IMPORTANT UPDATE ON STATUTORY BIODIVERSITY CREDIT PRICES
Kathryn Brown
Jul, 31 2023 3 min readLast week Defra announced indicative prices and information for developers wanting to buy statutory credits in order to comply with their Biodiversity Net Gain (BNG) requirements. This will help developers plan ahead for the new legislation taking effect in November 2023, but also provides an interesting guide to landowners looking to create and sell units in a private market.
It is now widely known that the Environment Act 2021 introduced a new condition from November 2023 for developments which require planning permission that they demonstrate, through a net gain plan, that their development produces a minimum 10% biodiversity net gain (BNG). However, there are some exemptions to this condition, the most important one being small site applications.
There are three choices, in order of preference by government and cost, available to developers to meet the BNG requirements. The government has remained clear that the purchase of statutory credits is to be a last resort for developers.
- Deliver the habitat creation ‘on-site’.
- Deliver the habitat creation ‘off-site’, for example through an agreement with a nearby landowner.
- Go to the government and buy statutory credits where the government will invest the money into other nature recovery schemes.
The announcement demonstrates that, in most cases, statutory credits will be more than double the cost of what we have recently seen units trading for in the private marketplace. Whilst the prices given today are only a guide until the legislation is in force, a price for cropland, grassland, and woodland is £42,000 per credit whilst high distinctiveness habitats such as peat lakes are £650,000 per credit.
Of particular significance in the announcement last week is that a ‘spatial risk multiplier’ will apply when purchasing statutory biodiversity credits. This means that for every 1 biodiversity unit a developer needs to compensate for, they must buy 2 credits. When using the biodiversity metric to calculate how many credits are needed to achieve a 10% net gain, it will automatically calculate this multiplication. At face value, the multiplier is not accounted for in the table of prices.
Following this announcement James Firth, Head of Planning at Ceres Property, comments “the newly published guidance provides additional clarity for developers, and those bringing forward planning applications, on how biodiversity net gain will be applied in practice. Alongside on-site biodiversity measures, and off-site net gain on sites identified by a developer, the option of statutory credits will provide an important further option to ensure a net gain on planning and development projects.”
Peter Cole, Head of Natural Capital, added that “the announcement yesterday is important for landowners considering creating biodiversity units to sell on the private market as it sets a price ceiling that developers will be willing to pay. The market prices continue to evolve and have come a long way since the £9,000 – £15,000 per unit estimated when Defra first consulted on BNG. The prices being seen currently offer an exciting opportunity for landowners looking to diversify their income and we anticipate the news yesterday will drive more developers to engage with landowners local to their developments to deliver their BNG requirements.
