Nature Repair Market Legislation

8 October 2024

Nature Finance Policy Branch
Department of Climate Change, Energy, the Environment and Water

Dear Nature Finance Policy team

Submission to Nature Repair Market Discussion Paper

Climate Friendly welcomes the Nature Finance Policy Branch’s commitment to consult on the Nature
Repair Rules (the Rules).

Overall, the proposals appear sound. We have key recommendations to:

1. Improve alignment of the proposals for biodiversity projects and carbon projects to avoid
duplication and additional costs for nature repair. For example, the alignment of project plans
for the Nature Repair Act 2023 (NR Act) should be aligned with the Land Management
Strategies for carbon projects. Audit timing should be aligned, as should key information in the
carbon and nature registries.
2. Require disclosure of key categorical biodiversity information on the register. Key mandatory
information should relate to ecological communities listing status, with voluntary declarations
of individual species, to encourage investment towards projects that will deliver the most
benefit to nature.
3. Increase investment certainty and reduce costs of nature repair through clearly defining the
number and scope of audits and providing limited method transitional arrangements.
4. Adopt clear materiality thresholds focused on potential environmental harm.

Thank you for the opportunity to contribute to the development of the Rules, and please do not hesitate to contact us if you require further information.

Kind regards,

Jay Hender

Executive Manager – Business Development
Question 1: Should existing projects be eligible to participate in the Nature
Repair Market?

Climate Friendly believes existing projects should be eligible to participate in the Nature Repair
Market from any other existing scheme or private sector action, so long as the following conditions are met:
1. The project has not been undertaken due to a requirement of Commonwealth, State or
Territory law (excluding the CFI Act as outlined below).
2. The project is not registered as an ‘offsets’ project under Commonwealth, State or Territory
law, as excluded in the NR Act.
3. The project proponent declares that future nature protection or repair from the project have
not been sold to another entity, or if they have, the party agrees to transfer their interest to a
new NR Act certificate.

The above proposed conditions would help develop a consolidated national nature repair market and harmonise existing schemes operating at the State or regional level or other private standards. It would also ensure the Nature Repair market only includes new activities, or appropriately recognises historical nature positive actions that have not been sold or those transferred to third party could be harmonised in one federally regulated market. This centralisation would create greater standardisation of claims and enhance regulatory outcomes.

Question 2: Do you agree that each registered project must include activities
beyond those required under a Commonwealth, State or Territory law?

Climate Friendly agrees that each registered project must include activities beyond those required under a Commonwealth, State or Territory law.

Noting that participation in the Commonwealth Carbon Farming Initiative (CFI) Act 2011 is voluntary, the legislation should be very clear that participation in the CFI Act does not preclude registration under the NR Act. The NR Act was designed to enable the interoperability between carbon and nature markets to ensure appropriate layering of incentives for carbon drawdown and nature repair.
Interoperability with carbon farming projects and the NR Act monitoring frameworks will provide critical incentives to improve biodiversity outcomes beyond mere compliance with carbon farming method requirements and has significant capacity to achieve biodiversity impacts at scale, including across existing projects that currently cover over 10 percent of Australia.

We note that part of the requirements for interoperability should be to specify what additional activities are being conducted to improve or protect biodiversity beyond the base carbon farming project requirements. The additional activities should be articulated on the NR Act Register, along with cross references to the ACCU Scheme project register.

Question 3: Do you agree that the specified information should be mandatory at
the application stage?

Climate Friendly broadly supports the proposed information to be submitted in the registration application. We also believe that given the potential lengthy time between project registration and
issuance of a certification, there would be benefit in increased information at project registration.
Including this additional information on the Registry would help improve market transparency. The key additional information we propose is categorical information related to project biodiversity.

We propose that land-based projects should be required to define the names of ecological communities into the below categories:

Ecological Names of Ecological
Community Listing Communities verified
Status
Critically Endangered
Endangered
Threatened
Not listed

There is also likely benefit in the project registration including additional voluntary information on specific species identified on the property, or those located in nearby areas, that are expected to benefit after restoration. This could help the market compare potential biodiversity improvement value at the project registration stage.

