The Australia Institute has made a submission to the Senate Standing Committee on Environment and Communications, References Committee Inquiry into environmental offsets. We argue that while offsets are often imperfect and need to be well managed, they have a place in environmental management.

Our submission relates to the economics of environmental offsets and our experience in how offsets are treated in the economic assessment of major projects.

There are strong economic grounds for the use of offsets.  For example, when an environmental asset is to be damaged or destroyed, resulting in a loss that is born by the environment and therefore the wider community.  To ensure community welfare is not reduced, the developer needs to compensate the community. While other forms of compensation exist, environmental offsets can avoid the need for difficult environmental valuation exercises.

We discuss how environmental offsets have been treated and mistreated in the economic assessments of:

• China First Coal Project
• Warkworth Coal Project
• Wallarah 2 Coal Project
• Maules Creek Coal Project​