Defra releases biodiversity statutory credit prices
Developers now have an idea of the cost of ‘last resort’ credits, but will they affect unit prices?
3 minutes to read
Ahead of the mandatory introduction of Biodiversity Net Gain (BNG) in November, Defra has recently made a flurry of announcements, particularly the much-awaited pricing of the statutory credits.
Credits versus units
Now you may be asking yourself, what is a unit, and what is a credit? Defra has made it very clear that a biodiversity unit is created by a BNG scheme where a habitat is established to offset the loss of a unit elsewhere. A biodiversity credit is a term for the statutory credit of last resort, which is available only if you are unable to purchase a biodiversity unit.
In its response to the BNG consultation, Defra stated that the price of statutory credits would be deliberately set at an uncompetitive level with BNG unit market prices - with the hope that land developers would be strongly incentivised to create BNG units first and foremost. Therefore, Defra has said that statutory credit prices are likely to start at around £42,000 each in contrast to unit values which have tended to average around £25,000 to £40,000 each.
What has been announced?
- The credits are broken down into low, medium and high distinctiveness categories, with different habitats further broken down within each category - the credits' costs increase with the habitat's higher distinctiveness
- The credits for the replacement of habitats with the lowest distinctiveness will cost £42,000 each, ranging up to the most distinct habitats, e.g. peat lakes, costing £650,000
- To take the place of one biodiversity unit, you will need two statutory credits, therefore a minimum cost of £84,000
- VAT will apply to the purchase of statutory credits at the prevailing rate
- Prices given are only indicative and will be confirmed once BNG becomes mandatory in November 2023
- Natural England will sell the credits on behalf of the Secretary of State.
Defra has yet to release what precisely is required to qualify to purchase a biodiversity credit, but we expect that you will need to prove there are no BNG units available to you. Natural England has said a developer will need to provide evidence to the Local Planning Authority (LPA) that they have been unable to achieve BNG through on-site and off-site options, before they may be able to buy statutory biodiversity credits.
How will BNG unit prices be impacted?
We have not yet seen the impact that the statutory pricing will have on the wider biodiversity unit market, but rural consultant Harry Howard-Jones anticipates: “Especially in areas expecting a scarcity of biodiversity units, prices for units will increase from what we had previously been experiencing of £35,000 upwards per unit depending on the habitat. But BNG unit supply versus demand in an LPA area will still influence unit prices. We have recently seen prices fall in areas where a significant amount of BNG land has been marketed.” James Shepherd, a Partner in the rural consultancy team adds: “however the pricing of the credits provides confidence to land developers around the prices they will need to pay in the units markets.”
Knight Frank has produced a guide with the latest information on BNG for developers and landowners.