In the UK, Biodiversity Net Gain (BNG) payments have emerged as an income stream for landowners, conservation organisations, and local authorities due to new regulations requiring developers to compensate for biodiversity impacts caused by their projects.

Here’s a breakdown of how these payments work as an income stream for landowners, farmers, and potentially any rural community committed to biodiversity net gain.

Biodiversity Net Gain Requirement:

Under the Environment Act 2021, all new developments in England must achieve a minimum of 10% biodiversity net gain. This means they must improve biodiversity levels by at least 10% compared to the pre-development baseline, either on-site, off-site, or through purchasing biodiversity credits.

Developers who cannot achieve BNG on their development site must offset their impact by investing in off-site projects that increase biodiversity. This can involve payments to landowners or conservation groups who provide these off-site habitats.

Creating and Managing Biodiversity Sites:

Landowners, farmers, and conservation organisations can offer land for biodiversity enhancement or habitat creation that meets BNG standards. By transforming parts of their land into high-quality biodiversity sites — such as wildflower meadows, wetlands, or woodlands — they can generate income by leasing or selling biodiversity units to developers.

This transformation might involve rewilding, habitat restoration, or creating new green spaces. Developers' payments provide funds for the initial setup and ongoing management of these biodiversity sites, creating a sustainable income stream.

Sale of Biodiversity Credits:

If on-site and local off-site options aren’t available or practical for developers, they can buy biodiversity credits from the government. These credits fund conservation projects and are used to meet the developers’ BNG obligations.

Local authorities, land trusts, and private biodiversity banks can also create their own biodiversity credits by developing and managing habitat sites specifically for BNG. These credits are then sold to developers, with proceeds funding long-term conservation management.

Long-Term Income through Management Agreements:

BNG typically requires a 30-year commitment for land maintenance and biodiversity management, meaning landowners receive ongoing payments for maintaining and enhancing biodiversity over this period.

These payments are structured into long-term agreements, providing a stable income stream that can help support sustainable land management and conservation efforts on private or public lands.

How the BNG sales happen

1. Direct Sales of Biodiversity Units: Landowners directly contract developers to create and sell biodiversity credits. This can be the most lucrative but also the highest risk option, as it requires the landowner to manage and monitor the biodiversity habitat independently. Success depends on meeting biodiversity metrics and regulatory compliance, which can be complex and costly but offers direct payments from developers.
2. Brokerage Models: In this medium-risk approach, a third-party broker matches farmers offering biodiversity units with developers in need. The broker manages some logistical aspects and often takes a fee, reducing the risk and administrative burden on the landowner.
3. Environmental Banks: The lowest-risk option involves long-term contracts (typically around 30 years) with an organisation like the Environment Bank. Here, the bank funds habitat creation and leases the land back to the owner for ongoing maintenance. Landowners receive rent and management payments, providing steady income with minimal risk, as the bank handles most initial costs and commitments.

BNG income can often be combined with other environmental subsidy programs, although compatibility varies between schemes. This stackable approach allows farmers to diversify income streams as traditional agricultural subsidies decline, providing financial stability through conservation efforts.

This system offers new revenue avenues and aligns with national goals for biodiversity and environmental sustainability, as outlined in the Environment Act and supported by organisations such as Natural England.

Overall, BNG payments provide a way for landowners, conservationists, and local authorities to contribute to ecological restoration while creating a sustainable income source. This system encourages biodiversity enhancement and habitat preservation, making it an attractive opportunity for those involved in land management and conservation.

The Biodiversity Net Gain (BNG) principles are outlined in the UK’s Environment Act 2021