Having this information disclosure voluntary is proposed for two reasons:
1. there is a potential high cost of full species assessment, which may not be financially
supported in the market. Specific methodologies may seek this information to be mandatory
for certain project types.
2. There may be risks to poaching of threatened species, so ensuring the disclosure if voluntary
provides the flexibility required to avoid risks to nature.

Species Listing Total Number Fauna identified
Status of species within proximity
identified on of the project and
site likely to benefit
after restoration
Critically
Endangered
Endangered
Threatened

This specific categorical information could help the market compare potential future biodiversity protection and improvements at the project registration stage, facilitating improved early investments.
Without the inclusion of categorical information on biodiversity at project registration (and later) would also enable proponents to embellish biodiversity benefits to gain undue financial benefits.
Question 4: In what ways could the project plan facilitate the registration and
implementation of a biodiversity project?

Climate Friendly supports the requirement of an initial project plan being submitted at the point of registration. Project plan requirements and guidelines should be harmonised with Land Management
Strategy (LMS) guidelines that are being reviewed for the CFI Act at present to ensure one plan that can be used for NR Act and CFI Act, rather than two. Having two similar documents for one property across two schemes will cause confusion, duplication and unrequired costs.

A key point to note is that a project plan should remain a live document over the life of a Nature
Repair project. There should be considerable change to a project plan between project registration, implementation on the ground, and ongoing management and reporting. We propose the Rules require an updated project plan be submitted at each point of registration, certification and each project reporting period. This codification should also help encourage adaptive management. This contrasts with the minimum legislative requirement in Part 9 Division 3 which only require an update to a project plan be provided to the CER within 60 days of there being a material change.

Question 5: Should the listed project types be excluded from the Nature Repair
Market?

Climate Friendly supports the inclusion of the proposed excluded project types regarding Weeds of
National Significance and illegal activities that impact nature, in alignment with the CFI Act. Our experience has been that these excluded activities under the CFI Act have achieved the intended goals of avoiding incentives to damage nature, with the aim of later seeking a financial reward.

Question 6: Should registered projects be required to transition to new or varied
methods? What exceptions, if any should be allowed?

Climate Friendly believes rules related to transitioning to new or varied methods require considered thought. We see minimal risk in allowing limited method transitional arrangements in the NR market.
We do believe exemptions to transition are generally best considered at the method level, rather than in the Rules. A key reason to develop transitional arrangements within specific methodologies is that in our experience, methods are most often changed due to technological improvements in monitoring, and are therefore not scheme level changes. With new monitoring techniques, there are often circumstances where historical monitoring cannot be reconciled with emerging monitoring technologies, as you cannot travel back in time. This is a key reason that transitional arrangements should be enabled in particular circumstances within methods, and not enabled in others.
Question 7: Do you agree with the proposed content of the Biodiversity
Certificate?
Question 8: What specific project attributes should be included on a Biodiversity
Certificate?

Climate Friendly supports the proposed Biodiversity Certificate information and attributes, with additions.

We feel it is important that the biodiversity certificate clearly shows the link to relevant CFI Act methods, project and ACCUs. Where possible, this information should also be clear in the register.

As noted similarly in question 3, we believe greater information related to species and ecological community listing status is required to enable greater market differentiation on biodiversity benefits.
We recommend adding ‘Area of projects against ecological community listing status,’ within the proposed ‘Project size in hectares,’ as exampled in the table below.

Ecological Area protected (Ha) Area to be restored Names of Ecological
Community Listing (Ha) Communities verified
Status
Critically Endangered
Endangered
Threatened
Not listed

We also believe greater information on relevant listed species would assist market to target areas of greatest environmental need. Below is additional information proposed to be voluntarily included alongside the attributes proposed in the Discussion Paper.

Species Listing Total Number Flora species Fauna species Fauna identified
Status of species identified on site identified on site within proximity
identified on of the project and
site likely to benefit
after restoration
Critically
Endangered
Endangered
Threatened

Climate Friendly believes not including the proposed categorical information risks detracting from scheme integrity as proponents would be encouraged to potentially over embellishing the description of biodiversity benefits from their projects - noting many potential financial investors may not easily identify embellished claims related to nature.
Question 9: Do you agree with the proposed certificate information to be
included on the Register?

