Executive Summary｜I

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Biodiversity
Net Gainin England
Developing Effective
Market Mechanisms

Discussion Paper
October 2021

© Alex Sidney

Foreword

Lynn Scarlett, Chief External Affairs Officer
The Nature Conservancy
Worldwide, losses of biodiversity continue at an alarming pace, jeopardizing
natural systems and the benefits they provide to communities and economies.
Reflecting this trend, in the UK, 15 percent of terrestrial and freshwater species
face extinction. Changing this trajectory requires new policies and new rules thatreverse this trend. Offsetting biodiversity losses and incentivizing investments
in nature offer a ‘new deal for nature.” The potential for mobilizing the powerof a nature marketplace is significant, but that power requires clear goals andsmart rules. This report, Biodiversity Net Gain in England, builds on experienceswith biodiversity markets across the globe to help shape the UK’s pathway toprotecting and restoring nature.

Peter Simpson, Chief Executive Officer
Anglian Water GroupThe climate and biodiversity crisis is upon us. It is for us to solve now
because it will be too late if we leave it to future generations. Our region has
lost a lot of its biodiversity over the last century and we must join forces withothers to put it back, for its own sake but also to underpin growth and theregion’s economy. This welcome paper highlights challenges and issues thatneed to be addressed to ensure that Biodiversity Net Gain works for natureand is trusted by practitioners and stakeholders. I believe that, done right,
Biodiversity Net Gain can help reverse biodiversity loss. Done right, we canhelp the region’s beleaguered habitats and species and reap benefits for thecommunities we serve. And crucially, restoring biodiversity will help us both
mitigate climate change and adapt to the inevitable impacts we face, such as
flooding and drought.

Rosie Begg & Glenn Anderson – Landowners
Wendling Beck Exemplar ProjectThis timely report from TNC highlights the risks and areas needing furthertransparency to ensure BNG policy can deliver landscape change at scale.
Both buyers and sellers need more clarity if they are to plan projects properly
and engage with different markets early. From a landowner perspective, it
is imperative that clear rules around the stacking and bundling of different
ecosystem services are defined as quickly as possible. BNG has been key
to habitat restoration and nature creation around the world and the UK canbegin with strong foundations thanks to the lessons TNC share in this report.

Michael Copleston - Head of Land
RSPB England
If it’s done well, biodiversity gain should be a step change for habitat
creation and nature recovery in England. The conservation sector has
been clear that there are a lot of potential pitfalls in how biodiversity gainis designed and implemented - Government and every other organisation
involved in biodiversity gain will need to learn everything possible frominternational experience and academic research.

Developing
Biodiversity
Effective Market
Net Gain
Mechanisms
in England｜｜IIIIIPP

Table of Contents
Executive SummaryI

1. Introduction

1

1.1 Paper objectives 

4

1.2 Paper structure

4

2. BNG policy in England: where we are and where we are going
2.1 Biodiversity in development planning in England: an historical perspective

6
7

2.1.1. Adoption of a ‘no net loss’ policy 

82.1.2. From no net loss to biodiversity net gain

9

2.2 Expected changes under the Environment Bill

11

2.3 Current and anticipated BNG market activity

14

2.4 Potential risks associated with poor market design19

3. How can BNG markets generate maximum gains at least cost? 22

3.1 Key components for an effective BNG scheme

23

3.2 Assessing the current status of the BNG scheme in England 

26

4. Selected areas requiring further elaboration for BNG in England

30

4.1 Measuring biodiversity and driving the right type of investments 

33

4.1.1. Using ‘habitat’ as a proxy for biodiversity vs. addressing species requirements 

35

4.1.2. Other key considerations for Biodiversity Metric 3.0

37

4.2 Defining BU delivery mechanisms and enabling a level playing field 41

4.3 Stacking and bundling: How can projects mobilise diversified funding sources? 

43

4.4 Enabling functioning markets: what can government do? 48

4.4.1. Ensuring robust and predictable demand for BUs

49

4.4.2. Stimulating BU supply

50

4.4.3. Facilitating market transactions51

4.4.4. Stimulating investment in BU supply

54

5. Next steps: checklist for market players 

56Annex 1: BU delivery mechanisms in the US

60

｜PP ｜ IVIV

Biodiversity Net Gain in EnglandAnnex 2: Potential funding instruments for BNG65

Annex 3: Potential incentive mechanisms

67

Annex 4 : Glossary 

70Annex 5: References

74

Acknowledgements79

FiguresFigure ES-1. England’s progress towards establishing effective BNG markets

III

Figure 2-1. Relevant policy and wider developments influencing BNG in the UK,
including influential EU policy 

8Figure 2-2. Ongoing BNG market activities in England

14

Figure 2-3. BNG Market size in England

18

Figure 2-4. Annual BNG funding compared to public and non-profit biodiversity
funding in England in 2018-2019

19

Figure 4-1. Overview of main discussion areas covered in this section

32

Figure 4-2. What should a good biodiversity metric cover?

34

Figure 4-3. Objectives and associated rules for stacking and bundling

45

Figure A-1. Offsetting mechanisms in the US wetland and streams mitigation scheme

60

Figure A-2. Advantages and disadvantages of offsetting mechanisms prevalent in the US

61

Figure A-3. US historical uptake of habitat banks

64

Developing
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TablesTable 3-1. Key components for an effective BNG scheme 

24Table 3-2. UK progress on the BNG components

26

Table 4-1. Examples of time to maturity for different habitat types

39

Table 4-2. Types of stacking and bundling

44

Boxes
Box 1-1. Potential benefits of a mandatory BNG scheme

3

Box 2-1. The mitigation hierarchy for biodiversity: from avoidance to net gain9

Box 2-2. Post-Brexit environmental reforms in the UK – a rapid overview

11

Box 2-3. The biodiversity metric and UKHab classification

12

Box 2-4. Warwickshire: from participation in the Defra pilot to broader adoption

15

Box 2-5. The Wendling Beck Exemplar Project: an early supplier of BUs
within an emerging market

15

Box 2-6. US wetland and stream mitigation scheme – a quick overview

18

Box 2-7. The US wetland and stream mitigation program’s evolution: from on-site
to off-site mitigation

20

Box 4-1. Stacking and bundling: definitions44

Box 4-2. International lessons associated with stacking and bundling48

Box 4-3. No net loss or net gain market transparency measures in the US and Australia

53

Box A-1. Twelve standards of the US wetland and stream’s mandatory offset plan

62

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Biodiversity Net Gain in England

Biodiversity Net Gain in England:
Developing Effective Market Mechanisms｜I

P© Alex Sidney

Executive
Summary

Executive Summary

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Biodiversity Net Gain in EnglandT

he UK is in the process of establishing new
policies and rules for biodiversity, substituting
for those that applied under European Union
policy and legislation. Following a two-year transition
period, the Environment Bill (expected to receive
Royal Assent in 2021) will make biodiversity net gain
(BNG) mandatory for most housing and infrastructuredevelopments, including mining. Developers subject tothis requirement will need to provide a plan to deliver
BNG with their applications for consent, based on the
mitigation hierarchy and a prescribed habitat-based
metric. For impacts that cannot be avoided, minimised
or offset on site, infrastructure developers will need tocompensate for these impacts off site. They may be able
to achieve this through purchasing biodiversity units(BUs), thereby creating a market referred to as the BNG
scheme or BNG market in this paper.
This discussion paper has been prepared to support
the net gain goal for biodiversity on land and in
freshwater through approaches that deliver the best
outcomes at least cost. The paper seeks to support
the development and implementation of England’s BNG
policy. It also provides a framework that can help othercountries exploring biodiversity offset markets.
Establishing a well-functioning BNG scheme will
involve significant effort. A well-designed regulatory
framework is essential for the scheme to operate
effectively. To that end, England can leverage knowledge
from other countries to set up markets that work well fromthe start. In the United States, where biodiversity offset
markets are well developed and worth approximately
USD 3.9 billion a year, such rules have evolved over
several decades and are now firmly rooted. England canalso draw upon examples in Australia and continental
Europe.
Lessons from international experience, reflectedin this paper, suggest that 20 critical components
are essential to underpin effective BNG markets (seeTable 3-1 in the main report for more details). These
components can be grouped into three categories:© Alex Sidney

Executive Summary

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What

Who

How

BNG foundations and ground rules
set out the rules that all market
actors must follow for overall
positive outcomes for biodiversity

BU delivery mechanisms androles define rules for the use ofeach mechanism and roles andresponsibilities for all stakeholders

Disclosure and scheme
administration provide the basis for
ensuring that market actors comply
with the underlying rules.

Some essential building blocks are already in place in England, and others are under development, but a number ofcritical components require further clarity to achieve the best possible outcomes for biodiversity (as shown on figureES-1 and Table 3-2 in the main report).

FigureES-1.
England’sprogress
progress towards
BNG
markets
FigureES-1.
England’s
towardsestablishingestablishingeffective
effective
BNG
markets

What

BNG foundations and ground rules

Addressed

Mandated

3｜Loss/gain methodology

2｜Policy scope

Partially/not fully addressed
1｜Policy goal

4｜Mitigation hierarchy

5｜Strategic spatial plan
6｜BNG site selection
criteria

8｜BNG actions/additionality

7｜Durability criteria

9｜Habitat types/equivalence
10｜Duration of offset

11｜Performance criteria & standards
12｜Timing of compensation &credit release

Who

BU delivery mechanisms and roles

13｜BU delivery mechanisms
14｜Clear roles

How

Disclosure and scheme administration
15｜Net gain plans

16｜BU delivery plans
17｜Permitting process and timeline
18｜Monitoring and long-term
reporting
20｜BNG tracking system

Legend ｜Addressed via metric

19｜Enforcement

Addressed via Environment Bill

Partially/not fully addressed

Mandated via secondary legislation

｜IV

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Biodiversity Net Gain in England

A metric for calculating biodiversity losses and gains
is in place in England but is not without its limitations.
Its application and effectiveness will need to be assessed
through careful monitoring. Recognising that certain
losses are traded for uncertain gains where a habitat proxyis used, we recommend development of mechanisms toensure the maintenance of existing high-distinctivenesshabitats that are not designated or protected, but which
require ongoing maintenance management. The costsof maintaining existing high-distinctiveness habitats are
not always covered in the current system. If the focus of
the BNG scheme is mostly on creating new habitats, thisintroduces a genuine risk that existing habitats will not beprioritised or maintained.
Mechanisms for delivering gains in the form of
BUs need to be clarified, along with transparent rules
for setting up habitat banks that guarantee parity
between on-site and off-site compensation. Experiencefrom the US wetland and stream mitigation scheme has
shown that a non-level playing field between on- andoff-site compensation (for example, laxer monitoringand enforcement) can lead to a preference for on-sitecompensation despite poor ecological success. Studies
on ecological impact assessments (EcIAs) in Englandhave also identified poor effectiveness of on-site
ecological mitigation. Balanced rules for on- and off-site
BNG delivery are expected to increase demand for off-site
habitat banking, which may generate better biodiversity
outcomes and boost market liquidity.
Landowners need clear rules for stacking andbundling. This will make it easier to assess whether
they can sell multiple environmental services (including
biodiversity) emanating from land use changes and how
to do so. In the short term, a period of market design andlearning through trials will enable the development ofadequate rules for the BNG market.
To become established, the market will needadditional support. Measures can feed robust andpredictable demand, stimulate supply and smoothtransactional aspects of the market, such as market
transparency. Demand guarantees provided bygovernment and pre-purchase allowances areinterventions that ensure robust and predictable demandfor BUs. Interventions that stimulate supply of BUs vary
widely: greater flexibility in trading between adjacentStudies on ecological impact assessments in
England have also identified poor ecologicaleffectiveness of on-site mitigation measures.

and non-adjacent local planning authorities (LPAs),
supporting production of BUs in advance of transactions(‘habitat banking’), measures to de-risk BU supply, andfinancial incentives, such as governmental grants and tax
relief.
International good practice is to maintainconservation assets in perpetuity, in accordancewith no net loss or net gain policy. Thirty years could
prove to be insufficient time to achieve lasting gains,particularly for some habitats that take a long time toreach maturity and become fully colonised by thriving
populations of associated species. We recommend that
greater consideration be given to the need to maintainsome high-distinctiveness habitats beyond 30 years, toallow time for them to reach maturity and to ensure that
benefits are sustained over time.
Secondary legislation and guidance accompanying
the Environment Bill must provide clarity. To deliverpolicy efficiently and ensure clear market rules, it
must include defined governmental roles and sufficientregulatory capacity. Multiple government roles in themarket could result in perverse outcomes and conflicts ofinterest. Government core functions are to regulate BNG
for individual planning developments and to monitor
policy outcomes over time. Another important aspect isensuring sufficient regulatory capacity. BNG places anadditional burden on authorities already operating beyond
capacity, and many LPAs lack ecological expertise.

Executive Summary

In its current form, the BNG scheme in England could generate GBP
100 to 300 million annually. The market size prediction is based on market
modelling assuming an average price per BU of GBP 20,000, a loss of up to
15,000 BUs per year and a 50 to 100 percent off-site compensation delivery
rate (in line with the US wetlands and streams market, where approximately
80 percent of impacts were compensated for offsite in 2017). This would givelandowners acting as BU suppliers access to a predictable funding source
for sustainable land use change. However, some funds would go to covertransaction costs. This means that funding for net additions to biodiversity(over and above compensation) would be relatively insignificant, below GBP
10 to 30 million per year. Some possible additions to the scheme (such as
permitting stacking of biodiversity and other environmental credits) could
also have high transactional costs that need to be accounted for. It is criticalthat the costs of setting up the scheme do not outweigh the potential benefits
and additional revenues generated through it.
We recommend expanding the reach of a well-designed BNG scheme toleverage additional funding for biodiversity. Potential ways to do this overtime could include:

U

Crank up the level of ambition: raise the goal for net gains over timefrom 10 percent in 2023 to 30 percent in 2030 (or as soon as themarket is well established);

U

Extend the BNG requirement to Nationally Significant Infrastructure
Projects;U

Add marine habitats to the scope of mandatory net gain;

U

Boost the visibility and transparency of this market so it attracts morevoluntary contributions;U

Give clearer direction on spatial planning for BU delivery—andprioritise off- over on-site mitigation where it gives the best
outcomes for biodiversity (species as well as habitats) through local
nature recovery strategies;U

Use BNG to renature previously developed areas in the grey
belt (post-industrial land or former mines, unused factories andcommercial areas) not suitable for infrastructure development;U

Tap the BNG processes for wider UK nature recovery ambitions—for
example, by deploying the biodiversity metric for approaches tohabitat evaluation, management and pricing under environmental
land management schemes (ELMS)© Glenn Anderson｜VP© Glenn Anderson

Biodiversity Net Gain
Introduction
in England

1. Introduction
Biodiversity Net Gain in England:
Developing Effective Market Mechanisms

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Biodiversity Net Gain in EnglandB

iodiversity continues to decline globally, driven
by unprecedented urban expansion, conversionof land for agriculture, development of
infrastructure to meet the demands of an increasingly
global human population and climate change (Bull etal., 2020; Diaz et al., 2020; Garibaldi et al., 2020; IPBES,
2019; Maron et al., 2018; UN Population Division, 2019).
In the UK, despite starting from a relatively impoverishedbaseline, the National Biodiversity Network’s ‘State of
Nature’ report for 2019 (www.nbn.org.uk) reported a 13
percent decline across UK taxa since 1970, with 15 percent
of terrestrial and freshwater species considered to befacing extinction (Haxyhow et al., 2019). For mammals, thefigure is as high as 25 percent (Matthews and Harrower,2020).
Global and national targets to halt biodiversity
decline have not been met. New global agreements callfor much greater emphasis on restoration of biodiversity,
ecosystems and the services they provide, to compensate
for losses. The 15th Conference of the Parties (CoP) to
the UN Convention on Biological Diversity (CBD) is in theprocess of negotiating a ‘new deal for nature’ to be adopted
in 2022. This will include the universal adoption of the
mitigation hierarchy, which mandates avoiding impacts
as the first and most important step, before minimising
impacts and offsetting residual impacts. In addition, thedeal is likely to set ambitious but ‘plausible’ global goals of
no net loss by 2030, and 10 percent to 15 percent net gain
by 2050 (CBD, 2020). Reaching the CBD’s global targets
will require much greater emphasis on avoiding new
impacts to biodiversity and restoring already converted
and degraded ecosystems while offsetting residual losses.
Biodiversity offsets have been identified as a marketbased mechanism that could generate significant
private sector funding flows for biodiversity. A recent
report by the Paulson Institute, The Nature Conservancy
and the Cornell Atkinson Center for Sustainability (2020),
amongst others, reviewed the biodiversity-funding
potential of mandatory no net loss or net gain policies.
The report concluded that about 95 percent of impacts tonatural areas are currently not offset and estimated thatcompensation of approximately USD 162 to 168 billion peryear would be needed to address these impacts to achieve
no net loss across all countries. This equates to GBP 116 to
121 billion per year, approximately 25 percent to 35 percentof the estimated global biodiversity financing gap (Deutz

To date:42
Countries

Regulatory no net loss
or net gain requirements
in place

66
Countries

Established provisions
to enable voluntary no
net loss or net gain

28
Countries

Undertaking initial
explorations of policy
options

59

No policies in place

Countries

Source: zu Ermgassen et al., 2019

et al., 2020). To date, 42 countries have regulatory no net
loss or net gain requirements in place, 66 countries haveestablished provisions to enable voluntary no net loss or
net gain, 28 are undertaking initial explorations of policy
options, and 59 countries have no such policies in place (zuErmgassen et al., 2019)).
The UK is establishing new policies and rulesets forbiodiversity on land and for freshwater, substituting
for those that applied under European Union policy
and legislation, which include provisions for mandatory
net gains. The Environment Bill (expected to receive
Royal Assent in 2021) will make BNG mandatory formost types of development from 2023. As a solid starting
point, England has adopted a biodiversity metric (Pankset al., 2021), which gives clear, nationwide rules on how
to assess losses and gains in biodiversity for purposes ofdemonstrating BNG. The national approach sets Englandapart from many other biodiversity offset schemes (suchas in the US, Australia, Germany or France), which use
many different regional metrics, resulting in a lack ofconsistency (ICF and IEEP, 2014) and making it challenging
to track outcomes at a national level.
Potential benefits from a mandatory BNG schemevary across stakeholders (see Box 1.1). To ensure thatthe BNG scheme reaches its full potential in England andto avoid risks which can result from a poorly designed
scheme, careful policy and regulatory design is key.

Introduction｜3

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Box 1-1. Potential benefits of a mandatory BNG scheme

For society as a whole, mandatory BNG
incentivises protection of biodiversity byinternalising the costs of biodiversity loss.
Without a mandatory BNG requirement,
developers are not liable for the costs of habitat
destruction resulting from housing and land use
development. They have a limited incentive to
reduce their negative impacts. Mandatory BNG
holds developers accountable for their actions, inline with the polluter pays principle. Because theymust pay to offset any residual impacts to ensure
overall net gain, developers have an incentive tominimise their impacts on biodiversity. In wellfunctioning markets, prices of highly distinctive
habitats are prohibitively high and a powerfuldisincentive.
For stakeholders looking to transform land use,
BNG will allow mobilising private sector funding
for these activities. As a point of reference, in2016 alone, USD 4.8 billion (GBP 3.4 billion)
in transactions were generated through BNG
or no net loss mitigation banks and financial
compensation funds worldwide (Bennet et al.,2017). Approximately USD 3.9 billion (GBP 2.8
billion) was generated in the U.S. alone, mostly
through the wetland and streams mitigation
scheme (see Box 2.6). Substantial funding flows
to landowners significantly increase the financial
viability of sustainable land management. Habitat
creation, restoration and conservation become afinancially attractive land use alternative, able tocompete with more conventional income sources
such as agriculture.
For developers, a well-designed BNG scheme
would lead to efficient and cost-effective
permitting processes. Studies on established
net gain or no net loss schemes internationallyhighlight how well-functioning biodiversity
markets with numerous third-party BU suppliers
can generate cost- and time-saving benefits fordevelopers. In New South Wales, Australia, habitatbanking resulted in the halving of developers’
time-to-permit and cost savings of AUD 35 million(GBP 20 million) across 20 projects.

For people and communities near on-site andoff-site offsets, BNG schemes can generate
multiple co-benefits. The value of being in nature
for mental health is widely recognized (Bratman etal., 2019). Reversing the destruction of biodiversity
and increasing its abundance through net gain
policy will directly benefit psychological wellbeing. Further, economic co-benefits associatedwith tourism, increased property prices andemployment are likely. Regarding the latter, studies
from the US suggest that every USD 1 million (GBP
0.7 million) spent on offsets delivers from seven to
40 jobs, mostly in rural areas (Duke and ten Kate,2014).
For local authorities, BNG may offer income
opportunities. Public land can be used for the
supply of biodiversity units (albeit risks of crowding
out private BU suppliers would need to be carefully
considered). For example, local authorities in
Warwickshire and Greater Manchester are
already pursuing BNG as an opportunity to fundenhancements to their local parks and green
spaces while generating additional income.
The mandatory BNG rule could enableestablishment of well-functioning markets,
spurring demand for voluntary biodiversity
offsets. Such schemes are quite rare at present,
particularly when compared to the rapid growthin carbon offsets supported by clear rules orvoluntary agreements such as the Woodland
Carbon Code (WCC). A well-established BNG
scheme could result in more companies mitigating
and offsetting their biodiversity impacts to become‘biodiversity neutral’. This could include policies tooffset their historical impacts and be applied toreversing biodiversity loss associated with pastdevelopments and land degradation, rather thanbeing limited to new developments.

Source: Authors

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Biodiversity Net Gain in England

1.1 Paper objectives
This discussion paper has been prepared by a group ofactors looking to support the net gain goal for biodiversity
on land and for freshwater through approaches thatdeliver the best outcomes at least cost. No net loss or
net gain policies do not always achieve their ambitions( zu Ermgassen et al., 2019). This paper is intended tosupport implementation of England’s BNG policy during
the upcoming two-year transition period, inform its future
development and provide the basis for informing othercountries looking to establish such markets.

