(Updated with revised timeline from Defra)

Market actors have expressed major concerns about the UK’s nature market direction, as biodiversity rules for the planning and development sector have been delayed by the UK government.

The UK’s biodiversity net gain (BNG) mechanism was slated to become mandatory this year, but Defra announced that it will be delayed by three months, confirming earlier reports of a delay by public broadcaster the BBC. Market participants and environmental campaigners alike have reacted with surprise and concern about the market’s future and the wider implications.

“[The government] has shown itself to be routinely incompetent when it comes to the nuts and bolts of environmental policy delivery … Rather than pulling its socks up and fixing delivery, its solution (time and again) is to cancel, weaken, or delay,” said Craig Bennett, CEO of the national charity Wildlife Trusts, said on LinkedIn.

Biodiversity net gain aims to place rules on the planning and development sector in the UK to mitigate its impact on nature.

Under the rules brought in by the Environment Act 2021, development projects need to achieve a net improvement of 10% biodiversity through onsite improvements, purchasing units from offsite land managers, or using the government’s statutory credit mechanism as a backstop.

The shift came just over one month before the policy was due to become mandatory for land developers. Many participants had foreshadowed the delay due to a lack of readiness in the local councils that bear the brunt of approving, monitoring, and enforcing the policy on the ground.

REASON REACTION

Market actors have previously raised concerns about the policy, citing the limited resource capacity of local planning authorities (LPAs) to effectively monitor and enforce the scheme.

“There is a real lack of readiness within local authorities. BNG regulations were slow to appear as was funding, (which was also very low). This is quite a significant shift in planning policy that requires expert input that many local authorities simply do not have,” Michael Burgass, director at nature consultancy Biodiversify, told Carbon Pulse.

Research released by the Royal Town Planning Institute earlier this month revealed that 61% of planners couldn’t confirm that they would have dedicated ecological expertise in place by November. The respondents generally stated they had low levels of confidence in the practicalities of BNG, including identifying sites, and BNG proposal interpretation. Some 38% of planners expected BNG to be the biggest challenge they would face this year, according to the research.

In July, Defra (Department for Environment Food and Rural Affairs) announced a £9 mln injection for local authorities to boost in-house ecological support but many commentators have highlighted that it might not be sufficient to fill capacity gaps.

“The government has significantly increased its funding for LPAs to being in capacity to deliver BNG, which is welcome, but capacity is at such a low baseline after the last 15 years of cuts that substantially more is needed to create a regulatory system that will unambiguously deliver on its biodiversity aims,” Sophus zu Ermgassen, an ecological economist at the University of Oxford, told Carbon Pulse.

LPAs may continue to adopt the policy anyway, using Defra’s biodiversity metric. The policy is already being implemented in the counties of Oxfordshire and Warwickshire, and a nature investment fund that works with LPAs in Gloucestershire stated their intention to stick with the policy.

“[LPAs] want to play their role in ensuring BNG brings about the growth of natural environments that our communities want and need,” said Darren Rodwell, environment spokesperson for the Local Government Association in a statement. The London councillor expressed an eagerness to work with the government and Defra to ensure councils are ready to deliver the critical components of BNG.

“There have been several delays to the implementation programme and councils are concerned about the impact of further delays on their ability to effectively implement BNG. Councils urgently need confirmation of go-live dates, essential guidance and definitions, and a clear timetable of funding in order to employ additional staff and invest in the expertise and capacity,” Rodwell added.

For smaller LPAs with limited resources, the future remains uncertain as it does for the UK nature market as a whole.

BET GAIN

Market players looking to buy and sell into environmental markets tend to like certainty to ensure their investment decisions are assessed appropriately for risk.

“This is a gamble – I expect that the government is thinking that the shock to market confidence that comes with the delay will be outweighed by the improvements that come from another few months of upskilling and capacity building,” said zu Ermgassen.

“Confidence is so important to the construction of new environmental markets, so we can definitely not afford many more confidence shocks like this,” he added.

