Biodiversity credits: a new market for landowners?

This article explains the Biodiversity Net Gain concept before examining how the resulting biodiversity credits scheme will work. It then investigates what a biodiversity gain site comprises, along with suitable farmland schemes and the Environment Bank which will manage the credit system.

Biodiversity Net Gain

Biodiversity net gain offers landowners the opportunity to sell biodiversity credits to developers needing to offset their environmental impact, and it becomes mandatory from January 2024. The Government has pledged to increase housebuilding to 300,000 houses a year by the mid-2020s, however, it is also committed to protecting biodiversity, stating its aim to: `leave the environment in a better state than we found it, and pass on to the next generation a natural environment protected and enhanced for the future.’ These aims can appear to conflict, and the Government has created biodiversity net gain in an effort to redress the balance.

Extra boost for nature

Biodiversity net gain means that a developer must create additional biodiversity improvement at a development site rather than comply with the previous `no new loss’ principle. If an environmental scheme cannot be created on-site, alternative areas may be identified off-site including on farmland. Implementing the scheme through the planning system looks set to open a new market for landowners with land suitable for creating biodiversity units. 

The Environment Act, which attained royal assent in November 2021, contains provisions that developers in England will be required to demonstrate a biodiversity net gain of 10% as a requirement of obtaining planning permission on a development site.

Biodiversity credits: how the scheme will work

To attain planning consent, an assessment must be made of the pre-developed site with the number of biodiversity units calculated according to Natural England and Defra’s Biodiversity Metric 4.0. The developer must then demonstrate to local planning authorities how they will contribute the total biodiversity units required by creating improved habitat and maintaining that area for 30 years. 

Local planning authorities will only approve planning applications where the biodiversity value of the completed site exceeds the pre-development value by 10% or more. In cases where it is impossible to deliver biodiversity net gains on a development site, a developer could work with a landowner off-site to ensure delivery of the net gains via an individual contract, or they could purchase biodiversity credits from the government.  

As the costs of environmental schemes will be lower off-site, it is anticipated that a large percentage of the gains will be realised in this way. Developers will be able to source land themselves for offsetting or purchase credits from intermediaries who can identify suitable sites and draw up agreements with landowners. 

A skylark on grassland

Biodiversity Gain Sites

Sites generating biodiversity units are called Biodiversity Gain Sites and they must be recorded on a national public access register being set up by Natural England and Defra. The Biodiversity Metric 3.0 will be used for assessing mandatory biodiversity net gain as set out in the Environment Act. Natural England is also developing a net gain

Sites Register which contains information on all sites used to deliver biodiversity net gains; to ensure that the same piece of land cannot be used more than once, a monitoring framework is also being established. A net gain habitat management plan and reporting template are being created to ensure that habitat gains are achieved.

Farmers and landowners keen to participate in the Biodiversity Credit Scheme must register land that they think would be suitable for the scheme, along with baseline figures from the Biodiversity Metric. In practice, the Government buys the biodiversity credit from the landowner and then sells it to a developer on the biodiversity net gain marketplace.

Suitable farmland schemes 

Biodiversity credits could be gained from making small changes to land use such as sowing a different grass mix to include wildflowers which attract pollinators, or from larger schemes involving wetland management or habitat creation.

Linking up with other local nature recovery schemes may be viable for some landowners; for others it may be attractive to implement schemes on marginal land.

Once agreement is reached, the landowner could receive regular payments to maintain the area; it may be advisable to consider future support payment claims before signing up to a scheme. As land under a biodiversity net gain agreement must be maintained for a minimum of 30 years, tenant farmers keen to get involved would need to negotiate an agreement with their landlord. 

Species-rich marshland

Environment Bank

An Environment Bank will sell credits to developers, pay landowners a capital amount for habitat creation and a regular amount for annual management. It is anticipated that payments will take inflation into account. The price for biodiversity credit units is being reviewed.

Get an expert on your side

Mandatory biodiversity net gain is becoming an integral part of all major planning applications and a biodiversity credit investment pipeline is being established. Having a specialist ecologist such as Arbtech on-board from an early stage will give credibility to an application, reduce the costs of compensatory measures by maximising the existing biodiversity on the site and minimise the risk of a refusal: contact us to speak to a professional ecologist and obtain a quote.

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