IPART was appointed to monitor the credits market and make recommendations to improve its efficiency and effectiveness. We were asked to do this annually for 3 years, from 2022–23 to 2024–25. This final report summarises our analysis and provides the findings and recommendations from our third annual review.
The NSW biodiversity credits market has faced various challenges since its inception, particularly around high transaction and search costs, and ensuring adequate in-demand credit supply, market liquidity and stakeholder confidence. Our first two annual reports found that the market was not functioning as well as it could be.
Some issues of concern remain
Many of the issues we have highlighted in the market remain, including:
- The Biodiversity Conservation Fund (administered by the Biodiversity Conservation Trust) continues to hold a significant number of obligations for which development has occurred, but no credits have been purchased.
- Over a third of the Trust’s acquittals in 2024-25 were not on a like-for-like basis. To date, the Trust has used variation rules and conservation actions to secure obligations for around 40% of all biodiversity types for which developers paid into the Fund, including obligations for endangered and vulnerable species.
- The risk that the Fund will not be able to source like-for-like credits to offset obligations is not adequately considered in current processes. It is important that consent authorities have access to accurate information about which biodiversity types are at high risk of not being able to be offset on a like-for-like basis. It is also important that the Fund is able to take this risk into account in determining its charges.
- Trading in the market continues to be administratively complex and time consuming. Much of the process is manual, which increases the likelihood of errors and discourages market participation. Changes that have been announced to improve data accessibility and availability have not yet resolved important data issues experienced by current and prospective participants.
- Overlapping functions of government entities and a lack of guidelines for private brokers risk creating conflicts of interest and opportunities for corruption. These risks affect participants’ confidence to participate in the market.
- There is limited reporting on the environmental outcomes of the Scheme, including which offsets have been delivered and using what conservation measures.
For further information about this review, please see Monitoring the NSW Biodiversity Credits Market.