Offsetting impacts on biodiversity and ecosystem services

Wherever development (or any land use change) takes place it has an impact on the natural environment.  Failure to mitigate for these impacts, over time, has contributed to the long-term decline in the nations’ natural capital, the very things that sustain our quality of life and that are vital for our future. This natural capital includes biodiversity, landscape and a range of other ecosystem services. But society recognizes that this development is needed to achieve future economic prosperity. What we are failing to recognize is that the continual, and often rapid, degradation of this capital is massively damaging the economic prosperity of future generations.

We need to recognize the importance of both development and a high quality natural environment. Government, with the help of various parties, looks set to introduce a new approach to mitigating for the impacts of development whereby developments are required to offset their impacts by the purchase of ‘Conservation Credits’. In return, developers experience greater clarity in the planning system, a more streamlined approach to permitting, they will not be required to sacrifice large areas of the development site to provide ecological areas (unless this enhances landscape or market value to their scheme), nor will they be required to engage in habitat creation and its long-term management within the development site (all of which is usually inaccessible to local people). As a result they will be able to maximize the appropriate net developable area of their site thereby avoiding ‘leap-frogging’ of development in which yet further greenfield land is required to satisfy development needs. There would therefore be significant cost savings to developers and credit purchases would be used through a markets exchange working with key delivery bodies through a process called habitat banking, to create, enhance and manage new and existing sites of biodiversity and landscape value, in the wider environment – putting the right habitats in the right places, enabling joining up of protected sites, restoring land to its previous biodiversity interest, enabling sites of significant scale to be provided and even providing vital resilience to climate change.  Working with the full range of stakeholders including landowners, farmers, conservation groups and others, this model (which is being promoted and invested in by an organisation in the UK called The Environment Bank Ltd would also provide large numbers of green jobs, of particular importance in challenged rural areas.

What is habitat banking?

Habitat banking is a market-based environmental mechanism to deliver ecosystem service benefits provided by land, including biodiversity conservation, and to address the historical loss of ecosystem service value at landscape and catchment scales. Habitat banking is an effective and efficient means of ensuring that development offsets its impacts on ecosystem services – where the true costs of development include the historically zero-costed resources which are lost as a result. The zero-costs applied to biodiversity and landscape have resulted in their observed degradation and fragmentation over time. Nature is economically invisible and we want to see a reversal of that position. The result of habitat banking will be to transform biodiversity from a risk and liability problem into a viable and profit generated business opportunity.  It should not simply be seen as a mechanism whereby certain individuals can ‘profit’ from biodiversity but instead should be viewed as a mechanism to stimulate proper investment into the natural environment. Investment that has hitherto been unavailable.

The fundamental premise of habitat banking is to identify existing or degraded land and habitats that may be restored, for example enhancing biodiversity by new habitat creation under a long-term agreement. So, for example, arable farmland might be used to create new habitats or managed in a way that promotes better biodiversity and landscape quality, where different types of credits can be used to supply different ecosystem services. Habitat banks are often designed to consolidate credits from many smaller development schemes to provide substantial added value to large landscape-scale initiatives. Habitat banking creates economic incentives for restoring, creating and enhancing habitats for the purpose of providing compensation for unavoidable losses to habitats and ecosystem services in advance of development actions, where on-site mitigation is difficult and would not result in such environmental benefits, as has repeatedly been shown in relation to S106 on-site mitigation designs.  Habitat banking enables both conservation and development by providing a mechanism for appropriate and necessary development to occur in a more responsible and environmentally sensitive manner.

