Biodiversity Net Gain and off-site provision

March 25, 2022

In the third in a series of articles on Biodiversity Net Gain, Ian Graves and Trevor Ivory consider off-site fulfilment of obligations.

The requirement under the Environment Act 2021 for new development to demonstrate biodiversity net gain (BNG) is expected to come into force in November 2023. As the Government acknowledges, not all projects will be able to provide BNG on site. To prevent BNG obligations becoming a barrier to development, the Act will provide developers with a number of options to fulfil them offsite. Developers will be able to provide the required biodiversity gains on other land they own, purchase “biodiversity units” from third parties and even buy “credits” from the Government to enable them to demonstrate the necessary amount of BNG.

Biodiversity gains and losses will be measured in “biodiversity units”. These units will be calculated using a “biodiversity metric”, the current version of which is Biodiversity Metric 3.0. This was published by Natural England in July 2021. The Metric uses habitats as a proxy for biodiversity and uses the type, size and condition of those habitats to calculate biodiversity units. Given the importance of the Metric in the new system, the Government has promised further consultation on it before the BNG provisions come into force.

Where insufficient biodiversity units can be provided on site, offsite provision can be counted. To ensure that these sites are providing legitimate biodiversity gains, they must be listed on a register of “biodiversity gain sites” that will be established by the Secretary of State. For land to be registered, the habitat enhancement works on the site must be secured by a planning obligation or conservation covenant, maintained for at least 30 years and be available to be allocated to one or more developments for which planning permission is granted. There will also be a fee to register them.

The Government envisages that a market in biodiversity units will develop as landowners who can create or enhance habitat to the required standard offer to sell this capacity to developers. Its market analysis estimates that there could be demand for as many as 6,200 offsite biodiversity units each year, with an estimated market value of £135m. The price of each biodiversity unit has been estimated at £20-25,000. There may also be opportunities for brokers to facilitate such transactions.

Local authorities may be ideally placed to act as providers of offsite biodiversity units or as intermediaries and should begin exploring those opportunities now. The Government expects local authorities to put in place measures to manage conflicts of interest and they will not be allowed to require developers to use any particular provider of offsite units. Nor will they be able to charge developers a general tariff for offsite gains that is not linked to specific, registered, biodiversity gain sites.

The market will, however, take time to develop and supply is likely to be heavily constrained in the early years. Particular problems are anticipated in urban areas where demand for development is high and opportunities for on site BNG provision are more limited. Although there will be no limit on how far away offsite provision can be from the development site it relates to, the distance will be accounted for in the Metric and the value of the units will be discounted appropriately. Local authorities should begin to consider now what steps they can take to establish a sufficient supply of offsite biodiversity units in their areas. This will help to avoid lack of market capacity from constraining development when the BNG requirements come into force.

As a last resort, the Government will establish a system of statutory biodiversity credits that can be purchased by developers where they cannot obtain appropriate provision on the open market. It is hoped that this will ensure developments will not be blocked by a lack of suitable provision. A “credit price review” will be carried out before the price of these credits is set, although it is anticipated that they will be priced so as not to undermine the establishment of the market system.

The Government’s ambition is for the new Environment Act to make BNG a prominent consideration in development. It believes that this will fundamentally alter the way that habitat losses are considered in the planning system. There is no doubt that that the changes will be significant. Both local planning authorities and developers need to be alive to the impact that the new requirements will have on viability in particular. Since the provision of BNG will be a legal requirement, the potential loss of habitats that are rare or hard to replicate may simply make the development of some sites uneconomic. This could change current assumptions about where new development will go considerably.

Most of the detail of how the new system will operate will be set out in regulations and the Government is currently consulting on its proposals. This represents a final opportunity to influence how the BNG obligation will work in practice. All those with an interest in new development should study the proposals carefully and consider responding to the consultation before it closes on April 5, 2022.

Ian Graves is a Legal Director and Trevor Ivory is a partner at DLA Piper.