enforce biobanking agreements and control. It provides a systematic mechanism for statements assessing and offsetting impacts on biodiversity.

• prepare annual reports on the scheme. The scheme applies to: Catchment management authorities will be • developments under Part 4 and activities able to help landowners establish biobank under Part 5 of the Environmental Planning sites where appropriate. Local government and and Assessment Act 1979 that are required to other NSW State Government agencies will undertake the threatened species assessment be involved in the scheme administration in of significance accordance with the legislation: • development projects under Part 3A of the • Local government will incorporate Environmental Planning and Assessment Act biobanking statements into the 1979 (the Minister for Planning may require development consent. that Part 3A developments offset impacts in • Department of Planning will be consulted accordance with the biobanking assessment before biobanking statements are issued methodology) (where required). • the establishment of biobank sites on both • Department of Primary Industries private and public land including land to will be consulted on biobanking agreements. which the Native Vegetation Act 2003 applies. • Department of Lands will register biobanking A scheme review will be conducted after the agreements on land title. first two years of operation.

5 Scheme Overview

4. Biobank sites establish a biobank site by signing up to a biobanking agreement. Landowners are able to generate biodiversity credits by agreeing to carry out a set of Landholders anywhere across NSW can management actions which, over time, are voluntarily establish a biobank site to generate expected to improve biodiversity values. credits, except for land that is already managed Management actions are set out in the or expected to be managed for biodiversity biobanking agreement and may include the conservation. The consent of all owners and management of grazing, fire, weeds, human certain parties with an interest in the land is disturbance and other actions, depending on required under the legislation. the threatened species present at the site. Landowners can decide which areas of their Biodiversity credits are issued once a land they will include as the biobank site, biobanking agreement has been approved; allowing different economic activities (such as the number and type are calculated using the primary production) to continue on other parts BioBanking Assessment Methodology and the of their land. Landowners can also decide who Credit Calculator. they will sell their credits to, the price of their credits, and the timing of the sale. These biodiversity credits can then be sold on the open market, generating an alternative All biobanking agreements are registered on income source for the landowner to help the land title. The obligation to protect and manage the land for conservation. In order manage the land is binding on both current to generate credits, landholders need to and future owners of the site.

DECC and Hunter–Central Rivers CMA staff and ecologists discuss the BioBanking Assessment Methodology during the pilot program. Photo: J.Stace/DECC

6 5. The biodiversity credit market the scheme rules. Credits from one or more sites may be required to satisfy the number Once credits have been issued to a biobank and type of credits needed. site owner, they can immediately be sold to any buyer. Each biobank site may generate In addition, credits can be: a number of different ecosystem or species • purchased as an investment for re-sale at a credits, and any of these credits may be sold later date separately or in groups. • purchased in advance of project approval Biodiversity credits may be purchased to: (which can be resold later if not used) • achieve conservation goals. The sale of • acquired to build a portfolio of credits to the credits provides funds for the ongoing offset future development. management of the site. Developers will seek to purchase credits • offset the impacts of a development on available for the lowest price. Landholders will biodiversity values by purchasing credits aim to get the best possible return from their and then retiring them in accordance with credit sales.

Figure 2 Credit transactions (calculating the price of credits is detailed further on p.12)

CREDITS biobank biodiversity site owner credit purchaser $ Part B

single process BioBanking $ Part A annual process annual payment 1 Trust Fund total fund deposit 2

1 Annual payment as per schedule in biobanking agreement 2 Based on present value of estimated management cost

7 Scheme Overview

6. BioBanking for developers the biobanking statement, in accordance with the offset rules. Any measures that have Developers can voluntarily use BioBanking been proposed to minimise the impact of to minimise and offset their impacts on the development onsite, or environmental biodiversity. The scheme provides an alternative contributions for conservation purposes, path for developers to the current threatened may be taken into consideration under the species assessment of significance process. assessment. BioBanking offers several advantages for The biobanking statement sets out the developers: credit requirements, and is then submitted • It can reduce costs and time associated with with the development application biodiversity assessments. under the Environmental Planning and • It provides a transparent and consistent Assessment Act 1979. The statement rule-based approach for determining offsets, satisfies the biodiversity assessment enabling offset requirements to be assessed requirements, and exempts the developer even in the initial stages of project design. from needing an assessment of significance • It allows credit requirements to be or species impact statement for the estimated and purchased at any stage of proposal. the project proposal. The consent authority (the council or • It enables offset sites to be managed by Department of Planning) incorporates a biobank site land owners interested in condition in the development consent (if conservation rather than by developers. granted) that requires retirement of credits • It enables greater flexibility in project in accordance with the statement, before the management and costs. work commences.

Developers must run the BioBanking For Part 3A developments, the Minister for Assessment Methodology to participate in the Planning may require that biodiversity credits scheme. The methodology: are purchased and retired as a condition of • determines what impacts the development project approvals to offset the impacts of the will have on biodiversity values, and project. They may also require compliance whether the development can meet the with a biobanking statement that has been improve or maintain test obtained voluntarily. • assesses the number and type of credits Once credits have been used to either offset that need to be retired in order to offset development impacts or permanently secure the impacts. conservation of biodiversity, they are retired The types of credits that are suitable to offset so they can no longer be used for any other a particular development will be set out in purpose.

