Australia’s climate and biodiversity laws rely heavily on offset markets that treat ecosystems as interchangeable. But nature is not fungible, and the growing evidence of unique, localised species shows why offset systems are structurally incapable of protecting what is irreplaceable.

“Australia’s environment laws are broken.” How many times have we heard this in the last several years? It has been repeated ad nauseum by conservationists and business lobbyists alike, to the point where it now has no clear meaning. Of course, our environment laws are broken (or, to be more precise, have never been fully functional). But in the policy debates now playing out at the national, state, and regional levels, there is a fundamental problem – one which stems from a failure to understand the natural world.

Much of the basic architecture of Australia’s – and the world’s – climate and environmental protection systems are “marketised solutions”: trading systems for artificial credits or offsets, which are authorised by governments.

The basic idea is that an entity, usually a corporation, is permitted to undertake some level of environmentally damaging activity in exchange for money, which finances other activities designed to cancel out that damage. The creation of these offset markets is intended as a remedy for the market failures that lead directly to ecological destruction under the capitalist economic system – euphemistically referred to as “externalities”. Their appeal is that they provide a largely autonomous mechanism to restrict harmful activities that governments, for whatever reason, don’t want to ban outright.

There is no shortage of reporting on the failure of offset markets to deliver on this promise. Over and over again, investigations have revealed that both carbon and biodiversity offsets are often nothing more than a sham. Biodiversity restoration credits are certified for areas that were already protected land. Carbon offsets are sold for trees that never grew. The amount of carbon emitted vs the amount mitigated by offset activities are wildly out of proportion.

In effect, carbon and biodiversity offset markets as they currently exist are not offset markets at all: they are a largely fraudulent stock exchange.

Integrity (or the lack thereof) in offset markets is a serious issue, and it is also widely recognised. At its core, this critique of the offset system implies that if we could only assure the validity of these credits – if we had a more powerful regulator, better ways of measuring carbon emissions and capture, proper valuation of the credits to create a real disincentive to pollute – if only we did markets well enough, they would work. Whether those measures are actually feasible, not to mention cost-effective, is debatable. But in the case of biodiversity offsets, there is a more essential design flaw in this approach.

Inherent in the logic of offset markets is the concept of fungibility: that one thing can be exchanged for another. In the case of carbon markets, intended (in theory at least) to regulate climate-wrecking fossil-fuel emissions, this makes a straightforward kind of sense – a tonne of CO2 entering the atmosphere is the same, regardless of where it is emitted, by what mechanism, and by whom. (Strangely, this is a truth that our government seems unwilling to accept when it comes to regulating so-called “Scope 3” emissions – those resulting from Australian fossil fuels burnt overseas.)

Nature does not work like this. A square kilometre of Gondwanan rainforest is not equivalent to a square kilometre of tropical savannah, nor is it the same as a square kilometre of alpine meadow or dry sclerophyll bushland. Though they are both endangered, a greater glider and a red-tailed black cockatoo are not interchangeable. This is self-evident and, in fairness, is recognised under existing environmental laws, which require biodiversity offsets to capture the same ecosystem or species as those threatened by the activity they are meant to compensate for.

And yet – when we consider finer scales of ecological comparability, things are less clear. Is a population of sugar gliders in the Sydney basin the same as one in the Yass Valley? The answer, historically, is likely to have been “yes” – until 2021, when genetic evidence showed that what we thought of as the sugar glider, Petaurus breviceps, is actually three separate species, with coastal and inland populations in NSW separated by a million years of evolutionary time.

Examples such as this are becoming more common, not less. The more we discover about the natural world, the more we realise that there is vast unrecognised diversity around us.

Most interestingly – and concerningly, from a conservation perspective – are the many so-called “short range endemic” species being found across the continent. Earlier this year, colleagues and I published evidence that the Illawarra population of one of Australia’s most unusual reptiles, the salamander skink Anepischetosia (don’t worry, no-one knows how to pronounce it), has been genetically separated from other apparently indistinguishable skinks in the southeast for up to nine million years. Think about that: these lizards have been living in the same 75km stretch of coastal rainforest since before the common ancestor of humans and chimpanzees. They live nowhere else on the entire planet.

It doesn’t matter to these incredible, enigmatic creatures if we protect a patch of rainforest in Port Macquarie or the Border Ranges, hundreds of kilometres away – but these are considered “like for like” under the New South Wales Biodiversity Offset Scheme. Alarmingly, under the Environment Protection and Biodiversity Conservation (EBPC) Act reforms currently proposed by the federal Labor government, the current limits on what counts as an equivalent offset are set to become even weaker than they already are.

Biodiversity in Australia is poorly described and incompletely assessed for threat status. Much of our unique flora and fauna, including an estimated 9000 species of invertebrates, is being lost before it is even documented. And even if this were not the case, better information cannot redeem a system that is fundamentally wrongheaded.

At a basic level, ecological communities are simply not exchangeable. Their value is inherent and unique, accumulated and shaped in deep time, and fundamentally irreplaceable. This is a reality apparently lost on the architects of Labor’s Nature Repair Market, unironically nicknamed “Green Wall Street”.

Offset markets divorce nature conservation from the physical world, abstracting ecosystems into disembodied ledgers. They sell out communities facing loss of green space, offshoring it to some less profitable locale. Above all, they sell us the lie that we can only save the priceless by giving it a price – and invariably, that price is small compared to the dividends of destruction.

The views expressed in this article may or may not reflect those of Pearls and Irritations.

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