Biodiversity Net Gain – An emerging market

Today we face the double, interlinked emergencies of human-induced climate change and the loss of biodiversity.

WWF Living Planet report 2022

This opening line from WWF's Living Planet Report 2022 highlights the severity of the biodiversity crisis. Climate change has rightly been at the forefront of recent environmental concerns, but the related issue of declining biodiversity has been somewhat overlooked and requires its own urgent attention. The Living Planet Report noted that worldwide wildlife populations fell by an average of 69% between 1970 and 2018. Changing land use, pollution and climate change are largely responsible for this decline.

In October 2022, the Foot Anstey team attended the Solar & Storage Live 2022 conference at the NEC in Birmingham, where we had the opportunity to hear about interesting developments in this space.

In this article we share some key highlights and explain what Biodiversity Net Gain is.

What is Biodiversity Net Gain (BNG)?

Back in 2020, we reported the changes that the Environment Bill was going to introduce to the planning system. Since then, the Environment Bill received Royal Assent, becoming the Environment Act 2021. With effect from November 2023, almost all planning applications for development will need to be accompanied by a biodiversity net gain plan to be approved by the local planning authority before development can lawfully begin. The plan must contain an assessment of the value of natural habitats before and after development and must demonstrate that a net gain of at least 10% will be achieved.

Biodiversity units and mitigation hierarchy

BNG will be measured in biodiversity units using Defra’s biodiversity metric. Habitat enhancements will need to be secured/maintained for at least 30 years.

The Government's intention is that BNG should be delivered through the following mitigation hierarchy:

  • Avoid/reduce biodiversity impacts through site selection and layout.
  • Enhance and restore biodiversity on sit.
  • Create or enhance off-site habitats, either on the landowner's own land or by purchasing biodiversity units on the market.
  • As a last resort, purchasing statutory biodiversity units from the UK Government (only where the landowner/developer can demonstrate that they are unable to achieve biodiversity net gain through the available on-site and off-site options). Statutory biodiversity units will be priced higher than units available on the market so that the development of local market schemes and non-credit habitat creation projects are not discouraged.

The role of solar PV in enhancing biodiversity

The role that large-scale solar PV developments can play in enhancing biodiversity was discussed in some detail during the conference. An effective land management plan for a solar project can both increase the productivity of the solar farm and enhance local biodiversity. Since solar panels typically only occupy around 40% of the leased land, there are opportunities for dual use such as grazing of livestock which, in turn, ensures that the solar panels are not blocked by grasses. Wildflower meadows, bug hotels, etc. can easily be incorporated on solar farms, increasing biodiversity.

One way in which solar developers may be able to increase the value of biodiversity on their land is using agrivoltaic solar farms, where energy and food production as well as water conservation can be carried out simultaneously. Agri PV projects are emerging across Europe, including Sun'Agri's viticulture agrivoltaics in France, BayWa's Agri-PV project in the Netherlands and Regener8's ecosystem enhancement and Agri-PV project in Sardinia, Italy.

In BayWa’s project, panels were arranged above fruit crops, creating conditions up to five degrees cooler than traditional growing methods. The reduced heat stress and evaporation from the soil meant that less water was required. The panels also retained heat better at night than the plastic coverings usually used by farmers, which could potentially enable a reduction in plastic waste on farms.

Regener8's 'inclusive design' approach demonstrates how multiple sustainable development goals can be achieved on a solar project. The site consisted of fragmented land, some of which was deteriorated and not suitable for agricultural activities. Land which could not be used for Agri-PV was instead restored to create habitats, renewing nutrients and minerals in the soil as well as acting as carbon storage (all of which taking place underneath high-standing, semi-transparent solar panels).

As well as these benefits, there is clearly a strong case for food security alongside energy security if crops can be grown on the same land as installation of solar PV. The layout of the solar development is critical to establish a scheme that has these dual benefits. While solar developments have traditionally been placed on lower grade agricultural land, there is opportunity, if properly managed and planned, to use cultivated land in a smarter way.

Policy and upcoming legislative changes to be aware of

The National Planning Policy Framework (NPPF) states that planning policies and decisions (i.e., decisions when planning applications are made) should contribute to and enhance the natural and local environment by minimising impacts on and providing net gains for biodiversity. The NPPF also states that plans made by Local Planning Authorities ("LPAs") (i.e., the abovementioned local land use policy documents) should identify and pursue opportunities for securing measurable net gains for biodiversity. Section 102 of the Environment Act 2021, which will come into force on 1 January 2023, will extend the previous duty on LPAs to "conserve" biodiversity to include an active requirement to also "enhance" biodiversity.

Emerging Markets

In light of the above, many local authorities have already adopted land use policies requiring BNG (significantly pre-dating the statutory 10% BNG requirement that will be introduced through the Environment Act 2021). Many of those existing policies in fact require more than 10% BNG, with some up to 25%. Further, projects facilitating the trading of biodiversity credits are already emerging. For instance, the Environment Bank has established a network of habitat banks through which BNG units are made available for developers to purchase.

Defra has estimated a market size of £135 – £274 million per year for the trading of biodiversity units once mandatory net gain under the Environment Act 2021 comes into force. Given that large BNGs are possible on solar farms, some solar developers are looking beyond merely meeting the 10% BNG minimum legal requirement and creating an additional revenue stream through selling any excess units to other developers in England, who would otherwise be unable to meet their development’s minimum requirement. Where developers are looking to rely on excess units for satisfying the minimum requirements, they need to ensure that any such excess units satisfy the ‘additionality’ requirement. Such excess units should be distinct from the gains necessary to meet the statutory BNG requirement for the original solar development.

Defra’s Consultation on Biodiversity Net Gain Regulations and Implementation (January 2022), which closed on 5 April 2022, stated that it did not intend to establish a centralised trading platform for biodiversity units. The price for biodiversity units will be agreed between buyers and sellers. The consultation envisaged that the private sector, rather than the UK Government, would perform the necessary roles to facilitate the market (such as brokering). However, much of the detail will need to be filled in by secondary legislation, policy and guidance.

We will have to wait and see if this market establishes itself and how much guidance is forthcoming. Without a central register of BNG credits there seems to be a risk of double counting which would go completely against what the legislation is seeking to achieve, i.e., real biodiversity improvement. There needs to be relevant protections in place so that the sale of BNG credits is reliable and trusted. Without this, the whole scheme runs the risk of failing in its key aim.

If you would like to discuss what steps your business may want to take in relation to biodiversity, please get in touch with our team of experts.