The paper is intended for:

The Nature Conservancy, with support of eCountability
and eftec and input from many others, has led the
preparation of this discussion paper, drawing on direct
experiences with biodiversity offsets in a range ofcountries, including the UK, the United States, Australia,
Germany, France, Colombia and Mongolia. We also build
on experience from direct support to the Wendling Beck
Exemplar Project, a BNG project which has participatedin Natural England’s national credit pilot scheme (seeBox 2.5). We conducted numerous interviews with UK,
European and US stakeholders involved in biodiversity no
net loss and net gain markets to draw lessons from theirexperiences.

U

Policymakers and executive public bodies (atnational and local level);U

Developers affected by the upcoming BNG
policy;U

Stakeholders interested to act as biodiversity
unit (BU) suppliers (including landowners orenvironmental service companies)

U

Other parties (such as consultants or lawyers)
who want to support the development of thepolicy and the market, by providing technicalassistance or acting as intermediaries.

U

The wider international environmental
community with an interest in better
understanding BNG schemes, supporting theestablishment of BNG in the UK, or disseminating
lessons from the English experience in othercountries.

1.2 Paper structure
The paper furthers this discussion in the following sections:

Section 2

Section 3

Section 2 provides historical and contextual
background on the evolution of the UK’s BNG policy
to date, including upcoming changes with the adoptionof the Environment Bill, current and anticipated market
activity, as well as potential risks associated with a poorly
designed regulatory framework. It will be of particular
relevance to readers who are unfamiliar with the BNG
scheme in England and with recent and anticipated market
developments.

Section 3 outlines key components for effective BNG
markets, drawing on international experience with moremature markets before assessing current progress in the
English market against these components and areas for
improvement. This section provides an overall roadmap
for setting up a regulatory framework that will provide
clarity and transparency to key market players. It will beof particular relevance to policymakers and implementing
agencies looking to design markets.

Introduction｜5

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Section 4

Section 4 discusses in more detail selected areas for the establishment of functioning BNG markets in England:
U

U

Measuring biodiversity and driving the right typeof investments. This subsection examines how
Biodiversity Metric 3.0 (Panks et al., 2021) will
provide the basis for estimating biodiversity losses
and gains in the form of BUs, the ‘currency’ for the
BNG scheme. We argue that rigorous monitoring of
its application will be needed to provide the basis
for possible further refinement.

U

Stacking and bundling. Rules on how BNG relateswith other environmental credit and funding
schemes also are not clear. This creates challenges
for BU suppliers hoping to forecast the revenue
potential of sustainable land use interventions.
Clear objectives and principles are needed to guidethe definition of rules and guidelines in this area.

U

Enabling efficient markets through government
support. Supply-side, demand-side, exchange
and financing measures will be needed to lower
transaction costs and boost participation in BNG
markets, particularly in the early period whenmarkets need to be established.

Defining BU delivery mechanisms and enablinga level playing field. BU delivery mechanisms
envisaged in the BNG scheme are not clear. These
need to be clearly defined to ensure a level playing
field.

Section 5

Section 5 summarises key recommendations in a checklist for the stakeholders involved in developing the UK’s
BNG policy and market. These range from national policymakers to landowners interested in generating biodiversity
units on their own land.
In addition:

U

Annex 1 provides an overview of BU delivery
mechanisms that are in place in the US wetlandand stream mitigation scheme and identifies how
they have evolved over time;
Annex 2 sets out potential funding mechanismsthat could help support the development of BU
markets;

U

Annex 3 sets out other potential incentive
schemes;U

Annex 4 contains a glossary of key terms used inthis paper;U

Annex 5 contains the list of references used forthis paper.

© Andrew NealU

Biodiversity Net Gain in England

2. BNG policy inEngland: where
we are and where
we are going
Biodiversity Net Gain in England:
Developing Effective Market Mechanisms© Glenn Anderson｜

P｜6BNG policy in England: where we are and where we are going© Glenn Anderson｜7

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U Since the adoption of the UK’s Town and Country Planning
System in 1947, various UK and EU policies have paved theway for mandatory BNG.
U The Environment Bill defines new rules for taking accountof biodiversity in development planning, by introducing
mandatory biodiversity net gain requirements for most typesof development. The Bill is expected to be adopted in 2021
with net gain requirements becoming mandatory in thesecond half of 2023.
U Market activity in the area of biodiversity offsets has
increased significantly in advance of adoption of theEnvironment Bill and other regulatory developments.
U Once the market has matured, it is estimated thatmandatory net gain could offset impacts on approximately
6,300 hectares annually and generate GBP 100 million to
GBP 300 million in biodiversity funding per year.
U However, if the regulatory BNG framework is unclear, this
could generate significant risks. Those risks are spelled out
in this section to form the basis for improved regulatory
design.

2.1 Biodiversity in development
planning in England:an historical perspective
Consideration of biodiversity has grown more prominent over the years in
the UK planning system. This builds on a long history of efforts to safeguard
nature since 1947, when the UK’s Town and Country Planning System received
royal assent and Sites of Special Scientific Interest (SSSIs) were established.
Such efforts were heavily influenced by EU policy and legislation (Figure 2-1).
Policies have evolved over the years from a focus on damage limitation towards
more explicit requirements to enhance biodiversity in the planning and deliveryof infrastructure and housing development, combined with greater emphasis onmarket-based approaches.

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Biodiversity Net Gain in England

Figure 2-1 Relevant policy and wider developments influencing BNG in the UK, including influential EU policy

Figure 2-1. Relevant policy and wider developments influencing BNG in the UK, including influential EU policy

National
Planning
PolicyFramework

EU

UK

UK’s town andcountry planningsystem (including
establishment ofSites of Special
Interest)

1947
1979

1985

EU Birds
Directive(lastchangedin 2009)

EU EIA
directive

Planning
PolicyStatement 9:
Biodiversity& GeologicalConservation(PPS9) issues

UK Natural
Environment
and Rural
Communities(NERC) Act

DEFRA
Habitat-based
biodiversity metricoffsetdeveloped
scoping
study

Series of
DEFRA
pilot offset
projects

RevisedNational
Planning
PolicyFramework

BNG
becomesmandatory

2005

2006

2009

2012

2019

2023

2010

1992

2003

1992

1992

EU Habitats
Directives(lastchanged in2013),
includingthe EUNatura 2000
Network

EU SEA
Directive

EU 2020
Biodiversity
Strategy
includes “nonet loss”

1992

2011

2021

1992
Expected

Environment
Bill passes
into law

Source: Authors

2.1.1. Adoption of a ‘no net loss’ policy
EU directives and biodiversity strategies have paved
the way for a no net loss policy in the UK. EU directives
have underpinned the UK’s approach to considerationof ecology (and later biodiversity) in development
planning from 1973 (when the UK entered the EU)
until its exit in 2020. These have included directives
on nature protection such as the Birds Directive (1979)
and the Habitats Directives (1992) and those related
to impact assessment methodologies, such as theStrategic Environmental Assessment (2003) and theEnvironmental Impact Assessment (1985) Directives.
Despite increasing obligations to make risks to natureand biodiversity transparent, biodiversity objectives havebeen largely aspirational, and declines in biodiversity
continued.
An explicit requirement to demonstrate no net loss
outcomes from development was introduced in 2011as part of the EU 2020 Biodiversity Strategy, which
committed to halt the loss and degradation of terrestrial
and marine biodiversity and ecosystem services by 2020.
It introduced a goal to maintain and restore ecosystems
and their services (Article 2) and a commitment tointroduce policies requiring ‘no net loss of biodiversity andecosystem services’ (Article 7). Through these articles,

the EU 2020 Biodiversity Strategy placed an obligation on
Member States not only to limit damage to biodiversity
from economic development, but also to implement
tangible measures to protect and enhance it. It also madeexplicit reference to use compensation or offsetting
schemes as a mechanism for achieving no net loss. The
EU new 2030 Biodiversity Strategy adopted in 2021 setsout even stronger ambitions for biodiversity recovery in
the long term, based on an EU nature restoration plan.
The introduction of a ‘no net loss’ policy across the
EU through the EU 2020 Biodiversity Strategy sparked
interest in the addition of an ‘offset’ step to the mitigation
hierarchy (Box 2-1). The mitigation hierarchy has long
been accepted as an important conceptual framework
for ecological mitigation in impact assessment. In theEU, however, it had typically been applied with an on-site
focus; avoidance opportunities were constrained by thereactive nature of many national planning systems andtherefore seldom achieved. Work by the Business andBiodiversity Offsets Programme (BBOP, 2009), amongst
others, emphasised the need for clear policies on no net
loss to guide implementation of the mitigation hierarchy
for tangible outcomes (Treweek and ten Kate, 2019).

BNG policy in England: where we are and where we are going｜9P

Box 2-1. The mitigation hierarchy for biodiversity: from avoidance to net gain
Box 2-1. The mitigation hierarchy for biodiversity: from avoidance to net gain

1

2

3

Net Loss ofBiodiversity

Net Gain of
Biodiversity

The first and most important step of the mitigation hierarchy is to avoid adverse impacts, including the consideration of project alternatives. The second step consists of measures to reduce impacts that cannot be avoided,
followed by work to restore or rehabilitate damaged ecosystems or species populations on the site of the development (Step 3). Offsets (Step 4) can be used as a measure of last resort if and when it can be demonstrated thatappropriate efforts have been made, through other steps in the mitigation hierarchy, to minimise residual impacts.
Offsets can be either on site or off site. They can be used to achieve either a no net loss objective or a net gain inbiodiversity following the development.

4

Net
gain

4

No
net
loss

Steps in the mitigation hierachy｜
Predicted impact

Avoidance

Minimization

Restoration/Rehabilitation

OffsetSource: Adapted from Bennet et al., 2017

2.1.2. From no net loss to biodiversity net gain
In the UK, the need for improved ecologicaloutcomes following development was highlighted ina series of critical reviews of ecological provisions in
the Environmental Impact Assessment (EIA) process.
(Treweek, 1995, 1996; Thompson et al., 1997; Treweek
and Thompson, 1997; Treweek et al., 1999; and Byron
et al., 2000). Some of the systemic failings identified at
the time were attributed to the EU’s EIA Directive (andconsequently the UK’s EIA Regulations) requirements to
identify mitigation measures but not to implement them.
This often resulted in unrealistic mitigation proposals
and a failure to allocate sufficient funds for their delivery.
Where ecological mitigation was carried out, it was
generally on site, often in suboptimal conditions and at

an inadequate scale with little option to optimise spatialdelivery of mitigation or achieve economies of scale. The
requirement to avoid impacts came with caveats (withsignificant impacts to be avoided ‘if possible’), and there
was no definite requirement to follow up or monitor
outcomes. It was increasingly clear that, without greater
emphasis on restorative action, development would
continue to erode biodiversity.
A number of factors have catalysed more explicit
emphasis on restorative action. Requirements tocompensate for residual impacts on the EU Natura
2000 network established some precedent for offsite interventions to restore or create habitats. Interest

Biodiversity Net Gain in Englandin mitigation banking and other biodiversity offset
mechanisms began to gain traction in 2005 when
the government issued Planning Policy Statement 9:
Biodiversity and Geological Conservation (PPS9). It
advised local planning authorities on policies for theprotection of biodiversity and geological conservation
through the planning system.
PPS9 placed a clear duty on local planning authorities(the ‘biodiversity duty’) to ensure that protected species
and habitats in the UK would be a ‘material consideration’in a planning application. ‘Plan policies and planning
decisions should aim to maintain, enhance, restore or
add to biodiversity and geological conservation interests’,
PPS9 stated. It also promoted incorporating biodiversity‘within the design of development’ at a more strategiclevel, urging local planning authorities to maintain habitat
networks by ‘avoiding or repairing the fragmentationand isolation of natural habitats’ and protecting these
networks from development. (‘Such habitat networks
should be protected from development and, where
possible, strengthened by or integrated within it.’1). In
2006, the Natural Environment and Rural Communities(NERC) Act placed a duty to conserve biodiversity on
public authorities in England. This included explicit
requirements to enhance, restore or protect certain
species or habitats.
In 2007, responding to increasing concerns about
the loss of non-designated sites and features in the‘wider countryside’, Defra identified a need to explore
new policy options, including the creation of markets inbiodiversity and biodiversity incentives such as offsets(Defra, 2007). Defra found that although the ‘biodiversity
duty’ had made biodiversity a greater priority within
the planning system, it was open to interpretation withrespect to requirements to compensate for the residual
adverse effects of a development proposal (Defra, 2009).
Defra then carried out a scoping study on the design
and use of biodiversity offsets in an English context.
The study reviewed policies and schemes being usedworldwide and concluded that offsets could play a partin implementing policies towards no net loss or a net
gain of biodiversity in England (Defra, 2009). The study
found that the department could help streamline theplanning process by reducing outcome uncertainties,
1 PPS9 was replaced by the National Planning Policy Framework in 2012.

2005

Planning Policy Statement 9

Interest in mitigation banking and other biodiversity
offset mechanisms began to gain traction.

© Todor Tilev/TNC Photo Contest 2021

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creating economic incentives for landowners to invest
in conservation activities and helping ensure that thosehaving a significant residual impact on biodiversity would
bear some of the costs associated with its loss.
The National Planning Policy Framework of 2012
introduced an explicit requirement to minimise impacts
on biodiversity and provide net gains in biodiversity as
part of the government’s commitment to halt biodiversity
decline ((MHCLG, 2012).
A habitat-based metric developed by Treweek andButcher (2010) and further described by Treweek,
Butcher and Temple (2010) was used as the basis for aseries of pilot offset projects (Defra, 2012). Stakeholders
felt that the metric was largely beneficial in providing aquantified, consistent, transparent and relatively simple
tool to account for a wider range of biodiversity impacts
than before. The metric has been further developed andincorporated in tools developed by Natural England andDefra to underpin biodiversity net gain assessments
through the Environment Bill (Panks et al.,2021). The
revised National Planning Policy Framework, published in
2019, retained the biodiversity duty and also referenced
the need to ‘minimise impacts and provide net gains forbiodiversity’.

BNG policy in England: where we are and where we are going｜11P

2.2 Expected changes under the Environment BillThe Environment Bill will require biodiversity net gain to be achieved and demonstrated for certain types of new
development in England. It will not change existing legal protections for biodiversity and will not apply to NationallySignificant Infrastructure Projects (NSIPs) or development in the marine environment.

Box 2-2. Post-Brexit environmental reforms in the UK – a rapid overview

Given the UK’s historical reliance on EU
environmental rules, exiting the European Union
created a need for a new legal framework to ensure
effective environmental protections continue.
Here are key documents organizing the post-Brexit
environmental policy framework:
The 25 Year Environment Plan (2018) presents
the UK government’s goal for improving theenvironment within a generation. The plan setsout a vision for leaving habitats for wildlife, air andwater quality in a better state than they found it.
The Agriculture Bill (2020) is inspired by thisplan and outlines how environmental subsidies
will give farmers and land managers in Englandan incentive to adopt more sustainable land
management practices. Through Environmental
Land Management Schemes (ELMs), landowners
can receive payments for the delivery of ‘public
goods’. These relate to local nature, landscapeand ecosystem recovery, better air and water
quality, higher animal welfare standards, improved
access to the countryside and measures to reduce
flooding. Such environmental subsidies are
anticipated to come into force by 2027 and will
replace agricultural subsidies under the Common
Agricultural Policy.
The Environment Bill is designed to translate the
25 Year Environment Plan’s visions into specificactions. It prescribes how to protect and improve
the natural environment in the UK by providing
targets, policies and plans. Next to mandatory
biodiversity net gain (BNG), it includes provisions
on resource efficiency, waste, air quality, recallof products that do not meet environmental
standards, water, regulation of chemicals andwider connected purposes.

Sources: DEFRA 2018, UK Parliament (2021), House of Commons(2020)The Environment Bill is anticipated to receive Royal Assent in 2021. BNG will become mandatory for all new
developments in the second half of 2023. Until then, the mandatory net gain regime introduced by the Environment Billwill be implemented in a transition period during which practical experience will be reviewed and important secondary
legislation developed, including provisions related to irreplaceable habitat and stacking and bundling of payments fordifferent ecosystem goods and services.
A robust and repeatable habitat classification for baseline surveys and monitoring is essential for ecological impact
assessment and projects seeking to demonstrate biodiversity net gain. In England, proposed measures to achieve atleast 10 percent BNG will need to be calculated using Biodiversity Metric 3.0 (Panks et al., 2021) and outlined in a
biodiversity gain plan submitted with planning applications.
Biodiversity of the development site before and after development, as well as any registered offsite biodiversity
gains, will be scored in terms of biodiversity units. These use habitat as a proxy for overall biodiversity and reflect

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Biodiversity Net Gain in England

the type, area, distinctiveness and condition of habitats, as described in Box 2-3. Scores are adjusted to account for
strategic significance, the difficulty of creating or restoring habitat (risk of failure) and the time taken to reach target
condition. The use of one habitat classification within the Biodiversity Metric 3.0 makes it possible to track losses andgains of habitat in a consistent way and evaluate outcomes at national level. Habitats included in the biodiversity gain
plan must be secured for at least 30 years. The 10 percent BNG requirement applies only to direct footprint losses due
to development: There is no requirement to offset indirect or cumulative impacts, even though these can be significant.
Box 2-3. The biodiversity metric and UKHab classification

The biodiversity metric (Treweek, Butcher and Temple, 2010) was used in pilot projects conducted by Defra(Defra, 2012) and further developed by Natural England (Biodiversity Metric 3.0 – Panks et al., 2021). It underpins
England’s mandatory BNG policy. Natural England has developed tools and guidance for using the metric to tracklosses of biodiversity units (due to impacts) and gains (due to habitat restoration or creation). Developers calculate
the number of BUs that they are required to deliver to achieve BNG. Potential suppliers of BUs (landowners or
managers) use the metric to determine the habitat types they will target and the management they will introduce
to achieve gains within their land area. Developers outline their commitments in a biodiversity net gain delivery
plan, which planners review before giving consent for development.
The metric uses habitat (vegetation type) as a proxy for overall biodiversity. Affected intertidal and terrestrial
habitats in England have been assigned distinctiveness scores intended to reflect their habitat assessment using
the UK Habitat Classification (UKHab), a comprehensive habitat classification system that helps ecologists identify
and map habitats in a field in a consistent and unified way based on five levels of increasing detail (Edmonds
et al., 2014; www.ukhab.org). In addition, UKHab incorporates secondary codes to reflect condition, origin or
management regime, diversity and value for conservation. Habitat parcels are scored for their condition in thefield. This needs to happen at the right time of year (Spring is ideal in England.)The number of biodiversity units (BUs) per hectare (the proposed currency for BNG) is estimated based on
habitat area x distinctiveness x condition. BUs are also adjusted on the basis of uncertainty (the extent to whichassured outcomes can be achieved from efforts to restore or create a particular habitat type) and the time needed
to reach target condition. An adapted version is used for rivers and streams and another for linear features ofhabitat such as hedgerows.
Biodiversity Metric 3.0 (Panks et al., 2021) uses habitat types as a proxy for overall biodiversity. It can be applied
to all UK sites/habitats and is fungible but also represents a ‘lowest common denominator’ in that it does notaddress the particular requirements of species’ populations. Supplementary methods may be necessary to ensurethat high-priority biodiversity features for which habitat is not a good surrogate are appropriately measured andoffset, but there is not a plan to incorporate specific species-related objectives into the BNG scheme or the metricframework.

© Ken Geiger

Sources: Butcher et al., 2020a, 2020b

BNG policy in England: where we are and where we are going

Gains can be delivered on site, off site or via statutory
biodiversity credits (credits procured through agovernment-operated scheme). Offsets are defined asmeasurable conservation outcomes; they must be basedon a credible and consistent method for quantifying losses
and gains so that the point of ecological equivalence (nonet loss) can be clearly established. Gains can be achieved
through a combination of:U

Habitat enhancement within development sites.
Where works are involved in order to achievethis, there must be a planning condition, planningobligation or conservation covenant that ensuresthat the works will be maintained for at least 30
years after the development is completed.

U

Habitat enhancement can be made to a siteother than the development site but only where
the enhancement is required under a planning
condition or conservation covenant, recorded in a
proposed new Defra biodiversity gain site registerand assured of being maintained for at least 30
years. This off-site enhancement can be carriedout by the developer or by a third party. Where
developers purchase biodiversity units from offsite enhancement from third parties, this createsa BNG market.

U

Government as a supplier of last resort forbiodiversity units. Government is investigating
ways for it to function as a supplier of lastresort, in the event that developers are unable tomeet their requirements for biodiversity credits
elsewhere. It is anticipated that credit pricing
would be set above the market price, so that itremains attractive for developers to organise
their own qualifying biodiversity enhancements(either at the development site or elsewhere) if
they have the option to do so.

The government wants to discourage damage tohabitats on future sites before development starts because
it could reduce pre-development biodiversity units andmake it easier to achieve a 10 percent improvement. To
that end, damage to habitats as a result of activities after
30 January 2020 will not be taken into account for the
purpose of assessing predevelopment biodiversity value,
unless the developer has permission.

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Biodiversity gains under the Environment Bill are
expected to contribute to the national nature recovery
network and to local nature recovery strategies. The intent
of the nature recovery network is to protect and enhanceareas of particular importance for biodiversity, in line withthe recommendations in the Lawton Review (Lawton etal., 2010) and the National Planning Policy Framework(NPPF) (MHCLG, 2019). It also is meant to provide an
incentive to deliver net gains where they will contributeto strategic objectives for biodiversity. Supply of BUs
from land managers is anticipated to come primarily fromenhancement of habitats in poor or moderate condition
or from the creation of higher-distinctiveness habitats oncurrent habitats of low or medium distinctiveness.
The NPPF requires local plans to take a strategic
approach to maintaining and enhancing networks ofhabitats and green infrastructure, and to enhance natural
capital at a catchment or landscape scale across local
authority boundaries. Furthermore, in paragraph 174, the
NPPF includes exacting requirements for local plans to“identify, map and safeguard components of local wildliferich habitats and wider ecological networks, including …
designated sites of importance for biodiversity; wildlife
corridors and stepping stones … and areas identified bynational and local partnerships for habitat management,enhancement, restoration or creation” (MHCLG, 2019).
To meet their NPPF requirements, local authorities
will need to consider how best to implement biodiversity
offsets to optimise outcomes for biodiversity, using thebiodiversity metric to account for losses and gains within
their plan area.
Potential issues with the underlying methodology andapplication of the biodiversity metric are discussed in moredetail in Section 4.1.