Yes. It is critical that a market for biodiversity has clear transparency on the biodiversity impacts and project attributes. The information proposed in the Discussion paper, as well as the additional information outlined in our submission to Question 7 and 8 above, should be included on the Register.

Inclusion of this information on the Register is important for scheme level trust. It is also critical for market function with it enabling better price discovery, pricing and focusing of investments towards the greatest environmental benefit. Including this information on the Register will also help avoid market failure related to potential information a-symmetry.

Climate Friendly notes that the proposed information for the Registry does not appear aligned with the recently released proposal for Registry information for the ACCU market. For example, information on agents is not included in the NR Rules consultation paper. We propose DCCEEW work to align the two proposals wherever possible to ensure consistency.

Question 10: Do you agree with the proposed content for Category A
biodiversity project reports?

Climate Friendly is broadly supportive of the proposed information in Category A biodiversity project reports.

However, we suggest alignment with prior feedback that the baseline condition and change in condition be reported at both a project level, and for each ecological community listing status. This is important as a property with a 1% area of critically endangered ecological communities is substantially different to a property that consists of 100% critically endangered ecological communities. Reporting baseline and condition change at the level of ecological community listing status, or for each individual ecological community, will enable the market to appropriately differentiate based on project impact.

Question 11: Should a Category B biodiversity project report be required every 5
years?

Yes. It is critical that projects are required to report at frequent intervals, irrespective of whether a biodiversity certificate has been issued, or not.

Question 12: Do you agree with the proposed requirements and contents of an
audit report at the time of certificate issuance?

Yes. This will provide higher certainty as to the completeness and accuracy of underlying information, to drive confidence in investment and market decisions.
Question 13: What factors should determine the number and timing of audits for
Category A or B biodiversity project reports?

Question 14: Should the CER have authority to set additional audits requirements, or
should these be limited to proponent consent?

Climate Friendly believe the number and timing of audits should be determined during the development of methodologies. The key factor to consider is the scale of risk to nature, and verifying nature benefits. This could mean audit numbers vary within projects of different sizes within a method, or between methods. We believe the audit approach and principles for the NR Act should be aligned with those in the CFI Act. These arrangements include consideration of the scale of the project, with risk-based audit powers initiated by CER and intermittent gateway checks. As well as the inclusion of no audit pathways for low risk and small projects, as are being piloted for environmental plantings and plantation forestry. There also appears logic in aligning the timing of NR project audits with carbon audits, where the two overlapping projects operate on the same land.

Audit intervals should be consistent and known at the point of project registration, with clear guidance of what number of audits can be expected and the scope of audits. Without clarity of future audit requirement, it will be difficult to assess project administration costs, hindering project registrations.

Question 15: Under what circumstances should the CER require an audit with the next
biodiversity project report?

An audit should be required at the next biodiversity project report in circumstances where a significant reversal of biodiversity occurs. The Rules surrounding these additional audits should include CER discretion in circumstances of natural disaster (fire, flood, cyclone, disease), which can cause a temporary reversal of biodiversity. Or as required within the method or project plan notes a significant and measurable event has been achieved.

Climate Friendly does not support the proposed definition of a significant reversal for notification. We

Question 16: Do you agree with the proposed definitions of significant and not
significant reversals of biodiversity outcomes for notification?
believe the wording is too vague and not related to the actual biodiversity risk. We propose the alternate wording for consideration and potential refinement:

A significant reversal for notification has occurred if the size of the area impacted exceeds any of the below thresholds:

- 20% of total project area
- 5% of critically endangered ecological communities in the project area
- 10% of endangered communities in the project area
- 20% of threatened ecological communities in the project area
- 30% of non-listed ecological communities in the project area
We believe linking thresholds to ecological community and species listing status, or ecological condition, povides a more science-based approach to declaring significant reversal that’s less open to interpretation. It is also more related to actual risk to biodiversity in Australia. The exact area and percent thresholds can be adjusted after consideration.