‘Too many loopholes’: NSW inquiry to scrutinise use of environmental offsets

New South Wales’ use of environmental offsets to compensate for habitat destruction caused by major developments will be examined by a parliamentary inquiry.

The state upper house probe follows a Guardian Australia investigation that revealed serious concerns about the system, including instances where promised offsets never eventuated.

The inquiry was self-referred by the upper house environment and planning committee with backing from the Greens, Labor and the Animal Justice party.

The Greens MLC and committee chair, Cate Faehrmann, said there had been “a disturbing lack of transparency around sites protected as offsets”.

Related: ‘Enormous sum of money’: $40m windfall from NSW environmental offsets sparks calls for inquiry

Faehrmann said the inquiry would investigate whether the use of offsets had been effective in halting the decline of the environment and “whether there are adequate protections in place against conflict of interest within the scheme”.

It would also consider the role of the NSW Biodiversity Conservation Trust in administering the state’s biodiversity stewardship scheme, which allows landowners to sell offset credits on land they have agreed with the government to permanently conserve.

“From the outset, environmentalists have had concerns with the biodiversity offsets scheme,” Faehrmann said.

“We continue to see applications to clear threatened species habitat approved on the basis that it can be offset by protecting land elsewhere, but anyway you look at it, it’s loss of habitat.”

The opposition’s environment spokesperson, Penny Sharpe, said Labor hoped the inquiry would establish whether the offsetting system was working as intended.

“We think the offsetting system is creating too many loopholes that are not advantageous to biodiversity but are actually helping to destroy it,” she said.

Mark Pearson, of the Animal Justice party, said offsets were “misleading and deceptive” and the parliament’s koala inquiry – which found the animal was on track for extinction in the state by 2050 – had already demonstrated government failures to protect habitat.

Related: 'It's an ecological wasteland': offsets for Sydney toll road were promised but never delivered

Guardian Australia’s investigation revealed that a public reserve promised as an offset for the M7 in Sydney had still not been delivered some 15 years after the motorway opened for traffic.

A second reserve on the site of Airservices Australia’s former radio transmitting station at Shanes Park in the Blacktown City council area was also undelivered more than 10 years after it was first identified as priority conservation land to compensate for the construction of 181,000 houses in new suburb developments.

The investigation also uncovered tens of millions of dollars in offset credits purchased by the state and federal governments from properties linked to consultants whose company advised the government on development in western Sydney.

The parliamentary inquiry adds to a list of investigations launched since the revelations.

The NSW auditor general has fast-tracked a planned review of the scheme and the state’s transport department referred purchases it made to the Independent Commission Against Corruption for investigation.

Comment was sought from the NSW environment minister, Matt Kean.