Biodiversity Net Gain for Landowners
As we mentioned on the introductory BNG page, the need for units purchased from off-site suppliers is expected to be worth £135 million – £274 million annually. So how do you get involved in this new market?
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First steps.
It is important to discuss the commitment involved: BNG is a 30-year legal agreement and whilst companies such as Land and Heritage can provide guidance on what you may be able to achieve on your land, it is wise to get legal advice as well. Currently, there is little public information on issues such as tax implications or selling land entered into a BNG agreement. The National Farmers Union has some advice and guidance on the legal areas of BNG.
Once you decide to proceed with investing in BNG it is time to consult an experienced ecologist who will visit your land and carry out the baseline habitat survey. Land and Heritage can support you through this process. From here we can discuss your options: this is not a detailed planning stage but rather designed to inform you of the areas which would give you the most units, the types of habitats suitable for your land and the activities required to achieve those habitats.
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At this stage you have two options.
Option 1: You can register your land and enter a conservation covenant with a responsible body (e.g. a Local Planning Authority). Your baseline will be taken from the date of the agreement and your proposed habitat creation and/or enhancement plan will become a legal obligation. This allows you to put your units on the market for sale. There are some risks involved in this option as you will need to provide the upfront costs and wait until your units are purchased to gain any income. However, this may be beneficial as the metric positively accounts for habitats created before development occurs, i.e. the longer the time gap is between habitat creation and development the more units this habitat is worth.
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Option 2: You can reach out to developers or work with a “matchmaking” company and wait until a developer needs to offset a development, then enter into a legal agreement with them through planning. This allows for greater flexibility, for example, a development may require specific habitat types to fulfil their BNG requirements. It also means you will have guaranteed income from the time of agreement. This is the option where working with Land and Heritage is more beneficial than an agronomist.
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Whichever option you choose, you will need an experienced ecologist to complete the BNG Metrics and design your Habitat Management and Monitoring Plan. Additionally, once registered you will need monitoring visits required to fulfil your legal agreement. Land and Heritage can support you throughout this process.
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BNG and other funding schemes.
For landowners, a big question is how BNG fits in with existing funding schemes. The Government has confirmed that BNG units cannot be claimed for habitats created or enhanced through alternative funding. This is referred to as 'stacking'.
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For example, woodland created through the Forestry Commission Woodland Creation Fund cannot be registered as habitat creation for BNG. However, once the obligations of the funding have been achieved, BNG can be registered on any additional enhancements, such as improving the woodland from a poor condition to a good condition. The same applies to Countryside Stewardship funding, if you received funding to create species-rich grassland you can register BNG for enhancing the grassland from a poor condition to a good condition.
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Carbon Credits is another common scheme; again the initial habitat creation cannot be registered for BNG, but the process of improving the condition of the woodland, provided there are no negative impacts to the carbon sequestration ability of the woodland, can be registered for BNG.
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BNG efforts can be directly stacked with nutrient credits. For example, within a catchment designated for Nutrient Neutrality, converting agricultural land near a watercourse to a wetland can be registered for both Nutrient Credit and BNG units. There are eight catchments currently designated for Nutrient Neutrality in the southwest: the River Camel in Cornwall and seven catchments in Somerset. Land and Heritage can provide support on both Nutrient Credits and BNG units for landowners in these areas.
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How much are BNG units worth?
The cost of indicative Statutory credits has been released, grouped into tiers depending on the distinctiveness of the habitat. For area habitats, this can range from £42,000 for Tier 1 credits to £650,000 for Tier 5 credits. Linear habitats are £44,000 for each hedgerow credit and £230,000 for each watercourse credit.
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These prices take into consideration the following factors: management of the land covering at least 30 years, monitoring and reporting, ecologist or other experts’ costs, insurance, costs to cover work if the habitat fails, machinery, tools and other staff to carry out the tasks, inflation and market competition costs and the cost of experts to review your legal agreement. The price of credits may also need to offset revenue lost from no longer being able to farm the land depending on the habitat created.
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As a very indicative example; Land and Heritage is frequently involved in woodland creation which can cost £23,250 per hectare as a rough guide. Advisable contingency costs in case of failure would be around £10,000 for 1ha of broadleaf woodland (a low-risk habitat), totalling £33,250. This does not include fees such as legal advice, fencing to exclude livestock or other specific costs.
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1ha of Modified Grassland enhanced to broadleaf woodland in Moderate Condition, would generate 3.52 units. At a conservative price taking the indicative statutory credit rates as guidance; broadleaf woodland could be priced at £48,000 per unit. For 3.5 units this woodland scheme is worth £168,960, minus costs leaving £135,710 in profit for 1 ha of land in agreement for 30 years. This equates to a minimum income of £4,523 a year for 1ha.
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Now this example involves a land-use change from agriculture to woodland, however, this isn’t the case with all habitats and it is possible to continue gaining agricultural income from land managed to produce BNG units if you are willing to change the way you farm.
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Contact us today to have a chat about your land management plans and we can put together a no-obligation quote.