Improved forecasting of demand will improve market operation.
The NSW Government has commissioned the development of methods to help forecast future demand for biodiversity credits. This is one of the initiatives the NSW Government is taking to improve information about credit demand, supply and pricing and the operation of the biodiversity credits market more broadly.
Forecasts are inherently uncertain and should be considered in the context of other expert advice and information.
Market participants should consider seeking independent advice and use sound judgement in interpreting the data and its application to decision making.
Sources of information about current credit demand may be more suitable for short-term decision making. A summary of and links to other sources of information about current demand for credits can be found on our page:
The department has also released the Biodiversity Credits Demand and Supply Dashboard.
The dashboard gives users an overview of demand from approved major projects and supply from approved Biodiversity Stewardship Agreements, excluding credits already retired. The longer-term and nearer-term future credit demand estimate reports, along with demand information of the Biodiversity Credits Demand and Supply Dashboard from approved major projects, now captures and provides users with information for demand that may exist across the various stages of the planning approval pathway for ecosystem credits.
Landholders seeking information about generating credits from biodiversity stewardship agreements are encouraged to contact the Biodiversity Credits Supply Taskforce. Developers looking for assistance in sourcing credits to meet their obligations should submit a Credit Demand Expression of Interest through the Biodiversity Credits Supply Taskforce.
Two forecasting methods have been developed – longer term and nearer term
Two methods have been developed to forecast credit demand, based on the predicted offset obligations of major projects at different stages of the planning approval process: before and after a biodiversity development assessment report (BDAR) has been prepared.
- A longer-term (pre-BDAR) forecast method: A spatial model combined with digitisation of development footprint boundaries for major projects at the early stages of the planning approval process (where a BDAR has yet to be prepared), which generates a longer-term future demand estimate.
- A nearer-term (post-BDAR) forecast method: A survey of BDARs for major projects at the exhibition stage or later of the planning approval process, but before consent has been granted. The exported BDAR obligations data from the Biodiversity Assessment Method Calculator is used to generate nearer-term credit estimates for these major projects.
Credit predictions of the nearer-term (post-BDAR) credit demand estimate report use data from major projects that have already submitted a BDAR as part of the planning approval process but are projects that have yet to be determined, and so there remains a significant level of uncertainty.
The illustration below shows the key stages of the planning approval process captured by each forecasting method, including the Biodiversity Credits Demand and Supply Dashboard, and the degree of confidence in the estimates' accuracy.
Method used to estimate longer-term (pre-BDAR) future credit demand
The method initially involved looking at state significant development (SSD) and state significant infrastructure (SSI) projects (as identified through the NSW Major Projects Planning Portal at 28 March 2023) in the early stages of the planning approval process (pre-exhibition stage).
It was then determined whether these projects had a published indicative development footprint that would result in the clearing of native vegetation. The development footprints for these projects were digitised where possible and incorporated into a spatial model to estimate biodiversity credit demand.
The spatial model involved determining the likely vegetation present in the development footprints using mapping products, removing land that needed to be excluded from assessing impacts, and then applying the Biodiversity Assessment Method formula for calculating ecosystem credits based on the approximate development footprint and vegetation identified.
The credit demand outputs were then grouped by Offset Trading Groups, and IBRA (Interim Biogeographic Regionalisation for Australia) regions and subregions.
A more detailed summary of the method used can be found in the publication:
Limitations to note before reviewing the longer-term demand estimates
Estimates are based on projects at the early stages of the planning approval process and are inherently uncertain
The longer-term (pre-BDAR) credit demand estimate report is based on data from very early in the planning approval process for major projects, before a BDAR has been undertaken and the project has been approved. Therefore, the development footprints and resulting credit predictions associated with early-stage projects can be highly uncertain.
The confidence in the estimates is also impacted by the scale and resolution of development footprints early in the planning process.
Care should be taken in interpreting the results of the model output.
Estimates do not include potential demand for species credits or from local development
The scope of the longer-term credit demand estimates is limited to state significant development and state significant infrastructure major projects that are in the early stages of the planning approval process (pre-exhibition phase), as identified through the NSW Major Projects Planning Portal.
Local development (particularly in urban, coastal areas and regional centres) may also drive demand for ecosystem credits, however, at this stage it has not been included in the demand estimate report due to the difficulty in sourcing this data in consolidated form.
