Nature Repair Committee consultation: Biodiversity Assessment Instrument

30 October 2024

Nature Repair Committee Secretariat
Nature Finance and Markets Division
Department of Climate Change Energy the Environment and Water

Via online submission: https://app.converlens.com/climate-au/nature-repair-committee-bai

Re: Submission in relation to the Consultation on the Nature Repair Committee outline of the Biodiversity Assessment Instrument

The Great Barrier Reef Foundation (GBRF) is pleased to comment on the Nature Repair
Committee’s consultation in relation to the draft Detailed Outline of the Biodiversity
Assessment Instrument (BAI) which specifies requirements relating to the measurement or assessment of biodiversity, its protection and/or enhancement, under the Nature Repair
Act 2023.

As the lead charity for the Great Barrier Reef (GBR), the GBRF designs and delivers partnerships involving diverse individuals and organisations, including Reef Traditional
Owners, to scale up restoration in an effort to mitigate climate change impacts and strengthen biodiversity conservation.

GBRF supports the creation of the Nature Repair Market as part of Australia’s transition to a nature-positive economy. We recognise the significant role the Market can play in driving much-needed investment into protection and enhancement of Australia’s unique biodiversity, including the conservation, restoration and adaptation of marine and coastal biodiversity at a scale that remains unachievable with government or philanthropic funding.
For this potential to be realised and remain sustainable in the long term, it is critical for the
Market to be designed, regulated and governed with strong principles of integrity at its core and a foundation in science and evidence.

Supported by the Australian Government and the L’Oreal Fund for Nature Regeneration,
GBRF has commenced development of a scientifically rigorous reef biodiversity crediting method that could help drive private sector investment into scaling coral reef restoration efforts on the GBR and beyond. Along with the Australian Institute of Marine Science
(AIMS), we are developing an accounting approach to underpin a methodology that rewards the reef condition / biodiversity uplift from restoration interventions under a future Nature
Repair Market methodology and/or a biodiversity crediting method within one of the emerging international schemes / standards. With our partners, we are working on a similar methodology for seagrass restoration.

GBRF’s detailed and technical comments are informed by this work on ‘public good’ biodiversity crediting methods for the marine realm and the following broader principles which guide our engagement with nature markets:
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1. Nature markets can be enablers for critical conservation action; this means that
robust science and a strong focus on on-ground outcomes should be central,
allowing for full transparency in relation to structure and mechanisms, governance,
decision-making, and underlying environmental and market information, thereby
ensuring the market’s integrity, social license and credibility both within the
community and the corporate sector, nationally and internationally.
2. Market structures should be fair and equitable, and pragmatic without
compromising integrity, facilitating strong uptake on the supply side and confidence
on the demand side.
3. Leadership, participation and engagement from First Nations People is critical to
ensure nature markets can become tools to help Traditional Owners realise their
visions for Country: First Nations rights, interests, cultural obligations and traditional
knowledge should be integrated into market structures and regulation in line with
guidance provided by relevant First Nations led organisations and/or relevant
regional or representative bodies, and benefits for First Nations People should be
maximised through equitable inclusion and market access, and strong enshrined
rights (including consent rights).
4. Any nature or biodiversity market should recognise the value not only of restoration
and ecosystem improvement, but also of stewardship, protection and avoided loss
– including and especially as delivered by First Nations People – in order to ensure
ecosystem resilience into the future.
5. Issues of tenure and ownership, including Indigenous rights, interests and
obligations, should be acknowledged and addressed in collaboration with relevant
parties to ensure clarity in relation to rights and claims, and avoid unintended
consequences and perverse incentives.
6. Consideration should be given to how national markets interact with State and
Territory legislation, existing domestic initiatives and global frameworks, and how
international standards and verified methodologies can be leveraged to improve
integrity and accelerate uptake and implementation.
7. The carbon market provides valuable lessons and some examples of best practice
but also a number of cautionary tales, and these should be heeded in the design
and regulation of nature markets; meanwhile the interaction of the two markets
should be clarified so as to maximise positive outcomes and prevent perverse
incentives.
8. Governments have a critical role to play in helping catalyse market development.

