Nutrient Neutrality
Summary
In response to the Nutrient Neutrality legislation, members of the project team have been key to the design of world-first markets for the exchange of Nutrient Neutrality credits. These designs are crucial to facilitating efficient trade, ensuring that housebuilders get the water quality improvements they need, and farmers are adequately compensated for the costs that they face, while giving certainty that the credits are of high integrity.
Dragon team involved
Ben Balmford, Luke Lindsay, Brett Day
Policy context
Nutrient neutrality legislation has been in force since 2017 with the Conservation of Habits and Species Regulations, which requires that new housing developments in certain areas should not add more ‘nutrient pollution’ to the water catchment. It applies only to new housing developments in areas with protected habitats sites that are already in ‘unfavourable condition’ (due to nutrient pollution).
What we did
Working with EnTrade, Wessex Water and Wheatley Young and Partners, the team have informed the design of catchment markets for Somerset and the Solent. The marketplaces brought together landowners and credit buyers (typically housing developers) to facilitate the exchange of nitrogen and phosphorus credits in order to meet nutrient neutrality obligations, and in due course potentially expand to carbon. The market is designed in such a way that both buyers and sellers are fairly rewarded for their contribution to the surplus, which also helps to incentivise honest bidding on both sides of the market. Nutrient offsetting will help protect fragile eco-systems, like saltmarshes and mudflats in the Solent and the lowland wetlands in Somerset. These markets will ensure that development is still able to proceed as housing developers and businesses are able to meet their obligations, and businesses can buy credits to meet their planning and ‘Nutrient Neutrality’ obligations for protected wildlife sites (including trade in verified phosphorous credits) and other environmental commitments.
More information available on the particular scheme designs and rules for Somerset, Solent, and Bristol.
RELATED PROJECT: Designing markets for bundled environmental goods
Facilitating the multi-lateral trade of environmental services between multiple sellers and multiple buyers, underpinning UK markets to meet regulated obligations on housing developers, particularly regarding water quality and biodiversity.