Biodiversity gains under theEnvironment Bill are expected
to contribute to the national
nature recovery networkand to local nature recovery
strategies.

｜14

Biodiversity Net Gain in England© Glenn AndersonP

2.3 Current and anticipated BNG market activity
In response to the development of the mandatory BNG policy proposals in the Environment Bill, pre-BNG market
activity has increased across different parts of the expected market, as shown in Figure 2.2.

Figure 2-2. Ongoing BNG market activities in England
Figure 2-2 Ongoing BNG market activities in England
Administration

Several local planning authorities have thus far set up their own BNG schemes, incl. in Warwickshire, Devon, Leeds,
Newcastle, Oxfordshire, Lichfield, Plymouth, or the Greater Manchester Combined Authority

MarketDemandHousing developers start tolook for and buy biodiversity
units e.g. Barratt, Persimmon
or Taylor Wimpey
Infrastructure developers
start to look for and buy
biodiversity units e.g. Balfour
Beatty, Morgan Sindall or
Galliford Try

Direct exchange between
buyers and sellers
Brokers connect buyers andsellers via market places, e.g.
the Environment Bank
Land agencies offer strategy
guidance and offsetting
support to developers e.g.
Savills
Local authorities/ county
councils begin to serve asintermediaries between
buyers and sellers, e.g.
Warwickshire

SupplyPrivate landowners/ habitatbankers start to develop andsell biodiversity units, e.g.
the WBEP in Norfolk or theEnvironment Bank
Local authorities/ county
councils use public land to
generate/ sell biodiversity
units, e.g. in Greater
Manchester or Warwickshire

Source:Adaptedeftec et al., 2021
and market
participant interviews
Source: Adapted from eftec
et al.,
2021from(forthcoming)and(forthcoming)
market participant
interview

Within the land use planning system, which is the basis for policy (and therefore market) regulation, some planning
authorities or regions have been implementing BNG policy for several years already (Box 2-4).

BNG policy in England: where we are and where we are going｜15

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Box 2-4. Warwickshire: from participation in the Defra pilot to broader adoption

Warwickshire’s Coventry and Solihull subregion participated in the national biodiversity offsetting pilot
in 2012 to 2014 as one of six pioneering regions. Due to the pilot’s success, all LPAs within the subregion
agreed to continue mandatory net gain for almost all development applications. Relying on the Warwickshire
biodiversity impact assessment (BIA), sites’ pre- and post-development biodiversity values are calculated ina uniform and transparent manner. The LPAs’ ecological advisors review these BIAs, assure adherence to themitigation hierarchy and advise on site enhancements.
Warwickshire County Council initially acted as a broker between developers and landowners and provided BUsfrom public land. Where local markets matured, it rolled back these actions and transitioned to a regulatoryrole only. Across the subregion, developers have markedly increased their efforts to avoid biodiversity losses.
Landowners with an interest in serving as BU suppliers need on average one year to enter the market.
Sources: Warwickshire County Council, 2020; Natural England, 2019a; eftec et al., 2021 (forthcoming)

Similar initiatives have developed in other areas, such as Oxfordshire and Greater Manchester. As in Warwickshire,these are developing:
U Processes for collaboration on delivering BNG between neighbouring planning authorities; andU Mechanisms for biodiversity unit supply-side involvement by the local authority. For example, this entails
planning local, publicly run habitat banks, or acting as an agent to organise potential BU supply.
Supply-side activities include habitat restoration and creation to generate and sell biodiversity units (BUs).
Ongoing activity by individual land managers is poorly understood, although many are now interested in the potential
market opportunities. Some exemplar projects to supply BUs—such as the Wendling Beck Exemplar Project in Norfolk(see Box 2-5) or Alscot in Warwickshire—are developing land management options and associated business plans for
supply of BUs.
Box 2-5. The Wendling Beck Exemplar Project: an early supplier of BUs within an
emerging market

The Wendling Beck Exemplar Project (WBEP) is a landscape-scale project aiming to transform 784 hectaresof farmland through biodiversity restoration, creation and enhancement. Located north of the market townof Dereham in Norfolk, the project site is within the Wendling Beck catchment and includes rivers, grasslands,
woodlands, wetlands and other habitats. Landscape transformation is likely to be funded via the sale of BUs andother forms of environmental credits (including nutrient trading and carbon).
Preparation of the WBEP is piloted by the Wendling Beck Alliance (WBA), a multi-stakeholder collaborationof landowners, local government and non-governmental organisations. The four farmer/landowners who own
the majority of the land, Norfolk Wildlife Trust, Norfolk County Council, Norfolk Rivers Trust, Norfolk FWAG and
The Nature Conservancy, are all members of the alliance.
A deliberate approach to learning and dissemination is embedded in the project. The WBA is committed tosharing experiences nationally and globally with policymakers and practitioners. In 2020-2021, the project
participated in Natural England’s biodiversity credit pilot and is in continuous dialogue with policymakers to,amongst others, help clarify issues around stacking and bundling from a practitioner’s perspective.
Sources: Authors

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Biodiversity Net Gain in EnglandSome of these were part of Natural England’s credit pilot
project to design a biodiversity credit investment pipeline.
A total of 87 projects responded to Natural England’scall for projects; nine were funded to develop a BNG site
assessment report to inform habitat management plans
and help calculate predicted biodiversity unit provisions.

Next to land use planning system actors, several
private market actors also are taking on intermediaryroles, facilitating transactions and exchange between
developers and biodiversity unit suppliers. In areas
where it anticipates an active market, the Environment
Bank now purchases BUs from landowners, sells them todevelopers and takes on the long-term risk. Brokers, suchas EnTrade, are working in specific areas of the country
with individual land managers to develop options for
how BUs would be supplied, enabling them to respondquickly to future demand. Start-ups like Zellar offer online
marketplaces to match buyers and sellers. And large landagencies (e.g. Savills) are beginning to enter the field,
ramping up internal resources to help developers provide
on-site and off-site biodiversity mitigation.
Key policy areas are still unclear, which is why many
project sponsors and developers are still in ‘wait andsee’ mode or unwilling to commit. As BNG becomesmandatory in 2023 and the regulatory framework matures,
market activity is expected to increase. While the size of
the BNG market in England cannot be accurately predicted,
current estimates point to potential annual funding via the
BNG market of around GBP 100 million to 300 million(eftec et al., 2021 – forthcoming). This estimate is based onmodelling activities that will shape the market, including
demand for BUs and the unit cost. .

© Glenn Anderson

On the demand-side for BUs, activity has been
limited to date, although some larger developers (suchas housebuilders) have developed pilot schemes. In
addition, large infrastructure providers (for example,
Highways England and Network Rail, who are not coveredby the mandatory BNG requirement) have commitments
to compensate for biodiversity/environmental impactsof development and are taking actions around various
projects.

Supply-side activities include habitat
restoration and creation to generate andsell biodiversity units
Demand for BUs from developers will be driven by thefootprint of developments and the impact these could
have on biodiversity after on-site mitigation. Irreplaceable
habitats (still to be defined by secondary legislation, as
shown in Table 3-2) are excluded from this footprint, whichmeans that offsets will not be an option for them.2 The
residual impacts will need to be compensated off-site,
either through a developer’s own actions or through BUspurchased in the biodiversity market. Roughly 66 percent
of England’s total land is eligible for development and forpotential inclusion in the BNG scheme (see Table 2-1).
Over 60 percent of this land is made up of arable land andgrassland.

2 If, under extraordinary circumstances, such irreplaceable habitats are nevertheless affected by development, bespoke compensation packages can be negotiated. Insuch cases, developers would negotiate with Natural England or other governmental agencies to develop a package of interventions to achieve biodiversity gains. Thismight involve specialist research to develop new restoration techniques, or measures to reinstate key species, often going beyond proven methods.

BNG policy in England: where we are and where we are going

HabitatArea (ha)｜17PArea (percent)Land already developed (total area of urban areas)

1,583,745

11Land excluded from BNG market for biodiversity reasons (e.g., designated sites)

1,773,902

13

Land available for habitat creation

8,634,923

62

Cropland

5,320,698

38

Grassland

3,125,945

23

Woodland and forest

188,2811

577,872

4

Cropland

38,846<1

Grassland

135,454

1

Heathland and shrub

96,100

1

Sparsely vegetated land

5,228

<1

Woodland and forest

302,245

2

Other land

1,303,007

9

England total

13,873,451

100

Land for habitat enhancement

Source: eftec et al., 2021 – forthcoming

The land area affected by biodiversity loss on an annual basis can be estimated based on historic rates ofdevelopment, although this is likely to be a low estimate given ambitious plans for housing and infrastructure developmentthat have been put forward in the context of COVID-19 recovery plans. The historic rate of land use development inEngland is roughly 6,300 hectares per year. The habitat types that will be offset as part of the BNG scheme are difficult
to predict. Based on conservative estimates from Defra’s Biodiversity Metric 2.0 (eftec et al., 2021 – forthcoming), it canbe assumed that two to three BUs would be lost for each hectare, which would amount to an overall loss of approximately
15,000 BUs per year. The rate of biodiversity loss associated with development going forward may increase if land use
development accelerates (for example, to deliver housing targets) or decrease if the BNG policy acts as a disincentive tobuild on land of high ecological value. For example, the policy would likely provide an incentive to avoid the estimated 487
hectares per year of development that destroy priority habitat (currently making up 6 percent of the annual developedarea). The expected price per BU will vary according to the type of biodiversity that needs to be compensated for (and theassociated costs of enhancing it), the opportunity costs of the land and the relative scarcity of BUs in the local market. In
most areas, there is no shortage of BU supply expected, so costs will be determined by the costs of actions to generatethem (including opportunity costs of land and transactions costs), plus a small premium to reward the provider for thedelivery risk they take.
Forecast BU prices vary widely. Initial forecasts were in the range of GBP 9,000 to 15,000 per BU (Defra IA). However,based on modelling of habitat delivery and transactions costs, revised forecasts indicate that prices could go as high as
GBP 15,000 to GBP 25,000 per BU, with an expected average of GBP 20,000 per BU (eftec et al., 2021 - forthcoming).
Based on a up to 15,000 BUs per year, and assuming that 50 to 100 percent of BUs are delivered off site, a total
estimated market size would be 7,500 to 15,000 BUs per year. As a point of reference, approximately 80 percent of offsets
in the US wetland and streams mitigation scheme (see Box 2-6) were conducted off site in 2017, up from 50 percent in2010 (Hough and Harrington, 2019). Using the average price of GBP 20,000 per BU gives the above-mentioned market
size of GBP 100 million to 300 million per year (Figure 3-2).

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Biodiversity Net Gain in EnglandBox 2-6. US wetland and stream mitigation scheme – a quick overview

The Clean Water Act Section 404 Wetland
and Stream Mitigation Programme is amongst
the most mature and successful biodiversity
offset schemes globally. It is based on the 1972amendments to the Federal Water Pollution
Control Act, known as the Clean Water Act(CWA). Section 404 of the Act regulates thedischarge of dredge or fill material into US
wetlands, streams and other aquatic systems by
developments. The overarching aim is to restore
and maintain chemical, physical and biologicalintegrity of wetlands, streams and other aquatic
systems and to assure ‘no overall net loss’ ofwetland and stream areas and functions.

Protection Agency (EPA) are in charge of ensuring
implementation of Section 404.

In 2016, the approximate averagetransaction value of the US wetlandand stream mitigation market was

USD 3.5 billion(GBP 2.5 billion).

Developers are obliged to mitigate and compensate
their impacts on wetlands and streams as partof the project permitting process. The US Army
Corps of Engineers and the US Environmental

Sources: zu Ermgassen et al., 2019; The Environmental Law Instituteand Land Trust Alliance, 2012; Bennet et al., 2017

Such funding streams are significant from the point of view of fund recipients, including landowners looking forsustainable and predictable funding streams to transform land management practices and generate biodiversity
benefits. As shown in Figure 2.4, a 50 percent off-site offset ratio at a BU price of GBP 20,000 would equate toapproximately 40 to 50 percent of public funding and close to 70 percent of non-profit funding on biodiversity in Englandin 2018-2019.

Figure 2-3. BNG Market size in England
Figure 2-3 BNG Market size in England

30’000400

25’000

20’000300

15’000200
10’000
100

0

5’000

10%

20%

30%

40%

50%

60%

70%

% share offsets offsite
Legend｜Likely range

Source: Adapted from eftec et al., 2021 – forthcoming

Source: Adapted from eftec et al., 2021 – forthcoming

80%

90%

100%

Price p. BU (£)

Annual BNG market size (£M)

500

BNG policy in England: where we are and where we are going｜19

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Figure 2-4. Annual BNG funding compared to public and non-profit
Figure 2-4 Annual BNG funding compared to public andbiodiversity funding in England in 2018-2019
400

Annual biodiversity funding in England (GBP m)

Administration
335

300

200

Based on a
50 percent
off-site ratio
and a GBP 20k
BU price

222

130
Net gain100

No net loss

0
BNG

NGO

(2018-2019 baseline)

Public(2018-2019 baseline)

Funding source
Sources: eftec et al., 2021 – forthcoming; DEFRA, 2020.
Note: English NGO funding adapted from UK funding figures"© Glenn Anderson

non-profit biodiversity funding in England in 2018-2019

It is important to bear in mind that BNG funding
is not directly comparable with public grant funding
and subsidies or philanthropic donations. In practice,
the BNG funding is mainly to offset loss of biodiversity
from development and will deliver only 10 percent gain.
Therefore, of the total value of BNG spending (estimatedat GBP 100 to 300 million per year), only 10 percent (GBP
10 to 30 million per year) is comparable to public andnon-profit biodiversity funding. This means the positive
contribution from BNG equates to less than 10 percent
of non-profit and less than 5 percent of public funding forbiodiversity in 2018-2019.

2.4 Potential risks associated with poor market design
A poorly designed BNG scheme could generatesignificant risks, which need to be mitigated throughcareful policy design.
Creating a “license to trash” is a widely discussed
risk. Some fear that BNG would enable developers to treat
nature as a tradeable commodity, thereby legitimising
its destruction on the basis that impacts can be offset,
rather than incentivising avoidance. This risk must be
taken seriously. It can result from failure to stringently
comply with the mitigation hierarchy (due to insufficient
enforcement or inadequate monitoring capacities), as
well as inadequate protection of irreplaceable habitats.
A situation where biodiversity units become thedominant proxy for biodiversity—while other biodiversity
information, such as the presence of specific species,
is less considered—can also add to this risk. In addition,a too powerful offset supply industry may seek to lobby

policymakers to ensure plentiful demand for BUs and toguarantee the industry’s revenues.
Failure to achieve net biodiversity gains is also asignificant risk. Such failure can be the result of fivefactors, many of which are discussed further in Section
4. First, a lack of clarity around who is liable for delivering
net gain can lead to inaction and non-compliance. Failure
to achieve net gain outcomes can result from not holding
those who are liable accountable for their delivery. This
could be due to inadequate enforcement mechanisms or
to insufficient requirements and resources for monitoringand enforcement. The absence of clear rules regarding
additionality and combination of revenues from the sale ofbiodiversity units with other environmental credit markets
and subsidies (“stacking”) could also weaken biodiversity
outcomes. Similarly, short scheme time frames pose a risk
to biodiversity outcomes. High-distinctiveness habitats can

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Biodiversity Net Gain in Englandtake significantly longer than 30 years to reach maturity.
Finally, lax rules on where impacts need to be offset (“servicearea”) can also compromise outcomes for biodiversity. For
example, if a biodiversity-rich woodland forming part of alarge, interconnected network is destroyed and offsets are
generated on land surrounded by urban development, it
is possible for it to achieve sufficient units but with much
lower chances of colonisation by characteristic species.
The time delay between certain losses due to impacts andgains is accounted for by a “time to target” multiplier, but
this does not address the immediate habitat requirementsof impacted species populations. Interim declines could beconsiderable unless habitat banks are used that can deliver
habitat in advance of impacts, allowing displaced species
to colonise replacement habitat.
Compromised biodiversity outcomes can also be
a consequence of too great an emphasis on on-site
mitigation. Experience from the US wetland and stream
mitigation scheme has shown that on-site mitigation

can have a track record of poor ecological success (seeBox 2-7). Studies on ecological impact assessments(EcIAs) in England have also identified poor ecologicaleffectiveness of on-site mitigation measures (Drayson
and Thompson, 2013). There are enforcement andliability risks associated with on-site mitigation that need
to be adequately considered. Developers could pass on
ambitious on-site BNG commitments to homeowners who
may be unaware of the necessary expenses or unforeseen
liabilities associated with those commitments and maylack appropriate qualifications to ensure long-term habitat
management. Social benefits associated with green spaces
in urban areas may thus be better addressed throughadditional green infrastructure and green open spacerequirements in planning policy (for example, Building
with Nature, BREEAM and the Natural England GreenInfrastructure Standards) rather than BNG.

Box 2-7. The US wetland and stream mitigation program’s evolution: from on-site
to off-site mitigation

The US wetland and stream mitigation program
saw a shift in preference from on- to off-site
mitigation, after on-site mitigation demonstrated
a poor ecological track record. The Memorandumof Agreement (MOA) between the Department of
the Army (DOA) and the Environmental Protection
Agency (EPA) set formal guidelines for no net loss
mitigation of wetlands and streams for close to
20 years until 2008. This document articulated
a clear preference for on-site mitigation:‘Compensatory actions (e.g., restoration ofexisting degraded wetlands or creation of manmade wetlands) should be undertaken whenpracticable, in areas adjacent or contiguous
to the discharge site (on-site compensatory
mitigation). If on-site compensatory mitigation is
not practicable, off-site compensatory mitigation
should be undertaken in the same geographic area
if practicable (i.e., in close proximity and, to theextent possible, the same watershed).’A 2001 study by the National Research Council(NRC) evaluated the effectiveness of the scheme
and concluded that taking a watershed approach

to offset site selection would be more ecologicallyeffective than an on-site offsetting preference. It
stated that the ‘preference for on-site and in-kind
mitigation should not be automatic but should
follow from an analytically based assessmentof the wetland needs in the watershed and thepotential for the compensatory wetland to persist
over time.’ It stressed that there are cases inwhich on-site mitigation is neither practicable nor
environmentally preferable.
In 2008, the DOA and EPA issued new regulations
on compensatory mitigation. The regulations
noted: ‘We disagree that the rule should establish
a preference for on-site compensatory mitigation,
because the failure rate for such projects is quite
high. … Because of its poor record of ecologicalsuccess, a preference for onsite mitigation cannot
be justified.’ The rule established a new ‘preference
hierarchy’ (Section 332.3b) for compensatory
mitigation, with offsite mitigation options given apreference over on-site mitigation.
Sources: DOA and EPA, 1990, 2008; NRC, 2001

BNG policy in England: where we are and where we are going

There may be a risk of BNG
crowding out agricultural
tenants, who currently oversee
approximately

30%

of agricultural land across the UK

Poorly designed or overly complex market rules
may prevent the BNG scheme from reaching its fullpotential. As outlined earlier, markets with high rates ofparticipation can generate cost advantages stemmingfrom lower transaction costs in the permitting process. Low
participation in the market, in turn, can have the opposite
effect. This may be the result of an unclear, inconsistent orovercomplicated regulatory framework, and it can lead to
uncertainty and reduce incentives to engage in the market.
For example, BU providers must be able to predict BNG
revenue streams so that they can invest in land-use change
and commit to long-term management arrangements.
Developers need to clearly understand what their BNG
obligations are and how they can fulfil them. Without suchclarity on both sides, trade will be constrained. Potential
market actors will remain in a ‘wait and see’ mode or
decide against participating in the market, if they think it
is too risky.
The ecological robustness of the scheme should not
be compromised. Academic research (e.g. zu Ermgassen
et al., 2020) has shown how too much flexibility for offset
trading rules can undermine biodiversity impact avoidance.
However, falling victim to the ‘precision trap’ (designing
the regulatory framework and resulting permitting process
in such a way that it becomes too complicated, inflexible
and burdensome) can result in significant costs and be
impractical. This in turn discourages potential BU suppliers
from entering the market.
Low market activity can result from offset
service areas that are too small or through indirect
incentivization of on-site offsets. If the area in which
an offset for a specific impact can be conducted issmall, particularly in areas with low development
activity, potential BU suppliers may be discouraged fromparticipating in the market due to the risk of being unable
to sell their biodiversity units. This also results in higher｜21

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costs and administrative burdens for developers who haveless choice in terms of BU providers and therefore lessnegotiating power. Where there is no supply, developers
may need to organise their own offset provisions (Dukeand ten Kate, 2014).
Indirect incentivisation of on-site offsets can also
take place, even though these may be less beneficial fornature (as discussed in Box 2-7). If on-site offsets are lessstringently monitored and enforced, or have lower quality
standards than off-site offsets, this gives them a costadvantage. Developers with an interest in minimising theircost would have less incentive to rely on third-party off-site
BU providers.
A lack of transparency (for example, on historicaltransactions and on BU pricing) can result in
disadvantages for both developers and BU providers.
Developers run the risk of paying unreasonably high prices
for BUs. In turn, landowners may run the risk of accepting
unreasonably low compensation for their services,
particularly when markets are being set up and no pricebenchmark is available.
Finally, poorly designed BNG schemes can have
perverse social justice outcomes. For example, there
may be a risk of BNG crowding out agricultural tenants,
who currently oversee approximately 30 percent ofagricultural land across the UK. While agricultural tenancy
is incentivised through taxes, no such tax incentives are inplace for BU supply.
Overall, the number one driver for such risks orperverse outcomes is an imperfect and incoherent
regulatory framework. For developing a market that
benefits nature, clear and well-designed rules on
implementation, enforcement and long-term governanceare needed. As part of England’s two-year BNG pilot phase,the suitable design of such a ruleset needs to be further
explored via end-to-end learning so that the Environment
Bill, associated secondary legislation and the biodiversity
metric can be crafted in ways that maximise opportunities
and mitigate risks.
The following sections identify necessary components
of a successful offset programme (including based oninternational experience) and a number of critical areasthat need to be addressed in order to provide sufficientcertainty for stakeholders on both sides of the market
equation to actively engage at scale.