With this background and leveraging significant in-house expertise across both coral restoration ecology and carbon markets (including market, method and project development), we are pleased to provide the attached submission.

Should you have any questions or require clarifications, please contact

Yours sincerely,
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1. Is the biodiversity assessment instrument an appropriate means of achieving
consistency in how methods describe biodiversity?

GBRF agrees that the market and the broader sector would benefit from more consistency in definitions and the description of ecosystem condition and biodiversity outcomes. Where relationships, terms and categories are de facto consistent across contexts and use cases, some of this can be achieved through the BAI; however, it is important to acknowledge that even fundamental concepts and relationships and their implications for the Nature Repair
Market can differ, in particular in the marine as opposed to the terrestrial context. We refer to GBRF’s submission in relation to the Nature Repair Market Rules for an example outlining the conceptual difference in reversals in a marine context with declining counterfactuals as opposed to terrestrial circumstances with (often) steady-state baselines.

2. Does the biodiversity assessment instrument assist in ensuring that methods comply
with the biodiversity integrity standards?

Based on the draft Detailed Outline of the BAI that is the subject of this consultation, the
BAI provides an additional avenue to embed the biodiversity integrity standards into the structure of the scheme and the components of future projects; however, compliance requirements (and enforcement) in relation to the biodiversity integrity standards should not be limited to detailed clauses, but should also be considered at an overarching principles level – and assessed by the Regulator as such. This will serve to avoid situations where projects may comply with the letter of specific clauses, but where the overall design, governance, or operational implementation of those projects may have questionable alignment with the standards. In such cases, the Regulator should have scope to assess and enforce alignment with the biodiversity integrity standards at a higher level.

3. Do you have any feedback on the scope of this biodiversity assessment instrument?

With one of the key rationales for BAIs under the Nature Repair Market the consistency in measurement approaches and resulting comparability of biodiversity projects, it is important to consider the circumstances under which this is practical and can happen without compromising scientific integrity of methods.
In particular, GBRF would urge the Nature Repair Committee to consider separating terrestrial and marine BAIs, given the different scales and levels of connectivity – with marine ecosystem connectivity very high, increasing the risk of irreversible adverse effects from inappropriate projects or interventions across project areas and beyond, but the scale of project interventions likely very small compared to the ecosystem, their scale of impact, and the interaction of those interventions with indicators used for baselining / referencing.
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4. Do you have any feedback on the First Nations knowledge, values and data section of
the biodiversity assessment instrument?

While GBRF will not speak on behalf of First Nations people, we would caution that the requirement for verification of First Nations participation or biocultural outcomes through an “established First Nations-led framework, or a First Nations-led or co-design framework developed as part of the method development process” may lead to unintended consequences for low(er)-capacity groups that may find themselves with yet another layer of verification imposed on them that they may not have had input to and that may not reflect their particular culture(s) and stories / histories.
The carbon market offers a number of successful examples of how to demonstrate First
Nations leadership, engagement and biocultural benefits led by the relevant groups in the ways they prefer – that may be through a framework, or through both culturally appropriate monitoring and story-telling, or even just direct engagement with select partners / buyers.

Equally, the requirement that “monitoring and verification of outcomes should be undertaken by First Nations peoples, not be outsourced to non-First Nations peoples” might risk putting small or independent First Nations proponents into a position of having to ‘use’ other First Nations people not from their Country rather than what may be their preference for long-standing, trusted advisors that may or may not be of First Nations heritage. GBRF would suggest additional consultation with relevant First Nations organisations to determine whether this requirement should be amended to ensure that First Nations can make the relevant decisions about verification at their discretion and that this should be the case irrespective of whether they are project proponents or not.

5. Do you have any feedback on the measuring and assessing change in biodiversity
aspects of the biodiversity assessment instrument, including:

• Establishing how to measure change in project biodiversity

GBRF notes the proposal for biodiversity project characteristics to include
- ecosystem condition
- removal of threats
- commitment to protection of biodiversity
- capability of the project area to support threatened species
- culturally significant entities.

