Speech to Udayana University on environmental markets
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It’s a pleasure to be here in Bali, Indonesia, for this year’s meeting of the G20 Environment and Climate Ministers.
To our hosts, our Indonesian friends and neighbours: thank you for your wonderful hospitality.
The Balinese people have always been welcoming to Australians.
And Australians have always loved the Balinese for your warmth and generosity.
I know people here have been through some difficult times recently … going from six million tourists a year, to fewer than fifty at the height of COVID.
But that’s starting to turn around again – and I hope events like this will encourage people back to this beautiful island.
Certainly my family and I are looking forward to our next trip here, which will be number six for me.
Can I also acknowledge everyone at Udayana University who have helped organised this event:
- Professor I Putu Gede Adiatmika, Vice Rector for Planning, Cooperation and Information
- And all the Deans, staff and students who have joined us this morning
I think everyone left yesterday’s meeting of Ministers feeling energised and hopeful.
It reminded us of the scale of our task, but also the tremendous scope of our opportunities.
Because every nation on this planet is living through the same great global transformation.
It’s the biggest economic change of our lifetime – and it’s powered by new clean energy, by new forms of technology, by exciting new ideas, and by a whole new world of businesses and industry.
And beneath all this change is something just as important: a revolution in how we value our natural world.
Economics has always been, at its most basic level, about what we choose to value.
It’s about the price we’re willing to pay for goods and services; and the incentives we create for producing them.
But there’s always been something missing in our system of pricing.
We’ve been quick to recognise the economic value of activities that degrade the environment, but we’ve been very slow to attach economic value to protecting and restoring it.
This imbalance has, inevitably, drawn us into environmental debt … where we take more from the natural world than we give back.
But those assumptions are gradually changing – and this conceptual revolution has the potential to completely transform our economic relationship with the natural world.
If we can place a reliable value on nature …
If organisations and individuals can profit from their good work for the environment …
Then we can incentivise more restoration and protection.
And we can begin to reverse our environmental decline – and even start repaying our environmental debt.
Australia is blessed with brilliant scientists, economists, public servants, farmers and supportive business organisations –
And through their work, we’ve become a global leader in measuring and accounting for nature.
Ten years ago, the then Australian Labor Government created the world’s first national legislative scheme for crediting carbon offset projects.
This meant designing a whole new method of measurement – to calculate the impact that native tree planting and Indigenous fire management would have on carbon emissions.
We measured their carbon reductions, and we certified them, as an economic product that could be bought and sold.
And today, millions of dollars of these carbon credits are being traded each year – providing an extra income for farmers and landholders, and lowering Australia’s overall carbon emissions.
Like all markets, there’s an ongoing task to make sure the scheme is built on impeccable integrity.
But it’s an important part of Australia’s climate strategy, and for our longer path to net zero emissions.
When these markets are well designed – when they’re properly regulated – they can be a powerful force for good.
Which is why, last week, the Prime Minister and I announced that we would be developing a new environmental market, this time for biodiversity –
Or more simply: a nature market.
This scheme will work in tandem with existing carbon credits.
And it will make it easier for businesses and philanthropists to invest in projects that repair and protect nature.
Like replanting a vital stretch of koala habitat.
Or restoring a damaged section of waterway – so the local platypus population can swim through a healthy stream, unimpeded.
Or reviving a critical nature corridor – where animals travel for food and water, or for shelter, or to avoid bushfires.
Or planting vegetation along a hillside – to stop erosion and to protect the local soil.
Or rewarding blue carbon projects – which revive wetlands and mangroves and beds of sea grass, and which absorb carbon at up to five times the rate of tropical rainforests.
As I said, this nature market will work in partnership with carbon credits.
It will help ensure sure that, when we plant new trees, we’re not just establishing an endless monoculture, relying on a single species …
… But that we’re supporting a rich spectrum of biodiversity; of plants and animals and ecosystems; and that we’re planting the right trees in the right places.