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Biodiversity Net Gain in England© Ildemar Kanitz

3. How can BNG
markets generate
maximum gains
at least cost?
Biodiversity Net Gain in England:
Developing Effective Market Mechanisms

How can BNG markets generate maximum gains at least cost?

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U International experience provides a solid basis for defining
key components for effective and environmentally beneficial
BNG markets.
U We set out 20 key components that need to be adequately
tackled in the BNG regulatory framework, including thedefinition and enforcement of the mitigation hierarchy; thedefinition of clear rules on what needs to be restored, where
and how; the types of BU delivery mechanisms that canbe established; and disclosure and scheme administration
processes.
U UK policymakers should ensure that these key components
are adequately addressed when revising the Environment
Bill, drafting secondary legislation and upgrading thebiodiversity metric

3.1 Key components for an effective
BNG scheme
A well-designed regulatory framework is essential for a BNG scheme tooperate effectively. Based on learnings from other biodiversity net gain or
no net loss schemes across the globe, we have identified 20 key components
for an effective BNG scheme which is beneficial for the environment anddoes not generate unnecessary costs. The identification of these components
was particularly influenced by interviews with stakeholders involved in the US
wetland and stream mitigation scheme, one of the most mature biodiversity
offsetting schemes globally (e.g. zu Ermgassen et al., 2019).

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Biodiversity Net Gain in EnglandP

In Table 3-1 below, these key components are grouped in three categories:
What

Who

How

BNG foundations and ground rules.
These provide the foundational
basis and set out the rules that all
market actors must follow for overall
positive outcomes for biodiversity.
They establish policy objectives,
define which development impacts
are offset, establish the basis for
mitigation requirements (including
spatial delivery) and provide clarity
on what qualifies as net gain.

BU delivery mechanisms androles. These establish BU delivery
mechanisms, define rules regarding
use of each mechanism and defineroles and responsibilities for all
stakeholders.

Disclosure and scheme
administration. These establish
the basis for ensuring that market
actors comply with the underlying
rules. They establish requirements
for disclosure and the administrative
arrangements needed for ensuring asmoothly functioning BNG scheme.

Table 3-1 briefly elaborates on the nature of these key components. Together they define the core structure for
an effective and environmentally beneficial BNG market. These components alone are not sufficient to determine
whether or not the market will function, as market activity will be driven as much by government policy as by voluntary
drivers influencing voluntary demand for offsets.

Table 3-1. Key components for an effective BNG scheme

Component

Requirements

What: BNG foundations and ground rules
1

Policy goal

Requirement and goals for mandatory ‘no net loss’ or ‘net gain’ are established.

2

Policy scope

The types of developments as well as the natural assets to which the policy applies are clearly
defined.

3

Loss/gain
methodology

A methodology is in place to quantify impacts and BU supply using a consistent and credible
metric. This enables developers to assess unavoidable residual impacts and BU suppliers todetermine the number of units they can supply.

4

Mitigation hierarchy

Strict rules are in place to ensure that developers adhere to the mitigation hierarchy, which itself
is clearly defined.

5

Strategic spatial planfor biodiversity

Strategic spatial plans prioritise BNG offsets in ecologically appropriate locations or locations
prioritised for conservation, allowing BNG to contribute to wider biodiversity priorities.

6

BNG site selection
rules/ criteria

Clear criteria establish where BNG delivery and BU supply can be located (including definition ofareas not considered suitable for BU supply). This includes spatial limits on delivery of BU relative
to impact locations. Such rules may be dictated by ecological/biodiversity outcome or by uses andvalues attached to nature by people (ecosystem service or natural capital considerations).

How can BNG markets generate maximum gains at least cost?

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Requirements

7

BNG durability
criteria

Durability criteria are in place to ensure that BNG measures are sufficiently long-lasting (e.g.
gains persist at least for the duration of impacts). These can include mandatory legal mechanisms
safeguarding against incompatible uses, the requirement to have long-term site management plans inplace or proof of available funding to finance long-term management activities.

8

BNG actions/additionality

Specific actions may be used to provide net gain/BUs beyond gains that are already mandated,taking into account existing mechanisms for conservation. Also includes rules regarding
mechanisms for gain given the habitats and locations concerned (e.g. habitat restoration,
preservation, enhancement, creation).

9

Exchange rules/
equivalence

Clear rules on what constitutes equivalence between residual development impacts and offsets
are defined, e.g. whether offsets must be in-kind (i.e. compensate impacts through restoration/
creation of the same type of habitat) or out-of-kind (i.e. compensation via inequivalent habitat
types or financial measures).

10

Duration of offset

The length of time BNG schemes and offsets need to be in place is determined.

11.

Performance criteria
and standards

Uniform performance criteria and standards are established, which all BNG actors and BU
suppliers must adhere to. These form the basis for ongoing reporting and monitoring.

12

Timing ofcompensation &credit release

Clear rules on timing include specifications on how long impacts must be offset after the time ofdevelopment. They also specify when BUs can be sold—for example, whether a partial release of
BUs, tied to intermediary milestones, is possible or whether BUs can be sold only once a habitat isfully restored.

Who: BU delivery mechanisms and roles
13

BU delivery
mechanisms

Institutional mechanisms through which BUs can be delivered are well defined. These could
include permittee-responsible offsets or third-party offsets (e.g. habitat banks or compensation
funds). Clear rules outline when each mechanism can or cannot be deployed.

14

Clear roles

Roles and responsibilities for all BNG parties, including for developers, BU suppliers andadministrative agencies in charge, are clearly defined. An important role to be specified is that of
the oversight agency, which is responsible to ensure disclosure and long-term compliance.

How: Disclosure and scheme administration
15

Net gain plans

Clear guidance on how developers must report their net gain strategy and prove adherence
to the mitigation hierarchy is provided. A net gain plan can be submitted as part of the formal
permitting process.

16

BU delivery plans

Clear guidance on how BU providers must report on an offsetting site and their long-term
management plans is set. This can be submitted either as part of the formal permitting process
or as part of the BU supplier registration process. To ensure a level playing field, the samerequirements should apply to all BU delivery mechanisms.

17

Permitting process
and timeline

Administrative permitting processes and timelines are defined. These determine how and whendevelopers receive permits and commit to a net gain plan. They also need to specify the offset plan
approval process.

18

Monitoring and longterm reporting

Clear rules on how to report performance throughout implementation and long-term
management are provided. Implementation monitoring ensures successful establishment of
the BNG (offset) site, while long-term management monitoring discloses whether the desired
ecological impacts are met. The resulting reports serve as the basis for effective enforcement.

19

Enforcement

Well-articulated and effective enforcement mechanisms prevent noncompliance. These should
apply to the initial BNG implementation process as well as to long-term site management.

20

BNG tracking system

Transparent and publicly accessible systems for tracking BNG demand, supply and transactions
are provided.
Source: Adapted from Wilkinson, 2017

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Biodiversity Net Gain in England

3.2 Assessing the current status of the BNG
scheme in England
In England, several of the key components for an effective BNG scheme have been defined. However, as ofJune 2021, several critical components had been only partially addressed or not at all, as discussed in Table 3-2.
Whereas some aspects are covered in the draft version of the Environment Bill, the Bill mandates that other key
components should be addressed in secondary legislation, while others are assumed to be covered by the biodiversity
metric framework and guidance.
Overall, it is important for policymakers to approach these components holistically and to not prioritise someover others. It is in their entirety that these components establish a sound regulatory framework. To provide certainty
and avoid delays, these components should be addressed, refined where needed and implemented as soon as possible.
To further effective implementation of all components, a joined-up strategy for government on BNG could be ofvalue. This also could help avoid conflict of interest in public sector roles. Regular stock-taking, for example every
five years, on the implementation of these components as well as the overarching success of the scheme (e.g. its
ecological effectiveness and market implications) could be considered to ensure iterative improvements.

Table 3-2. UK progress on the BNG components

Legend ｜Addressed via metric

Addressed via Environment Bill

Mandated via secondary legislation

Partially/not
fullynotaddressed
Partially/ fully
addressed

Component

Current status

What more is needed

What: BNG foundations and ground rules
1

Policy goal

The Environment Bill prescribes mandatory‘biodiversity gain as condition of planningpermissions’. The percentage gain is to be set
via secondary legislation but is anticipated tobe 10 percent.

Secondary legislation should strive for a net
gain goal of 10 percent or higher, potentially
via increases in the level of ambition over time(e.g. 20 percent net gain by 2050). A reductionin the scheme’s net gain level of ambitions should
be avoided to ensure that the scheme delivers
meaningful results.

2

Policy scope

Regulated resources include all land andrelated freshwater habitat types. (BNG
applies to most developments, except thosecommissioned by a development order orurgent Crown developments).

The types of regulated resources anddevelopments to which mandatory BNG applies
could be expanded. Thus far, mandatory BNG
does not cover marine biodiversity, which should
be included in future expansions of the scheme.
Furthermore, the scheme covers infrastructure(including nationally significant infrastructure
projects) and housing developments but
not agricultural expansion. This significantly
constrains the net gain potential, as in 2018 only
approximately 5 to 10 percent of England’s land
was developed, while 60 to 65 percent was under
agricultural use (Ministry of Housing, Communities& Local Government, 2020). If limited toinfrastructure and housing developments, annual
BNG activity will occur on only a tiny fraction ofland (less than 0.1 percent).

Secondary legislation defines irreplaceable
habitats where offsetting is not an option(90A.18). Types of developments required tooffset impacts (including exceptions) can be
refined via secondary legislation.

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Current status｜27

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What more is needed3

Loss/gain
methodology

The biodiversity metric sets a standard
methodology for quantifying the assessmentof biodiversity losses and gains. This metricis to be continuously refined (the next version
being expected imminently).

Regulators should systematically monitor practicalexperiences of using the metric to keep track of its
ecological comprehensiveness and cost efficiency.
As discussed in Section 4.1., this can provide thebasis for continuous refinements to the metric.

4

Mitigation
hierarchy

Developers must provide ‘information about
the steps taken or to be taken to minimise
the adverse effect’ on biodiversity by thedevelopment.

Strict adherence to the mitigation hierarchy
should be ensured throughout the scheme,to avoid generating a ‘licence to trash’. Strict
protection of irreplaceable habitats as well
as appropriate monitoring and enforcement
capabilities are needed.

5

Strategic spatialplan for biodiversity

Nature recovery strategies set out areas tobe prioritised for biodiversity recovery. These
strategies are to be defined by local authorities
via secondary legislation.

Clear rules should be determined on how BNG
delivery must align with strategic spatial plansand overarching conservation priorities (such as
the national Nature Recovery Network and local
nature recovery strategies). Service areas should
be determined carefully to avoid a mismatch
between supply and demand, as this could
disincentivise BU suppliers from entering themarket.

The extent to which BNG delivery projects
must align with nature recovery strategies is
not specified.
6

BNG siteselection criteria

The circumstances under which land is or is
not eligible to be registered as a BNG site are
to be set out by secondary legislation.
The adequate distance between impact andBU supply sites is factored into the metric’s
calculation, creating incentives for offsets
close to impact site.

7

BNG durability
criteria

Legal durability mechanisms are definedas (a) a condition subject to which theplanning permission is granted, (b) a planningobligation, or (c) a conservation covenant.
Long-term site management and funding
requirements are thus far not addressed.

Site selection criteria should prioritise ecologicalintegrity over distance to impact site. As
experience in the US has shown (see Box 2-7),
on-site mitigation can result in poorer ecologicaloutcomes than off-site mitigation. BNG delivery
sites further away from the impact site in connectedbiodiversity-rich areas could result in greater
benefits for nature.
Beyond legal mechanisms, further attention
should be directed to long-term site management
and funding activities. For example, in the
US wetlands and stream mitigation scheme,
endowment funds are mandatory for habitatbanks to finance a mitigation site’s long-term
management, monitoring and enforcement
activities in perpetuity.

8

BNG actions/additionality

Actions to provide BUs are determined by
the metric. Habitat interventions measured
by the metric must result in improved habitat
conditions to generate tradeable BUs, thereby
disqualifying pure conservation activities as a
BU supply action.

Potential disincentives to maintain existing
good habitat should be monitored carefully.
Additional legislation (for example ELMs) shouldbe crafted in such a way to effectively incentivise
landowners to safeguard habitats of conservation
value. Perverse outcomes should be prevented(e.g. that landowners destroy high-quality habitat
to participate in the financially attractive BNG
scheme).

9

Equivalence/
habitat types

Equivalence is determined via the metricthrough assigned levels of distinctiveness foreach habitat type. Rules allow the exchange
within the same (in-kind) or a higher (out-ofkind) level of distinctiveness. ‘Trading-down’by offsetting impacts on a high-distinctivenesshabitat through lower distinctiveness habitat is
not permitted.

Not applicable.

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Biodiversity Net Gain in England

Component

Current status

What more is needed10

Duration of
offset

The duration of BNG delivery is set to 30
years.

11.

Performance
criteria andstandards

Performance criteria or standards for onsite or Clear implementation and ecological impact
offsite BU delivery are thus far not addressed. performance criteria and standards should be
set. Ideally, these should incorporate ambitious
ecological criteria which not only focus on habitat
type and area, but also address nuances such as
species abundance. To leapfrog experience in the
US (see Section 4.2) and ensure a level playing
field, such standards must apply in equal measure
to all BU delivery mechanisms.

12

Timing ofcompensation &credit release

Time lags between residual impacts andcompensatory BU supply are priced into themetric, incentivising BU supply temporally
close to impacts.
Rules on the temporal release of BUs andwhether BUs can be (partially) sold prior
to full habitat creation/restoration are notaddressed.

30 years is very short by the standards of natureand could prevent long-term net gain beyond
this period. While certain restrictions on full
habitat creation and restoration reversal are to be
expected, more comprehensive measures to ensure
long-term site conservation could be considered,particularly of high-distinctiveness habitats. Matureand successful schemes such as the US wetlands
and streams mitigation scheme have shown thatperpetual offsetting requirements do not hinder
market participation. A similar approach to highdistinctiveness habitats in England is advisable.

Open questions around the temporal release of
BUs from BU delivery mechanisms should be
addressed. Amongst others, these include:
1. How long can credits be held after a site isrestored?
2. Can a percentage of credits be sold prior
to habitat restoration, in line with defined
milestones or performance criteria?

Who: BU delivery mechanisms and roles
13

BU delivery
mechanisms(including rules)

Acceptable BU delivery mechanisms andclear rules for when which mechanism can beused are not (yet) defined.

Policymakers should reflect on the desirable
types of BU delivery mechanisms. Acceptablemechanisms should be defined, along with rules
and guidelines outlining when which mechanism
should be used. (For more details, see Section 4.3).

14

Clear roles

Some (administrative) BNG roles are spelledout by the Environment Bill. For example,
the secretary of state may sell credits todevelopers and the planning authority may
approve biodiversity gain plans.

More clarity on who the key administrative
stakeholders of England’s BNG scheme are would
be beneficial. Clear roles should be assigned
early on, to give these stakeholders enough timeto prepare and stock up their internal capacities
accordingly. For example, two important roles that
could be clarified include:
1.
Long-term administrative oversight andenforcement of BNG.
2. Long-term data collection, storage andprocessing related to BNG registries.

Several critical roles needed for effective BNG
scheme administration have thus far not been
defined or assigned.

How: Disclosure and scheme administration
15

Net gain plans

The Environment Bill makes the submissionof biodiversity gain plans mandatory forplanning authorisation. A biodiversity gain
plan should list the development, proveadherence to the mitigation hierarchy,
showcase biodiversity value of a site pre- andpost-development and reference offsite BU
delivery sites or BU purchases if applicable.
Secondary legislation may define othermatters to be included in net gain plans, aswell as their format, submission procedures
and liable submission parties.

Not applicable.

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Current status｜29

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What more is needed

16

BU deliveryplans

BU delivery plans, in which BU suppliers spellout their mitigation actions and long-term
management plans, are thus far not addressedor mandated.

Policymakers should consider making thesubmission of BU delivery plans mandatory for BU
suppliers. Just as biodiversity gain plans spell out
actions taken by developers to adhere with the BNG
scheme, BU delivery plans are a means to createtransparency on BU suppliers’ actions. The plans
could provide details on the offsetting measurestaken by BU suppliers, including quality criteria
compliance. They could be loosely based on the 12
elements of an offset plan mandatory for offsetting
providers in the US wetland and streams mitigation
scheme (see Section 4.3).

17

Permitting
process andtimeline

Required timelines for submitting andapproving gain plans are to be determined by
the Secretary of State in secondary legislation.

Administrative logistics for BU delivery plans
should be clarified. This entails clear procedures
and timelines for submission and approval, as well
as clarity on interrelations and interdependencies
with net gain plans.

Timeline and submission procedures
related to BU delivery plans are thus far not
addressed.
18

Monitoring
and long-term
reportingLong-term monitoring and reporting
requirements are thus far not addressed.

Clear rules on monitoring and reporting should
be set out. For example, BNG delivery mechanism
could report on their implementation process, themeeting of their performance standards and longterm biodiversity impacts.

19

Enforcement

Secondary legislation will set out financial
penalties for the supply of false or misleading
information in connection to the biodiversity
gain site register.

Enforcement mechanisms ensuring the meetingof performance standards over the full net gain
period should be defined and implemented toensure successful and long-term BNG delivery. The
implementation and long-term performance of onand off-site BNG delivery sites should be enforced
in equal rigour.

Wider enforcement measures throughout the
30-year net gain period are not specified.
20

BNG tracking
systemThe creation of a public “biodiversity gain site
register” is set out via secondary legislation.
Such a registry will include the location of theland, the work and enhancement to be carriedout, information on the state of the land before
and after the work is carried out, liable parties
as well as reference to developments which
rely on the site for offsetting.

The development of a clear vision of what is
expected from such a registry (e.g. level of
granularity and filter functionalities) and who
will be responsible to implement it (e.g. local
record centres) should be a priority. The registry
is time sensitive, as it relates to the overarchingdata management infrastructure needed to provide
market transparency. The establishment of sucha data management infrastructure will demandsignificant time and resources.

Source: Adapted from Wilkinson, 2017; Defra, 2021

Biodiversity Net Gain in England©Hrebenda Fox｜

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requiring further
elaboration for
BNG in England
Biodiversity Net Gain in England:
Developing Effective Market Mechanisms

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Critical areas need to be addressed for the
success of England’s BNG scheme. These include
some components highlighted above, as well as
wider considerations that need to be addressedin the short or medium term. These key areas arealso represented on Figure 4-1.
1.

Measuring biodiversity and driving the righttype of investments. Biodiversity Metric 3.0
provides the basis for estimating biodiversity
losses and gains using a consistent ‘currency’(biodiversity units, or BUs). It will be criticalto monitor and evaluate the strengths andweaknesses of its underlying methodology,
practical use and resulting outcomes forbiodiversity in England at local and national
scales. This is needed to provide the basis forfurther refinement, if necessary.

2. Defining BU delivery mechanisms andenabling a level playing field. BNG scheme
mechanisms for delivering BUs are being
developed. These need to be clearly definedto ensure a level playing field between
on- and off-site mechanisms. International
experience points to clear advantages of ahabitat banking approach, with lessons fordefining mechanisms suitable to the English
context.
3.

Defining clear rules on stacking andbundling. How BNG interrelates with otherenvironmental credit and funding schemes
is not understood. This creates challenges
for BU suppliers hoping to forecast therevenue potential of sustainable land use
interventions. Clear objectives and principles
are needed in this regard.

4. Enabling efficient markets via governmentled measures. Supply-side, demand-side,exchange and financing measures will beneeded to lower transaction costs and boost
stakeholder participation, particularly inthe early period when markets need to beestablished.

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Biodiversity Net Gain in England

Figure 4-1. Overview of main discussion areas covered in this section

Figure 4-1. Overview of main discussion areas covered in this section
Legend ｜Addressed via metric

Addressed via Environment Bill

Mandated via secondary legislation

Partially/not fully addressed
BNG policy

Other policies

Key components of a BNG scheme
BNG foundations and ground rules

3｜Loss/gain methodology

2｜Policy scope

Partially/not fully addressed
1｜Policy goal

4｜Mitigation hierarchy

5｜Strategic spatial plan
6｜BNG site selection
criteria

8｜BNG actions/additionality

7｜Durability criteria

9｜Habitat types/equivalence
10｜Duration of offset

11｜Performance criteria & standards
12｜Timing of compensation &credit release

Who

BU delivery mechanisms and roles

2

13｜BU delivery mechanisms
14｜Clear roles

How

Disclosure and scheme administration
15｜Net gain plans

16｜BU delivery plans
17｜Permitting process and timeline
18｜Monitoring and long-term
reporting
20｜BNG tracking system

4
Additional demandside measures

19｜Enforcement

What else government and others can do
Additional supply
side measures

Additionaltransaction
measuresSource: Authors

Additional
financing measures

Other environmental credit schemes

1

Mandated

Stacking &bundling

Other governmental environmental
funding flows

Addressed

Clear rules on interrelations with other environmental schemes

What

3

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© Sophie Trémolet

Selected areas requiring further elaboration for BNG in England

4.1 Measuring biodiversity and driving the righttype of investments
As described in Section 2.2, the biodiversity metric provides a consistent national basis for quantifying losses
associated with development impacts and gains stemming from implementation of the mitigation hierarchy. The
metric is not without its limitations, however. It will be crucial to monitor its implementation. This will ensure thatgenuine biodiversity gains are achieved at appropriate scales and provide the basis for continuous improvementof the methodology, if and when required.
Figure 4-2 identifies characteristics of a ‘good’ biodiversity metric based on international experiences. Below, we
consider the extent to which Biodiversity Metric 3.0 meets those criteria and identify areas for ongoing monitoring andpotential future improvement.

