The NSW Government recently announced its intention to become the first Australian state to use AI to fast-track large scale housing development approvals. Use of AI to automate and speed up EPBC decision making has also been raised in the context of ongoing reform proposals.
As the public and private sector continue to grapple with effective, secure and appropriate use of generative AI, this article considers some key opportunities and important guardrails for such AI use in environmental impact assessment and development approvals.
Snapshot
NSW proposal: planning assessment for large-scale housing
The NSW State government recently confirmed its ambition to use AI technologies to support speedier assessment of state-significant development applications, with a particular focus on delivery of housing. Following the Early Adopter Grants Program which assisted 16 Councils to trial AI solutions to improve local planning processes, the NSW government has now launched a tender for development of a new AI system that would:
EPBC proposal: environmental law reforms to include AI use in assessment and approvals
During the August 2025 Economic Reform Roundtable, the federal Ministers for the Environment and Water and Housing, Homelessness and Cities jointly announced an intention to accelerate approval of significant housing proposals under the EPBC Act (the federal environmental impact assessment regime). In addition to resourcing and process reform, a key objective was ‘piloting AI to simplify and speed-up assessments and approvals’.
Following the Roundtable, the federal Minister for the Environment announced that EPBC Act reforms will be introduced to Parliament in late 2025. It is indicated, but yet to be confirmed, that the AI pilot would relate to a broader suite of EPBC proposals rather than just the housing sector.
Artificial intelligence (AI) and generative artificial intelligence (Gen AI)
The Australian Government Policy for the responsible use of AI in government (September 2024) (AI Policy) defines an AI system using the OECD definitionas follows:
An AI system is a machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments. Different AI systems vary in their levels of autonomy and adaptiveness after deployment.
The stated objective of the AI Policy is ‘to ensure that government plays a leadership role in embracing AI for the Benefit of Australians while ensuring its safe, ethical and responsible use, in line with community expectations,’ and emphasises the need for the policy to evolve and develop over time.
Different considerations arise depending on what type of AI technologies are used, the inputs, its context, and the way the AI output is assessed and implemented by humans. The Planning Institute Australia Guidance Note AI in Development Assessment (Feb 2025) recognises that rule-based AI (effectively automated decision-tree assessment) provides clear parameters and traceability, whereas more creative tasks and machine-learning can involve complexity that make it difficult to track the factors that have influenced an outcome in any particular instance.
We agree that AI has great potential to support efficient decision making, including through initial assessment against clearly defined criteria, and synthesis of complex or large data sets. However, in planning and environmental decisions where judgment is required, human decision making, often by officials who are accountable to the electorate, remains a foundational principle. AI systems must support, rather than replace, that process. In addition to the standard rationale for review and recalibration of AI system outputs, such as potential to entrench bias and produce incorrect or incomplete outputs (often called hallucinations), it is important to recognise in planning decisions that the social and environmental context for decision making is continually evolving. Any AI system will need to be continuously updated to reflect the appropriate balance of factors in sustainable development over time, including in very localised communities.
Government response to ethics and governance in the use of AI
There are a range of existing government policies addressing ethical and responsible use of AI in the public sector. These include:
National governments around the world are grappling with whether and how to impose new AI regulations. Following extensive review, we are awaiting the Australian government’s position on AI regulation. Indications are that Australia will adopt a lighter touch, pro-innovation and pro-productivity approach, as compared to, for example, more restrictive and comprehensive European regulations.
In NSW specifically:
Key considerations for use of AI in planning and environmental approval processes
A threshold question is whether explicit legislative authorisation would be necessary to allow use of AI or other computer-generated material as part of a planning or environmental decision-making process, and what conditions should be imposed on that use in light of the potential risks associated with AI. For a range of Commonwealth administrative decisions, there are already explicit provisions that allow decision makers to rely on material generated by computer programs, or for a computer program to itself make decisions. The safeguards built into those provisions may include for example ‘reasonable steps’ to ensure consistency with the objects of the relevant legislation and permissible grounds for the decision, and satisfaction on ‘reasonable grounds’ as to the accuracy of the information entered into the computer system, and that it has been entered into the system correctly. While these may also be relevant to use of AI, the safeguards currently in place do not, in our view, fully implement all the potential guardrails foreshadowed in the AI Policy and ethics frameworks in the way that would be necessary for use of AI in further decision making.
We can see significant potential for rule-based AI systems to streamline aspects of the process for planning decision making along the lines foreshadowed by NSW and where the use-case is limited to a specific and replicable type of development, for example:
However, it would be important that:
More sophisticated AI analysis may also assist at a systems level, for example analysis of past applications and processes to identify common issues or bottlenecks. It will be interesting to consider over time whether AI assists to identify reforms that would facilitate greater involvement of AI in the assessment process, facilitating further efficiency.
Some of these opportunities similarly exist for environmental approvals applications, however we have some concerns that the increased complexity of interactions between environmental considerations (including social impacts) is less amenable to reliance on AI assessment as we currently understand and use AI systems. For example, use of AI to undertake risk analysis or predict potential impacts of a project to inform EPBC Act decision making by a regulator on a specific project may be problematic, and automated generation of a likely outcome based on precedent in past decision making would be highly problematic.
A key risk is potential challenge to approvals decisions by applicants or by objectors if there is a lack of transparency and trust in the underpinning AI models, training data sets and tools used, and the inputs and prompts into the AI system to produce the approval decision. This could arise where the AI generated output is itself flawed which undermines the lawfulness of the ultimate decision, or where the decision maker has relied on the AI generated output in a way that undermines the lawfulness of the decision. For example:
In all cases, it will be necessary to resolve concerns around reliance of government on AI systems developed by the private sector, including in relation to probity, privacy, and ownership of intellectual property rights in materials used to train the underlying AI model or system and of course that reviewed by the AI system in producing the relevant output. This includes building public confidence that government departments relying on AI have the relevant skills to understand, manage and audit their AI systems effectively, and ensure that the nuances of Australian regulations are embedded into the AI models and training data.
It may be that, ultimately, law reform or specific policy development is required to guide use of AI in planning and environmental decision making, linked to grounds on which applicants or third parties may or may not challenge the subsequent approval decisions.
Use of AI by developers and applicants
Although the focus of this article is primarily on use of AI in government decision-making, it is important to recognise that developers and applicants also have increasing opportunity to use AI to support impact assessments, generation of application materials, and pre-application compliance checks.
When using AI to support the making of an application, we recommend that applicants:
Environmental impacts of use of AI
Finally, it is relevant to note that the use of AI also has potentially significant environmental impacts as elaborated in chapter 6 of the Report of the Select Committee on Adopting Artificial Intelligence (November 2024), in particular the significant amount of energy use required for AI functions, as well as water use and broader land use impacts including mining critical minerals for hardware components and waste management.
Although these matters already fall within a range of regulatory systems it is nevertheless worth considering carefully in the context of planning and environmental decision making, where it is important that the regulatory systems themselves also support, and do not undermine, the overall objective of sustainable development.
