Biodiversity Offsetting - Environmental Audit Committee Contents


4  Justification and timing

26.  We have discussed above the metrics and the geographical aspects of a possible offsetting system. More fundamentally, however, the case for offsetting rests on other factors, including: whether it still allows appropriate local protections for biodiversity through the 'mitigation hierarchy', whether it could operate in a market which produced effective offset solutions and whether the pilots have provided sufficient information to allow the scheme to be introduced at this time.

Mitigation hierarchy

27.  The National Planning Policy Framework re-stated the mitigation hierarchy; that if "significant harm to biodiversity resulting from a development proposal cannot be avoided, adequately mitigated, or, as a last resort, compensated for, then planning permission should be refused"[61]. The Lawton report warned in 2010 that "biodiversity offsetting must not become a 'licence to destroy' or damage existing habitat of recognised value. ... Offsets must only be used to compensate for genuinely unavoidable damage".[62]

28.  Similarly, the National Trust cautioned that "the offsetting framework must not encourage a culture of wildlife being 'disposable, tradable and replaceable'; biodiversity offsetting should be a last resort, after all attempts to avoid and reduce possible impacts have been taken".[63] Friends of the Earth thought offsetting would be "a much higher-risk strategy than enforcing what is there already".[64] The Secretary of State assured us, however, that:

    emphatically, there will be no change to [the mitigation hierarchy] at all. This is just adding on. We are trying to resolve the conundrum at the end, when something cannot be mitigated. So, absolutely emphatically, all the existing mitigation arrangements carry on; that does not change at all. What we are trying to get away from is the rather sterile, lengthy and very costly legal battles under the current system that cannot be resolved through mitigation.[65]

29.  Offsetting provides a means of compensating environmental loss from development only as a last resort, after the possibility of alternative development sites or mitigating the extent of the loss have been exhaustively examined. Any biodiversity offsetting system must emphasise the continued primacy of the 'mitigation hierarchy', and the Government should make clear under such a system that the National Planning Policy Framework commitment to the hierarchy will not be weakened or bypassed.

An offset market

30.  The Green Paper envisages that an offset market would enable environmental compensation to be provided more quickly and cheaply than currently.[66] The Environment Bank saw a "danger" that a market might drive offset prices down too low to bring projects forward.[67] The Green paper asserts that "allowing any required compensation to be bought 'off-the-shelf' from a market removes the need for negotiation on what will be provided".[68] The Wildlife Trusts warned that the system would not work until there was a sufficient range of different potential habitats available for offsets, reflecting the wide range found across the country.[69] The Environment Bank told us "If we cannot provide the developer with the right type of offset in the right place at the right time, at the right scale, it is no use to him".[70]

31.  The Green Paper also anticipates potential cost savings from creating a market, with "economies of scale from large-scale habitat restoration and recreation".[71] But that depends on whether an offsetting scheme were mandatory or voluntary. The Impact Assessment that accompanied the Green Paper indicates that a mandatory scheme would have a larger economic impact, and environmental benefit, but also a higher cost for business.[72] Policy Exchange estimated that a compulsory scheme could add around £71 million to the total cost of development each year, or 0.1% of the value of annual construction in the UK.[73] The Home Builders Federation warned that anything that increased the time taken to achieve planning consent, such as a mandatory offsetting scheme, could add additional costs to business.[74] The Defra impact assessment calculated that a voluntary scheme would be largely cost-benefit neutral, whereas a mandatory scheme would have a net present value benefit of £452m over ten years.[75]

32.  An effective market for offsets would be more likely if there were a sufficient volume of activity. Witnesses had mixed views about whether offsetting should be mandatory, which might generate higher volumes, or voluntary. The Home Builders Federation wanted a "fully permissive" system for developers to allow other options to be available.[76] The Country, Land and Business Association, on the other hand, believed that:

    To be viable, the system will need to be mandatory, subject to thresholds ... Unless the system is mandatory we doubt we will be able to ensure the level of investor confidence required to produce the number of offset sites required. Landowners will not think it worth their while looking into offsetting if there are only a few random developers looking for offsets.[77]

The RSPB also wanted a mandatory system.[78] Based on its experience of the pilot in Nottinghamshire, the Wildlife Trusts noted that only three out of 10,500 planning applications it had screened had come forward as possibly suitable for offsetting, and in two of those three cases the developers not been interested in that approach. The Wildlife Trusts saw this as a symptom of the voluntary nature of the pilot.[79] Similarly, the Environment Bank believed that no offsetting schemes being delivered after 18 months in a pilot demonstrated that "very few developers will ever choose to compensate where they are not required to do so ... If there is one key lesson to draw from the Government pilots it is that a fully permissive system will not work".[80] The Secretary of State took the same lesson:

    The pilots show the conundrum of whether this system should be obligatory or entirely voluntary. From the pilots we have seen in this country, there is not an enormous amount [of offsetting] that has come forward so far.[81]

33.  The offset market could also play a role in the continuing management of offsets after they have been set up. The Green Paper notes that planning permissions generally assume that a development will be permanent, so there will be a need to ensure any compensatory biodiversity gains are also permanent.[82] If there were conservation covenants attached to offsets, the obligation and liability for their management would pass from one owner to the next.[83] It is conceivable that offsets could be offset again themselves if the offset site were subsequently itself developed. The National Farmers Union told us that the long-term liability implicit in an offset would ultimately need to be reflected in its price, so "only those with long-term interest in land can actually participate in this market, which means landowners as opposed to agricultural tenants".[84] Lafarge believed, however, that asking landowners to commit to managing offsets in perpetuity could make them hesitate.[85]

34.  A market could encourage offset providers to offer projects of a size that facilitated 'ecosystem networks', in part prompted by potentially lower costs from the greater economies of scale that these would allow. A danger is that the market could produce many offsets of a similar, lowest-cost, type rather than a mixed range of types. The Government should task Natural England to monitor any offsetting scheme introduced to ensure a balance of habitat types are covered in the offsets, so that overall they are broadly similar to the habitats that are lost, and provide Natural England with the resources that such monitoring would need. If necessary, the weighting factors applied in the offset metrics should be adjusted to ensure that such a balance is delivered.

35.  A mandatory, rather than voluntary, offsetting system could help a market to develop, which would in turn allow more environmentally and economically viable offset projects to be brought forward. Poor uptake in the pilots suggests that compulsion is needed, but the case for a mandatory system has not yet been made. More analysis of the pilots (as we discuss below) should be undertaken once they have been concluded, specifically to test how uptake might be expected to vary according to the design of the schemes.

The justification and timing of the offsetting proposals

36.  The Government set out its case for offsetting in its Green Paper consultation in September 2013, stating "Biodiversity offsetting has the potential to help the planning system deliver more for the economy and the environment." It put forward two main advantages:

    It ensures that there is 'no net loss' of biodiversity as offsets demonstrably compensate for the residual losses and are secured for the long term, and provides scope to achieve an overall net gain for biodiversity through locating the right offsets in the right place to improve ecological networks.

    It can make compliance with biodiversity protection provisions quicker and more transparent, certain and consistent.[86]

37.  It is clear that the current system is not doing enough to protect and enhance biodiversity. The Wildlife Trusts told us that the majority of local planning authorities have no system for securing off-site biodiversity compensation.[87] The Environment Bank highlighted Defra research which demonstrated that biodiversity was considered as material in only 1% of planning applications, and where it was considered material it was rarely a reason for refusal. Where mitigation or compensation was considered appropriate it was rarely delivered effectively.[88] Policy Exchange similarly concluded that the key weaknesses of the current planning system for biodiversity protection are the lack of transparency, poor monitoring and little or no enforcement of compensation agreements.[89] The Woodland Trust told us that the current system was not working because ancient woods were still under threat.[90] And RSPB believed that the planning system did not adequately guard against biodiversity loss, with the mitigation hierarchy inconsistently applied and compensation often inadequate and short-lived.[91]

38.  Some of our witnesses, despite identifying weaknesses in the offsetting model proposed by the Government (paragraph 10), saw it as an improvement on the current system. The Environment Bank, for example, highlighted a current risk of "massive environmental degradation" and argued that offsetting "could help planners take into account the environmental value of relatively low value sites, which we are losing by the hundreds each year".[92] The National Home Builders Federation were content in principle to look at biodiversity as a way that could improve sometimes "not ideal" processes and outcomes.[93]

39.  On the other hand, some witnesses did not think that offsetting was the best way of addressing these weaknesses. RSPB thought the biggest problem was not about environmental compensation but a failure to address harm in the first instance under the mitigation hierarchy (paragraph 27).[94] Friends of the Earth saw offsetting as allowing for the "tradable destruction of habitats".[95] They wanted to see better implementation of the National Planning Policy Framework "before introducing a new and much more risky system of offsetting."[96]

40.  There were also more fundamental concerns about how well any system could meaningfully equate environmental losses and gains. The Institute of Environmental Management and Assessment noted the particular challenge of "demonstrating equivalence" in offsetting,[97] which Professor Colin Reid of Dundee University saw as an ethical as well as practical question:

    Any offsetting scheme based on balancing biodiversity units is making major assumptions over the equivalence of 'units, which is not without question on ethical grounds, and our ability to measure their value, which is not without question on scientific grounds. This is not to say that an offsetting scheme should not proceed, but it should do so with an explicit recognition of the ethical choices made and of the limitations in assessing value and equivalence.[98]

41.  Nevertheless, several witnesses saw in an offsetting regime an opportunity to improve on current frequently inadequate consideration of biodiversity loss in development projects. RSPB thought the concept is "a very valuable starting point, because it makes people understand that there is a benefit and a value to some of this habitat that you are losing".[99] The Woodland Trust highlighted the wide range of assessments under the current system of what compensation is appropriate for ancient woodland loss, and suggested that offsetting "would provide a clear framework for everybody to follow".[100] The Home Builders Federation told us that in the current situation there can be several habitat assessments produced by different parties which can make the process slow and opaque, so having a clear national metric "would be very helpful for the industry as well as for planners".[101]

42.  There are both advantages and disadvantages in offsetting. It might be possible to devise a better metric (paragraph 16) and more robust systems for assessing individual offset projects (paragraph 19), and ensure that they are only used as a last resort under the mitigation hierarchy (paragraph 29). But a weakness of the Green Paper is that it does not provide a clear and evidenced analysis of how, in its words, offsetting would deliver "biodiversity gain" and be "quicker and more transparent, certain and consistent". The offsetting pilots might provide that information, but they are still underway. More fundamentally, however, before any offsetting scheme is taken forward there needs to be recognition that unless like-for-like habitat replacement is required, any process will have to make ultimately subjective 'equivalence' judgements about the value of nature. That concern should prompt the Government to develop a system where offsetting 'risk factors' (paragraph 8) are initially given very high weightings which can only be reduced when experience of offsetting in practice provides confidence that the environment has not been harmed overall.

43.  In December 2011, the then Defra minister Richard Benyon told the House that "the biodiversity offsets pilots ... will run for two years and there will be an independent evaluation of the process. A decision will then be made on whether, and if so how, to support greater use of offsetting across England".[102] Defra's consultation timetable, we were told, would allow it to take into account "the full assessment that is planned for when the pilots finish".[103] The pilots are not due to be completed until April 2014. CIWEM questioned whether the two-year timeframe of the pilots would be sufficient "given the time it takes for any natural habitat to become properly established and colonised".[104] The Aldersgate Group stressed that "time is needed to design an effective system".[105] When we asked about arrangements for an independent evaluation of the pilots, the Secretary of State told that "we will do that within Defra. ... We have a whole range of people who we can bring in, but ultimately this is a Defra responsibility and we will have to persuade Government colleagues that it deserves time".[106]

44.  In the meantime, the Secretary of State emphasised that he had visited Australia to examine their offsetting system (the Green Paper notes that more than 20 countries have such programmes, including also Germany and the United States).[107] (Friends of the Earth questioned the achievements of those other schemes.[108]) The Secretary of State told us that "there is quite a lot of commonality between our metric and the metrics that are being employed elsewhere"[109] and that:

    What was striking, where we were in Australia, was that it was all very similar countryside; it was wide open country with gum trees, it was all very similar. Things are a lot more complicated ... in Northamptonshire. But I still think there are lessons to be learnt, and the benefits could still be delivered.[110]

45.  The two-year offsetting pilots have not yet run their course, nor have their results been independently evaluated in line with commitments made by environment ministers in 2011. It is too soon to reach a decision on offsetting while the pilots have yet to be completed and independently evaluated. In the meantime the Government proposals appear to place as much, if not more, store on experience with offsetting in other countries, notably Australia which has little in common with the environmental landscape and development pressures of England. The Government should allow the offsetting pilots to run their course and then be evaluated in a genuinely independent way. If that evaluation indicates clear advantages in introducing an offsetting scheme, at that point the Government should bring forward revised proposals that reflect the concerns that we have raised in this Report .


61   Biodiversity Offsetting in England Green Paper, op cit, p24  Back

62   Defra, Making Space for Nature (September 2010), p87 Back

63   National Trust (BIO 080) para 17 Back

64   Q7 Back

65   Q73 Back

66   Biodiversity Offsetting in England Green Paper, op cit, para 31 Back

67   Q39 Back

68   Biodiversity Offsetting in England Green Paper, op cit, para 11 Back

69   Q40 Back

70   ibid Back

71   Biodiversity Offsetting in England Green Paper, op cit, p14 Back

72   Defra, Biodiversity Offsetting in England Green Paper: Impact Assessment (September 2013) Back

73   Policy Exchange (BIO 010 ) para 19 Back

74   Q4 Back

75   Biodiversity Offsetting in England Green Paper: Impact Assessment , op cit Back

76   Home Builder’s Federation (BIO 021) para 11 Back

77   Country Land and Business Association (BIO 019) response to Q8 Back

78   Q3 Back

79   Qq35, 41 Back

80   Environment Bank (BIO 012) para 13 Back

81   Q44 Back

82   Biodiversity Offsetting in England Green Paper, op cit, para 36 Back

83   Q61 Back

84   Q24 Back

85   Larfarge Tarmac (BIO 007) para 11 Back

86   Biodiversity Offsetting in England Green Paper, op cit, p3 Back

87   Woodland Trust (BIO 016) p1 Back

88   Environment Bank (BIO 012) para 7 Back

89   Policy Exchange (BIO 010 ) para 9. Back

90   Q2 Back

91   RSPB (BIO 014) para 1 Back

92   Q25 Back

93   Q2 Back

94   ibid Back

95   Friends of the Earth (BIO 003Back

96   Q2 Back

97   IEMA (BIO 015) para 10 Back

98   Prof Colin Reid (BIO 024Back

99   Q10 Back

100   Q3 Back

101   Q3 Back

102   HC Deb, 1 Dec 2011, col 1051 Back

103   Q53 Back

104   CIWEM (BIO 001) para4 Back

105   Aldersgate Group (BIO 023Back

106   Q48 Back

107   Biodiversity Offsetting in England Green Paper, op cit, p3. Defra provided the Committee with links to international studies: Compensating for damage to biodiversity, Biodiversity offsets in theory and practice, and State of biodiversity markets.  Back

108   Q21 Back

109   Q56 Back

110   Q62 Back


 
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Prepared 12 November 2013