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Biodiversity Net Gain in England

Figure4-2
4-2.
Whatshould
shouldaagood
good biodiversity
biodiversity metricFigure. Whatmetriccover?
cover?
What is measured by a biodiversity metric?

Area

What is the area of the affected habitat
Composition

Structure

Function/ process

What is present in terms of
biodiversity components/
features at different scales(gene, species, habitat)?

How are those components/
features organised in space?

What are underlying
processes and functions that
underpin ecosystem viability?

Condition

Measure of state and capacity to support biodiversity

Characteristics of a good biodiversity metricSame methodology be used
to determine losses and gains
across different habitat types

Reasonably precise measure
to yield genuine overall gainsof biodiversity

Accounts for certain losses
but uncertain gains (e.g. via
risk multipliers)

Accounts for time taken for
habitats to reach maturity

Science-based and defensible

Straight forward to
implement

Recipe for developing a good metric

Developed using a transparent method withstakeholder input

Take landscape context into consideration/ incorporate metric into an overarching spatial plan and wider
conservation priorities

Sources: Wilkinson et al., 2017; Zambello et al., 2018

Sources: Wilkinson et al., 2017; Zambello et al., 2017

Potential risks associated with the proposed approach and ways to mitigate them are identified below.

Selected areas requiring further elaboration for BNG in England4.1.1. Using ‘habitat’ asa proxy for biodiversity
vs. addressing species
requirements
The Biodiversity Metric 3.0(Panks et al., 2021) uses ‘habitat’
as a proxy for biodiversity, partly
because it’s easier to use. Much UK
and European nature conservation
policy target habitats because they
provide a pragmatic link between
efforts to conserve populationsof individual species and more
integrated approaches to landscapelevel management. Habitats are
relatively stable over time comparedwith species populations. In
addition, they can be adequately
described with fewer types andare normally used as the primary
focus of biodiversity conservation (Treweek et al., 2010). One habitat typemay support several species of conservation concern (Bunce et al., 2013);
this means management to enhance its extent or condition can deliver
multiple benefits. A potential result is more efficient allocation of resources
for conservation. Links between habitats and the species populations they
support are not explicit, however.
One of the main motivations for developing the UK Habitat
Classification (UKHab, as described in Box 2-3) was to support directcomparisons of habitat extent or condition before and after development.
Although habitats have been the main unit for monitoring biodiversity andecosystems at national and European levels, achieving consistency has been
constrained by use of multiple classification systems, with variable andinconsistent definitions. UKHab ensures consistent definition of habitats
across the country, identifying vegetation types that can be expected tosupport a predictable, characteristic or typical range of species. Habitats aredescribed primarily on the basis of vegetation characteristics (compositionand structure), with additional descriptors of biophysical context (calcareous
grassland, for example) or sometimes management being available throughsecondary codes.
Biodiversity is multidimensional and difficult to define and measure.
While it is important to avoid oversimplification, highly complex metrics
that require detailed baseline data to use could create regulatory

Much of UK and European
nature conservation
policies target habitats
because they provide apragmatic link between
efforts to conserve
populations of individual
species and more
integrated approaches
to landscape-level
management.

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Biodiversity Net Gain in Englandbottlenecks. Nevertheless, use of a habitat proxy alone may have
limitations. Biodiversity Metric 3.0 reflects species’ requirements only
insofar as they affect assigned scores for intrinsic distinctiveness of habitats
and their recognition in the field, or benefit from habitat enhancements. It
remains to be seen, then, whether Biodiversity Metric 3.0 will deliver tangible
overall gains in biodiversity in all its dimensions. Structure and function of thehabitats are reflected in the condition assessment methods to a degree but
are not necessarily given sufficient emphasis considering their importancefor some taxa.
Objective approach. Some of the subjectivity associated with otherbiodiversity loss/gain metrics has been removed in Biodiversity Metric
3.0 by assigning levels of distinctiveness based on published literatureand specialist knowledge regarding characteristic species composition ofdifferent UK habitats. For example, an agricultural ryegrass ley is inherently
less distinctive than a species-rich chalk grassland (Treweek et al., 2010).

© Diana Naatz｜36

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Gains can be achieved by increasing the area occupied by higher
distinctiveness habitats and/or by improving the condition of existing
habitats, allowing quite a lot of flexibility in the delivery of gains. Obviously
the two parameters are not completely independent as lower distinctivenesshabitat types transition to higher distinctiveness types with suitable
management and vice versa, according to reasonably predictable trajectories.
Distinctiveness reflects the plant species composition of habitats (vegetation
types) but does not necessarily reflect diversity or abundance of other taxa.
Many offset systems in other parts of the world establish mechanisms tooffset impacts on some species of conservation importance. Under the
proposed system for England, existing mechanisms will remain in place tosafeguard protected species, but there are many other species for which
there is no targeted provision, including many rare and declining species thatwere identified for action under the UK’s Biodiversity Action Plan.
Bespoke offsets of a higher standard than regular BNG delivery andwith more rigorous and stringent monitoring should be developed tooffset impacts on very high-distinctiveness habitats and specific species.
The need for such tailored offsets was envisaged in addition to use of abroad habitat proxy in the initial work that led to the definition of UKHab.
Treweek et al. (2010) recommended that ‘supplementary methods would
be necessary to ensure that high-priority biodiversity features for which
habitat is not a good surrogate would be appropriately measured and offset’.
Otherwise, they noted, important assemblages of flora and fauna would notnecessarily benefit from broad habitat interventions because they require
specific management in specific locations with sufficient ecological potential.
In some cases, deliberate introduction of species might be needed to achievecolonisation of newly created habitat because some species now havevery fragmented distributions in the landscape. In theory, strict regulation
should prevent development affecting very high-distinctiveness habitats,but in practice these habitats are regularly damaged and lost (as previously

Gains can be achieved byincreasing the area occupied
by higher distinctivenesshabitats and/or by improving
the condition of existing
habitats.

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mentioned, up to 6 percent of the annual developed area affects priority habitat). Bespoke offsets might be necessary
or appropriate to improve outcomes for very high distinctiveness habitats. The resulting increase in developers’ costs
would further remove incentives to develop in such high-distinctiveness habitats. In addition, the metric specificallyflags some ‘irreplaceable habitats’, but further work is needed to define those and establish a comprehensive listing.

4.1.2. Other key considerations for Biodiversity Metric 3.0
Defining area multipliers. Established offset principles generally require the creation of an area of equal size or larger
than the area lost or affected by development. There is a great deal of published literature from the United Statessuggesting that chances of assured delivery of biodiversity credits are considerably improved by use of larger areamultipliers. When conceived (Treweek et al., 2010), a minimum 1:1 replacement ratio was envisaged for this reason
to reduce cumulative erosion of the area of land allocated to biodiversity/conservation, especially given the fact thatindirect impacts are not addressed by the current system. This has not been carried through into current proposals
for Biodiversity Metric 3.0, though it is partially addressed by the spatial and temporal multipliers.

Limits to what can be offset: defining irreplaceable habitats. It is generally
accepted that there are limits to what can be offset on a like-for-like basis
due to the inherent vulnerability or irreplaceability of affected biodiversity(BBOP, 2012).
The UK’s proposed framework is based on a presumption against damage
or loss of certain irreplaceable habitats, but there is further work to be done
to establish the relative irreplaceability of certain habitats. It is difficult tosee how this can be evaluated meaningfully without detailed considerationof the requirements of discerning species that are largely confined to ancient
habitats (or otherwise relatively irreplaceable habitats) and hence act as
indicators of their presence.
Strategic spatial planning and site selection. The UK BNG framework creates incentives for location of offsets that will contribute to BNG within strategic spatial networks, established at local or national level (nature recovery
networks) through use of a multiplier. This approach can also contributetowards a degree of additionality (achieving gains that would not have beenachieved otherwise through existing statutory conservation mechanisms).

Experience from overseas
emphasises the importanceof clearly defined service
areas where offsets delivery
is considered acceptable orallowable.

Experience from overseas emphasises the importance of clearly definedservice areas where offsets delivery is considered acceptable or allowable.
The BNG scheme for England uses strategic multipliers to encouragetargeting of BNG actions within defined nature recovery networks, but these
are relatively low. Aside from this element, there is some uncertainty aroundlegitimate jurisdictional limits and spatial separation between impacts andoff-site offsets. Biodiversity Metric 3.0 does not quantify connectivity andit will be up to local authority regulators and planners to judge whether
proposed habitat creation or restoration is appropriately located in ecological

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Biodiversity Net Gain in Englandterms (e.g. on a suitable geological substrate, where
there are reasonable chances that characteristic species
will colonise or where key functions and processes will
operate). Judgements about the extent to which these
conditions are met in proposed off-site offset locations
will often need specialist input.
Experience also highlights the common tendency toconfuse ecological aspects of spatial delivery (i.e. delivery
where BNG outcomes can be achieved in technical terms)
with ecosystem service aspects (i.e. delivery where
people benefit from the offset and do not experience
adverse impacts from habitat loss in one location andgain in another). During the UK’s voluntary offset phase(since 2012), the assumption has been that gains should
be delivered as close as possible to where losses occur.
But the basis for this rule is not clearly established, andit should be reconsidered in the light of clear social andecological criteria.
Habitat banking potentially has an important part toplay in improving habitat connectivity within strategic
spatial networks; it provides opportunities to consolidate,link and aggregate gains.

Onsite versus offsite delivery of biodiversity gains
Biodiversity Metric 3.0 allows flexibility regarding
on-site or off-site delivery of BNG and permits on-site
offsets. As originally conceived (Treweek et al., 2010),
the metric would have been used for off-site offsets
only, with a minimum area replacement ratio of 1:1, toachieve gains of higher distinctiveness habitats outside
designated or protected areas and to bring more land
into suitable management to improve the condition ofexisting habitats. Allowable mechanisms for gain would
have linked to no net loss targets in the UK Biodiversity
Action Plan at the time (maintain condition of existinghigh-distinctiveness habitats, restore degraded habitat or
create new, high-distinctiveness habitat, etc.), focusing
spatial delivery on suitable land to network habitat or
benefit particular species populations.
Under the proposed system, nature recovery
networks will be pivotal to ensure that newly restoredor created habitats do contribute to conservation
outcomes for rare and declining species that are notcovered by protected species legislation. Selecting
optimal locations for delivery of biodiversity gain may
not guarantee that impacted species
are able to benefit, however. First,
losses may be experienced by one
population, with BNG delivery
benefitting another. Second, timedelays between impacts and gains
may mean there are significant
interim losses of habitat for declining
species.
One of the main reasons that
habitat banks emerged was thegeneral failure of onsite mitigation.
Much on-site habitat mitigation will
form beneficial green infrastructure
but may not genuinely benefit
biodiversity for a variety of reasons—such as available areas are below
minimum viable habitat thresholds,
or they are too disturbed by thepresence of people and domestic cats.
Access for suitable management may
also become increasingly constrained
over time.

Selected areas requiring further elaboration for BNG in EnglandDuration of offset. International good practice indesign of biodiversity offsets requires biodiversity gains(and/or the management required to deliver them)to persist in perpetuity or at least for the duration of
the impacts being offset. A fixed time frame based on
duration of impacts (30 years is currently envisaged)
will have different implications for different habitat types.
Creating some habitat types (such as salt marsh) may
result in land use change that is effectively irreversible
without major capital expenditure. Creating or removing
other habitats can be more straightforward (a woodland
may be cut, for example, although this would require afelling licence). A scheme duration of 30 years could limit

the net gain potential of higher-distinctiveness habitats,as some high-distinctiveness habitats (e.g. woodlands)
require significantly more time than 30 years to reachmaturity and become fully restored (see Table 4-1).
Existing habitats will also vary in terms of their suitability
and cost of delivering BUs; supplying BU from agriculturalland is generally cheaper without having to ‘buy out’ fromexisting land use at a significant cost. A hybrid approachto the duration of offsets may be advisable: upholding a
30-year time frame for lower-distinctiveness habitats,
while stipulating ‘in perpetuity’ offsets for higherdistinctiveness habitats.

Table 4-1. Examples of time to maturity for different habitat types

Habitat typeTime to maturity (years)

LinearRivers and streams
Hedgerows

15-25
3-5
>30

Restored biotic composition, diversity and functioning
Establishment of structure
Species colonisation

AerialWetlands

Lowland heaths

Semi-natural grasslands

Woodlands｜39P

1-2 Improved hydrology and arrival of bird species<10 Beneficial changes for vegetation and invertebrates>60 Full recovery of habitatc. 2 Vegetation improvements
10-15 Full recovery of pollinator functions
4-5 Restoration of MG5 and acid grassland vegetation>100 Restoration of calcareous grassland and species-rich meadows<10 Soil restoration
4-15 Full recovery of pollinator functions
20-30 Full canopy restoration
30-40 Colonisation of shade-tolerant species>80 Full restoration
Source: Maskell et al., 2014

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Biodiversity Net Gain in England

Potential perverse outcomes of maintaining existing habitats. The current system does
not provide for maintenance of existing higher-distinctiveness habitats that form
valuable sources of species for colonising new habitats—and are important in theirown right. As originally conceived, the metric would have allowed sales of credits fromsuch habitats, priced to cover the maintenance needed to sustain them in the landscape,or the management needed to bring them into suitable or optimal condition. This is afeature that has been lost as a result of transitioning from a no net loss system to BNG(‘new’ habitat only). Failure to provide incentives to preserve such habitats could leadto significant losses of important species reservoirs, management neglect or, at worst,
deliberate removal to make way for more lucrative ‘uplift’ opportunities. While it may bepossible to establish cut-off dates for baseline definition that will partially address thisrisk, further consideration of possible protection mechanisms is needed—for example,
as part of the ELMS scheme.
For very high-distinctiveness habitats, certain losses might translate into very uncertain
gains—unless their taxonomic diversity and specific management requirements are
addressed. The system relies on the nature recovery network to ensure that newly
created habitat or management improvements are spatially targeted to benefit speciesof conservation importance. However, if losses continue, this alone might not result inrecovery within the time frame needed to ensure that declining species have continuityof habitat.

Review and accreditation. Further consideration needs to be given to the process ofrestoration and creation (BU supply side) and how it will be monitored and ensured in
ecological terms.
This includes considerations such as:
1.

Ensuring that ‘gain’ sites are suitable or have the potential to achieve target
outcomes;

2. Establishing clear benchmarks that can be used to monitor progress over time, tied
to release of payments; or3.

Testing actual achievement of gains in biodiversity overall (at local, regional or
national scales) and having insight into trade-offs between habitat types (aresome being lost more than they are gained, or is there a preference for habitatsthat are easier to create?)

Other factors to be considered are:1.

Existence of colonisers to benefit from habitat restoration or creation, and what
action should be taken if their presence is unlikely without deliberate intervention
or, on the other hand, incentivising selection of more suitable sites;

2. Management needed to create specific biophysical conditions for discerning
species; and3.

Management needed to create habitat structure that will benefit particular species.

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As things stand, local authorities are seriously lacking the capacity needed to review BNG delivery plans in detailfrom a technical biodiversity perspective or to evaluate the suitability of proposed BNG sites. Critical reviews of
biodiversity offset schemes globally have identified the need for independent review and verification.
Practical considerations. Some habitat restoration/creation will depend critically on sources of propagules that may
be in limited supply—for example, seed stocks for lowland meadows of the right local provenance. This could affectcosts of habitat creation or cause delays.

4.2 Defining BU delivery
mechanisms and enabling a levelplaying field
As discussed in Section 2.3, there has been some limited market
activity over recent years driven by voluntary offsets and isolated cases of
mandatory offsets in local planning authorities where initial Defra pilots
had taken place.
The BU delivery mechanisms that will be established to supply BUs areunclear. In the US, broad types of market supply mechanisms have become
established over time, as described in more detail in Annex 1. It is essentialthat these mechanisms develop in a way that will support a liquid market
for BUs. Having sufficient BU supply options has multiple benefits in termsof efficiency and environmental outcomes. The more quickly potential BU
delivery mechanisms are clarified and the market becomes established, themore efficiently the market will operate.

© Glenn Anderson

BU supply in England is likely to come from a mixture of sources (which are
not mutually exclusive), including:U

Farm businesses, where small areas of less productive land may be
used to generate BUs due to more sensitive farming operations;U

Private estates, where BU supply aligns to existing habitat
management plans or is a commercially viable opportunity due to alarge local development;

U

Bespoke environmental enhancement projects, where BU supply is
one of the key products/ revenue sources for the business plan;U

Public sector land holdings, including public bodies that manage large
estates (e.g. MoD) or surplus land held by local authorities;

｜42

Biodiversity Net Gain in EnglandU

Non-governmental organisations (NGOs),
where BU supply fits with wider strategic
opportunities—e.g. by enabling expansion ofexisting high-biodiversity habitats.

P

Major uncertainties remain over how BNG will becontracted and therefore who will bear the risk of BU
delivery, which will affect BU prices and will determine
which land managers will commit to the process.
All suppliers will be committing their land to the BNG
agreement for 30 years according to the legal requirement,
and in practice potentially longer, as restrictions may thenapply to habitat management beyond the 30 years.
The market exchange of BUs will require supply tomeet demand at a precise point in time, i.e. exactly
when the developer needs to show a BNG plan to an LPA
to obtain planning permission. This timing requirement
is potentially a constraint on market activity because
sellers waiting for buyers, and buyers waiting for sellers,
will both be incurring costs. Various processes can help
mitigate this timing risk.
Habitat banking can help with creating liquidity inthe market as it allows BUs to be stored ready to beprovided as demand arises. With the habitat banking
market mechanism, the biodiversity credits in an offset
scheme are produced before (and do not require ex-ante
links to) the losses they compensate for, and are stored
over time (eftec et al., 2010). Banking helps align supply
with demand over time. It can benefit suppliers as the
BU value of habitat enhancement can increase over time,
due to the ‘time to target’ penalty in the biodiversity
metric reducing. As biodiversity enhancement is alreadyunderway/completed, this reduces risks to biodiversity.
In New South Wales, Australia, a study of 20 projects
found that biobanking halved average time-to-permit
and delivered cost savings totalling AUS 35 million. The
average time-cost saving for smaller projects was AUS
0.25 to 0.75 million (GBP 0.14 to 0.45 million) and forlarger projects AUS 1.5 to 4.5 million (GBP 0.88 to 2.65
million) (Duke and ten Kate, 2014).
As habitat banks have actions already underway, they
have better knowledge of what price per BU they needto charge developers in order to cover their costs (suchas securing land and implementing management plans todeliver BUs).

In New South Wales,
Australia, a study of
20 projects found thatbiobanking halved averagetime-to-permit and delivered
cost savings totalling

AUS 35 M
Source: Duke and ten Kate, 2014

In line with US experience (discussed in Annex 1),
habitat banking should be encouraged because it canbenefit both biodiversity outcomes and market liquidity.
Although banking is not precluded in the currently
proposed system, it could be supported more clearly bydefining the process for banking BUs and setting up themarket components that support banking (as described in
Section 3.2). This includes having a process for registering
BU supply in order to bank it, stating what information isrequired for registration, and outlining good practice on
demonstrating additionality and rules on stacking andbundling (see Section 4.3). The parameters in the metric(see Section 4.1) also influence the process of banking;
being able to sell more BUs as their delivery progresses(and the ‘time-to-target condition’ risk reduces), will
mean there is a return to placing projects in a bank andprogressing with BU delivery actions.
Brokers can also help line up supply ready to meetdemand when developers require it. This can beparticularly important if BUs from specific habitat types
are required. Individual private landowners, such as farms
and estates where BNG is a minority source of income,are more likely to benefit from using brokers to participate
in the market. For projects where BU supply is a moresignificant (even potentially the main) source of income,brokers may also be helpful and—similar to the potential
to operate a habitat bank, from which to sell BUs overtime as buyers come forward—will improve their ability
to supply the market.

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Whatever offsetting mechanisms will be legallyavailable within the English BNG scheme, they needto ensure a level playing field. On-site biodiversity
mitigation should be regulated to the same standards
as off-site BU supply—for example, by requiring theiruse of the biodiversity metric, and management plans todeliver BUs, to be transparent. Mechanisms to monitor
and enforce BNG delivery over the long term must be
applied in equal rigor to sites both on- and off-site.
Weaker standards and regulation for on-site mitigation
will weaken demand for BUs, deter supply and therefore
weaken the BNG market. This will both harm development(with less supply, there is less opportunity for competition
to reduce prices) and weaken biodiversity delivery.
Experience in the 1990s in the UK showed that integrationof biodiversity mitigation into on-site measures generally
failed because it was poorly implemented and notmonitored, and requirements were not enforced.
All landowners, including public bodies andenvironmental NGOs, should avoid supplying BUs
at less than their cost of delivery or market value(whichever is higher). Doing so would represent a
subsidy to biodiversity damage, which would therefore
amount to giving a ‘licence to trash’ and would conflictwith public bodies’ and environmental NGOs’ obligations.
Along with the rules and processes through whichthese transactions will operate in the market, there
is also a need for independent oversight of market
operations. An Office of Environmental Markets, ora similar regulatory body, could support monitoringof individual transactions (particularly more complex
and/or precedent-setting ones, including BNG trading
between local authorities), and it could track overall
transaction outcomes (i.e. is BNG actually being
delivered?). Evaluating these outcomes and providing
feedback into the new market systems is crucial to
improve environmental outcomes over time.

