One biodiversity credit for a watercourse costs 230,000 pounds from the English government, and the rules oblige a developer to buy two of them for every unit of harm the metric records. That figure is not an estimate of what repairing a river costs. Defra sets it with a mark-up whose published purpose is to keep the state from undercutting the private market it wants built. Prices like that one are instruments of policy, set to change behaviour rather than to recover a cost.
Two very different things travel under the word credit, and conflating them makes nonsense of both. One is compensation a developer is compelled to provide because a regulator will otherwise refuse consent. The other is a certificate bought voluntarily by a company that has done no measured harm at the site in question. The first is a liability created by planning law. The second is a purchase. They share vocabulary, registries and sometimes the same project developers, and answer to entirely different tests.
Where the compulsory version comes from
Compulsory compensation begins with the mitigation hierarchy, which sequences a developer's obligations: avoid the impact, minimise what cannot be avoided, remediate what remains, and only then compensate for the residue. Every regime below tries to make that last step measurable and enforceable, and every criticism of them turns on whether the earlier steps were genuinely exhausted first.
The United States has run a nationwide version since 2008, under the compensatory mitigation rule at title 33, part 332 of the Code of Federal Regulations. Its stated purpose is to offset unavoidable impacts to waters of the United States authorised through Department of the Army permits, which issue under section 404 of the Clean Water Act, sections 9 or 10 of the Rivers and Harbors Act of 1899, or both. It ranks three ways of discharging the obligation. A district engineer should prefer credits from a mitigation bank, because a bank must have its instrument, its mitigation plan and its financial assurances approved before any credit can be debited, and because credits are released only as milestones in the bank's own schedule are met. Second preference goes to an in-lieu fee programme, in which a government or non-profit sponsor takes the money and the obligation together. Last comes permittee-responsible mitigation, which the rule treats as the only option where the permitted impacts are not in the service area of an approved bank or in-lieu fee programme that has the appropriate number and resource type of credits available.
An in-lieu fee sponsor may sell advance credits, meaning credits available before any mitigation project has been built, provided its approved instrument allocates a specific number of them and sets a schedule for fulfilling them. That provision is the clearest statement in the whole rule of the problem the field calls temporal loss: the harm is immediate and certain, the repair is future and conditional, and somebody has to decide how much of that gap the permit system will tolerate.
England wrote no net loss into a statute and set the number at ten per cent
Schedule 14 of the Environment Act 2021 inserted a new Schedule 7A into the Town and Country Planning Act 1990. Writing while it was still a bill, zu Ermgassen and colleagues called it the most wide-ranging net outcome type policy globally. Its logic is arithmetic. Paragraph 2 defines the biodiversity gain objective as met when the biodiversity value attributable to a development exceeds the pre-development value of the onsite habitat by at least the relevant percentage, and sub-paragraph 2(3) fixes that percentage at ten. Value is whatever the statutory biodiversity metric says it is; the metric is a document the Secretary of State writes, revises and lays before Parliament, so the unit of account is administrative rather than ecological.
Three sources can supply the ten per cent: habitat on the development site itself, registered offsite gain allocated to the development, and statutory credits bought from the government. Government guidance requires them to be taken in that order and calls the sequence the biodiversity gain hierarchy. Habitat counted toward the objective has to survive, and the Act splits that requirement across two provisions. Paragraph 9 of the new schedule covers significant onsite gain: the enhancement must be maintained for at least thirty years after completion, secured by a planning condition, a planning obligation or a conservation covenant. Offsite gain gets its thirty years from section 100 of the Act, which defines a biodiversity gain site as land where enhancement works are required under a conservation covenant or planning obligation and somebody is required to maintain the enhancement for at least thirty years afterwards. Regulations may change either period, but not below thirty years. Paragraph 6 closes the obvious loophole by treating habitat cleared without permission on or after 30 January 2020 as though it were still there when the baseline is taken.
