How will the biodiversity unit and credit markets work?

How will the biodiversity unit market work?

The Government acknowledges that there will need to be regulations and guidance on the biodiversity unit market including oversight and an agreed approach to credit pricing and sale – work is underway. It anticipates that price and payment terms will be agreed between seller and buyer and be sufficient to cover the costs of set up and maintenance. Further work is being done to assess how eligibility for Agricultural Property Relief and Business Property Relief will be affected for farmers.

Units will need to be registered. A publicly accessible register is proposed to be operated online – it is expected that units will be registered as required for each development.

Eligibility includes the following:

• A conservation covenant or planning obligation by an appropriate person or body, relating to land made available by a provider with sufficient rights in that land, to be suitably managed (via a Habitat Management and Monitoring Plan) for at least 30 years
• The enhancement is measured using the biodiversity metric against a baseline assessment. This will be pre-enhancement or, if activities have reduced biodiversity value since 30 January 2020, pre-reduction. A statement is proposed to be required that the applicant has checked whether the baseline has deteriorated since that date. The enhancement must comply with the rules on “additionality” and “stacking” (see below).

On-site units need not be registered, but the Government is considering how information on them is captured.

The assessment for eligibility of a site is proposed to take no more than 28 days and there will be a fee, with a potential financial penalty for the issue of false or misleading information. Habitat providers are proposed to be allowed to appeal any rejection.

What is “additionality”?

The Government is keen to secure genuine “additionality” through net gain and is consulting on how to achieve this. As a starting point, any enhancement delivered as part of a development may count towards the gain, provided it is recognised in the metric and even though it is required under a planning obligation e.g. as open space. However, this does not apply to designated features within statutory protected sites (which are subject to statutory requirements) or irreplaceable habitats. The Government is considering whether enhancement of non-designated features could be considered “additional”.

It is proposed that a maximum of 90% of the gain can comprise mitigation and compensation measures for protected species or to address off-site impacts on protected sites (e.g. SANG or nutrient neutrality measures).

The Government also proposes that biodiversity net gains can be secured in local wildlife sites and nature reserves and in habitats (including designated features of protected sites) in the intertidal zone or less than 2km above the mean high-water mark.

What is “stacking”?

There is uncertainty regarding “stacking” i.e. the ability to combine multiple payments for different services or products from the same area of land e.g. for nature-based carbon trading, markets for agricultural products or schemes to reward environmental land management. The Government is minded to allow stacking, provided payments are for distinct, additional outcomes. Landowners should consider local nature priorities e.g. in the Local Nature Recovery Strategy.

What about Government issued statutory credits?

The Government proposes the sale of statutory credits to developers to avoid delay as a last resort, where on-site or off-site delivery or credits are not available - at least in the early years until the biodiversity unit market has matured. A review will confirm the price for the credits before the system takes effect. The price will reinforce the use of credits as a last resort, whilst being cost-effective – at least one biodiversity unit should be created for every credit sold.

The current preferred approach being consulted upon is for developers to be able to purchase credits before final approval of the BNG Plan. Revenue will be invested in habitat creation and enhancement.