Australia: National Review of Environmental Regulation: a serious catalyst for reform?

Clayton Utz Insights

Key Points:

Four key strategies would clear up the confusion in Australian environmental regulation, says the Interim Report on the National Review of Environmental Regulation.

The Interim Report on the National Review of Environmental Regulation – released on 19 March 2015 by the Australian Government on behalf of Environment Ministers across the country – provides a snapshot of current reforms across Australia on three key issues (biodiversity, chemicals and waste) and recommends further work on four strategic reforms based on existing initiatives in various parts of the country (some of which are noted below).

Why the review?

According to the Interim Report, despite decades of focus on regulatory reform, the consequences of Australia's complex and inconsistent environmental regulations include confusion over compliance requirements, duplication, delay, regulatory burdens that are disproportionate to environmental outcomes, unnecessary costs (estimated $500 million per annum) and a negative climate for investment.

The solution

The Interim Report outlines four key strategies:

1. Risk-based regulation

Risk-based regulation, as the name suggests, is based on the level of risk associated with particular actions. In other words, the level of regulation is proportionate to the level of risk of occurrence and impact. According to the Interim Report, this means minimising regulatory processes and costs for low-risk actions and directing resources towards actions with a high-risk of occurrence or a potentially high-impact environmental outcome.

NSW will take this approach from 1 July 2015 with risk-based EPA licensing. The reform aims to ensure that the NSW EPA can target high risk and poor performing licensees, and because risk ratings are tied to fees, there will be an incentive to reduce risk.

2. Harmonisation

According to the Interim Report, many existing reform processes have a focus on harmonisation and removing duplication both within and between jurisdictions.

The Australian Government's one-stop-shop policy for environmental assessments and project approvals reflects this approach. A number of states have now signed up to assessment bilateral agreements (which accredit the State assessment of a project so that parallel Commonwealth assessment of that project is not required). The Commonwealth has introduced the Environment Protection and Biodiversity Conservation Amendment (Bilateral Agreement Implementation) Bill 2014 to allow the Commonwealth to facilitate state assessment approval decisions and pave the way for approval bilateral agreements (which would accredit the State approval of a project so that parallel Commonwealth approval of that project is not required). The Bill is currently before the Senate.

3. Strategic and landscape scale approaches

The Interim Report suggests that landscape or regional scale assessments have the potential to deliver greater savings for business than improvements to the efficiency of project-by-project assessments. Other benefits of this approach include effective consideration of cumulative impacts, reduction of regulatory burden and cost, and improved project certainty in strategic assessment areas.

The use of strategic assessments has been gaining momentum in recent years. Typically, they take more time and resources than single project assessments, and are therefore most effective when prepared in anticipation of several projects in a particular region.

Following the development of strategic assessments in NSW (Western Sydney Growth Areas), Victoria (Melbourne Urban Growth Boundary) and the ACT (Molonglo Valley Urban Development), the Western Australian and Commonwealth Governments are currently preparing a strategic assessment of the Perth and Peel regions of WA, and the NSW and Commonwealth Governments are working on the Upper Hunter Valley Strategic Assessment.

4. Market-based instruments

The final strategy proposed in the Interim Report is market-based instruments (probably the most widely known examples of which are carbon credit trading and water trading). These instruments are in contrast to the traditional "command and control" regulatory approach.

The Interim Report notes NSW's biodiversity banking and offsets ("bio-banking") scheme, which uses a formal market to facilitate the trade of biodiversity conservation credits. Under that scheme:

  • landowners generate biodiversity credits by establishing bio-bank sites to enhance biodiversity on their land; and
  • developers can purchase credits to offset the biodiversity impacts from their developments.

The Interim Report also refers to other market-based approaches to environmental regulation in other jurisdictions, such as the Queensland government's market-based approach to nutrient management, and reverse auctions that have been trialled around Australia.

The Interim Report recommends a review of Australia's Biodiversity Conservation Strategy to consider its implementation through, amongst other means, market-based instruments.

What now for the Interim Report and reform process?

In its 27 February 2015 Agreed Statement, Commonwealth, State and Territory Environment Ministers noted the Interim Report, and committed to "considering removing unworkable, contradictory or incompatible environmental regulation, and identifying opportunities for collaboration between jurisdictions." Given numerous efforts along these lines in the past, it is hoped that the National Review will garner some success.

In the meantime, there are some relatively easy administrative fixes that could be done immediately and make a big difference to project delivery.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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