4.3 Stacking and bundling: How can projects
mobilise diversified funding sources?
The sale of biodiversity offsets is likely to generate substantial funding for landowners looking to repurpose theuse of their land. Land use change needs to be a viable business proposition for suppliers of biodiversity units so thatthey have an incentive to participate in the market rather than use the land for other purposes. Expected profit levels
are unclear; they will in part depend on how efficiently BU suppliers generate and manage delivery. However, given therisks involved in BU supply (including policy risks from Government actions and delivery risk), sellers will likely expect
profits per BU transaction in the region of several GBP 100s or GBP 1,000 per hectare (over 30 years). As a point ofreference, the gross margin for wheat, which entails significantly lower implementation risks and temporal lock-in,
is approximately GBP 700 per hectare (Webster and Baley, 2019). Another factor influencing market returns will beother environmental goods and services that can be sold with or alongside BUs.

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Biodiversity Net Gain in England

Selling multiple ecosystem services from an area of land can be done by selling them separately (stacking) orin combination (bundling), as defined in Box 4-1. Table 4-1 shows that approaches to stacking and bundling can varyconsiderably from one place to another.
Box 4-1. Stacking and bundling: definitions

Stacking

Bundling

Stacking means measuring and accrediting thedifferent types of environmental services from anature-based project on a single area of land, andselling the services to different buyers, or receiving
multiple payments from a single buyer for eachservice delivered.

Bundling means packaging the biodiversity andenvironmental services produced by a nature-based
project on a single area of land and selling the
package (typically as a single unit of trade or credit)
to a single buyer.

Table 4-2. Types of stacking and bundlingTypes of stacking and bundling

Description

ExampleHorizontal stacking

A nature creation/restoration project
performs more than one distinct
environmental management practice on nonspatially overlapping areas and receives asingle payment for each practice.

A landowner plants trees across distinct
parts of property, receiving nutrient credits
for forested buffer along a stream and carbon
credits for the trees upland in the property.

Vertical stacking

A nature creation/restoration project
receives multiple payments for a single
environmental management activity on
spatially overlapping areas.

A landowner plants a forested riparian buffer
to receive both water quality credits andcarbon credits.

Temporal stacking

A nature creation/restoration project involves
only one management activity but payments
are disbursed over time for different
ecosystem services.

A landowner initially restores a habitat
to receive endangered species credits.
Later, when a carbon market develops, thelandowner receives carbon offset credits.

Bundling

A nature creation/restoration project receives Often applicable to broader environmental
a single payment for providing multiple
credit types which encompass multiple
ecosystem services on the same land.
ecosystem services (e.g. US wetland credits).
Source: Cooley and Olander, 2011

In the UK, markets for different ecosystem services are still developing. Potential returns for other environmental
services that could be stacked or bundled with BUs include:
U

Carbon credits associated with tree planting: The Woodland Carbon Code is a voluntary carbon offset
market with clear rules and an associated trading platform. Returns associated with woodland carbon codetransactions vary by woodland type and other factors but can generate around 100 to 300 tonnes of carbon
over 30 years. Historic price levels of around GBP 10 per tonne give a present value revenue of around GBP
1,000 to GBP 2,000 per hectare over 30 years. However, more recently the Woodland Carbon Guarantee
auction has been clearing at around GBP 19 per carbon unit, giving higher returns.

Selected areas requiring further elaboration for BNG in EnglandU

Nutrient trading schemes: These are understoodto involve payments of around GBP 100 per
hectare per year, giving a potential present value
revenue of around GBP 2,000 per hectare over
30 years.

Returns from other ecosystem service markets
are a fraction of the expected total price per BU.
However, they may not involve any or much additional
management action on top of the costs of delivering BU
supply (although some monitoring and other transaction
costs would be expected). Therefore, the additional
revenues they provide could be significant relative to the
profits that BU sellers may achieve.

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Separate sale of nutrient, carbon and/or other credits
on top of BUs through stacking or bundling involves
complex issues. It is essential for BU suppliers to haveclarity on combining revenues from biodiversity units
with other types of revenues. In the English context, it
would be helpful to set out explicit objectives for defining
rules on stacking and bundling regulations. As outlined in
Figure 4-3, such objectives could include:
U

Objective 1: Guarantee additional biodiversity
net gain at all times, i.e. biodiversity gains must
exceed losses from impacts. Resulting rules
would centre on prohibiting double counting andensuring clear additionality;

In addition, revenues from BU sales could potentiallybe stacked or bundled with:U

Objective 2: Avoid perverse market outcomesfrom stacking and bundling;U

Funding schemes, such as agri-environment
schemes (e.g. ELMS)

U

U

Different grants (e.g. Woodland Creation
Planning Grant, HS2 Woodland Fund).

Objective 3: Administrative efforts associatedwith developing, monitoring and enforcing
stacking and bundling policy must be
proportionate to environmental and social
benefits.

Figure 4-3. Objectives and associated rules for stacking and bundling
Figure 4-3. Objectives and associated rules for stacking and bundling

Sta

s

dit

s
ype
nt t

ng
cki

Sta

ere
diff

re
of c

cki

Net gain

ng

of c

red
i

No
perverse
market outcomes(gains must
exceed losses)

ts &

sub

sid

ies

Administrative efforts proportionate to gains
Objectives
Rules

Measure of state and capacity to support biodiversity

1｜No double counting

2｜Clear additionality

3｜No crowding out

4｜Reasonableadministrative effort(i.e. one single unit of gain
is not used to compensate
two equivalent units oflosses)(i.e. intervention would nothave happened anyway andholds against additionality
tests)(e.g. subsidies must notdisincentivize private actors
from entering the field or
grant unfair advantage)(i.e. costs associated withadministrative efforts
should not outweighpotential benefits)

Sources: Bean, et al., 2008; Hough and Harrington, 2019

Sources: Authors

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Biodiversity Net Gain in EnglandTo achieve these broad objectives, key areas require clarification:
Rules to evaluate additionality of actions. Evaluating whether an actionis additional amounts to assessing whether it would have otherwise happened
if not for the selling of the offset (Broadway Group, 2021 – forthcoming).
Additionality may need to be assessed through a combination of tests and canbecome more complex when considering the interactions among schemeswith different parameters.
These tests are based on different aspects of ecosystem services markets,
including:

Legal requirements

Are actions additional to standards required in laws or regulations?
Economics

Would actions be profitable without the stacked or bundled payment?
TimingDid the project commence before payments were available?
Environmental performance

Are there positive outcomes against a pre-project environmental baseline?

Rules to evaluate additionality of outcomes. Besides the potential lackof additionality of actions, the way ecosystem outcomes are measured could
also compromise the additionality of outcomes or lead to double counting.
This is a risk with BNG, as the way biodiversity loss is measured (through BUs)
excludes other ecosystem services (e.g. carbon sequestration and storage inhabitats). If credit is claimed for carbon benefits from actions supplying BUs,
but losses of carbon are not measured, then revenues could be received forproviding carbon sequestration that is not additional to the pre-development
baseline. However, the current state of play is that the carbon losses as aresult of land use development are not measured, and developers are notresponsible for compensating for them.
This illustrates the relevance of different additionality tests. In
environmental outcome terms, compared to before the development and BU
supply actions take place, there may be no additional carbon sequestration
and/or storage (depending on the types of habitats involved). However, ina legal sense, carbon benefits from actions to supply BUs are additional, as
there is no requirement at present to compensate for carbon losses fromdevelopment (although this could be built into good practice).

© Alex Sidney

Selected areas requiring further elaboration for BNG in England｜47

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Coordination across different ecosystem services markets. The current
range of developing markets (BNG, carbon, nutrients, etc.) have different
measurement approaches, duration and voluntary/mandatory status. This
makes it important to measure baselines and demonstrate additionality for
all potential markets in a consistent manner ex-ante of a transaction in any
one of them. Good practice in measuring and recording baselines is also
important for habitat banking in BNG. This is an area in which pilot BU supply
projects can demonstrate good practice. They can be transparent to buyers
and regulators about how their baseline has been defined and measured for
BNG—and across the different parameters potentially used to measure otherecosystem market transactions.
The importance of this is further underlined by issues related to stacking
and bundling that have emerged in the US and Australia (see Box 4-2). Alack of well-designed and consistent rules can result in double counting or alack of additionality, causing lower biodiversity outcomes. In addition, If every
region determines its own rules and enforcement mechanisms independently,
this can result in higher administrative costs and uncertainty for market actors.
In order to coordinate activity in different environmental markets and ensure
additionality of environmental benefits, Government must provide clear rules
on whether and how stacking and bundling will operate across the multiple
ecosystem markets and subsidy schemes (e.g. ELMs) developing in the UK.
In the short term, a period of market design and learning through trials
will enable the development of adequate rules for the BNG market. To makethis happen, Government should offer clarity on whether it is acceptable tosimultaneously participate in different payments for ecosystem services (PES)
setups and receive public payments. Government must have the capacity tomonitor, evaluate and offer feedback from the trials.

© Alex Sidney

Good practice in measuring
and recording baselines is also
important for habitat banking
in BNG.

During the trial and development of the rules, Government should
not exclude land managers who have already invested in payments fromecosystem services schemes or other funding programmes, provided theycan:U

Demonstrate additionality for each scheme/payment, which aremeasured and justified against a recorded baseline;

U

Base this on agreed (interim) criteria;

U

Are transparent with their measurement and justification.

More work is needed on stacking and bundling, so that practical tools andinformation enable land managers and investors to plan and act with confidence.
This goes beyond the scope of this paper.

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Biodiversity Net Gain in EnglandBox 4-2. International lessons associated with stacking and bundling

Pitfalls from lack of stacking and bundling regulations in the US. In the US, there are no nationalrules around stacking and bundling of different
environmental credits. This has resulted in multiple cases where actions or outcomes were notadditional or led to double counting. For example,
a disputed case concerns the Environmental Banc
& Exchange in North Carolina. This habitat banksold wetland credits to the Department of Transportation in 2000. In 2008, it then sold nutrient
offset credits for the same conservation actions
to another public buyer, despite lacking additionality. North Carolina has since revised its rules
for stacking and bundling, no longer allowing such
temporal stacking.
Controversies around problematic regulation in
New South Wales, Australia. In Australia discrepancies between national and state rules on stacking and bundling have led to controversies. Australia’s national EPBC Biodiversity Offset Policy
clearly prohibits stacking and bundling of carbon
and biodiversity credits, explicitly stating: ‘The
conservation gain achieved while participating
in another scheme (such as the Carbon Farming
Initiative) would also not be eligible for use as anoffset’. However, several states have developed
their own policies around stacking and bundling.
In New South Wales, stacking and bundling of
biodiversity and carbon credits is formally enabled. The policy states: ‘Land management requirements for the purpose of creating carbon credits
are not considered to be legal requirements forbiodiversity management under this policy. Thismeans that the same site can potentially generate
both biodiversity credits and carbon credits through the same management actions’ (State of NSW
and OEH, 2014). This has been criticised overconcerns about lacking additionality and double
counting by various stakeholders (e.g. the Australian Conservation Foundation).
Positive lessons from a well-thought-throughapproach to vertical stacking in the COTE scheme. The Willamette Partnership scheme ‘Counting on the Environment’ (COTE) represents aninteresting potential approach to vertical stacking. Established in 2009 by a series of US public,
non-profit and private stakeholders, the partnership was set out to pilot trading of different types ofenvironmental credits. Four credits were includedin the scheme: Wetlands, water quality, upland
prairie and salmonid habitat. An accounting andmeasurement protocol was created to define eligibility and additionality, including methods to reconcile environmental credit incomes and public
subsidies. Based on the protocol, more than one
type of credit could be sold from the same management activity and proportionately reduced in
number when one of another form of credit was
sold. When a certain amount wetland credits
were sold, species credits from the same plot of
land were reduced by the same proportion. The
scheme provides landowners with the flexibility
to sell credits which are most valuable at any one
time, while avoiding double counting.
Sources: Poulton, 2014; von Hase, et al., 2018

4.4 Enabling functioning markets: what cangovernment do?
Besides establishing the regulatory framework for an effective BNG scheme, government will need to play anactive role to ensure that markets function efficiently. In the early phases of the scheme, an active involvement willbe essential to help avoid regulatory failure, accelerate market participation and ensure smooth transaction processes.
This section discusses policies and interventions to ensure robust and predictable demand, stimulate supply andfacilitate transactional market aspects, such as transparency and administrative capacity. These will influence thewillingness of the financial sector to invest in the supply side of the market, so finance-specific interventions toencourage investment are also discussed.

Selected areas requiring further elaboration for BNG in England

Government agencies should avoid trying to do too much, however,and focus on essential government tasks that include legislating andregulating. Other optional roles for the public sector (such as a seller or abroker of BUs) risk creating distractions for public sector agents, generating
conflicts of interest and crowding out the private sector. Such additional
functions should therefore be kept to a minimum, at least while the market
becomes established. For example, brokering of BUs would best be carried out
by private sector agents rather than by multiple local authorities, particularly
when brokering needs to take place across local planning boundaries.

4.4.1. Ensuring robust and predictable｜49

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Government agencies should
avoid trying to do too much,
however, and focus on
essential government tasks
that include legislating andregulating.

demand for BUs
A potential demand-side measure is to increase the transparency of thescheme to boost voluntary participation. Voluntary demand for BUs is quiterare. Public and non-profit campaigns centred on the mandatory scheme toboost public awareness could give more companies incentives to aspire to‘biodiversity neutrality’. Such voluntary company commitments could apply tohistorical as well as international developments. This could expand potential
demand for BUs and help establish market confidence.
A more specific demand-side intervention is a demand guarantee.
Government could provide such a guarantee. This instrument has been usedin other environmental markets (e.g. through the floor price in the Woodland
Carbon Code credits) and to ensure supply of other public goods (e.g.
advanced market commitments to encourage pharmaceutical research).

U

Act as a broker, i.e. resell to the market at cost as soon as possible;

U

Retain it as ‘net gain’ towards national biodiversity objectives; orU

Bank it to ensure future supply shortages are avoided.

A variation on this option is for Government to purchase BUs throughoption contracts, giving the seller an opportunity, but not obligation, to sell to
Government at an agreed price. This would allow suppliers to choose not tosell to Government if they wish to sell in the open market.

© Jari Cornelis/TNC PhotoContest 2019

Government could commit to purchase a certain number of BUs in each LPA(or other zones, such as local nature recovery strategy areas). The anticipatedpurchases could be determined through spatial modelling of expected
requirements and advertised ex-ante to encourage supply. Purchases could
be spread evenly over all supply of an adequate standard and put forward by acertain date or prioritised through a bidding process. Government could thenpotentially do several things with this supply:

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Biodiversity Net Gain in England

A major challenge for efficient demand guarantee
policies is to identify the right price level for Government
intervention. A price that is too high means Government
overpays; too low, and Government will undercut suppliers
and weaken market confidence. The best way to establish
pricing is through actual supply actions, such as encouraging
habitat banks or undertaking a reverse auction.

policy mechanisms that Government could use to support
supply:U

Enabling trading between adjacent and nonadjacent LPAs would stimulate supply. The
Environment Bill already includes a provision
to allow purchases of BUs from outside an LPA.
Through the metric, a penalty is attached to this(a 25 percent reduction for BUs in neighbouring
LPAs, and 50 percent beyond). Ensuring thisoption is used will give confidence to suppliers
that they can sell to buyers from outside their
LPA. For example, this would include supporting
consistent implementation of the BNG regulatory
process (such as for granting of planningpermission) by the two LPAs involved (the supply
and demand locations).

U

Governmental grants to suppliers could
provide payments to help start BU supply
projects. Experience from projects within Natural
England’s credit pilot scheme have shown that

Advance purchase capability could also be enabled
for the wider market: Land use developers could
purchase BUs (or BU options) to cover their anticipatedfuture needs. This would fuel suppliers with revenue earlyin their project development and also help smooth the levelsof demand and supply over time.
Markets provide the incentives for buyers and sellers toinnovate to overcome challenges (such as on timing) in an
efficient manner. The challenge in the BNG market is to keep
Government’s rules from blocking such innovation, whilestill ensuring efficient market outcomes for biodiversity andsociety.
It should be noted that several of these interventions
that spend money to boost demand for BUs would havea ‘no-regrets’ element; the worst-case outcome would
be biodiversity enhancements that helped deliver 25
Year Environment Plan objectives. Another advantage of
ex-ante interventions would be to help establish the actual
costs of supply; this would inform expected prices to themarket. Their disadvantage could be to cost more per BU
than measures that support (but have less control over)supply of BUs, or market activity overall, so there is a tradeoff to assess between certainty and cost of outcome.

4.4.2. Stimulating BU supply
The BNG policy proposals in the Environment Bill
include a provision for the Government to act as a ‘sellerof last resort’. This is to ensure that the BNG requirement
does not act as a block on development and/or impose
excessive costs on developers (if they are not able to procure
BUs in the market). However, such powers for Government
could potentially create a perverse incentive because
they introduce an additional risk for private suppliers. By
deterring investment in supply, they could increase the riskof supply shortages, which they are designed to address inthe first place. Alternatively, there are a number of other© Todor Tilev

Selected areas requiring further elaboration for BNG in Englandproject preparation costs can be significant.
Grant initiatives such as Natural Environment
Investment Readiness Fund (NEIRF) deployedby the Environment Agency can alleviate someof these. Governmental grants for project
preparation can help kick-start the market andbuild a project pipeline. However, they lack the
incentives created by investments (i.e. the needto repay capital) and may be a less cost-effective
use of public finances compared to investing in
suppliers or demand-side measures as there isno direct return on investment (e.g. BUs suppliedor financial revenue).
The Government could develop, and possibly cofund, insurance (or re-insurance) schemes for supply
of BUs. The purpose would be to allow BU suppliers (and,potentially, buyers), to insure themselves against failure of
BU supply (i.e. where habitat management actions do not
result in the expected biodiversity gains). This would help
build confidence in the market and give the Government
an incentive to regulate the market effectively to reduce its｜51

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insurer risks.
Similarly, government could consider de-risking
BU supply by temporally limiting suppliers’ liability.
Measures of this sort are in place in the US wetlands andstreams mitigation scheme, where habitat bankers are liable
for meeting strict performance standards over the first 10
years of delivery. After that, liability is transferred to anendowment fund, usually overseen by a local conservation
organisation. Habitat bankers are responsible to endow thisfund appropriately. They do this by factoring the costs of asite’s long-term management, monitoring and enforcement
into the credit price, combined with interest rates to sustain
the fund into perpetuity (The Environmental Law Instituteand Land Trust Alliance, 2012). Additional potential derisking measures are outlined in Annex 3.
Finally, Government could support the supply of
propagules critical to the restoration and creation ofcertain habitat types. This can lower habitat creation costs
and prevent delays in supply. To decrease risks of importing
diseases when procuring propagules from afar, government
could promote species seed banks of local provenance.

4.4.3. Facilitating market transactions
Although the Government can influence both thedemand and supply sides of the market, its key role isto ensure they transact in a way that is transparent andinspires trust. Indeed, the main function for Government inthis respect is to act as an effective regulator.

© Todor Tilev

To avoid risks of regulatory failure, the Government
needs to resource and implement the regulatory
processes that will oversee the BNG market. Local
planning authorities are in charge of environmental andmonitoring/regulatory functions at the local level. In
addition, the national government will need to establish aregister for BU trading, which is transparent, easy to use
and publicly accessible. It will also need to define rules andprocesses for habitat banking and inter-planning authority
trading, and to monitor the use of the biodiversity metric andensure that it performs as needed. The central government
has a key role to play to ensure that the BNG scheme isdelivering as planned and to conduct ongoing learning andevaluation to continue improving the scheme going forward.

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Biodiversity Net Gain in EnglandSome of the major risk factors in this area that could lead toregulatory failure include:
UU

If insufficient regulatory powers to overseeand control the market are transferred.
Enforcement powers are planned to be at the
local level. There are also planned processes
to monitor outcomes ex-post—for example,
as part of biodiversity outcomes monitored by
the Office of Environmental Protection (OEP),
which will be created following adoption of theEnvironment Bill. However, there appears to
be a gap in terms of macro regulatory powers(i.e. across the market) when more than one
planning authority is involved. Additional
regulatory capacity at national level could also bebeneficial. For example, it could vet offset plans
and their implementation to ensure that theseare developed and implemented in a consistentmanner.
If resources for government agencies toundertake their assigned functions are
inadequate. Primary capacity constraints
include:U

Local governments do not have enoughecologists on staff to monitor BNG
requirements adequately. (By one estimate,
only one third of Local Planning Authorities
have their own ecologist, and thesefunctions can be challenging to contractout.) The central government is committed
to transferring additional resources, but itwould be important to ensure that this is
not done at the expense of existing budgets.
It should result in only a moderate or no
overall increase in budget available at local
level for nature recovery;U

Access to technical assistance fromnational public bodies on the transactions
process to make sure local government canenable timely transactions; andU

Good infrastructure to allow adequate
access to data (e.g. to relevant biodiversity
data through local records centres).

The capacity across the system can be aided bya program of training—first, to develop a common
understanding of the process among buyers, sellers,
brokers, regulators and other players, and, second, in
specific parts of the system (e.g. training sellers andregulators on good practice for BU supply). An example
of a specific area to build capacity and discuss processes
is the time-phasing of the sale of BUs from a supplier,which may sell BUs to buyers in stages over time.
In addition to BU transactions themselves, there
is a need to strengthen adjacent biodiversity policy
measures. This need has been observed in other usesof economic instruments in environmental policy. For
example, the introduction of the landfill tax, without
additional resources to regulate or control illegal waste
disposal, led to an increase in fly-tipping. In the case of
BNG, this means strengthening associated BNG policy
enforcement through sufficient capacity in LPAs, Natural
England and biodiversity monitoring (e.g. through better
access to biodiversity data). This resourcing should bepart of a cross-Government strategy for BNG delivery.
To recoup regulatory costs to the public sector, fullcost recovery could be considered. This is practiced bysome jurisdictions in the US and Australia, who charge
fees for their administrative services to credit suppliers.
Additional costs are factored into the final credit price(Duke and ten Kate, 2014). Full-cost recovery will also
ensure that Government neither subsidises demand nor
undercuts private suppliers.
Market transactions can be supported throughother measures relating to information, brokeringand regulatory capacity. As shown in Box 4-3, different
international no net loss or net gain schemes facilitate
market transparency in various ways.

