If a developer can't provide the full 10% biodiversity net gain on site, it is possible to provide the net gain on another site in a number of ways. The developer could provide the additional biodiversity on a separate site, or purchase an offset through the local authority, a private sector provider or eventually the government.
No simple solutions
In developing biodiversity net gain legislation, the government has assumed that a market for biodiversity units will emerge, potentially worth up to £800m per year in England. It is tempting to suppose that biodiversity units could be traded like carbon credits but the reality is not so simple. Biodiversity offsets are not a straightforward off the shelf solution to the new biodiversity requirements for several reasons:
Developers are required to avoid and limit harm to biodiversity, with offsetting as a 'top up' solution (the mitigation hieararchy)
Offset sites are required to be local, and a suitable offset may not be available in the local area.
Offsets must be tailored to compensate for the type of habitat lost
There may be a lack of providers or suitable sites
Mitigation
Developers are required to apply the mitigation hierarchy as described in best practice guidance. The mitigation hierarchy requires developers to take three steps:
avoid causing harm, especially to highly distinctive habitats
limiting harm to other habitats
compensating for unavoidable harm to habitats
Off site biodiversity offsets are part of the final stage of mitigation, once the development has been optimised to avoid, limit and compensate for harm to existing habitats. In an analysis of planning consents in four early adopter local authorities, covering 185 hectares of development and 1659 dwellings, researchers found that 87% of compensation was provided on-site, and 11% off-site.
Localism
The new biodiversity net gain requirements are administered locally via the planning system. When the biodiversity net gain policies and legislation were being created, Defra consulted with local authorities, who showed a strong preference for offsets to be local rather than national. This makes sense from the local authority's perspective, as planning decisions are made by locally elected leaders who are tasked with striking a balance between public and private interests , national policies and local needs. From their perspective, any negative effects of a development are felt locally so any mitigation or compensation should also be local, as already happens through Section 106 and CIL. The government responded by tweaking the official biodiversity unit calculator to heavily downgrade scores for offsets in adjoining or distant local authorities. Many local biodiversity policies have taken this further by requiring the offset site to be located within 10km of the development site, and this is quickly becoming a norm.
Even in urban areas with a such as Greater Manchester, where biodiversity net gain already applies, offsets are expected to be provided within the same metropolitan borough, and offsets in adjoining boroughs are scored down. This will create big challenges in urban boroughs where land values are high, unless the offset land is somehow unsuitable for development and therefore available at a lower cost.
Habitat categories
Habitats are classified into broad categories including grassland, woodland, hedgerows, and rivers. Biodiversity losses in one broad category must be offset within the same category, although this applies more readily to low distinctiveness habitats - more distinctive habitats may need to be replaced like for like. Loss of high distinctiveness habitats should be avoided and are difficult to justify using the official biodiversity calculator. Therefore unlike a carbon credit, a biodiversity offset must be be tailored to the needs of the development site
Offset Providers
There are a number of ways of sourcing an off-site offset. The developer could provide the additional biodiversity on a separate site, or purchase an offset through the local authority, a private sector provider or eventually the government once the national scheme is set up.
Developer's Offset
A developer could try to source a suitable parcel of land locally and provide a local wildlife site or nature reserve with the assistance of a wildlife trust. This would require a parallel development project to source suitable land, carry out surveys, create a landscape management plan and put in place legal agreements for long term management and monitoring, all of which must be in place before the main development can receive planning consent. If a developer is hoping to have a pipeline of development in the same local authority, it would be beneficial to create a larger offset site with the potential to benefit multiple development sites in a 10 km radius. In many locations in the Thames Valley, developers must already provide or fund a Suitable Alternative Natural Greenspace (SANG) to relieve pressure on existing designated nature sites. If the developer is providing a SANG, rather than paying into a SANG fund, this could also be optimised to function as a biodiversity offset.
Local Authority Offsets
Some local authorities will be providing their own offset schemes, which will likely be the simplest and cheapest option for developers. Unlike other options, the local authority does not have to have all the details of their offset sites in place before signing an agreement. The offset agreement can be written into a section 106 agreement rather than having to draft a separate and unfamiliar conservation covenant. There is no need to convince the local authority that the provider will deliver. There are many hidden costs involved in creating, maintaining and monitoring a habitat for biodiversity, and many local authorities are underestimating those costs. Finally, if the local authority elects to create a habitat offset on its own land holdings, the cost of the land does not need to be factored in.
Private Sector Offsets
There are a few private sector biodiversity offset providers, some working across England, others locally. These providers typically partner with farmers because while agriculture accounts for up 63% of England's land use, farmers struggle struggle to break even with hefty subsidies. Farmers rely on agricultural subsidies which are now in a state of flux in the post Brexit environment. However, it appears that it be possible for farmers to collect some subsidies on land managed for biodiversity. Farmers typically own agricultural machinery which can be used for habitat creation and maintenance, and charge about half the rate of a landscape contractor. Some farmers are joining forces to create habitat offset banks of potentially up to 10,000 hectares in several locations.
National offsets
Eventually, the national government will market its own biodiversity offsets, however these will be statutorily required to be priced at a level which is higher than the private sector, and will be used for national biodiversity projects. This will create a fallback option where no other provider is able to offer an offset in the local area, but at a premium cost.
Chosing the right offset
Whilst biodiversity offsets are not a one stop shop solution to biodiversity net gain, they do offer flexibility in meeting the full 10% biodiversity net gain requirement. The developer will need to gauge whether it is more cost effective to purchase an offset or slightly scale down the development to enable the biodiversity gains to be provided on site.
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