The edges have already begun to move. From 6 August 2026 the requirement does not apply at all to planning applications for developments of 0.2 hectares or less, and small developments that remain in scope may consider onsite and offsite delivery at the same time rather than exhausting onsite options first. That is a deliberate relaxation of the hierarchy for the smallest sites, announced in the guidance's own update log.
The state prices its own credits so that almost nobody buys them
Statutory credits exist under section 101 of the Environment Act 2021, and subsection (4) is the provision that explains the price list. In setting the amount payable for a credit of a given value, the Secretary of State must have regard to the need to determine an amount which does not discourage the registration of land in the biodiversity gain sites register. Defra's guidance says the same thing in plainer words: prices carry a mark-up to stop statutory credits undercutting the offsite market, are reviewed every six months to keep them high enough not to compete with it, and are explicitly not guideline prices for offsite units.
The published tiers run from 42,000 pounds per credit for low distinctiveness habitat and for medium distinctiveness heathland and shrub, grassland, individual trees, urban and cropland habitat, through 48,000 and 66,000 pounds, to 125,000 pounds for saltmarsh, coastal lagoons, seagrass, priority ponds and several native woodland types, and 650,000 pounds for lakes. Hedgerow credits are 44,000 pounds and watercourse credits 230,000 pounds. On top of that a spatial risk multiplier doubles the number of statutory credits required, so two must be bought for each biodiversity unit being compensated. None of these figures is a valuation of habitat. They are a deterrent with a receipt attached.
Section 101(8) obliges the Secretary of State to publish reports on the arrangements and subsection (9) requires each to cover a period of no more than a year. Those reports show the deterrent working. In the year to 31 March 2026 the third such report records total statutory credit income of 426,100 pounds, up from 212,920 pounds in the first financial year of the policy's operation. Defra reads the low receipts as confirmation that credits are serving their intended purpose as a last resort backstop. Over the same year, credit income funded an investment of 530,000 pounds in habitat creation and enhancement, buying 44.6 registered biodiversity units in Lincolnshire through an open market tender, described in the report as highly distinctive floodplain wetland mosaic habitat and secured under a conservation covenant for a minimum of thirty years, with Natural England incurring 76,306 pounds of administration costs and 32,714 pounds left unspent at the year end. Two years after the requirement became mandatory in February 2024, a national compensation backstop for the whole English planning system is transacting in hundreds of thousands of pounds.
New South Wales audited its own scheme and published the result
New South Wales established its Biodiversity Offsets Scheme in 2017. Landholders enter in-perpetuity biodiversity stewardship agreements that generate credits; developers whose consent carries an offset obligation either buy those credits or pay into the Biodiversity Conservation Fund and transfer the obligation to the Biodiversity Conservation Trust.
The Audit Office of New South Wales concluded that the department had not effectively designed core elements of the scheme and that implementation by the department and the trust had been limited. The market carries 1,394 types of ecosystem credit tradeable across 364 offset trading groups, plus 867 species credits, and around 86 per cent of ecosystem trading groups and 97 per cent of species credits had never been traded. Of the assessed demand, nine per cent of ecosystem credit demand could be matched to supply on the department's own credit supply list and four per cent of species credit demand could be matched. Between August 2017 and February 2022, 972 assessments indicated development affecting roughly 22,500 hectares and requiring around 340,000 ecosystem credits and 1.7 million species credits.
The behavioural finding is the one that generalises. Around 340 proponents paid into the fund over that period, worth around 90 million dollars as at 9 May 2022 in the audit's own reporting, while fewer than 27 proponents acquitted an obligation by buying and retiring credits generated under the current scheme in the market. Paying the fund is faster and more certain than finding a matching credit, so most developers did that, which converts a market obligation into a public liability discharged later, if a matching credit can be found at all. The audit records that the trust may acquit obligations with measures other than like-for-like credits and that the department had given no clear guidance on when doing so would still satisfy a no net loss standard.