Studies conducted globally indicate that a critical factor influencing sellers’ involvement in environmental markets is the assurance of consistent policies, as they need to make certain commitments on land management in order to sell credits, commented zu Ermgassen. Landholders may begin to question whether they should participate in the mechanism but a few months’ delay may provide an opportunity to build capacity within the system.

Alicia Gibson from nature fund manager Finance Earth echoed these points: “We are hugely disappointed to learn that BNG policy may be delayed. Any market, especially at an early stage, needs a stable and enabling policy environment in order to build trust and encourage market participation and investment”

BNG had a fundamental role in the wider nature markets agenda in the UK A conference on Tuesday, which heard that the UK Government is backing a “Nature Accelerator”, managed by Finance Earth that is targeting biodiversity net gain projects as ripe for investment.

“BNG is an opportunity for the UK to show leadership internationally on how to create high integrity nature markets to support biodiversity recovery,” Gibson said.

Today’s move has raised questions about the wider direction of the UK’s nature markets.

“It’s critical that we have regulatory backing to nature markets – voluntary markets by themselves are plagued with issues. If we don’t get BNG or a watered-down BNG then it’s going to reduce confidence quite significantly and could stall the UK’s position as a leader in this space,” said Burgass from Biodiversify.

When landowners get legally tied into biodiversity gain they are locking land up for decades, so landowners will need to see a long-term benefit over a generational period, said Burgass.

Current rules under biodiversity require habitat improvements to be secured for a minimum of 30 years via planning obligations of legal covenants with landowners.

WISE TIME

The delay could prove an opportunity to overcome the governance and technical infrastructure challenges required for effective implementation.

“It’s essential they use this time wisely to address the big challenges facing BNG. Most importantly in my view is getting the governance right for on-site biodiversity gains, which underpins the integrity of the entire system, and determines the demand for off-site units, which is key to the whole market,” said zu Ermgassen.

Several ecological consultancies have also expressed the potential for progress within the delayed agenda. They are key players in delivering the site assessments for land developers, and often support LPAs in making sense of BNG generally, and many sell biodiversity units within the market.

“Rather than dwelling on the delay, we should use this time to keep preparing for mandatory BNG, we will hopefully see a less rushed implementation in 2024 and it will also give LPAs a chance to be ready, habitat banks to become established, and clients to align strategies with the upcoming changes,” Lewis Deacon, biodiversity net gain lead at AECOM, said on Linkedin.

Whether or not the now-afforded time will be used by LPAs and central government to get up to speed, the move comes amidst a number of rollbacks on wider environmental policies from the UK government.

“November was always thought to be quite ambitious – but it’s hard not to think ultimately it’s politically motivated given the events of the last couple of weeks,” said Burgass from Biodiversify, referring to UK Prime Minister Rishi Sunak’s move to push back a number of nearer-term climate goals.

“BNG could provide the backdrop to kick start a wider nature market but the government could be kicking the legs out from under the chair if it gets the introduction wrong,” said Burgass. He pointed to Sunak’s changes in net zero policy, as well as nutrient pollution rules that were recently shelved by the government in its “Levelling Up and Regeneration Bill” about to enter the final stages in the House of Lords.

The UK government has a housebuilding target of 300,000 new homes per year by the mid-2020s, and in parallel, the country is aiming to improve biodiversity and increase nature access for urban residents.

“This latest news characterises a deeply concerning trend in the Government’s approach to decarbonisation across the UK’s built environment. More and faster, not less and slower, action is needed if we are to meet our 2050 goals,” said Gillian Charlesworth, CEO of Building Research Establishment, on today’s announcement.

Late on Wednesday the Government announced a revised timeline developers will be required to deliver 10% net gain for new builds from January 2024 onwards, small sites from April 2024, and nationally significant infrastructure from 2025.

According to a statement from Defra, all guidance and regulations will be published in November. No update was provided on the national register for offsite units being launched.

Carbon Pulse has reached out to Defra for comment.

By Tom Woolnough – tom@carbon-pulse.com

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