Overall, the use of ‘ecosystem condition’ is a useful approach to ensure consistency as long as methods can specify how condition should be measured (through certain metrics and/or monitoring approaches) for particular ecosystems. Having a one-size-fits-all approach to condition assessment would pose a risk to method and therefore scheme integrity.
Measurement of ecosystem condition may also need to vary according to project stage given the lag time in response to restoration interventions in certain ecosystems.

GBRF supports the draft outline of starting state assessment requirements.

In relation to ‘reference ecosystems’, GBRF notes and agrees with the acknowledgement as per the draft Detailed Outline of the BAI that a “historic or contemporary ecosystem may not always be a realistic guide for project planning or condition assessment [due to] climate change or extensive, irreversible hydrological or topographic change”. As a result, GBRF
5|Page suggests the amendment of the definition to be “either undegraded or best-on-offer”, and would suggest that these reference ‘ecosystems’ could conceivably be identified at different scales (e.g. a particular reef may constitute a relatively intact reference even though the overall reef ecosystem might be degraded). Relatedly, GBRF supports the determination of reference ecosystem indicators / metrics at the level of methods.

Counterfactual scenarios should be able to be static or dynamic, and not necessarily steady-state (ie could be declining), in line with requirements to be set out in methods.
In particular, given the near real-time impacts of climate change on marine ecosystems, there will be a need to include provisions for methods to require baselines to be updated throughout the project (as actual data becomes available to refine modelled counterfactuals), at frequencies also to be specified at method-level. This might also necessitate provisions that enable the use of control / reference sites to inform these baseline/counterfactual updates, which GBRF suggests adding to the BAI.

Declining counterfactuals / baselines will also require a re-think of the definition of a
‘reversal’ in outcomes, noting that a delay in decline may still be a significant – and at times critical – biodiversity outcome to ‘buy time’ for an ecosystem to adapt, and/or for threats to be mitigated.

Regarding project area mapping, the BAI should include provisions for the use of emerging and future technologies that may provide fine-scale / high-resolution mapping abilities e.g.
through remote sensing approaches and may become accessible through a number of nascent global platforms / software products.

Regarding the “capability of the area to support threatened species”, it will be important for the assessment of this dimension to be flexible (as specified in the method) in order to allow for reliance on established data and ecological relationships – e.g. where peer- reviewed science may have proven that a given ecosystem in a (more) intact state supports one or several threatened species or drives their return to the area – rather than requiring new detailed scientific assessments.

As noted in the draft Detailed Outline of the BAI, culturally significant ‘entities’ should be defined by, and subject to approval of disclosure from, the relevant First Nations groups.

• Monitoring, measuring and assessing biodiversity outcomes at the project area

In line with reference to dynamic / declining counterfactuals in s3.5.3 of Part 2 (p.37) of the draft Detailed Outline of the BAI, GBRF considers it a critical amendment to change the following statement in s1.6.2 (p.18) to account for dynamic counterfactuals that may be declining from the pre-project / project starting state: “The starting state of a project area provides the comparison against which biodiversity change is assessed”. Using the starting state will preclude the participation of projects that are aiming to slow or stop the further, otherwise inevitable (e.g. due to climate change impacts, decline of ecosystems (rather than – unfortunately – being able to improve on starting conditions). This is critical for example in a coral reef context where the slow adaptation of coral to warming oceans has set ecosystems on a path of steep decline.
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The proposed use of a 5-star rating system as per SERA may not be sufficiently flexible to accommodate declining counterfactuals especially in the marine environment, in particular if the ‘reference’ against which a project is rated is a static reference state (rather than a
(set of) reference site(s) that face the same exogenous pressures). There will be cases where projects (and similar reference sites) might only ever be able to achieve an imperfect
– and declining – percentage ‘quality’ of a reference state, such as in the case of coral reef ecosystems where stemming the decline from a trajectory from 70% towards, say, 50%-of- reference-state, to 60%-of-reference-state is de facto a 5-star-outcome but one that a star- rating system may underrepresent. If a star-rating system was to be implemented, these circumstances should be accounted for through provisions for appropriate selection of the
‘reference’ and its potentially dynamic nature over time. (Note that this has implications for certificates being valued based on absolute vs relative outcomes.)