What the published evidence says about whether the gains arrive
The empirical literature on no net loss is small relative to the policy's spread, and it is cautious. A 2019 review in Conservation Letters by zu Ermgassen and colleagues screened the English-language peer-reviewed literature, 15,715 articles, and found 32 that reported observed ecological outcomes from no net loss policies, covering more than 300,000 hectares of offsets. About one third of the policies and individual offsets they examined reported achieving no net loss, mostly in wetlands, and mostly using area-based outcome measures the authors describe as widely criticised. Where success was reported, the reason cited most often was a high offset multiplier, meaning a large offset area relative to the area impacted. Two of their negative findings matter more than the headline. Although roughly two thirds of the world's offsets are applied in forested ecosystems, none of the four studies covering forest habitats or species demonstrated a successful no net loss outcome. And they found no evidence at all of no net loss achieved through avoided loss offsets, the design in which an impact is compensated by protecting existing habitat somewhere else.
The same lead author then looked at England before the requirement became mandatory, assembling every assessment submitted between January 2020 and February 2021 in six councils already applying no net loss or net gain rules, a sample the authors put at around six per cent of England's annual housebuilding and other infrastructure. The aggregate habitat change proposed was a 34 per cent reduction in the area of non-urban habitat, compensated by commitments to deliver smaller areas of higher quality habitat later in the development cycle. Ninety-five per cent of the biodiversity units delivered came from habitat within or directly adjacent to the development footprint and managed by the developers, which the authors identify as a governance gap: those gains risk being unenforceable.
The voluntary market has declined to make the same promise
The International Advisory Panel on Biodiversity Credits was established by France and the United Kingdom in June 2023, and launched its framework at the sixteenth Conference of the Parties in Cali in October 2024. That framework builds on the Biodiversity Credit Alliance definition of a credit as a certificate representing a measured and evidence-based unit of positive biodiversity outcome that is durable and additional to what would otherwise have occurred. The panel lists three uses: evidence-based contributions to nature goals, local compensation under strict criteria, and insetting within a buyer's own supply chain. It states that it does not support international biodiversity offsetting, that compensation must be local to local and like for like, that biodiversity is not fungible and therefore a standardised unit is not appropriate, and that it does not support secondary markets at this stage. Its community of pilots numbers more than forty projects.
That last list is worth reading twice, because a panel convened to grow a market has ruled out the two features that made carbon trading liquid. Without a standardised unit and without resale, a biodiversity credit is closer to a grant agreement with verification attached than to a traded commodity. Which puts the weight back where the evidence puts it: on whether the habitat is actually there in thirty years, and on whether anyone with power will check. Compare that with the recurring payment contracts used in ecosystem service schemes, where money moves annually against a condition that can be inspected and withdrawn. Compensation pays once and hopes.
Sources
Every figure, date and deal name above is drawn from one of the documents below. Each was fetched and cached on the retrieval date shown.