Selected areas requiring further elaboration for BNG in England｜53

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Box 4-3. No net loss or net gain market transparency measures in the US and Australia

International approaches to enhance no net loss or
net gain market transparency can inform England’s
current developments.
In the US, the Regulatory In-lieu fee and Bank
Information Tracking System (RIBITS) provides
in-depth information on third-party mitigation
providers across different environmental credit
schemes. It helps connect buyers and sellers bylisting providers, their geographic service areas andthe number of credits they have sold or are hoping
to sell. It includes suppliers’ contact informationand documentation, along with information on
mandatory mitigation policy and practices on anational, regional and local level. The platform
holds data on approximately 5,000 operational,
terminated, pending and sold out habitat banks andin-lieu fee project sites.
In Australia’s New South Wales biodiversity
offsetting schemes, five public registries facilitate
market transactions. Three of these provide
transparency on the supply side, while the othertwo provide information on demand and exchange:
1.

The credit supply register details the number,
types and locations of credits available forpurchase. It encompasses expressions ofinterest in potential credit supply, credits
pending approval and issued credits.

2. The accredited assessors register provides
information on credit accreditation, which
is mandatory within the New South Wales
scheme. It includes contact details of
individuals and organisations eligible to prepare
accreditations of biodiversity values and credits
for suppliers.
3.

Completed conservation agreements within
the scheme are listed in the private land andconservation agreement register, including
details on the size of the site, the type ofagreement, its starting date, terms of theagreement and more.

4. The credit demand register records thenumber, type and location of credits requiredby developers, including confirmed and still
pending demand (undergoing permitting
approval).
5.

Historical credit transactions are listed in thetransaction register. This provides an overview
of credit transfers and retirements, including
information on the credit type, number ofcredits, price, date of transaction and any
potential suspensions or cancellations.

Sources: NSW Government, 2021; RIBITS, 2021

To support the transaction process within the BNG market, the Government can take steps to improve availabilityof information. A key aspect of this in England is the planned BNG registry. While the registry will have a coreregulatory purpose of recording BNG actions that accompany planning approvals, it can also help share information
across market participants. There is a danger that the registry is required to perform too many functions, distractingfrom its core purpose. One solution would be to have a core registry focused on the delivery of the legal requirement
for BNG, linked to a BNG hub which enables access to a wider range of information designed to support the market.
Information contained in the BNG hub could include:
U

Banking of BUs (i.e. the locations where they are being generated);U

Publication of market data, for example:
U

Historical levels of land use development in each LPA, to share information on potential demand;U

Actual transactions, through aggregate and anonymous data that is confidential on individualtransactions, such as on areas managed under BNG agreements, and on price per BU.

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Biodiversity Net Gain in England

Information sharing through the registry and otherstructures better supports market development theearlier it happens. The aim should be for structures to beready within six months of the Environment Bill adoption(rather than wait until BNG becomes mandatory in 2023).
This will allow voluntary BNG activity (which is alreadytaking place) to start using the registry, generating
experience through which to refine its operation. Opening
processes for banking BUs earlier will encourage habitatbanking before BNG becomes mandatory and could
provide valuable information, including to Government,
on available supply, actual delivery costs and any
potential issues for functioning markets.
Government can also encourage exchange of BUs
by supporting brokering services. Brokering services
can reduce market entry costs for buyers and/or sellers.
Through the BNG hub, Government could provide asystem for registration of potentially available supply (butnot actual supply, which can be banked) and expected
future demand, by habitat and LPA.
Having consistent market information and enabling
access to this through the registry and hub will improve
market operation. This can be supported by Government
in several ways—first, by clearly defining required content
and, second, by producing templates for BNG agreements
and management documents (e.g. a standard contract
form, contents for a BNG site delivery plan). These
documents can also help reduce transactions costs
between buyers and sellers (e.g. facilitating due diligenceof suppliers by buyers).
The option for central or local Government to act
as a broker in the market should be avoided, despite
signs that this is already happening. It can distract from
Government’s essential functions (such as establishing
the registry) and produce conflicts of interest.

4.4.4. Stimulating investment in
BU supply
Investors will need to see a sufficient prospect offinancial returns relative to the risks in order to invest in
BU markets. Addressing the issues identified in Sections
4.4.1 to 4.4.3 (such as restricting the Government’s‘seller of last resort’ powers) will help boost investment
opportunities.

In addition, a range of potential Government
interventions can directly encourage investment in
BU supply. These are summarized in Annexes 2 and3. Suitable measures include technical assistance,
guarantees, tax incentives and advanced purchases,
described above under demand measures (4.4.1).
Further priority interventions are:U

Pump priming: Government injects funds into
the BU market, either as grants to suppliersor (as an extension of advanced purchasecommitments—see Section 4.4.1.) as payments
for a certain number of units to be supplied in theearly years of the market. Government could act
in partnership with potential buyers.

U

Invest in BU suppliers: In line with theGovernment’s Green Finance Strategy (HMGovernment, 2019), it could invest directlyin suppliers—for example, by giving loans on

Market operation can be improved by:

Having consistentmarket information
Enabling accessthrough the registry
and hub

Selected areas requiring further elaboration for BNG in EnglandU

Tax reliefs. These are an important incentive
mechanism for existing land use in England.
Reliefs currently applied in agriculture could be
extended to BU supply to create a level playing
field between commercial uses of land for
agriculture and BNG. A conservation property
relief (CPR) could be considered or guarantees
that the agricultural property relief (APR)
would not be affected by BNG delivery could be
provided.

The new UK Infrastructure Bank (UK IB) could
implement its environmental remit by actively taking
forward one or more of these financial measures (otherthan tax reliefs). With a sufficient scale of investment in
the market (e.g. through pump-priming and investments
in suppliers), the UK IB could issue a specific financial
investment product (e.g. a green bond) against theseinvestments. The UK IB could act in conjunction withother market interventions, in particular Government
advanced market commitments for BUs from specifichabitats with co-benefits, such as native woodlandthat extends existing areas of ancient woodland, or salt
marsh or peatland for carbon. Overall, Government
needs to identify the most cost-effective combination ofdemand, supply, transactions and finance measures toinject confidence into the market and stimulate supply(in particular, habitat banking) while still ensuringbiodiversity objectives are met.

© Sophie Trémolet

favourable terms and/or taking a minority firstloss share in habitat banks. The habitat banks toinvest in could be identified through a reverse
auction or similar bidding process. As well as
funding investment in supply, this would also
create an incentive for Government to ensure
the market functions (so it does not lose its
investment), giving confidence to other market
participants.

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Biodiversity Net Gain in England© Norverto Steves

5. Next steps:
checklist formarket players
Biodiversity Net Gain in England:
Developing Effective Market Mechanisms

Next steps: checklist for market players

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T

his section formulates recommendations forentities that can play a role in market development,
ranging from government agencies to BU suppliers
to housing developers. Recommendations are broadly
structured according to the main sections of this paper.

Area of focus

BNG framework

Scope of BNG
schemeRecommendations

Policymakers should carefully consider the key BNG components
outlined in this paper and lay out a clear pathway to ensure they areadequately covered in England’s BNG framework. This can be done
through:
U

Amendments to the Environment Bill before its adoption (expected
in 2021)

U

Secondary legislation accompanying the BillU

Departmental resourcing (e.g. land use planning system capacity)and policy implementation (e.g. other biodiversity policies)

U

Revisions of the biodiversity metric

Consider increasing the scope of the BNG scheme to increase potential
environmental benefits:
O

O

O

O
O

O

O

Joined-up
Government
strategy on BNG

Relevant for:

Defra, NE

Defra, NE

Increase the duration of the scheme from 30 years to perpetuity,especially for high-distinctiveness habitats, to ensure long-term
gains for nature, or make clear provisions for what will happen
beyond 30 years.
Extend the BNG requirement to Nationally Significant
Infrastructure Projects
Increase the level of net gain ambition over time—for example,
from 10 percent in 2023 to 20 percent by 2030 (or as soon as themarket is well established).
Increase the scope of mandatory net gain to cover marine habitats.
Be more directive in terms of where BU delivery is to be targeted
geographically and incentivise off-site over on-site BNG delivery tocreate larger, better-connected biodiversity-rich areas in line withlocal nature recovery strategies.
Increase the visibility and transparency of the BU market so that it
can attract more voluntary demand.
Use the BNG schemes’ infrastructure for wider UK nature recovery
ambitions—for example, by deploying the biodiversity metric tohabitat evaluation, management and pricing under ELMs.

Define a joined-up strategy for Government on BNG to ensure
integrated delivery of multiple policy objectives (e.g. housing growth andenvironmental protection). Ensure the strategy is adequately resourced,
particularly in terms of regulatory capacity.

Defra, HMT,MHCLG, DfT, BEIS

Take regular stock (for example, every five years) of the success of thescheme, its ecological effectiveness and market implications to ensure
iterative improvements.

Defra, NE, OEP

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Biodiversity Net Gain in England

Area of focus

Biodiversity
metricRecommendations

Regulators should systematically monitor practical experiences ofusing the metric in the initial years of the scheme to track its ecologicalcomprehensiveness and cost efficiency.

Relevant for:NE, Defra, Market
stakeholders

This can provide the basis for future improvements. Monitoring could
include:U

Review biodiversity outcomes across different sites and scales to,amongst others, help develop criteria to establish acceptability of
on-site vs. off-site gains.

NE

U

Assess whether existing multipliers to encourage BNG delivery
within strategic spatial networks are strong enough and increase
weighting of such multipliers if appropriate.

NE

U

Monitor potentially perverse incentives—for example, regarding
maintenance of existing good, unprotected habitats which would not
attract BNG funding under the current scheme.

Defra

U

Survey whether the metric supports the market effectively(including considerations of costs, time requirements andcompliance).

Defra, NE, Officefor environmental
protection

U

Identify biodiversity components or values that are not fullyreflected by a broad habitat proxy. These may require additionaltargeted regulatory action or bespoke offsets—for example, for
impacts on rare or threatened species outside development siteboundaries.

NE, Defra,
Professional bodies

U

Incorporate a requirement to include indirect impacts in BNG
calculations.

U

Evaluate integration of BNG with Ecological Impact Assessment(EcIA) standards and practices over time to ensure that BNG
delivery aligns with and is underpinned by rigorous EcIA approaches
and methods.

Strengthen
implementationof existingbiodiversity
policies

Step up implementation of biodiversity policies that will interact withBNG:U

A market mechanism puts associated policies under more pressure(because their outcomes have a financial implication), so they need
to be strengthened. Relevant policies include those that preserve
existing high-distinctiveness habitat, environmental impact
assessment and those related to ELMs.

BU supply
mechanisms

U

Provide clear guidance and rules on acceptable BU supply
mechanisms, ideally encouraging habitat banking

U

Ensure a level playing field across mechanisms, maintaining thesame quality standards for on- and off-site net gain delivery

U

Provide independent oversight of the operation of the market
system and transactions.

U

Establish clear objectives and principles as the basis for stacking
and bundling to address additionality. These principles will guidethe definition of rules and guidelines.

Defra, HMT, Officefor environmental
protection

U

Recognise the need for clarity, acknowledging the risks of stacking
and bundling, as well as the potential benefits.

Defra, NE

U

Alongside the mandatory use of the biodiversity metric, record
other environmental losses that can be traded as credits (e.g.
carbon) to monitor BNG impacts and the additionality of stacking
and bundling.

NE, LPAs

Stacking andbundling

Defra, NE, LPAs

Defra

Next steps: checklist for market players

Area of focus

Stacking andbundling

Demand-side
actions

Support market
transactions

Recommendations

During the development of the rules/ guidelines, encourage trial
stacking and bundling projects. Government should prepare tomonitor and learn from them.

Defra, NEU

Do not exclude land managers who have already invested inprojects from payments from ecosystem services schemes or otherfunding programmes, provided they can:Defra, NE

Other actions

Demonstrate additionality for each scheme/payment,
measured and justified against a recorded baselineU

Base this on agreed (interim) criteria where provided byregulatorsU

Are transparent with their measurement and justification.

Suitable demand-side actions could include:U

A market mechanism puts associated policies under more ·Ensuring a level playing field across on- and off-site BNG delivery

U

Extending mandatory BNG regulation to all land use developments

U

Governmental commitments towards demand guarantees.

U

Outline good practice guidance on key steps in BNG transactions,
including:U

Stimulateinvestment

Relevant for:

U

U

U

Templates for BNG transactions, including measuringbaselines for BU and other environmental markets, legal
agreements, management plans, financial plans for BU supply

U

Milestones for payments from buyers and for release of
biodiversity units from suppliers, including from mitigation/
habitat banks.

Ensure smooth transactions with relevant additional actions:U

Strengthen capacities of key regulatory stakeholders forsmooth scheme administration.

U

Improve availability of information, e.g. via a BNG informationhub.

U

Encourage early BNG market systems operations prior to
mandatory regulation (on a voluntary basis), to enable learningby doing

U

Supplier financing (via pump priming, tax reliefs, etc.) or coinvestment

U

Insurance offerings for supply or demand, to reduce risks

U

Regulatory certainty (see demand- and supply-side measures
above)U

Reduce policy risk (e.g. by avoiding conflicts of interest, use of sellerof last resort powers)

Non-governmental actors can accelerate market uptake and facilitate
learning, particularly during the two-year transition period up to 2023.
For example:
U

Companies which outsource/procure their infrastructure/housingdevelopments via third parties can accelerate BNG uptake byincluding BNG requirements in their tenders.

U

Suppliers can start identifying and preparing for projects andlearning the full costs of supply｜59

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Defra, NE

Defra, NE, LPAs

Defra, HMT, UK
Infrastructure BankAll stakeholders

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Biodiversity Net Gain in England© Colin Ronald

Annex 1: BU delivery
mechanisms in the US
This annex provides additional information on delivery mechanisms for BUs (also referred to as “credits”) in the US
wetland and stream mitigations scheme and lays out how they have evolved over time. The experience in the US offersinteresting lessons for the development of BNG markets in England and the UK more generally.
Three dominant institutional mechanisms in this scheme deliver offsets:
1.

Permittee-responsible offsets, where developers directly offset their project impacts;

2. Habitat banks run by individual landowners or commercial environmental service companies, which restore
and create habitat on a single site or across multiple sites to bank and sell BUs to developers;
3.

Compensation funds, which accept impact payments from developers and carry out offsetting projects once
enough funds have been collected.
Figure A-1. Offsetting mechanisms in the US wetland and streams mitigation scheme
Figure A-1. Offsetting mechanisms in the US wetland and streams mitigation scheme

Permitteeresponsible offset

1st party mitigation

Short definition

Responsible party

TimingDevelopers directly offset
their project impact onsite or off site, without relying
on third parties.

Developers hold full
responsibility and liability foroffset creation, management
and monitoring.

Offsets trends to be approved
simultaneously to impacts.
Can entail a short, temporallag between impacts andoffsets.

Compensation fundHabitat bank

3rd party mitigation

Short definition

Responsible party

TimingHabitat bank restoring
landscapes, independent ofdevelopments causing impacts.
Banks and sells ‘credits’ tocompensate for impacts todevelopers.

Habitat bankers (e.g.
landowners or privatecompany) hold responsibility
for offset creation,
management and monitoring.

Offsets tend to be establishedprior to- or simultaneously toimpacts.
In US context, credit release istied to performancestandards.

Fund accepting impact
payments based oncompensation funds inexchange for credits.
Project carried out once
sufficient funds are collected

Fund managers holdresponsibility for offset
creation, management andmonitoring (often restricted to
NGO or government resource
management entity)

Offsets tend to only beestablished upon collectionof sufficient funds.
Can result in significant timelags between impacts andoffsets.

Source: Deutz et al., 2020; Environmental Law Institute and Land Trust Alliance, 2012
Sources: Deutz et al., 2020; Environmental
Law Institute and Land Trust Alliance, 2012

Annex 1: BU delivery mechanisms in the US

Each BU delivery mechanisms has its advantages and disadvantages.
Figure A-2. Advantages and disadvantages of offsetting mechanisms prevalent in the US

Habitat bank(s)Permittee-responsible offset(s)Figure A-2. Advantages and disadvantages of offsetting mechanisms prevalent in the US+-

Advantages

Disadvantages

In case of large-impact projects,
permittee-responsible offsets can cover large
areas and respectively provide landscape-scale
environmental benefits (comparable with habitatbanks and compensation funds).

Approval of offsets often temporally simultaneouswith impacts, resulting in time lag between project
impacts and functional replacement of offsets.
Grants permittees full control over offsetting
projects.

High rates of non-compliance due to challenge forregulators to monitor many small, geographicallydispersed projects (in contrast to fewer, larger
third-party offsets).

Clear view on biodiversity unit pricing as habitat
tends to be restored in advance.

High upfront capital requirements, constraining
market participation.

Provides opportunity for landscape-level
restoration.

Commercial intermediaries acting as habitat bankswith motive to maximise profit tend to request highcommission fees, risking reduced returns forlandowners or higher credit prices; incentivised to
conduct cheapest offsets possible.

Temporal alignment: Credits readily available
upon project impacts, avoiding time lag between
impact and replacement.

Time-to-permit savings1 and potential cost savingsfor developers (especially small ones) due tooutsourced liability, frequently cheaper land
prices and economies of scale2.

Compensation fund(s)Frequently low scale of typical offsettinginterventions tends to result in less meaningfulenvironmental outcomes .

Low upfront investment requirements, allowing
market participation of non-profit and governmental agencies.
Provides opportunity to aggregate various small
impacts for landscape-level restoration especiallyin areas with less predictable demand.
Time-to-permit savings and potential cost savingsfor developers (especially small ones) due tooutsourced liability, frequently cheaper land
prices and economies of scale2.

Operations often limited to areas with high andpredictable demand for credits.
Mitigation often farther away from impact sites.

Associated with reputation of less management offunds and less precise princing of credits, potentially
crowding out private sector led habitat banks andresulting in lower conservation outcomes.
Limited to NGO and governmental agencies (in theUS).
Temporal time lag between project impacts andoffseting interventions, as offsetting projects are
only undertaken once sufficient funds are gathered

Notes｜
Some studies suggest up to five months of associated time savings for developers when relying on habitat banks vs. permittee-responsible offsets.

1

Australia studies indicate that third-party offsets allow delivery of 30 percent more area at two-thirds of the cost vs. permittee-responsible compensation under2

the Environmental Planning & Assessment Act.
Sources: Wilkinson, 2018; Duke and ten Kate, 2014

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The US wetland mitigation scheme introduced a level playing field across offsetting mechanisms a full 30
years after the beginnings of the scheme. This is because there was an unintentional policy bias towards permitteeled offsetting mechanisms, because such mechanisms were less closely monitored and enforced. It also resulted inlower conservation outcomes by permittee-led offsetting schemes. To overcome this unintentional bias, the Final
Compensatory Mitigation Rule was introduced in 2008, mandating 12 standards that all offsetting mechanisms (onand off-site, permittee- and third-party led) must report on (see Box A-1). The 12 standards have contributed to alevel playing field across different offsetting mechanisms and have encouraged greater developer compliance to themitigation hierarchy—as on-site and off-site permittee-responsible offsets became more expensive (Duke and ten
Kate, 2014; Hough and Robertson, 2008; Hough and Harrington, 2019).
After equal standards were set across all mechanisms, the US witnessed a significant increase in the numberof habitat banks, which have gradually become the dominant BU delivery mechanism at the expense of permitteeresponsible offsets. In 2010, 55 to 65 percent of all offsets were conducted via permittee-responsible schemes; 45
to 55 percent were on site. In 2017, the share decreased to 20 to 25 percent, and merely 5 to 10 percent was on site.
In the same time, habitat banking has increased from 25 to 35 percent to 55 to 65 percent. The rest of the market isserved by compensation funds, the share of which also increased from 5 to 10 percent in 2010 to 15 to 20 percent in2017 (Hough and Harrington, 2019). These changes were the result of the Final Rule, as well as other rules that defineda level playing field across on- and off-site BU delivery mechanisms.

Box A-1. Twelve standards of the US wetland and stream’s mandatory offset plan

The US wetland and streams mitigation scheme includes a mandatory offset plan which all biodiversity unit
suppliers must report against. This offset plan consists of 12 elements:
1.

Project objectives:
Overview of the provided habitat types and offset actions (e.g. habitat restoration, creation, etc.). This mustalso include a description of how the project will address landscape-level considerations.

2. Site selection:
Proof of meeting governmental criteria on site selection
3.

Site protection:
Proof that adequate mechanisms have been put in place to protect the site. This includes legal arrangements
to allow restoration, protection and prohibition of incompatible uses. Any changes in the site’s level of protection must be reported.

4. Baseline information:
Information on the baseline condition of the site (e.g. a description of the ecological characteristics of the
proposed site, maps of the site, etc.)
5.

Determination of biodiversity units:
An overview of the number of biodiversity units to be generated and a description of how the number of units
was determined

6. Mitigation work plan:
Outline of the habitat creation, restoration or conservation activities to be carried out at the site, including
project boundaries, construction methods and timing
7.

Performance standards:
Disclosure of objective and verifiable parameters against which the project’s success will be measured

Annex 1: BU delivery mechanisms in the US｜63

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8. Monitoring and ecological reporting:
Elaboration of ecological monitoring parameters and requirements, including details on logistics such as themonitoring schedule, duration of the monitoring period and the party responsible for monitoring
9.

