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Latest developments in the biodiversity and carbon market spaces.

We look at how areas such as biodiversity are being explored in an effort to prevent its decline.

The approach to carbon emissions has long been to put a value on CO2 and to create a trading environment in order to drive reductions in emissions. That approach is now expanding to other areas such as biodiversity which is being given a value to prevent biodiversity decline. The term being used to capture this evolving area is ‘ecosystem services’.

On-going developments in the UK highlight the speed at which this area is growing presenting both opportunities and risks for businesses and land owners.

A joint report – Nature Positive 2030 – issued by the UK’s statutory nature agencies on 22 September has called for urgent action to reverse the decline of nature.

As the Environment Bill continues its slow journey through Parliament one of the areas that has seen a significant amount of activity is biodiversity. The Bill is one of the main vehicles in England and Wales for delivering a number of the measures required to achieve the goals detailed in the joint report.

A key element of the Bill is the biodiversity net gain requirement pursuant to which planning authorities will require new developments to provide a 10% increase in biodiversity. This can either be through onsite or offsite habitat enhancements and is based on the use of common metrics and the creation of biodiversity units.

In theory this new net gain framework should help to reverse the decline of nature, but there are concerns in relation to its delivery. The new framework is due to come into effect in 2 years. A recent report found that a large proportion of local planning authorities do not feel equipped to implement and deliver this new requirement. Part of the reason for that is the need for the provision of a cross authority means of delivering and trading offsite enhancements. Very simply how will a biodiversity unit be validated, what is it worth and how can it be bought and sold? Currently there are voluntary unregulated trading platforms and markets.

This is a common issue when you also consider voluntary carbon markets. The drive to net zero is leading many businesses to have to start considering the need to offset emissions that cannot be eradicated. Presently unless you are required to participate in the UK emissions trading scheme, there is very little regulation of the trading of carbon credits.

Mark Carney’s Voluntary Carbon Market Initiative (VCMI) is trying to create a framework that will deliver consistency and uniformity, but there is much more work to be done.

We expect that as the market is outpacing the establishment of these frameworks, in the not too distant future we will see the creation of what can be best described as green trading networks through which buyers and sellers of ‘green’ units that encapsulate environmental gains or benefits (i.e. carbon offsets/credits or biodiversity net gains) will be able to trade.

What is lacking at the moment is the regulation of these activities. Experience has shown that ultimately a voluntary approach only takes you so far. The UK Government is taking steps to address this ‘gap’. There is an on-going project involving DEFRA and the Treasury looking at the role for Government and further regulation.

Those affected by these developments should continue to monitor this area so they are able to ensure the proper management of their activities and environmental impacts.

We will continue to provide regular updates as more information becomes available.

For further information regarding biodiversity or carbon emissions please contact Simon or one of our team of energy solicitors.

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