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Should offsets fund the Coalition’s reef plan?

On Monday, the Coalition announced its plan for the Great Barrier Reef, including a A$40m trust-fund to target threats to the Reef such as Crown of Thorns starfish and runoff from agriculture. The promises…

Crown of Thorns is one threat on the reef, but it’s not the only threat. Flickr/Nemo's great uncle

On Monday, the Coalition announced its plan for the Great Barrier Reef, including a A$40m trust-fund to target threats to the Reef such as Crown of Thorns starfish and runoff from agriculture.

The promises will be funded partially from offset money, generated through the environmental approval process for projects that could adversely affect the reef in various ways. While we don’t know exactly how much offsets will contribute to the fund, current approval decisions by the Federal environment department already require A$185m in marine offsets from development projects. If the Coalition plan will rely on a fund of similar magnitude, they need to take offset design very seriously.

Offsets are a way to channel private funds into reef conservation. Shadow environment minister Greg Hunt is certainly right in saying that, to effectively manage the reef, we need a more strategic approach to investing private money. The reef might have world-leading zoning – demarcated areas, showing which activities can take place in each location – but current offset investment schemes are far behind world’s best practice.

So, let’s have a look at how offsets might work for the Great Barrier Reef, and how we can learn from mistakes elsewhere.

Offsets are activities that compensate for damage approved by the environmental assessment process, supposedly ensuring no net (environmental) loss. They are a promising mechanism for halting and reversing the downward trend in reef health. Offsets are required under the EPBC Act and associated Biodiversity Offsets Policy.

But there are many risks associated with offsets. They should carry the label: open with caution.

One risk is financial capture. Government agencies might allow developments that would otherwise be unacceptable because of the cash flow. Bimblebox Nature Refuge in Queensland is an example, where critics argue coal-mining has been allowed in exchange for A$3 billion from offsets.

The Coalition is proposing that the trust is managed by Queensland with consultation from the Great Barrier Reef Marine Park Authority. Queensland has a troubling track record for environmental management of nationally (and internationally) important matters.

Even if this record improves, the risk remains that government decisions to approve developments will be influenced by the cash flow. Most other countries use third parties, rather than government, to both avoid this risk and to tap into expert capacity. Third parties can be important even to avoid the perception of capture, and consequent undermining of credibility.

Australia should choose to learn from decades of hard-earned offset lessons overseas. At least 29 countries have offset policies and an international collaborative group called the Business and Biodiversity Offset Program has developed best-practice guidelines. In brief, the best approach to designing effective offsets is to pool the money, and invest it strategically through a third party (not the developer or the government).

Another risk related to offsets is that companies can be asked to pay arbitrary amounts of money, pooled into a trust, that is later invested into activities not connected to the damage caused by their development. This becomes a pay-to-damage scheme, where the impact is not mitigated by the investment.

Under the EPBC Act, offsets must compensate for specific damage. For example, offset funds from a port development that reduces turtles’ food sources (seagrass beds) must be used to improve the survival of turtles through promoting the growth of seagrasses. It cannot be used to eradicate Crown of Thorns Starfish, as proposed in the Coalition’s plan.

Importantly, we know that the threat to the reef from Crown of Thorns starfish is a symptom. The cause is declining water quality from catchment runoff. If a medical doctor treated only the symptoms of illness, not the cause, most patients would not heal. If we treat the symptoms of reef decline only superficially, the reef will certainly maintain its downward trajectory.

While the current A$185 million for marine offsets is a lot of money, this total could and arguably should be much more. This is not just because it costs money to offset damages properly, but because many of those negatively impacted by environmental damages may not benefit much from the development.

Currently, the Federal environment department does not use a consistent or transparent method to calculate how much money a proponent must pay for offsets. It appears that a loose precedent is used instead of a more explicit, defensible method.

The Australian Government expects that offsets will produce a net positive benefit to the environment; given the large damages allowed, this is costly to achieve. To give us a fighting chance at producing net positive outcomes for the reef, and to move away from the perception that offsets are just pay-to-pollute, the amount of money required from developers should be transparently calculated based on the actual costs to achieve offset benefits.

The Great Barrier Reef is at a critical juncture and the underfunding of management and protection could contribute to irreversible declines. Offsets cannot replace government investment, as is suggested by the Coalition plan.

Offsets are one mechanism for the development industry to contribute, but they must be used in combination with government investment, in the right places in the right ways, and with government restraint on developments that adversely affect the reef.