Administrative reporting:Defined administrative reporting parameters and requirements (e.g. financial assurance, long-term management, funding, BU release) and details on reporting logistics (as outlined above in standard 8)

10. Long-term management and funding plan:
Appointment of a party responsible for long-term management and a description of the long-term management obligations, annual costs and financing mechanisms
11. Contingency and adaptive management measures:
Appointment of a party responsible for contingency measures and a description of how the offset plan may
be revised to address remedial procedures. This further entails a commitment to notify the regulatory agency
if significant modifications occur—for example, if monitoring data indicates that the project is not progressing towards meeting its performance standards
12. Financial assurance:
Overview of the types of financial assurance provided, including a description of how assurances were calculated and how financial assurances can be mobilised in event of non-compliance© Sophie Trémolet

Sources: Environmental Law Institute and Land Trust Alliance, 2012; DOA and EOA, 2008

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Over more than 30 years, the composition of habitat banks in the US has shifted markedly—away from small
enterprises owned and managed by landowners to large professional environmental services companies, whichbank credits across dozens of sites and receive investments from major private equity firms (e.g. KKR). This
process occurred on the back of a gradually more conducive policy environment, granting regulatory certainty anddefining procedural frameworks.
This has led to significant economies of scale (see Figure A-3). Large, multisite habitat banking entities can bufferrisks, as fallouts or limited credit demand on one site can be compensated through revenues derived from other sites.
However, on the flip side, these habitat banks have gained significant political influence and are now in a position toeffectively lobby for policies that may place economic gains above environmental gains (for example, by allowing saleof a certain percentage of credits prior to any undertaken habitat restoration or creation activities).

Figure A-3. US historical uptake of habitat banks
Figure A-3. US historical uptake of habitat banks

Final Rule issued by ISACE andEPA prioritising habitat banks

EPA and Corps1 guidance on
mitigation banking
Adoption of CWA §404 and EPA
environmental criteria

1995

1980

1993

1972

Habitat banks relatively rarecompared topermittee-responsible offsets
Few existing habitat banks often
set up and managed by individual
landowners

1995
2008

After 1995 issuance of the federalbanking guidance, the number of
habitat banks soared, especiallythose sponsored by the private
sector
On average, 56 banks per year
approved from 1998 to 2007
Guidance provided regulatory
certainty and procedural
framework

2008 issuance of the Final Ruleprovided comprehensive standards
for wetland mitigation and soft
preference for habitat banking aspreferred mechanism
This resulted in further proliferation of profitable, private sector-led
habitat banks across the US
On average, 86 banks approved
per year (2008-2017; 50%
increase over 1998-2007)

Today ~60% of all offsets under the US wetland and stream mitigation scheme are via professionally led habitat banks
Army Corps of Engineers.
Sources: Bean, et al., 2008; Hough and Harrington, 20191

Source: Bean, et al., 2008; Hough and Harrington, 2019

Annex 1: BU delivery Biodiversity Net Gain in England mechaAnnex 1: BU delivery mechanisms in the US
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Annex 2: Potential funding
instruments for BNG
Pump-priming

Description

U

U

Relevance for BNG

Gap funding: Initialpublic funding to growmarket/spur private
sector investment
Blueprint financing:Funding of replicableprojects

U

U

U

ExamplesCentralgovernmental BNG
credit scheme
Direct investment
in pioneering BU
suppliers
Potentially by UK
Infrastructure Bank
via Green Bond

U

U

U

Heat Networks Investment Project: on
basis of public investment of GBP 320
million, the project is aiming to lever~GBP 1 billion in private capitalNorthern Forest initiative: GBP 5.7
million governmental investment todevelop and test approaches for the
National Forest Partnership (aiming toplant 50 million trees over next 25 years)
Public Sector Energy Efficiency Loan
Scheme (managed by Salix Finance)

Loan schemes/
soft loan

U

Governmental loans
with favourable terms(i.e. lower interest
rates)U

Governmentalloans to finance
BU suppliers
potentially via UK
Infrastructure Bank

Technical
assistanceU

Technical assistanceto further capacity andestablish pipeline ofcommercially attractive
projects

U

Technical assistance U
body for credit
suppliers

Currently considered by UK government
regarding a Natural Environment Impact
FundFirst-loss
sharesU

Losses affecting
publicly owned shares
first in the context ofblended public andprivate investments to
reduce private sector
risks

U

Joint public andprivate investment
in BNG credit
suppliersU

California Freshworks Fund for healthy
food in low-income communities by the
California Endowment, JPMorgan Chase
Foundation and US Treasury’s CDFI fundGuarantees

U

Guarantees of aminimum return on
investments provided
via public fundingU

Guarantees for BNG
supplier investments
potentially hard tojudge ex-ante ofmarketU

UK government call for evidence on valueof governmental guarantee to underpin
loans to SMEs from energy service
companies (ESCOs), banks, lenders andpartner organisations, with aim to cut
SME emissions and energy bills

Publicprivatepartnership(PPP) bonds

U

Upfront investment byprivate sector against
public payments overthe long term in returnfor specific services

U

Most suitable forUpublic infrastructure
projects andrespective offsettingof unavoidable
damages

DC Water Environment Bond on green
infrastructure (i.e. permeable pavement
and bioretention) amongst others by DC
Water, DC Water and Sewer Authority
and Calvert Foundation

Blended finance

Governmental financing

Instruments

Legend｜Strong fit

Moderate fit

Low fit

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Biodiversity Net Gain in EnglandTax incentives

Innovative financial vehicles

Instruments

Public-private
fund design

Description

U

Relevance for BNG

Private investments
funds designed withhelp of governmental
consultation to serve
public interests

U

U

Examples

BNG investment
Ufund withgovernmental design
support
Relevance unclear

Industrial Energy Transformation Fund,
including GBP 315 million of investment;
UK government has consulted on thedesign of the fundAggregationof small-scale
projects

U

Aggregation of several
small-scale projects
into a single capitalraising prospectus
as a means to lower
transaction costs

U

Council-level
initiatives to financesmaller, landownerled habitat banks

U

City Leap Project, led by Bristol City
CouncilTax reliefs

U

Tax reliefs on capital
assets to provide
incentives, e.g.
through capital gains
tax, corporation tax,
inheritance tax andthe way that businessproperty is classified fortax purposesU

Tax reliefs for BNG
credit providers,
influencing land use
and mitigating BNG
supplier risks

U

UK agricultural rate relief via annual
business rate and jinheritance tax

Hypothecated tax
fundU

Forgone tax revenues
match funded byadditional private
financeU

Hypothecated BNG
tax fund
Limited potential
due to low tax
revenueU

UK Aggregates Levy Sustainability Fundand the UK Landfill Communities FundU

Source: IIEP, 2013; HM Government, 2019; eftec and GMCA, 2019; Government Outcomes Lab, 2021; GIIN, 2013
Legend｜Strong fit

Moderate fit

Low fitAnnex 1: BU delivery Biodiversity Net Gain in England mechaAnnex 1: BU delivery mechanisms in the US
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Risk reduction

Annex 3: Potential
incentive mechanisms
Instruments

Description

Lower policy
uncertainty

U

Relevance for BNG

Reduction in policy/
regulatory risk through:U

U

U

Long-term commitments
to reduce risk frompolicy changes
Clear andstraightforward rules andcommunication
Legal instrument
backing to ensure rightconditions

U

U

ExamplesImplementation of
the 18 BNG policy
components fromthe onset
Clear andtransparent
BNG policy
communication

U

N/A

Lower spatial
penalties within
BNG metric
Rules allowing
trading acrossregions

U

Increase in service areas actively
lobbied for by US habitatbankers under the US wetlandand streams mitigation scheme

Expansion of area
within which BNG
credit suppliers can sellcredits, reducing risk of
insufficient demand

U

Demand registries U

Publicly available
registries of planneddevelopments(potentially including
respective credit
demand) per area,
increasing certainty
around demandU

BNG demand/development
registryU

Australia’s New South Wales
biodiversity offsetting scheme
has a formal credit demand
register detailing the number,
type and location of credits
required by developers

Reduced liability
periods for credit
suppliers

Temporally limited
liability for credit
suppliers (e.g. credit
supplier liability limited
to 10 years while
prefinanced endowment
funds are liable for longterm management)

U

Temporally finite
supplier liability(e.g. 10 years)
Endowment fundliable for long-term
management (after
initial 10 years)

U

Habitat banks under the US
wetlands and streams mitigation
scheme liable for meeting
performance standards only forthe first 10 years, after which anendowment fund (financed byhabitat bank) is liable for longterm management

Trading in larger
service areas andacross regions

U

U

Legend｜Strong fit

U

U

Moderate fit

Low fit

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Cost reduction (1/2)

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Biodiversity Net Gain in England

Instruments

Description

Relevance for BNG

Preferential credit
release schedules

U

Upfront percentagebased release of credits(i.e. prior to habitat
creation/ restoration),
reducing need for
upfront financing

U

Credit release
schedules for BNG
habitat banks

U

Credit release schedule for
habitat banks under the US
wetlands and streams mitigation
scheme tying credit release totiered performance standards
and enabling certain percentageof credits to be released before
habitat creation/restoration

Events connecting
buyers and sellers

U

Dual approach ofproviding information
on funding
opportunities andpromoting investablesupply projects,
reducing transaction
costs

U

Council-organised
events connecting
buyers and sellers

U

Financing Green/Greening
Finance for Maritime initiativeat London International Shipping
Week

Trainings andtechnical support
for mitigation
suppliers andregulators

U

Publicly offered
trainings and technicalsupport to increasetechnical capacity, spur
efficiencies and reduce
costs

U

Council-organised
training sessions
for land owners
and environmental
service companies
engaged in BNG

URegularly conducted in the US
wetlands and streams mitigation
schemePlatform matching U
BNG credit buyers
and sellers

Publicly accessible
registry listing credit
suppliers acrossregions, facilitating thecredit supply searchU

BNG supply
registries
categorised byregionU

RIBITS platform of the US
wetland and stream mitigation
scheme lists credits available
from banks and compensation
funds per region

Standard
permitting
templates

U

Standard templates for
permitting applications
and/or habitat bankregistrations tosimplify/reduce costs ofthe process

U

National or countyUlevel standard
templates for BNG
permitting processes

Introduced by the state ofCalifornia under the US
wetlands and streams mitigation
programme

Reverse auctions

U

Auction models inwhich potential buyers
pitch their needs while
potential suppliers
auction their services.
Connects demand andsupply while ensuring
cost effectiveness.

U

Council-levelUreverse auctions toconnect demand andsupplyU

Landscape Enterprise Network(LENS) in Cumbria by Nestle andother partners
National Forest in England to
identify first sites to plant trees inrespective planting zones

Legend｜Strong fit

Moderate fit

ExamplesLow fitOtherAnnex 3 - Potential incentive mechanisms

Relevance for BNG｜69

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Instruments

Description

ExamplesCoalitions toaddress key
barriers

U

Coalitions identifying
barriers and means to
overcome themU

National BNG
coalition

Product labellingand certification

U

Certification andlabelling to improve
corporate image

U

Voluntary BNG
Ucertificates withconstrained potential
due to limited
voluntary demand

Forest Stewardship Council(FSC) or the Marine StewardshipCouncil (MSC)

Competitions

U

Governmental
competitions withfinancial rewards/
dedicated funding for
winning projects

U

Competition aroundcredit supply
delivery models toboost supply withpotential to connect
this to best practice
sharing

Boosting Access for SMEs toEnergy Efficiency (BASEE)
competition (2019)

U

U

Green Finance Institute’s
mission-led coalitions

Source: IIEP 2013; HM Government, 2019; eftec and GMCA, 2019; expert interviews
Legend｜Strong fit

Moderate fit

Low fit｜

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Biodiversity Net Gain in EnglandAnnex 4 : Glossary
Assemblage

A group of species found in the same location

Avoidance

Actions taken to prevent impacts from occurring, taking account of predictions forpotentially negative environmental effects (e.g. project decisions about site location
or design)

Baseline conditions

The conditions of a land area in the absence of a proposed plan or project. The
definition of these baseline conditions should take account of changes arising fromother causes (e.g. other consented developments or climate change).

Biodiversity

The variability among living organisms from all sources, including terrestrial, marineand other aquatic ecosystems, and the ecological complexes of which they are part.
This includes diversity within species, between species and of ecosystems.

Biodiversity credit

A term widely used in the literature for units of biodiversity to which a value can beapplied, or more specifically for BUs created in advance of sale and banked (known
as habitat banking)Biodiversity net gain

A specific, measurable outcome of development in which demonstrable andquantifiable benefits to biodiversity are achieved, compared to the baseline situation

Biodiversity net
gain market

Market activity and trade resulting from mandatory net gain. This includes
biodiversity unit buyers (mostly developers or public bodies) and sellers (mostly
landowners or intermediaries) as well as the transaction processes themselves.

Biodiversity net gain
policySpecific legislations and regulations spelling out biodiversity net gain policy

Biodiversity net gain
regulatory framework

All the rules which must be adhered to as part of mandatory net gain. Such rules canbe set out by policies and regulations on a national and local level, as well as by the
metric and its implicit rules on how to deliver gains.

Biodiversity net gain
schemeThe overarching system to establish biodiversity net gain markets. The biodiversity
net gain scheme encompasses the regulatory framework, the policy, the metric andthe market.

Biodiversity offsets

Measurable conservation outcomes resulting from actions designed to compensate
for unavoidable significant negative effects on biodiversity. The goal of biodiversity
offsets is to achieve no net loss, or preferably a net gain, of biodiversity.

Biodiversity unit (BU)

A proxy measure for biodiversity used to quantify biodiversity losses or gains using
a consistent measure. In England, these are calculated based on the biodiversity
metric tool which combines habitat type, area distinctiveness and condition.

Biodiversity unit delivery
mechanism

Mechanisms by which biodiversity units are delivered. In the UK context, this can
include permittee-led delivery and habitat banking. Other countries such as the US
would also allow compensation funds. The term is synonymous with biodiversity
offsetting mechanism.

Developing Effective Market
AnnexMechanisms
4 : Glossary

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｜71
71

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Biodiversity unit supplier

Entity (private landowners, habitat banks, NGOs, councils, etc.) that transforms land
use to generate and sell biodiversity units

Condition

A measure of the state of an ecosystem or habitat influenced by management. In
England, this is assessed using condition criteria set out in the technical supplement
for Biodiversity Metric 2.0 (with Metric 3.0 soon to be released).

Connectivity

A measure of the functional availability of the habitats needed for a particularspecies or set of species to move through a given area. Examples include the flightlines used by bats to travel between roosts and foraging areas.

Conservation covenants

Private, voluntary agreements between a landowner and a responsible body, such asa conservation charity or a public body, allowing for positive or restrictive obligations
to fulfil a conservation objective. These covenants can be binding not only on thelandowner but also on subsequent landowners. As such, they have the potential todeliver lasting conservation benefits for the public good. Covenants offer flexibility
as the parties negotiate the terms to suit their particular circumstances, including
the covenant duration.

Creation

The act of introducing a habitat or ecosystem on land where there is no evidence ofit having been present previously

Credits

Either BUs generally or specifically BUs created in advance of sale and banked(where habitat banking is in place)

Cumulative impact/effect

Effects on a receptor from multiple sources acting together, including backgroundchanges in the environment and other reasonably foreseeable developments

DistinctivenessA score reflecting the intrinsic species diversity of a habitat for vegetation types
in England. Distinctiveness scores are assigned to English Habitats in Biodiversity
Metric 3.0 and range from 2 to 8..

Ecosystem services

The benefits that people derive from the natural environment, a stock of ‘natural
capital’ from which many benefits flow—social, health-related, cultural or economic

Enhancement

The act of managing a habitat or ecosystem so that it is improved for biodiversity

Fragmentation

The breaking up of a habitat, ecosystem or land-use type into smaller spatial units orparcels with a consequent impairment of ecological connectivity and function

Habitat

The place or type of site or set of conditions where an organism or population
naturally occurs. Often used in a wider sense referring to where particularassemblages of plants and animals are found together (correctly defined as abiotope).

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Biodiversity Net Gain in England

Habitat banking

A market mechanism where credits from actions with beneficial biodiversity
outcomes (BU in the case of England) can be purchased to offset the debit fromenvironmental damage. Credits/BUs can be produced in advance of, and without exante links to, the debits they compensate for, and they can be stored over time.

In-lieu fee program/ compensation fundA biodiversity unit delivery mechanism prevalent in the US. In-lieu fee programs(also known as compensation funds) accept payments in exchange for credits.
Habitat creation and restoration projects are carried out once enough funds havebeen collected. This form of biodiversity unit delivery is limited to NGOs and publicbodies.

Linear habitats

Habitats that are given a length value in the Biodiversity Metric 3.0. These include
hedgerows and lines of trees.

Irreplaceable habitat

Habitats which would be technically very difficult (or take a significant time)
to restore, recreate or replace once destroyed, taking into account their age,uniqueness, species diversity or rarity. In the UK, they include ancient woodlandand veteran trees, blanket bogs, limestone pavement, sand dunes, salt marshes andlowland fens.

Mitigation

Measures taken to avoid or reduce negative impacts and effects and restore
damaged habitats, ecosystems or species populations

Mitigation hierarchy

A hierarchy of actions to mitigate negative impacts on biodiversity: avoidanceof biodiversity loss in development plans, minimisation in project design, on-site
mitigation to restore damaged habitats, and off-site offsets to restore or create themto compensate for residual loss

Net gain delivery

A type of measure taken to not only offset residual losses of, or permanent damage
to, ecological features, but further ensure percentage-based gains. For example, if aland area of 100 square metres is damaged, net gain delivery based on 10 percent
net gain would restore 110 metres of the same or higher distinctiveness habitat.
Depending on the circumstances, net gain delivery measures may be located withinor outside the project site.

No net loss

The outcome of biodiversity losses offset by commensurate gains

OffsetNet gain or no net loss delivery

Permittee-led biodiversity
unit delivery

A type of biodiversity unit delivery in which developers directly offset their project
impacts (whether on site or off site), without relying on third parties

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Priority habitats andspeciesSpecies and habitats of principal importance included in the England Biodiversity
List published by the Secretary of State under Section 41 of the Natural Environment
and Rural Communities Act 2006

Project

All types of proposals to which mandatory net gain might be applied (e.g.
development proposal/scheme or other land use change)

Restoration

The re-establishment of a damaged or degraded system or habitat to a close
approximation of its pre-impact condition

River habitats

River or stream habitats that are given a length value in the biodiversity metric.
These include any habitat with flowing water.

Service area

The area in which an offset for a specific impact can be conducted. Depending on
the size of this service area, the offset can be very close to the impact or relatively
far away.

Site of Special ScientificInterest (SSSI)

Sites designated by Natural England under the Wildlife and Countryside Act 1981

Stacking and bundling

Alternative approaches for selling multiple ecosystem services from an area of landor for combining the sale of environmental credits with public subsidies

Strategic significanceThe relative conservation importance of an area at a local or national level. The
extent to which restored or newly created habitat in that location would contributeto wider conservation objectives. In the UK/England, under BNG policy a multiplieris applied to reflect this with a score of 1 for locations that are not identified as
significant and 1.15 for those that are.

Target condition

In BNG policy for England, this describes the intended condition of habitat thatwill be delivered as a result of post-development habitat management, in order toachieve the required level of BNG

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The Nature Conservancy

eftec

eCountability

The Nature Conservancy is a leading
global environmental organisation. Its
mission is to conserve the lands andwaters on which all life depends.

eftec is an environmental economics
consultancy, advising clients on how toaccount for impacts and dependencies
on the environment when making policy,
business and investment decisions.

eCountability is an ecologicalconsultancy, supporting financial
institutions, government and businessto achieve ecological accountability.
Jo Treweek and Bill Butcher (Directorsof eCountability) developed thebiodiversity metric that has been
adapted and developed by Defra
and Natural England as the basis forbiodiversity net gain in England.

www.eftec.co.uk

ecountability.co.uk

The Nature Conservancy (TNC)
is fortunate to have the support ofvisionary people and organisations,whose generosity allows us to pursue
our mission. We are grateful to theEnterprise Rent-A-Car Foundation
for supporting our work to find water
solutions that work for rivers and thecommunities that depend on them.

www.nature.org

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© Sophie Trémolet

Developing Effective Market Mechanisms

Acknowledgements
The preparation of this discussion paper was led by Sophie Trémolet and Theresa
Reisch (The Nature Conservancy) in collaboration with Ian Dickie (eftec) and Joanna
Treweek (eCountability). It benefitted from great insights and review from Jessica
Wilkinson and Bruce McKenney (The Nature Conservancy), particularly with respect
to drawing lessons from experience with biodiversity offsets in the United States andelsewhere.
The paper benefitted from extensive interviews with the following practitioners:
Tom Ansell and Gary Styles (Zellar); Sam Arthur (FPCR Environment and Design Ltd
Consultants); Julia Baker (Balfour Beatty); David Baxter (EnTrade); Nate Bello andJane Rice (WRA); Tom Hunt (Association of Local Environmental Records Centres);
George Kelly (Bespoke Mitigation Partners); Emily Norton (Savills); Helen Nyul (BarratPlc); Krista Patrick (Greater Manchester Authority); Alex Robinson (Nature Capital);
Mandy Rudd (Greenspace Information for Greater London); Archie Ruggles-Brise(Spains Hall Estate); Chris Webb (The Nature Conservancy).
We are grateful to the following reviewers for their inputs and comments: Helen
Oakman and Matthew Ashford (Defra); Sophus zu Ermgassen (University of Kent);
Jack Rhodes (RSPB); Glenn Anderson (Wendling Beck Exemplar Project); Chris
Gerrard (Anglian Water Services); Bruce Howard (Ecosystems Knowledge Network);
Rachel Hackett (The Wildlife Trusts); and Daniel Shemie (The Nature Conservancy).

Please cite this document as:
Trémolet, S., Dickie, I., Treweek,
J., Reisch, T. (2021). Biodiversity
Net Gain in England: Developing
Effective Market Mechanisms.
A Discussion Paper. The Nature
Conservancy. London, United
Kingdom.

Biodiversity Net Gain in England
Developing Effective Market Mechanisms
Discussion Paper
October 2021