- Environment Act 2021, Schedule 14, as enacted. Inserts Schedule 7A into the Town and Country Planning Act 1990: paragraph 2 on the biodiversity gain objective and the ten per cent relevant percentage, paragraphs 3 and 4 on the statutory biodiversity metric, paragraph 6 on habitat cleared on or after 30 January 2020, paragraph 9 on the thirty year maintenance period for significant onsite gain, and paragraph 10 defining registered offsite biodiversity gain without stating a period https://www.legislation.gov.uk/ukpga/2021/30/schedule/14/enacted Retrieved 2026-08-30
- Environment Act 2021, section 100, as enacted. The biodiversity gain site register, including subsection (2)(b), which is where the thirty year maintenance requirement for offsite gain sits, and subsection (7), which permits a different period of at least thirty years https://www.legislation.gov.uk/ukpga/2021/30/section/100/enacted Retrieved 2026-08-30
- Environment Act 2021, section 101, as enacted. Biodiversity credits, including subsection (4) requiring the price to be set so as not to discourage registration of land in the biodiversity gain sites register, subsection (8) requiring published reports, subsection (9) setting the reporting period at no more than a year, and subsection (10) setting out what a report must state https://www.legislation.gov.uk/ukpga/2021/30/section/101/enacted Retrieved 2026-08-30
- Department for Environment, Food and Rural Affairs, Statutory biodiversity credit prices. Guidance published 27 July 2023, last updated 2 June 2026. The tier table, the spatial risk multiplier, the mark-up preventing statutory credits from undercutting the offsite market, and the six-monthly price review https://www.gov.uk/guidance/statutory-biodiversity-credit-prices Retrieved 2026-08-30
- Department for Environment, Food and Rural Affairs, Understanding biodiversity net gain. The biodiversity gain hierarchy, the thirty year management obligation, the 0.2 hectare exemption from 6 August 2026, and the update log recording each change https://www.gov.uk/guidance/understanding-biodiversity-net-gain Retrieved 2026-08-30
- Department for Environment, Food and Rural Affairs, Biodiversity net gain statutory credits report: 1 April 2025 to 31 March 2026. The third report under section 101(8), giving credit income, the units bought with it, administration costs and the unspent balance https://www.gov.uk/government/publications/biodiversity-net-gain-bng-statutory-credit-reports-2025-to-2026/biodiversity-net-gain-bng-statutory-credits-report-1-april-2025-to-31-march-2026 Retrieved 2026-08-30
- United States, 33 CFR Part 332, Compensatory Mitigation for Losses of Aquatic Resources. Current text on eCFR: the objective at 332.3, the ranking of mitigation banks, in-lieu fee programs and permittee-responsible mitigation, the definitions of advance credits and the watershed approach https://www.ecfr.gov/current/title-33/chapter-II/part-332 Retrieved 2026-08-30
- Audit Office of New South Wales, Effectiveness of the Biodiversity Offsets Scheme. Performance audit of the Department of Planning and Environment and the Biodiversity Conservation Trust, with the credit counts, the untraded proportions, the supply and demand matching rates and the payments into the Biodiversity Conservation Fund https://www.audit.nsw.gov.au/our-work/reports/effectiveness-of-the-biodiversity-offsets-scheme Retrieved 2026-08-30
- zu Ermgassen, S. O. S. E., Baker, J., Griffiths, R. A., Strange, N., Struebig, M. J. and Bull, J. W. (2019), The ecological outcomes of biodiversity offsets under no net loss policies: A global review. Conservation Letters 12(6), e12664, CC BY. Abstract read from the University of Copenhagen research portal record, because Wiley refuses automated fetch https://researchprofiles.ku.dk/da/publications/d7bd7e66-4696-4ce1-8450-758c8bcd41fd Retrieved 2026-08-30
- zu Ermgassen, S. O. S. E. et al. (2021), Exploring the ecological outcomes of mandatory biodiversity net gain using evidence from early-adopter jurisdictions in England. Conservation Letters 14(6), DOI 10.1111/conl.12820, gold open access. Abstract read from the Directory of Open Access Journals article record for that DOI, because Wiley refuses automated fetch and the Kent repository copy fails certificate validation https://doaj.org/api/search/articles/doi%3A10.1111%2Fconl.12820 Retrieved 2026-08-30
- International Advisory Panel on Biodiversity Credits, Framework for high integrity biodiversity credit markets. The panel page carrying the Biodiversity Credit Alliance definition of a credit, the three permitted uses, and the positions on international offsetting, fungibility and secondary markets https://www.iapbiocredits.org/framework Retrieved 2026-08-30
- International Advisory Panel on Biodiversity Credits, Pilots. The community of practice, described on the page as over 40 pilots https://www.iapbiocredits.org/pilots Retrieved 2026-08-30
- International Advisory Panel on Biodiversity Credits, home page, describing the panel as an independent global initiative established by France and the UK in June 2023 https://www.iapbiocredits.org/ Retrieved 2026-08-30