A term that developers and landowners should be familiar with, biodiversity offsetting is a vital component of any new developments that have a detrimental impact on the wider environment. In this guide, we define biodiversity offsetting and aim to provide helpful guidance for landowners and developers to help secure planning permission.

A vital component to achieving biodiversity net gain, we take a closer look at biodiversity offsetting below and what it means for you.

What is biodiversity offsetting?

Biodiversity offsetting is the term used to describe the last stage of the mitigation hierarchy.  If you are a developer or planning a construction project, you will need to consider existing habitats and wildlife - especially those legally protected by the government. The main goal of biodiversity offsetting is to allow for development that is responsible and environmentally sustainable.  

Any new development has the potential to negatively impact native species and ecosystems, and offsetting is a policy tool that looks to improve a project’s conservation status despite this. It allows for economic growth and expansion while balancing out any lost biodiversity value at a different location - achieving either no net loss or a preferred net gain.

Biodiversity offsetting is specifically linked to development projects that will cause unavoidable damage or a loss of biodiversity, such as the degradation of an area of natural habitat or the population of a species being reduced. These projects are expected to fully compensate for any damages through measurable, long-term conservation actions.

What are biodiversity offsets?

Biodiversity offsets are defined as the measurable conservation outcomes of a developer’s actions to compensate for their project's biodiversity impacts. These offsets are often regarded as an additional way to oppose any persisting project development impacts, after appropriate avoidance, minimisation, and restoration measures have already been explored.

Biodiversity offsetting in the UK

UK developers are required to protect any existing habitats and ecosystems found on their chosen site as much as possible. This will become even more important due to the newest legislation that was passed in the Environment Act of 2021. Developers in the UK will need to demonstrate that their project boosts the biodiversity value of their site by at least 10% (some local authorities will seek 20% or more). This biodiversity net gain is often achieved by following the mitigation hierarchy, and biodiversity offsetting is an excellent solution that may minimise the delays and costly setbacks that would occur if your planning permission is denied.

Biodiversity offsetting in the UK is seen as a way to add to biodiversity gain and counteract residual losses through conservation activities. It’s normally seen as the last step or resort in the mitigation hierarchy - a useful framework for businesses, developers and ecologists to clearly establish how to best improve the biodiversity value of their projects.

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Biodiversity offsetting in the mitigation hierarchy

Offsetting is the final and last resort in the mitigation hierarchy. A developer should opt to minimise their environmental impact regardless, and as much as possible. Depending on the project site, habitat scope, and development budget, it may be possible to avoid any significant biodiversity loss altogether. This is the first step in the mitigation hierarchy: avoidance. If this is impossible, then the developer should minimise impact where possible and restore areas within the development area.

In the worst-case scenario, a development should offset the project's impact offsite. This is the worst-case scenario because it includes a situation where biodiversity is lost, damaged, or degraded on your development site. A project should always exhaust all possibilities within the first three steps of the mitigation hierarchy before arriving at biodiversity offsetting.

Key biodiversity offset principles

There are several principles that you should apply to any conservation-related project, such as ensuring meticulous project supervision and strong stakeholder engagement. Within biodiversity offsetting specifically, three key principles should be complied with to achieve successful offsets.

Additionality

Any biodiversity gains from an offset should be completely additional. This means that the biodiversity offsets must engender gains that are wholly separate from any ongoing or planned conservational activities that are not a part of the offset. In other words, biodiversity gains from a biodiversity offset should be a direct result of offset actions and would not have occurred otherwise. 

This principle is even more relevant in situations where offsets are intended to strengthen the management and preservation of an area that is already protected. For instance, if there is an area that is protected on paper but is clearly underfunded or faces significant dangers, this area may properly benefit from additional aid through a biodiversity offset. Likewise, it may be very difficult to demonstrate additionality for an area that is already well protected, with low threat levels and adequate funding.

Equivalence

The balance of gains and losses should represent a fair exchange in biodiversity offsetting. In general, the same biodiversity values of habitats, species, ecosystems, or ecological functions that were lost in the original project should be conserved off-site. This requires that similar amounts and types of biodiversity are exchanged. In special cases, the off-site area may be different ecologically from the site of your development project (but it would normally seek to include habitats that are of higher value or distinctiveness than those impacted). This is normally allowed if the off-site location is connected to an ecosystem type or species that are in greater need of protection - or is acknowledged to be of higher conservation priority. 

Permanence

The biodiversity gains from offsetting should last at least as long as the impacts from your project do. This often means that the gains should be permanent. This can be difficult to ensure, as lasting conservation changes are ultimately placed in the hands of future generations. At the very least, the gains from offsetting should last at least for the operating life of the operational project, although ideally much longer. In practice often the gains will need to be secured for at least 30 years and will likely be secured through a section 106 agreement or Conservation Covenant.

How does biodiversity offsetting work?

With these principles in mind, biodiversity offsetting should only move forward when a project cannot first avoid or mitigate biodiversity loss. It may then compensate for the unavoidable damage to nature by creating a new, enhanced, or bigger offset site in a different location. In the end, biodiversity offsetting should bring about real benefits to both the environment and the economy. The ecological losses and gains created through offsetting are represented as numerical scores or “units.”

In England, this unit is a metric quantified by the habitat’s value, both onsite and offsite. To meet the requirements of the new Environmental Act, your biodiversity net gains will be measured by these units measured using a biodiversity metric. The value is typically based on a number of factors:

• Habitat type - on-site and off-site

• Habitat distinctiveness - this refers to the rarity of the habitat concerned and if it supports species that are uncommonly found in other habitats.

• Habitat’s quality - the quality of the habitat that is assessed as poor, moderate, or good and is based on a standard framework.

