A review of the NSW Biodiversity Offsets Scheme has found it effectively allows developers to pay to destroy threatened species, along with a raft of other issues.

Introduced in 2016, the highly criticised scheme enabled developers to offset unavoidable biodiversity loss by increasing biodiversity elsewhere, theoretically resulting in “net zero losses”.

In practice, the scheme doesn’t guarantee any such balance is achieved and is vulnerable to being manipulated, the parliamentary report published on Thursday found.

“The scheme’s design allows too much flexibility to trade off threatened species in exchange for cash, without guarantee that genuinely equivalent offsets will ever be found,” Greens MP and committee chair Sue Higginson said.

After an exhaustive 18-month-long inquiry, the report by an Upper House committee also found the offset system lacked transparency, opening it up to manipulation.

“We have heard that this scheme’s operation is so opaque and complex that no stakeholder group has full confidence in it,” Ms Higginson said.

Allegations of insider trading and collusion with the scheme were not surprising considering the limited transparency regarding actual ecological outcomes, she said.

The report included recommendations for fixing the scheme including a significant overhaul to ensure it meets best practice principles for biodiversity offsetting.

“I urge the government to address the concerns aired about the scheme by implementing the recommendations in full,” Ms Higginson said.

“We owe it to future generations to reform this scheme and protect what biodiversity remains in NSW.”

The report committee included members of the government, opposition and crossbench and received more than 100 submissions on top of holding four hearings into the scheme.

– AAP