Australia is good at this, and we have a history of sharing our expertise with countries in the region, working with our neighbours to build their own capacity.
Our International Partnership on Blue Carbon, for instance, is helping countries count their blue carbon ecosystems towards national climate commitments.
Our high integrity carbon offsets scheme – which we are helping set up in the Pacific – could eventually credit rainforest protection and mangrove restoration.
We’re contributing to a global framework that will help businesses measure and report their nature related risks, like many already do now with climate change.
And we’ve worked with our friends here in Indonesia too – to support your systems for measuring and verifying emissions reduction.
Of course, it’s up to governments around the world to lead the way on climate and environmental protection.
Nature markets can never replace government effort; they can only reinforce the direction set by strong public leadership.
But by placing a market value on positive environmental outcomes, we can incentivise the projects we want – particularly on private land.
And we can help farmers and other organisations profit from their good work.
But we need to make sure we do it right.
A bad market can be worse than no market – if it’s poorly designed, or under regulated, or if it creates perverse incentives, or if it just greenwashes bad behaviour.
These schemes need to be built on a solid ground – and they need to meet three essential conditions.
We need to be able to accurately measure what matters.
We need to measure the biodiversity benefit from planting native species, restoring mangroves, or removing pests and weeds from an area of land.
Without this information, landholders and businesses can't work out whether an activity will cost them money or pay for itself.
And investors can’t work out if the activity is worth investing in – or if it will just deliver business as usual.
If people are investing in nature, they need to be confident that nature will improve because of that investment.
That requires a clear baseline from which to measure.
We need laws to make sure that a buyer gets what they think they’re getting.
You need a good system for guaranteeing that trees we’ve planted are still there ten years, twenty years later.
You need to confirm that the habitat is in good condition and the threatened species we think we’re protecting are really there.
And we need to ensure that it’s meeting the principle of additionality … that we’re not paying for something that would have happened anyway.
This might seem difficult, but new technology is making this easier and cheaper every day.
We already have drones weeding the landscape and helping manage feral cats. We have satellites going over head, taking detailed pictures of landscapes every few days.
We are already combining space and satellite technology with citizen science and machine learning, to identify types of native frogs, or to distinguish native from imported species of fish.
And we’re only beginning to explore the power of these tools to monitor and support our landscapes.
As well as technology, we need good laws and good enforcement.
Buyers need confidence that trees aren’t going to be cut down, or that improvements to biodiversity won’t be reversed after credits are sold on.
This certainty allows buyers to invest with confidence.
And finally, a clear means of acknowledging and transferring property.
It’s currently very difficult to buy and sell environmental services directly.
It’s much easier to trade certificates or credits, in the same way it’s easier to trade with money than to barter.
Without certificates, businesses wanting to invest in nature have to enter into long term contracts with landholders, or they need to buy land and become landholders themselves.
That’s why we are establishing biodiversity certificates, as a simple means of transferring value – and the easiest way to connect buyers and sellers.
Australia is very well placed to meet all three of these challenges.
We’ve got the experience in regulating environmental markets.
And we’re prepared to learn from the successes and mistakes we made in establishing our carbon credits.
We’ve got brilliant scientists, universities and research institutions.
And we’ve got some of the most diverse landscapes on earth; with incredible biodiversity from coast to coast.
I know that businesses want to invest in activities that are good for the environment. They tell me all the time.
Their investors are demanding it. Their shareholders and their customers are demanding it. And so are their legal obligations under climate law.
This is a great opportunity to marry these goals: of environmental protection, carbon reduction, and private sector investment.
This is an extremely exciting field of policy.
Ultimately, I would like to see the market truly valuing nature, so that protecting forests is more valuable than destroying them.
And maybe one day Australia will house its own Green Wall Street: a trusted global financial hub, where the world comes to invest in environmental protection and restoration.
This future is more than possible. It’s within our national reach.