Summary
Designing markets to facilitate 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.
Funder Natural Environment Research Council (NERC)
More information
Biodiversity Net Gain (BNG) is a new approach to development that aims to leave the natural environment in a measurably better state than it was beforehand. It becomes a legal requirement at the end of 2023 and requires developers to minimise damage to the natural environment and wildlife species, restore nature lost due to the development, and deliver a minimum 10% net gain in nature.
Nutrient pollution is a big environmental issue for many of our most important places for nature in England. In freshwater habitats and estuaries, increased levels of nutrients (especially nitrogen and phosphorus) can speed up the growth of certain plants, impacting wildlife, and it is damaging protected sites. Advice from Natural England means that new residential development must achieve ‘nutrient neutrality’ – this is when the nutrient load created through additional wastewater (including surface water) from the development is mitigated. By designing development alongside suitable mitigation measures, additional nutrient loads can often be avoided or mitigated. This approach is called ‘nutrient neutrality’. It essentially allows developments to be permitted without impacting on the condition of protected sites.
Why it matters
Due to housing shortages and an increasing population, 300 000 new homes will need to be built in England each year. Despite efforts to avoid using new land, space constraints mean that about half of the new homes will be built on ‘greenfield’ sites that have not yet been developed. New housing built on farmland, at the edges of existing residential areas, will lead to a loss of natural environment and the wildlife species that live in these fields.
The focus of our work is to facilitate trade to meet regulated obligations on housing developers in the UK. Specifically, we are looking at the provision of water quality improvements (Nutrient Neutrality) and biodiversity enhancement (Biodiversity Net Gain) and the simultaneous trade of both services. While our work focuses on the UK context, our insights are more generally applicable to environmental markets with multiple buyers and sellers.
In response to the planned Biodiversity Net Gain legislation, members of the Dragon team have been key to the design of world-first markets for the exchange of biodiversity net gain credits. These designs are crucial to ensuring that housebuilders get the biodiversity net gain credits they need, and farmers are adequately compensated for the costs that they face, while giving certainty that the credits are of high integrity.
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 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.