When Numbers Start Making Decisions · Season Four, “Things That Cannot Be Priced Directly” · Article 9
1. Can an old hollow-bearing tree be replaced by a credit elsewhere?
Under the NSW Biodiversity Offsets Scheme, development that causes residual biodiversity impacts can generate a credit obligation after avoidance and minimisation. A proponent can purchase and retire the correct type and number of biodiversity credits. Elsewhere, land managed under a Biodiversity Stewardship Agreement can generate credits through permanent management actions.
NSW describes biodiversity credits as the common unit for measuring unavoidable development impacts and predicted improvement at stewardship sites. There are ecosystem credits and species credits. Ecosystem credits concern plant communities, ecological communities and habitat that can be reliably associated with them; species credits address threatened species that cannot be reliably predicted from the ecosystem type alone. NSW Environment: Biodiversity credits
The common unit makes legal obligations calculable and funds conservation management. But habitat is relational and located. An old tree with nesting hollows, a breeding site and a connected creek corridor may not be recreated in time through improved management elsewhere.
The central question is whether credits compensate a genuinely substitutable residual impact or turn payment into permission to destroy the irreplaceable.
2. Credits measure modelled loss and gain
Accredited assessors apply the Biodiversity Assessment Method to impact and stewardship sites. They identify plant community type, condition, area, threatened ecological communities, species habitat and landscape features. The method calculates credit obligations or predicted biodiversity gain.
A credit is not one hectare of nature or one animal. The same area can produce different credits because ecological type, integrity, threat, hollow-bearing trees and species evidence differ. The unit packages several attributes and a modelled change into an administrable obligation.
The gain side is particularly important. Avoiding a predicted future decline or improving management is compared with a counterfactual, not with creation of a duplicate ecosystem. Weed, pest, fire and restoration actions may improve condition, but outcomes are uncertain and take time.
The model needs conservative assumptions, monitoring and correction. Otherwise a certain loss at the development site can be exchanged for an optimistic future gain.
Counterfactual choice is decisive. A stewardship site can generate a larger predicted gain if the assumed future without management is severe decline. That assumption may be justified by threats, but it should not reward neglect or count protection already likely to occur. Assessors and regulators need evidence for the baseline, conservative treatment of uncertainty and transparent separation between avoided loss and active restoration. Both can be valuable, but they are not the same ecological achievement.
3. What like-for-like rules try to preserve
Like-for-like rules constrain substitution. NSW guidance says threatened ecological community impacts require the same community. Other native vegetation generally needs the same vegetation class and appropriate trading group in a nearby bioregional area. Hollow-bearing-tree impacts require offsets containing hollow-bearing trees. Species-credit impacts require the same threatened species. NSW Environment: Like-for-like offset rules
These rules recognise that biodiversity is not a single quantity. A wetland cannot simply offset woodland because both score highly. Species and ecological functions need meaningful similarity.
But “like” is still a regulatory category. Two sites of the same community can differ in connectivity, local rarity, cultural relation and climate resilience. A rule can reduce non-equivalence without eliminating it.
4. What price decides
The credit market determines prices, subject to funding requirements for perpetual stewardship management. Price reflects supply, demand, transaction costs and scarcity of the required credit type. A rare credit can become expensive and encourage landowners to establish stewardship sites.
High price can make avoidance more attractive. It can also produce pressure to widen substitution rules or use fund payments when matching credits are scarce. The market price does not prove ecological equivalence. It prices the legal instrument that satisfies the obligation.
Transparency is needed on credit type, site, management funding, retirement and outstanding obligations. Otherwise price becomes visible while the ecology it is meant to protect disappears.
5. Some losses should not enter exchange
The mitigation hierarchy requires avoidance and minimisation before offsetting. Serious and irreversible impacts recognise that some threatened entities are too vulnerable for ordinary exchange. NSW’s 2026 guidance links serious and irreversible impact to a significant contribution to extinction risk. NSW Environment: Guidance on serious and irreversible impacts
This is a non-compensable constraint. If a loss cannot be restored within meaningful ecological time, or would remove an irreplaceable local population, more credits should not automatically make it acceptable.
Offset systems are legitimate only when they preserve a real category of “no”. Without it, the unit converts the hierarchy into a purchase process.
Cumulative impact is another reason the “no” category cannot be assessed project by project alone. Each development may remove a small area and purchase compliant credits, while a region gradually loses connectivity, local populations and climate refuges. Strategic regional information should constrain individual approvals before the last functional fragments become unusually expensive credits. A sequence of legally offset residual impacts can still produce an unoffset landscape.
6. Three forms of non-equivalence: time, place and function
Time: clearing occurs now, while improvement elsewhere may take decades. Extinction risk can rise during the lag.
Place: habitat supports local connectivity, water, culture and species movement. A site 80 kilometres away cannot always perform the same role.
Function: ecological communities contain relationships among soil, hydrology, plants, animals and disturbance. Similar vegetation classification does not guarantee identical function.
Methods should disclose these mismatches and apply rules, multipliers or refusal where they are material. A larger quantity of credits cannot necessarily compensate for a missing kind of relationship.
7. Detecting and correcting error
Site assessment can misclassify vegetation, miss species or overestimate future improvement. Monitoring should compare promised management and ecological condition with outcomes. Registers should connect an impact obligation to retired credits and stewardship commitments.
Correction can require additional action, enforcement or method revision. Public and scientific evidence should be able to challenge an assessment. Stewardship funding must remain sufficient over time, not only at credit sale.
Errors should be classified: incorrect field data, incorrect application of the method, failed management or a method that systematically overpredicts gain. Each needs a different remedy.
8. Ecological value exists in relationships, not inside the credit
The credit is an interface between development approval, land management and finance. Ecological value exists in the living relationships the interface attempts to represent. Retiring the correct unit discharges a legal obligation; it does not magically transfer a habitat.
That distinction allows credits to finance genuine residual compensation without treating all nature as fungible. The unit’s authority ends where location, time and function are irreplaceable.
9. A practical test for biodiversity offsets
Ask:
- What impacts were first avoided and minimised?
- Which ecosystem or species credits are required?
- How similar are the impact and stewardship sites?
- What time lag and failure risk exist?
- Are connectivity, hollow-bearing trees and local function preserved?
- Could the impact be serious and irreversible?
- Is stewardship funded and monitored in perpetuity?
- Can assessment error and failed gain change the approval or obligation?
Conclusion: credits can compensate only substitutable residual impacts
Biodiversity credits provide a common, enforceable language for financing conservation in response to development impacts. Like-for-like rules and stewardship agreements are serious attempts to keep ecological substance inside that language.
My judgement is that credits are legitimate only after genuine avoidance and minimisation and only for residual impacts that are ecologically substitutable within relevant time and place. Serious and irreversible loss must remain outside purchase.
A credit can represent an obligation to protect biodiversity elsewhere. It cannot make a destroyed habitat reappear.
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