• Habitat area in hectares - or in kilometres if the habitat is linear, such as streams, hedgerows, lines of trees, or rivers.  

• Habitat location - if the sites are located in an identified local nature priority area

Additionally, offset providers may take into account the location, time, and risk associated with habitat recreation or restoration of the offsite area.

The Natural England Biodiversity Metric is a habitat-based metric that determines biodiversity value and biodiversity net gain. The Environmental Act requires the use of the latest version of this metric. The determined values and units of these sites are in turn created into exchangeable biodiversity credits.

What are biodiversity credits?

Biodiversity credits are seen as a metric to measure biodiversity net gain and a tool to help apply the mitigation hierarchy. They are also able to enable habitat banking (referred to as biodiversity banking, environment banking, or conservation banking). Within this banking system, you may see developers generating credit obligations to offset their negative environmental impacts and landowners with established biodiversity sites who may sell any generated credits to those who require them.

The United Kingdom's new Environment Act will establish a “compliance market,” ensuring a supply of biodiversity units from landowners and managers to sell to developers who require them. These off-site habitats will meet the required standard, and the creation and enhancement of habitats on their land will result in sellable biodiversity units in the market.

This is a new sales process that is still being designed, but some providers are currently commercially available such as Civity. Discuss this with your ecologist who may help broker deals or identify the best options available to you.

Our professional team of licenced ecologists can expertly assist with estate plans and securing the sale of biodiversity credits. Get in touch today for more information and guidance.

Biodiversity offset market and habitat banking

Through habitat banking, biodiversity offsets are turned into assets. Even though biodiversity offsetting does not necessarily require habitat banking, the two often work hand-in-hand. At this time, the UK government is not establishing a centralised trading platform for biodiversity credits, and the prices for these credits are uncertain. Instead, the onus is placed on the private sector, with the prices agreed upon between the buyers and sellers.

Read more about habitat banking here.

This market is to be supported and facilitated by various brokers, environment banks, private sector suppliers, start-ups, and large land agencies. By following the guidance and framework from the Natural England Biodiversity Metric, developers and landowners will be incentivised to find off-site biodiversity gains and biodiversity units that can either be sourced from the market or purchased from the UK government.

Biodiversity offsets in the biodiversity net gain market can be seen this way:

Biodiversity offset demand

After applying the mitigation hierarchy and the Biodiversity Metric, developers can look for and purchase biodiversity credits and units. To count towards the biodiversity net gain requirements, these credits must be registered and secured through a conservation covenant or planning obligation (s106 agreement) before they can be approved. In order to minimise negative impacts on development timeframes, the biodiversity credits do not have to represent completed off-site habitation creation or enhancement. In fact, the units can be bought and sold before any work has actually been done as long as the work begins no more than 12 months after the discharge of the biodiversity net gain pre-commencement conditions.

Biodiversity offset supply

Private landowners, managers, or habitat bankers may generate and then sell their biodiversity units through the biodiversity brokers or by combining payments for biodiversity units with other environmental credit markets and subsidies, referred to as “stacking.” Likewise, biodiversity offsetting can also offer income opportunities for county councils and local authorities. They can use public land to generate and sell biodiversity units to fund enhancements to parks and green spaces while generating additional revenue.

Biodiversity offset market

Within this market, you will see a direct exchange between buyers and sellers. Most of this will be achieved through brokers and intermediaries who connect housing and infrastructure developers to biodiversity unit sellers - often through marketplaces such as Civity. Local authorities may act as intermediaries in this market, but several private market organisations, such as large land agencies, are also taking on this mediator role. They may offer strategic guidance and offer internal resources to assist developers in their goal to provide off-site mitigation.

What are some limitations to biodiversity offsetting?

There are some concerns and possible limitations of biodiversity offsetting in the UK. The main criticisms revolve around the risks involved with a poorly designed biodiversity net gain market and the implementation of biodiversity offsetting. Some limitations to biodiversity offsetting include:

• Not all projects should utilise biodiversity offsetting. Some damages and losses will be too great in either type or amount that there is no appropriate offsetting compensation. An example of this would be if your development project leads to an impact on a species such as bats or great crested newts. Our ecologists can help you assess and improve where possible the ability to offset your project’s impacts.

• Offsets should be long-lasting. There is some apprehension that there is insufficient security around ensuring the gains represented by biodiversity units and credits are maintained for at least 30 years.

• Developers may begin to perceive a “licence to trash.” For example, they may fail to adhere to the mitigation hierarchy and feel that any habitat destruction is legitimised since it can be easily offset in another location.

Careful policy and a strengthened regulatory design may be enough to provide landowners and developers with the confidence to use biodiversity offsetting and to enter the biodiversity net gain market.

Benefits of biodiversity offsetting in the mitigation hierarchy

Despite the potential challenges, offsetting provides exciting and innovative ways to protect the environment and stop biodiversity loss. Aside from providing an incentive to protect biodiversity on private land and additional income for landholders with biodiversity offset sites, there are many benefits of biodiversity offsetting for both developers and the environment.

For one, biodiversity offsetting encourages a principled, partnership approach between stakeholders, landowners, and wildlife groups as they prioritise nature conservation. These genuine collaborations between local organisations and developers lead to more transparency, equity, and greater attention to local habitat losses and wildlife in the area. Aside from this, the simultaneous economic and environmental benefits are hard to beat. Biodiversity offsetting allows for fewer delays in expanding infrastructure and housing development while protecting the United Kingdom’s invaluable biodiversity.

Should you need any more guidance on biodiversity offsetting, please contact us. Our knowledgeable team of ecology experts would be happy to help. You may also find more advice and insight into other ecology services in our blog.

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