This demand analysis only includes ecosystem credits. Likely demand for species credits may be considered in future demand analyses. Additionally, the method only captures direct impacts of major projects, that is, those with proposed impacts on biodiversity values within their project boundary. It does not account for indirect impacts.
Estimates are based on a point in time
The method is applied to data that was available at a specific point in time. In this case, the cut-off date was 28 March 2023. This means that credit forecasts may differ if project footprints changed after that date, or if a field assessment resulting in a BDAR produced more concrete and reliable information relating to the project’s likely credit obligations. The department intends to update the longer-term forecasts more regularly, subject to resourcing.
Landholders should seek their own legal, financial and ecological advice before participating in the market. As the model ingests data from very early in the planning approval process for major projects, before a BDAR has been undertaken, the development footprints and resulting credit predictions associated with early-stage projects can be highly uncertain.
Method used to estimate nearer-term (post-BDAR) future credit demand
The method involved extracting Biodiversity Assessment Method Calculator case IDs from BDARs of major projects that were at, or post, the exhibition stage of the planning approval process, and yet to be determined.
Major projects were identified through the NSW Major Projects Planning Portal at 28 March 2023. Proposed credit obligation data was extracted from Biodiversity Assessment Method Calculator using the case IDs taken from the BDARs. The indicative credit obligation outputs were then grouped by Offset Trading Groups, and IBRA regions and subregions where the state significant developments and state significant infrastructure projects are located.
Limitations to note before reviewing the nearer-term demand estimates
Estimates do not include potential demand for species credits or from local development
The scope of the nearer-term credit demand analysis is limited to state significant development and state significant infrastructure major projects that are at, or post, the exhibition stage of the planning approval process, but have yet to be determined, as identified through the NSW Major Projects Planning Portal. Because these projects are yet to be determined, it is possible the method may overestimate demand. Some projects may not proceed all the way to being approved.
Local development may also drive demand for ecosystem credits, however, at this stage it has not been included in this demand estimate report due to the difficulties in sourcing this data in consolidated form.
This demand analysis only includes ecosystem credits. Likely demand for species credits may be considered in future updated demand analyses.
Estimates are based on projects that have not yet been approved and are therefore inherently uncertain
Biodiversity Assessment Method Calculator credit obligation data for major projects is subject to change throughout the planning approval process. Therefore, it should be noted that the Biodiversity Assessment Method Calculator credit obligation data used to generate this report may not be reflective of the final credit obligations in the conditions of consent once, or if, a major project is determined.
Estimates are based on a point in time
The method is applied to data that was available at a specific point in time. In this case, the cut-off date was 28 March 2023. This means that credit forecasts may differ if projects have revised their BDARs in response to submissions or if projects have proceeded to approval and have varied consent conditions. The department intends to update the nearer-term forecasts more regularly, subject to resourcing.
Landholders should seek their own legal, financial and ecological advice before participating in the market.
Understanding the future credit demand estimate reports
A copy of the future biodiversity credit demand estimate reports can be found below:
- Longer-term (pre-BDAR) biodiversity credit demand estimate report (PDF 657KB)
- Longer-term estimate report (Excel spreadsheet) (XLSX)(45.17 KB)
- Nearer-term (post-BDAR) biodiversity credit demand estimate report (PDF 256KB)
- Nearer-term estimate report (Excel spreadsheet) (XLSX)(20.1 KB)
Demand is presented per Offset Trading Group by each IBRA region and IBRA subregion. Demand is displayed in 2 ways:
- as a numerical credit estimate, provided as an average, with a lower and upper range in brackets
- in category format, being:
- strong (5,000 credits or more)
- moderate (1,000–4,999 credits)
- low (>0–999 credits)
- not detected (0 credits).
Note:
- Lower and upper ranges are only provided for in the longer-term estimate report.
- Demand ‘not detected’ in the longer-term estimate report only reflects SSD and SSI projects that are in the early stages of the planning approval process (pre-exhibition stage).
- For the longer-term estimate report, there may be demand for Offset Trading Groups showing as ‘not detected’ from other types of developments (e.g. local development) and/or from developments already approved under the planning process.
How the future credit demand estimate reports relate to other demand information products
The longer- and nearer-term credit demand estimate reports present information on the potential future demand of ecosystem credits from major projects at the early to mid- stages of the planning approval process – before and after a BDAR has been prepared but before a project has received planning approval.
The estimate reports are 2 of several sources of information about credit demand in the NSW biodiversity credits market.
A summary of and links to other sources of information about current and future demand for credits can be found on our page: