Keep your eyes peeled for biodiversity credits
Land agent and surveyor expert, Hugh Townsend, looks at how Biodiversity Net Gain credits could benefit Westcountry farmers and land managers in future
THE Environment Act received Royal Assent on November 10. Within this Act is a requirement for developers to contribute to a 10% net gain in biodiversity on their developments as part of the Government’s strategy to not just arrest the decline of our ‘natural capital’ but replenish and enhance it.
As this is now a requirement it is becoming clearer what this will involve on a practical level to both developers and land managers.
Developers will be required to set out how their net gain will be achieved as part of their planning application. Whilst they are encouraged to provide net gain on site if possible, many will have to either purchase land to create habitat elsewhere or pay someone to establish the gain for them. For farmers and landowners this represents an opportunity to create more income from unprofitable areas of land and may complement the holding’s areas of productive farming.
There is also the potential for synergy with other areas of diversification such as sporting or tourism. The downside is land will be locked up for at least 30 years. These conservation covenants will run with the land, creating binding targets and obligations on whoever buys or inherits the land.
The Biodiversity Net Gain (BNG) that developers require, and landowners will create, is represented by ‘biodiversity units’ calculated via the Biodiversity Metric 3.0. This will provide the common standard required for quality assurance for purchasers and regulates exactly what the provider is required to do. Whilst this metric has been in use in various iterations in the past it is likely that this version will be the one used for calculations for BNG, subject to a final consultation once the Environment Bill is enacted. Defra (Department for Environment, Food and Rural Affairs) propose values of £9,000 to £15,000 per unit, hoping to make it attractive to sellers by determining not to use compensatory or income foregone models.
Ultimately the price will be established by the open market and sellers will only take part if the final calculations make it worthwhile. It is possible that values could soar depending on the supply and demand. It will be interesting to see how BNG will interact with other environmental schemes such as the Environmental Land Management (ELM) scheme. It is generally understood that benefits may not be ‘stacked’ and that there must be additionality. The British Standards Institution’s guidance, BS 8683, defines this as not paying for something that would happen anyway, whereas Defra simply say they will not pay for the same thing twice.
The latter statement suggests more leeway and that the by-product of one scheme may be sold separately to the initial action e.g. creating woodland for biodiversity then selling the carbon sequestered as credits. In this instance you are not selling the carbon itself twice as you are being paid to create/improve habitat rather than sequestering carbon, making use of all revenue streams available from taking land out of production. This would make sense as it would encourage the overall uptake of landowners willing to take part.
Calculating original site’s baseline
There are several factors and multipliers involved in calculating the units a site will lose or gain including area, distinctiveness, condition, strategic significance, impact of development, time to reach desired level, difficulty of establishment, risk and proximity to development site. The higher the site of the development’s biodiversity, the more habitat will be lost from the development and in turn require from offsite projects to make up also the 10% net gain. This process will discourage new development on sites of high biodiversity.
First the original baseline of the area to be developed is established. Then the impact of the developmental actions and any existing habitat
lost are calculated and subtracted from the baseline. After the developer has established the on-site losses, they must try to deliver on-site gains. Where this does not reach a 10% net gain, they must look for offsite schemes.
Unit Calculations for Offsite creation / enhancement
Establish Offsite Baseline
The area in ha or km for rivers is worked out. There is no specific minimum or maximum size but under a certain threshold it would simply not be worth it. Local authorities are in the process of creating areas of strategic significance. If the location of a site is within such an area it receives a 15% boost to the number of units generated. If it is considered to be in a desirable location but not within an official strategic site it may receive a 10% boost subject to the local authority’s agreement.
Every habitat is given a distinctiveness score between 0 and 8 based on its rarity, proportion in SSSIs and its UK Priority status. This is multiplied by the area. This is combined with the condition of the existing habitat (or proposed habitat) ranging from x1 (Poor) to x3 (good). Certain habitats like cereal crops are automatically classed as poor. This creates the starting point for the number of units available.
As an example, 2ha of arable could generate: 2 (Area) x 2 (‘Low’ Distinctiveness) x 1 (‘poor Condition) X 1 (‘Low’ Strategic Significance) = 4 Units.
Account for Loss of existing habitat
The impact of enhancing a site (as it will have some habitat value already) must be calculated and subtracted from the final figure. This is the area of baseline to be enhanced or have new habitat created upon it.
Account for Gain of created / enhanced habitat
The created / enhanced habitat value must be calculated, as the baseline was, but using the new type of habitat or new condition scores with the following multipliers:
Spatial risk
The distance of the new site to the developer’s site will negatively impact the amount of usable units by 25% if in a neighbouring Local Authority area and 50% if further afield.
Difficulty of creation and time
The time it takes for enhancement or creation of a habitat to reach its desired potential will impact units with up to a 70% reduction if it takes 30 years or longer. The higher the difficulty will reduce the value by up to 10%.
If the above arable site was used to create Gorse Scrub: 2 (Area) x 4 (‘Medium’ Distinctiveness)
x 3 (‘Good’ Condition) = 24; x 1 (‘Low’ Strategic Significance) = 24; x 0.7 (Remoteness: 10+ years to establishment) x 1 (‘Low’ Difficulty of creation); x 1 (Spatial Risk: Within same LPA); = 16.8 Units - Baseline Units Lost: 4; Units created = 12.8.
It is worth noting the benefits of enhancing existing habitat rather than creating a new habitat. More units may be produced via enhancement even if the habitat is a more ‘common’ one than a newly created ‘rare’ habitat. This is due the loss of existing habitat that must be factored in before a new one is created. Enhancement does not have this issue, potentially resulting in more of a net gain.
The type of habitat, whether created or enhanced must be carefully considered as factors such as time taken to establish will drastically affect the number of units produced. The land manager must also consider how BNG compliments the rest of the business. Whilst it may seem simpler to sell land to developers and let them create habitat for themselves, retaining the land allows one to sell BNG units and continue farming to an extent (depending on the type of habitat created / enhanced) thus allowing the landowner to make the most of their ‘natural capital’.
Using the top end valuation for biodiversity units, and the example discussed above, a hectare of arable used to create gorse scrub would produce 6.4 units, subject to further factors such as distance to development site. This could potentially make up a payment of £96,000 or £1,295/acre per annum for 30 years. As BPS payments are reduced, BNG credits are something to keep an eye out for and should always form part of a estate / farm management review assessing and registering what sites might be available.
Hugh Townsend, FRICS, FAAV, FCIArb. is the land agent/surveyor expert of the WMN Farming supplement and he may be contacted on 01392 823935 or htownsend@townsendcharteredsurveyors.co.uk.