The Cost of Inaction, the Origins of Biodiversity Net Gain Policy

In previous blogs, we’ve detailed the ins and outs of Biodiversity Net Gain in the UK, why it exists and what mandates mean for developments moving forward. In this blog we look more at the origins of the BNG policy as we will delve into the UK’s Net Gain Impact Assessment. 

This document, published in 2019, created the baseline from which many of the current BNG ideas and policies have been and are being realised today. It also provides some forward thinking and fascinating insights into what the Government thinks will happen as a result of these changes.

A quick intro to the Net Gain Impact Assessment

BNG was developed by DEFRA in response to concerns about the negative environmental impacts of development and the loss of biodiversity and ecosystem services. In development for over a decade (work started when Gordon Brown was Prime Minister), BNG was finally set out in detail in the 2019 Net Gain Assessment. 

The Net Gain Impact Assessment builds on previous policy initiatives and papers, including the 25 Year Environment Plan, Biodiversity 2020 Commitments, Planning Act 2008, Town and Country Planning act 1990 (particularly section 106) National Planning Policy Framework and The Housing White Paper and Planning for the right homes in the right places.

The Net Gain Impact Assessment is a detailed document that lays out the problems of biodiversity loss in the UK. It dives into the rationale for government intervention, short-term and long-term costs and benefits of biodiversity mandates, and the key objectives and design of BNG policy. It’s an important read for anyone who wants to understand the Government’s intent as it both sets the groundwork for net gain policy and explains the method behind using a universal Biodiversity Metric to track development project’s net loss and gain. 

Clearly stating both economic and environmental benefits for the UK, the impact assessment provides a clear framework for achieving biodiversity net gain in the planning system. With the constant evolution of environmental insights and updated policies, it can be a challenge to understate how important this impact assessment is. However, it represents a tangible and measurable step forward in the UK's efforts to protect and enhance biodiversity and ecosystem services, and to ensure that development is sustainable and environmentally responsible moving forward.

What does the Net Gain Impact Assessment say?

The document first sets out the nature of the challenge that we face. According to the Net Gain Impact Assessment, recent trends in land use change and house building show that pressure on land, habitat, and biodiversity is likely to increase. The average annual land use change in the UK is around 145,700 hectares per year, similar to the size of Greater London, or around 1% of total England land area (p.11). The land cover map analysis included in the impact assessment shows that previous losses of habitat are frequent and diverse in terms of habitat type and variation across regions with 80% of development coming from large scale projects (p.12). 

Biodiversity and the ecosystems that support it are essential for human health and well-being as they provide food, water, air filtration and recreation. With the loss of habitat occurring more rapidly around urban populations, where natural capital is also the most valuable, it’s imperative to maintain and improve biodiversity particularly in these areas (p.10).

The threat to biodiversity means a reduction in the availability of suitable habitats for species to live and reproduce and ecosystems to thrive. The impact assessment highlights the importance of preserving and enhancing nature and creating better places for people to help reverse recent declines in nature by alleviating the pressure from development.

The impacts of land use change on biodiversity

Land use change refers to the conversion of land from one use to another, such as the conversion of natural habitats to agricultural or urban land. This is important in considering the impact on the UK’s natural environment because any type of land use change, be it developed or undeveloped change, can lead to habitat loss, fragmentation, and degradation. This inevitably results in biodiversity and ecosystem service declines.

On average, 75% of land use change in the UK is within non-developed use (p.11), such as agriculture, forestry, gardens or outdoor recreation areas. While developed use, that being residential or industry related, is significantly less than non-developed, both are disruptive to the natural environment and ecosystems and need to be carefully considered in any development to maintain healthy ecosystems. 

At the time the impact assessment was published, house building had increased at an average of 12.2% a year for a steady 6 years (p.12). This increase is projected to grow with 300,000 new homes per year expected by the middle of the next decade (p.9). As such, the UK government has established The Natural Planning Policy Framework which endeavours to provide protections for important sites and wildlife, making provisions for the delivery of biodiversity net gain. It has also incorporated policy proposals from the Housing White Paper and Planning for the Right Homes in the Right Places to better manage biodiversity gains across the country.

Costs and Benefits Analysis of BNG in the UK

The Net Gain Impact Assessment provides a cost-benefit analysis of three scenarios, A, B and C. Each representing different options available to developers.  

In Scenario A (low cost), the developer is able to avoid significant loss of distinctive habitats and therefore mitigates and enhances on site. 

In Scenario B (central estimate), the developer is able to achieve 75% biodiversity net gain on site. 

In Scenario C (high cost), the developer is unable to achieve any biodiversity net gain on site and must pay for off-site compensation. 

According to the assessment, the main costs of BNG are the costs to developers and government of delivering biodiversity gains, including the costs of habitat creation and management, monitoring and reporting, and administration.  The main benefits of BNG are the social benefits derived from local avoided habitat loss and local habitat creation, including benefits to health and wellbeing, recreation, and education.

The costs and benefits of BNG are calculated in the assessment using a cost-benefit analysis (CBA) approach, which involves estimating the difference in the costs versus the benefits from the policy over a 10-year appraisal period. 

According to the impact assessment, in the ideal scenario where developers keep biodiversity gains on-site (Scenario A), the benefits over a 10-year appraisal period are estimated to be £14.7 billion. Central estimates where the majority of net gain is on-site (Scenario B) are more conservative, assuming £9.6 billion in gained benefits. For developments requiring all net gains to be made off-site (Scenario C), there is an estimated benefit loss of -£5.9 billion (P.37).

These three scenarios aim to cover the full spectrum of possibility in net gain development costs and benefits onsite and offsite. However, the UK has made the calculated assumption that 75% of mitigation efforts will take place onsite. 

According to industry experts, it’s also assumed that “increased natural space can increase property and land values by as much as 25%” and  that “developments with biodiversity strategies have a greater chance of planning approval from local authorities, enjoy greater inward investment and faster property sales, and even reduced building energy costs.” (p.18) 

Broadly speaking, the impact assessment suggests that the benefits of BNG outweigh the costs, both for the individual developers and the public at large, and that the policy is likely to generate a positive return on investment.  Overall, the impact assessment suggests that the policy is likely to generate significant social and economic benefits, while also helping to protect and enhance biodiversity and ecosystem services. The sheer scale of this change is something we will explore in a future blog.