8 7. BioBanking for conservation of what those seeking to secure conservation outcomes would need to do: The scheme aims to encourage and secure investment in conservation by providing both 1. Decide on the desired conservation the legal and financial mechanisms to ensure outcomes. This could include conserving the long-term conservation of biodiversity habitat for a particular species, conserving values at biobank sites. Organisations with an endangered ecological community, or conservation goals can rely on the scheme’s helping establish a corridor or conservation robust nature to ensure the longevity of their habitat within a particular area. investments in biodiversity outcomes. 2. Search the public register for credits that The BioBanking legal mechanisms include support these outcomes. These may be the biobanking agreement, which runs credits in the ecological community or with the land and is placed on title. This is threatened species, or credits created from backed up by the Compliance Assurance a biobank site in a particular area. Strategy, which is DECC’s commitment to ensuring participants in the scheme fulfil 3. Buy those credits from the credit holder. their obligations. 4. Retire the credits to ensure protection The financial mechanism is provided by and management of the site. This means the BioBanking Trust Fund. By purchasing the credits cannot be sold on to a third credits, buyers are providing the upfront party in the future. The retirement of capital needed for the long-term funding of credits is recorded on the public register conservation on biobank sites. These funds of credits. are used to manage the site and improve In addition, biobank site owners are able to the biodiversity values on that site, and in so choose the purchaser of their credits. This doing increasing the viability of threatened means that a biobank site owner may decide species populations and improve the quality to sell their credits only to those seeking of habitat and the condition of native plant credits for conservation purposes. In this communities. situation, the biobank site owner would need The scheme makes it easier to secure to specify this in the contract covering the conservation outcomes. Here is an example sale of the credits.

9 Scheme Overview

8. Credit calculations using habitat for a given ecological community or the BioBanking Assessment threatened species. The number of ecosystem Methodology credits is calculated based on vegetation surveys.

The BioBanking Assessment Methodology • Species credits are created for threatened provides a set of rules to determine the species that cannot be reliably predicted number and type of biodiversity credits that using habitat surrogates. The number a development site will require to offset of species credits is calculated based on impacts, and that a biobank site can create targeted survey reports. and sell to protect biodiversity values. The methodology assesses all biodiversity The BioBanking Credit Calculator software values, including the composition, structure is used to apply the methodology rules and function of ecosystems, and threatened and determine credit requirements for species, populations and ecological development sites as well as the credits communities, and their habitats (as defined in landowners can generate and sell. the Threatened Species Conservation Act 1995). The number of credits There are two main types of biodiversity The number of credits calculated depends on credits – species credits and ecosystem a number of factors such as site values (e.g. credits. It is likely that both types of the structure and function of ecosystems), credits would be required or generated for and landscape context (e.g. the values any site. for connectivity and area of vegetation). • Ecosystem credits are created for all The methodology uses the scores from ecological communities, as well as each of these factors to derive the change threatened species that can be reliably in biodiversity values as a result of either predicted as occurring on site, using the development, or protection and management presence of vegetation that provides over time.

10 The improve or maintain test withstand further loss because only a small The improve or maintain test measures the number of populations remain and/or all impacts of development on biodiversity viable populations are considered essential for values. A development is considered to the survival of the species. improve or maintain biodiversity values if There may be some circumstances in which impacts on other areas are counter-balanced developments impacting on red flag areas by the retirement of credits in accordance still meet the improve or maintain test (the with the offset rules, and if red flag areas variation provisions). A set of Ministerial (areas that are important for biodiversity protocols will specify the situations in which conservation and that cannot easily be these variations could be justified. These replaced) are avoided, subject to the variation protocols will be publicly available. The provisions. The development footprint may Director General of DECC must apply the need to be modified to meet this test. protocols and must be of the opinion that Red flag areas include over-cleared avoiding red flag areas would be unnecessary vegetation types (including endangered and unreasonable in the particular ecological communities) and threatened circumstances. The Director General must species populations or habitat which cannot publish reasons for the decision.

Figure 3 Factors important in credit calculations

large areas linked healthy corridors sites

small areas isolated degraded

Number of credits pockets sites

Area of habitat Connectivity Condition of habitat

11 Scheme Overview

9. The price of credits may influence the return on credit sales expected by the landholder. The price of biodiversity credits will be based on the characteristics of the biobank site from While buyers and sellers of credits are which the credits are generated, as well as the free to negotiate the price, credits will be existing supply and demand for credits by the priced to ensure the Total Fund Deposit is market. reached as soon as possible. Payment is The location, condition and area of a property made into the BioBanking Trust Fund when defined as a biobank site will affect the credit credits are first sold by a biobank site owner, price. For example: until the Total Fund Deposit has been reached. • Small, isolated sites may have higher This provides capital for future payments to management costs than larger sites the biobank site owner for the long-term adjoining other areas already managed for management of the site. Both the Total conservation. Fund Deposit and the schedule of payments • Surrounding land uses or past management are set out in each biobanking agreement. behaviour may influence the presence The price of biodiversity credits will be of weeds or other biodiversity threats, based on a combination of the minimum which may affect the level of management price determined by the Total Fund Deposit required. (Part A costs) and any additional return • The location of the property will also negotiated between the landholder and affect the land value, which in some cases the buyer (Part B costs).

