Counting the cost of BNG: statutory credit prices released by Defra

The government continues to prepare for mandatory biodiversity net gain (BNG) coming into force in November 2023. Since our last update, the government has published its indicative prices for statutory biodiversity credits, which are intended as a last resort where developers are unable to use on-site or off-site units to deliver BNG.

Once BNG becomes mandatory, prices for statutory credits will be confirmed and credits will be available for purchase using a credit sales service.

An addition to the statutory biodiversity metric tool is being prepared, and will come online once BNG is mandatory, which will automatically apply a “spatial risk multiplier” to calculate the number of credits: two credits will be required for every one biodiversity unit being compensated. The spatial risk multiplier has not been accounted for in the indicative prices, so the actual starting point for any credits is likely to be at least double what is currently listed for any given habitat, and the cost of providing BNG by way of statutory credits could therefore be double the indicative price.

Habitats are divided into three categories of “distinctiveness” (low, medium, high), assessed by measuring different ecological factors such as the rarity of the habitat and the species richness within a habitat. Credits are tiered across the three distinctiveness categories to reflect the cost and value of different habitats. The indicative prices across these tiers are:

• A1: £42,000 per credit
• A2: £48,000 per credit
• A3: £66,000 per credit
• A4: £125,000 per credit
• A5: £650,000 per credit.

While the low habitat distinctiveness category does not distinguish habitat types, the medium and high distinctiveness categories set out broad habitat types (including heathland and shrub, grassland, trees, urban, cropland, woodland and forest, intertidal sediment, lakes, wetland, coastal lagoon and coastal saltmarsh) which are then further broken down into specific habitat types (including reservoirs, ponds, reedbeds, lowland heathland, littoral mud, coastal sand dunes, saltmarshes and saline reedbeds, native pine woodlands) and then allocated a tier (A1-A5) and corresponding price per credit (which follows the indicative prices above).

Statutory credits for linear habitats are dealt with separately. The price for one hedgerow credit is indicated as £44,000 and for one watercourse credit (to cover rivers and streams) is indicated as £230,000.

The government has indicated that it is publishing these indicative prices as a means to help developers “plan ahead” – in doing so, developers must be careful to take account of the implication of the spatial multiplier in calculating exactly how much they need to purchase in credits to compensate for biodiversity units.

In addition to the above, the government has published guidance on how to apply to become a responsible body (the body that regulates and enforces conservation covenants under the Environment Act).

The guidance sets out criteria that Defra will use to determine whether an organisation can become a responsible body (any organisation will need to continue to meet the criteria to remain a responsible body):

• Eligibility – the organisation must have an operating base in the UK to enable it to carry out the relevant functions and must be either a local authority, a public body or charity where at least some of its main purposes or functions relate to conservation, or a body other than a public body or charity, where at least some of its main activities relate to conservation.
• Financial security – Defra will check the organisation has adequate internal fiscal and administrative control for long term financial viability which may include reviewing any government funding recieved, how grant funding has previously been used, Companies House filings, and in the case of charities, whether the organisation has been subject to a Charity Commission inquiry in the last three years.
• Operational capacity and capability – to ensure the organisation can manage and enforce conservation covenants, Defra will consider matters such as whether there is access to relevant expertise as needed and that there is a structure and capacity that will allow it to effectively deliver conservation covenants including working collaboratively with landowners, and monitor and evaluate projects
• Ongoing suitability – where an organisation’s circumstances change such that it no longer meets one or more of the above criteria, Defra must be notified. The list of relevant changes in circumstances is not exhaustive but include disputes with landowners about the delivery of a covenant that cannot be resolved (even through the courts), being subject to criminal prosecution, civil sanctions, fraud or insolvency proceedings or a new Charity Commission inquiry, conflicts of interest, changes in expertise, financial situation or in the organisation’s purpose, functions or activities away from conservation.

The above is welcome clarification for aspects of the BNG regime as the November deadline looms closer. However, there are still a number of outstanding pieces of secondary legislation that the government is working on relating to:

• Exemptions (which types of developments will be exempt from mandatory BNG).
• Irreplaceable habitats (which habitats should be considered as irreplaceable for BNG purposes and therefore subject to bespoke compensation).
• The register (how the register will work and what will be mandated (including the need for land managers to register off-site biodiversity units)).
• Planning system (how BNG will work through the planning process, including approval of the biodiversity gain plan and the process for phased development).
• Commencement regulations (switching on the provisions in the Environment Act 2021 for the implementation date and setting out transitional arrangements for certain routes to planning permission).

In addition to the above, Defra has published an ambitious list of 16 topics for which it intends publishing guidance (though this list is not exhaustive). There is, therefore, still a lot of work to be done – we expect the next two and a half months are going to be particularly busy for Defra as it works to complete the mandatory BNG picture ahead of November.

Please see our previous related articles on BNG here and here.