The value of habitat banking to developers:

  • Increased net developable areas
  • Reduced programme delays and reduced costs
  • Liability for mitigation delivery discharged cost-effectively at start of development
  • Substantial reduction in need to create and manage ecology within the development
  • No long-term management costs and liabilities
  • Greater clarity and certainty in the planning system

The value of habitat banking to conservation:

  • More predictable and coherent outcomes for the natural environment
  • Higher ecological quality of receptor sites
  • Mainstreaming of the ‘value of nature’ in society. Nature becomes economically visible ie it has a cost, therefore a price, therefore a value. If it is valued it will receive investment for its protection
  • Diversification of income streams for landowners, farmers, and NGO’s
  • Removing the funding gap for biodiversity and landscape initiatives
  • Larger-scale conservation site delivery through pooled contributions
  • Funds for long-term management
  • Increased provision of access – local community engagement
  • Green jobs, especially of value in challenged rural communities


A workable approach being promoted by The Environment Bank (EB) is based on 5 core contributors – the environmental markets exchange (EB), the developer, the local authority which permits the development, the Key Delivery Body (landowner, farmers, NGO, other land management company or organization), and a trading platform.

Environmental Markets Exchange

EB will source receptor sites (sites to receive Conservation Credit spend) according to a range of criteria. It will create a registry and database of providers and will  contract directly with the Key Delivery Body (KDB) for the creation of new and restoration of existing sites.  An accreditation body (eg. government) would accredit EB to operate and local authorities would work with EB and stakeholders to secure local geographical literacy to habitat creation and restoration based on proximity principles taking account of what is best for ecology, nature conservation, landscape connectivity and other ecosystem services – providing the right habitats in the right places. In addition, EB would accredit the Key Delivery Bodies and draw upon them, through tailored contracts, for implementation on the ground.

EB would also be involved in the trading of credits which would leverage additional funds from investors who would require a return on their investments over set time frames. To this end EB would establish a trading platform which would provide investment opportunities for outside investment into ecosystem service markets. This is a further advantage of a transparent private sector model over a model in which local authorities and KDB’s would establish habitat banks since the latter would be highly unlikely to be able to attract external investment and would compromise their planning permitting and consultee roles respectively.

EB would broker the arrangements between developers and receptor sites, matching the credit purchase requirement that they would provide, with the appropriate receptor project. An independent assessor would determine the ‘habitat hectares’ affected by the development which in turn would be used as the basis of a metric for calculating the credit purchase requirement. EB would assess the credit value/worthiness of land put forward by a KDB and would calculate the cost of purchase of the credits from EB by the developer.  EB’s contract with the KDB would require appropriate monitoring of the implementation by the KDB, providing a feedback report to the local authority to ensure that their annual reporting mechanism is facilitated.

Local authorities

Local authorities are responsible for discharging duties in relation to planning and development control.  They will assess planning applications, determining with internal and external advice, the amount and type of credits that the developer would be required to purchase from the markets exchange in order to trigger the development.  They would not sell credits themselves nor would they establish habitat banks to receive credit spend as this would conflict with their planning permission function and could divert funds from the natural environment into core administrative budgets. Planning decisions would hence be free from the politics associated with local provision of environmental benefits. Location would be determined by a different group working with EB (see below) based on ecological coherence, hydrology, geology, connectivity and what is best for ecology and ecosystem service delivery.


Once credits are purchased from the markets exchange the unencumbered development would be allowed to proceed and the developer will have discharged their duties and liabilities with respect to mitigation provision upon the purchase of those credits.

Key delivery bodies

These are the bodies, companies, individuals (eg landowners/farmers) or organisations that would be contracted by EB to create and manage (ie implement) the new habitats or manage existing ones in a particular way. They would be contracted to EB according to a management plan. In some cases the KDB could be a local wildlife trust or a conservation body. The KDB’s would be responsible for planning local stakeholder engagement as part of the process of implementation. In many instances, local involvement with implementation would be encouraged and there could be opportunities to provide recreation where consistent with the objectives of the management plan for that particular project. The KDB would be responsible to EB for the delivery of the project. EB would require the receipt of an audit report annually for the first 5 years of the project. Contracts with KDB’s would be for a period of 5 years though management plans would be based on a minimum of 25 years (as this is recognised as a term which would enable security of success). If the KDB wished to put the land to an alternative use such as a development after a period of time, having received CC spend, there would be a mechanism for the assessment of impact/footprint and they would be required to purchase new credits to offset the impact.

By Prof. David Hill

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