We have published our annual report on the performance of the NSW biodiversity credits market in 2023-24. The key role of the biodiversity credits market is to connect buyers and sellers of biodiversity credits and enable them to trade credits at a price that reflects the efficient cost of offsetting biodiversity.
Over time, credit availability and price provide crucial information for sellers and buyers about the value of conserving different types of biodiversity. This ensures landholders face appropriate economic incentives for developing or conserving land based on its location and characteristics.
Overview of findings
Our analysis of the market over 2023–24 found that the significant issues we identified in last year’s annual review remain. The market continues to not operate well in 5 key areas:
- The option for proponents to pay into the Biodiversity Conservation Fund is preventing the market from developing.
- High up-front costs and long credit generation times create a lag between credit demand and supply.
- Market participants lack accurate and timely information.
- High transaction costs and market complexity discourage participation.
- Stakeholders lack confidence in market oversight and governance, which hinders their participation in the credits market.
Our recommendations
We have made recommendations with the aim of:
- reducing the impact of the Biodiversity Conservation Fund on the market
- improving the Biodiversity Credits Supply Fund reverse auction process
- improving information availability and quality to support market participants to make well-informed financial decisions, and reduce information asymmetries
- reduce transaction and entry costs where possible and practicable
- improving market participants’ confidence in the governance of the market, including the conduct of brokers and advisors
- encouraging the Government to continue to work with Aboriginal communities to identify how the market can assist them or support their priorities.