• Assessing and describing broader biodiversity benefits

GBRF suggests reconsidering whether broader biodiversity benefits should possibly be described and assessed outside the scheme. Similar to so-called co-benefits in the carbon context, these may be described, verified and assessed by proponents and buyers at their discretion – and may be subject to cultural protocols and other considerations that should not be universally prescribed – such that a flexible, non-prescribed approach may be more appropriate to avoid unintended consequences and perverse incentives for small projects
(e.g. run through independent proponents) to not register or have to rely on large, high- capacity aggregation or at least project support to prove their broader contributions.

6. Do you have any feedback on the consistency and transparency aspects of the
biodiversity assessment instrument, including:

• Defining key terms and concepts

GBRF notes that the BAI refers to counterfactuals whereas the Act and the consultation relating to the future Rules referred to baselines. It is worth aligning the terminology and definitions.
Regarding the definition of reference ecosystems, GBRF suggests the amendment of the definition to be “either undegraded or best-on-offer” rather than requiring an undegraded reference (which may not exist or be historically reliable).

• Considering climate change

Climate change should not only be considered from the perspective of impacts on project outcomes but recognised as a fundamental driver of key project characteristics, including – for example – counterfactuals. In fact, one of the primary objectives of a project may be to mitigate climate change impacts and/or improve resilience and adaptation of an ecosystem through restoration activities, making climate change not just an exogenous project
‘impact’ but a central component of project rationale, planning and design.
This means that the BAI (and broader scheme) need to allow projects to update any counterfactuals / baselines for new climate information; whether this should be required or optional may have to be method or ecosystem-specific. In many cases, not accounting for climate change impacts on counterfactuals is likely to result in de-facto under-accounting of
7|Page outcomes (given they are now delivered against an “even-worse” alternative state), but proponents might choose to accept that type of in-built conservatism in exchange for not having to incur the costs (or not having the capacity) to include updated climate modelling on an ongoing basis.

• Certainty and confidence

As prefaced in the ‘context’ outlined in the draft Detailed Outline of the BAI, potential investors will be concerned with the certainty of outcome delivery. Whilst there will be a level of uncertainty inherent in a project and project activity overall, which has to be at an acceptable level for the Regulator to issue a certificate (ie project activities need to be likely to lead the outcomes), there will be an evolving level of uncertainty during the course of the project.
Given a certificate will only be issued once and hence cannot reflect updated information, it will be important to give investors alternative options for accessing current information regarding the certainty of outcomes being delivered at different stages of a given project.
In most cases (discarding exogenous ‘shocks’ to that project), uncertainty would decrease as outcomes increase and/or become measurable over time, which presumably would increase certificate value. That increase in value – and hence potential price – would constitute an effective return for early-stage investors. If the BAI could provide for methods to specify (un)certainty thresholds at different points in time or trigger points, then these could be used to inform the market and remove the onus from tight contracting arrangements – effectively a similar concept to how an uncertainty buffer would be applied to crediting of multiple units (like ACCUs) – which otherwise isn’t possible for a single certificate.

• Data suitability and sharing requirements

Regarding data availability and sharing, GBRF supports full transparency and accessibility of any and all data and models used to determine biodiversity outcomes under the scheme.
This will contribute to equity within the scheme and advance market access for smaller, lower-capacity, and/or independent organisations, and will thereby contribute to achieving the overall objects of the Act. Arguments in relation to proprietary or commercial-in- confidence information are secondary when proponents expect the Government to issue
Certificates based on that information; the general public can expect full transparency.
GBRF notes that the exception to this should be culturally sensitive data and information, as identified by the relevant knowledge holders and/or First Nations groups.

7. Is the proposed Replanting Native Forest and Woodland Ecosystems method
consistent with the biodiversity assessment instrument?

[GBRF does not have the required expertise to comment.]

8. Do you have any other comments on the biodiversity assessment instrument?
No.