Calculating the price of credits Total price = Part A + Part B of credits Total Fund Deposit Return to landholder

The estimated cost Costs that landholders may seek to charge when of management and setting the credit sale price, which may include: reporting, for the life • establishment costs (e.g. application fee) of the agreement. • field assessment • preparation of management plans • land value • opportunity cost • return or risk margin.

12 Worked example A landholder with 200 hectares establishes a biobank site and receives 1000 credits.

Part A costs for the ongoing management costs were estimated to be $394,000 (to provide payments of $100,000 in year 1, $80,000 in year 2, $40,000 in year 3, $20,000 in year 4 and $10,000 for year 5, and onwards).

Part B costs, for establishing the agreement and the expected return to the landholder, were calculated to be $80,000.

The total price of credits would be $394,000 + 80,000 = $474,000, or $474 per credit.

If the landholder sold all 1000 credits for $600,000 (or $600 per credit), $394,000 is deposited into the BioBanking Trust Fund and the balance of $206,000 is paid directly to the landholder.

Payments into the BioBanking Trust Fund only the additional cost above the Trust Fund need to occur on the first sale of credits (or amount would be $2.08 million. This would if retired, before the first sale). If the credits increase the individual credit cost are sold a second (or subsequent) time or to $2,394. the Total Fund Deposit has been met, the A $5 million development proposal that saves full credit sale price is exchanged directly six months on time to obtain their approvals between buyer and seller. could save $375,000, or 15% in interest and If the Part B amount were to include expenses. Even at the higher credit price the land value for the biobank site at example, this saving would fund over $10,000 per hectare (so totalling $2,000,000), 150 credits.

13 Scheme Overview

10. The BioBanking Trust Fund The amount deposited into the BioBanking Some of the income generated from Trust Fund from credit sales is called the managing the land for conservation will be Total Fund Deposit, and is the estimated paid to the landholder through the BioBanking cost of carrying out the management Trust Fund. The Fund invests funds deposited actions on a biobank site. The Fund through the sale of biodiversity credits on Manager will keep separate accounts for behalf of the biobank site owners. The funds each biobank site and will publish public plus investment earnings are used to make annual reports . payments to the biobank site owner to help cover the cost of managing the site, over time. The Total Fund Deposit and future schedule The BioBanking Trust Fund: of payments to the landholder are set out in • provides a financial incentive to biobank site each biobanking agreement. These payments owners to continue to carry out obligations are made each year after the landholder under the biobanking agreement (in submits a report showing compliance with addition to legal mechanisms) the agreement. If the future investment • ensures that if land established as a biobank return is lower than expected for an extended site is sold, the new owner of the site has period, discussions with the landholder would the capacity to continue to manage the site. determine possible future payments.

Figure 4 The relationship between a biobanking agreement and the BioBanking Trust Fund

Individual site BioBanking biobanking agreements $ Total Fund Deposit Trust Fund include Invests Total Fund Deposit 1. Management actions deposited for all biobank sites 2. Credits issued 3. Total Fund Deposit $ $ $ 4. Annual reporting requirements $ Annual payments 5. Schedule of payments • $ Year 1 Individual • $ Year 2 biobank site • $ Year 3 accounts • $ Year 4 • $ Year 5 and onwards

14 11. What will make this scheme agreement. Failure to submit a satisfactory a success? report could result in annual payments being withheld. The latest science The BioBanking Assessment Methodology Annual reports is based on ecological principles, current DECC will publicly release an annual report threatened species, and native vegetation on the scheme’s performance on its website. data. This methodology will be reviewed and This report will provide the community with updated on a regular basis to ensure that it information about the number and type of incorporates the latest scientific knowledge. credits issued, the biobanking agreements The methodology is publicly available, signed, and the biobanking statements issued. providing full access to the rules applied in It will also report on the financial aspects of the scheme. the scheme.

Public registers Compliance and enforcement The BioBanking public register will provide Compliance ensures that there is details of all biobanking agreements, accountability for the commitments made statements and credits. It will also provide under the scheme. DECC will undertake an expression of interest facility to enable a comprehensive compliance assurance interested landholders to promote their program to: possible interest to generate credits given • ensure the integrity of the BioBanking appropriate interest from a credit buyer. Scheme Reporting • ensure compliance with legislative Biobank site annual returns requirements (to ensure biobank sites are Biobank site owners are required to submit managed properly) an annual return detailing their performance • ensure that offences are detected and in fulfilling the conditions of the biobanking appropriate action is taken.

15