NATURAL CAITAL MARKET UPDATE – ENVIRONMENTAL CREDITS
BIODIVERSITY NET GAIN
Demand for units this year has been steadily rising. With more sales being agreed, it is increasingly clear that off-site units are being purchased further afield from the development site, attracting full spatial weighting.
Prices paid by developers range greatly, depending on the type of habitat mitigation needed, the vendors circumstances, contractual factors, the timeframe before completion, and a variety of other influences. However, as we report in Farmers Weekly and Farmers Guardian weekly, sales have been agreed for units from medium to high distinctiveness for £19,000 – £30,000 per unit, for example Other Neutral Grassland, other grasses, scrub, and hedgerow. However, some rarer unit types can fetch prices from £30,000 – £200,000 per unit, especially “like for like” mitigation, and lowland meadow, water course units, and broadleaf woodland.
There has been a rumour that the Government was considering either adding small sites to the list of exempt developments or using a tariff system similar to the recently proposed Nature Restoration Fund impacting current environmental protections and conservation measures including Nutrient Neutrality. However, it appears that this is no longer on the agenda. BNG is not mentioned in the Planning and Infrastructure Bill. This Bill though, supports the argument that LPAs, when considering the location of any offset, should maybe place greater weight on the benefit of any mitigation to nature, rather than a hierarchy based purely on proximity.
Developers – BNG in the planning process and discharging obligations
Development of a site cannot start until the LPA approve the developer’s biodiversity gain plan (showing how they will achieve the necessary ‘gain’). In order for this plan to be approved, it is crucial that both a Habitat Bank creator and developer consider the legal mechanisms for securing any habitat gain.
For the developer, this may take the form of either a pre-commencement planning condition (or a condition as part of the planning permission) or a S106/conservation covenant depending on the type and location of the habitat required e.g. onsite, offsite and the ‘significance’ of the habitat.
Planning conditions ought to be used for non-significant onsite habitat enhancements (e.g. gardens), whilst S106s would be used for bespoke offsite habitat or significant onsite habitat (this definition varies but as a minimum usually includes medium distinctiveness or above, large numbers of units in relation to the development, or habitat condition enhancements).
If purchasing habitat units from a ‘wider’ habitat bank (so not a bespoke off-site BNG solution to a specific development) then a S106 will not be required to secure the gain of the habitat bank as it will already have its own one in place.
A developer will not need to have a definitive BNG solution in place at the point of determining the planning application, rather at the point that they need to discharge the pre-commencement condition. During the planning application process a developer will need to submit for approval a BNG Statement setting out their strategy for achieving BNG including the mix between on-site, off-site and statutory credits.
Therefore, we encourage developers to contact us at as early a stage as possible to arrange/reserve units for this (subject to a bank being secured if not already the case), allowing you to complete the BNG statement mentioning one of our sites and speeding up the process.
We can secure suitable off-site BNG units for your developments through applying our detailed knowledge of the statutory metric, approaching multiple vendors, be it direct to landowners or other brokers, and matching you up with the most affordable units on the market.
CARBON
UK Woodland Carbon Code
There is a consistent level of activity in the UK woodland carbon market. This market, whilst well-regulated, still operates on a voluntary basis – unlike both BNG and Nutrient Neutrality. Purchased carbon credits cannot help with actually meeting any current rules for emissions reduction. They are instead purchased by companies looking to voluntarily mitigate their carbon footprint or those anticipating future legislative offsetting requirements. Although such changes have not yet materialized, there have been numerous suggestions, particularly in the early 2020s, that such a change is expected, especially as the Net Zero Strategy remains Government Policy. Of course, the UK Emissions Trading Scheme still applies but this is based on emissions rather than mitigation. Interestingly, there has been some movement, with DEFRA’s endorsement of the new Biodiversity Standards (BSI) as part of a voluntary UK nature market covering a range of natural capital, including BNG and carbon, funded through Green finance.
Currently, Pending Issuance Units (PIUs) make up the overwhelming majority of enquiries we receive. As of 31st December 2024, the Woodland Carbon Code reported that only 800 Woodland Carbon Units (WCUs) were ready to sell – with only 135 projects having been verified at year 5. Project owners are tending to choose to hold onto their WCUs, expecting their value to increase.
PIUs are currently trading between £25-£35/PIU, but prices can vary considerably on a project by project basis. We have seen figures ranging from £20/PIU to £40/PIU. Factors such as tree species, biodiversity improvements, and any other additional benefits can all influence price by making a project more appealing to a company looking to improve their ‘Green’ image. The ‘vintage’ though, can also be particularly important when determining price. This refers to the anticipated timeframe in which a PIU is expected to mature into a WCU and when it can actually be used. The earlier the vintage the more expensive a PIU will be.
It is, however, extremely difficult to quantify exactly the effect of the vintage on the price per PIU. Our best guess suggests that for every year before a PIU is converted into a WCU there is an approximate 13p reduction in value. So if a PIU in a 2050 vintage was marketed at £32, we would expect a PIU from the same project in a 2100 vintage to be worth £25.50. The figure of 13p/year is based on an estimated £10 difference between the cost of PIUs from the first and last vintages and an estimated average project length of 80 years. This figure should be afforded an appropriate level of caution as it does not take into account all variables.
In September 2024, at the most recent auction of Woodland Carbon Guarantee Scheme, Woodland Carbon Units were purchased by the Government at £25/PIU.
UK Peatland Carbon Code
The peatland carbon market works on the same voluntary basis as the woodland carbon market. As of 2025 no PIUs have yet been converted into PCUs (Peatland Carbon Units) owing to the time it takes to get a project underway. Unlike the Woodland Carbon Code, the Peatland Carbon code requires restoration works to be fully completed and validated before the 5-year countdown to verification can begin.
The Peatland Carbon market is smaller than the woodland equivalent with only 345 projects listed on the UK Land Carbon Registry (compared with over 2000 woodland projects). Having said this, in 2025 PIUs have already been assigned to 11 different purchasers, possibly suggesting a greater level of activity than the woodland carbon market.
In terms of prices, the peatland carbon market is less well defined than the woodland carbon market. Typically, PIUs are currently being sold at between £25-30/PIU. However, prices can range up to £60/PIU. As with woodland PIUs, price is largely dependent on the vintage. For example, prices for a pre-2030 vintage should be expected to be at least £40/PIU.
EU & UK Emission trading & voluntary carbon trading
The recent announcement that the EU and UK’s emission trading market scheme will be linked is an encouraging development and hopefully will encourage more interest from the EU for our voluntary carbon units.
NUTRIENT NEUTRALITY
The Planning and Infrastructure Bill – Part 5: Development and Nature Recovery intends to introduce a tariff system by which developers satisfy their environmental obligations by paying a tariff into the proposed national Nature Restoration Fund (this does not include BNG).
We expect that if this Bill is passed by Parliament, it will be at least 18 months before it comes into effect. It is suggested that this tariff system will be mandatory within areas covered by an ‘Environmental Development Plan’ (EDP). However, it is thought that landowners may be able to submit mitigation sites independently to Natural England under an EPP.
We believe it is likely that developers and landowners will still have the option of continuing with open market purchases/sales. However, the “devil will be in the detail” on this, and is not yet available. The open market will remain a necessity in facilitating development as it is anticipated that it will take a significant time for EDPs to be created and rolled out.