Statutory biodiversity credits and how the price is set
Credits are the last resort in the biodiversity gain hierarchy and are priced to stay there. Here is how the tiers work, what evidence a gain plan needs, and where the cost lands in the cash flow.
The statutory biodiversity credit price is set by government, published as a schedule by tier, and deliberately pitched above what off-site units cost on the open market. That is the design of the scheme rather than a flaw in it. Credits are the last resort in the biodiversity gain hierarchy, and the price is the instrument that keeps them last. Check the current schedule before budgeting, because the figures are reviewed and a number copied from an old appraisal will be wrong.
For a developer the practical question is not what a credit costs in the abstract. It is how much of your shortfall is likely to end up in the most expensive tier, and what evidence you need before anyone will let you buy.
Why statutory credits exist as a last resort
Mandatory biodiversity net gain under the Environment Act 2021 works through a condition on planning permission, with the framework in Schedule 7A to the Town and Country Planning Act 1990. Development has to deliver a ten per cent gain, and the gain has to be secured in a defined order of preference.
On-site first. Where on-site delivery cannot achieve the required gain, off-site units, either on land the developer controls or bought from a habitat bank and recorded on the statutory register of biodiversity gain sites. Only where neither route can close the gap do statutory credits come in.
That ordering is enforced through the biodiversity gain plan, which the local planning authority has to approve before development can begin. A plan that reaches for credits without showing the earlier steps were exhausted will not be approved.
Credits are sold by government, and the money funds habitat creation somewhere in England chosen by government rather than by you. So the local authority gets no local habitat from a credit purchase, which is part of why officers resist them.
How the government sets and revises the price
The price is administrative, not a market clearing figure. Government publishes a schedule of prices per credit, by tier, and revises it.
The stated intention is that statutory credit prices sit above the expected cost of equivalent off-site units, so that buying credits is never the least costly option. Treat the published price as a ceiling on what your shortfall can cost, and as a benchmark against which to judge a habitat bank quotation.
Two budgeting points follow. Price the shortfall at the current published schedule and note the date you took the figure, because a revision between appraisal and purchase is a real risk on a scheme with a long run-in. And remember that the schedule can change in either direction, so an appraisal that assumes the present figure will hold for three years is making an assumption worth stating.
Where the shortfall is large, the difference between credits and off-site units becomes one of the more substantial line items in a scheme, comparable to the infrastructure costs discussed in the article on utility connection costs in a development budget.
Tiers and habitat distinctiveness
Credits are not a single commodity. The schedule is tiered, and the tier that applies to your shortfall depends on what is being lost.
The logic follows the statutory metric. Habitats of low distinctiveness sit in the lower priced tiers; habitats of higher distinctiveness sit in the more expensive ones, because they are harder to recreate. Watercourse units and hedgerow units are dealt with separately again, consistent with the trading rules in the metric that prevent a loss in one of those modules being compensated with area habitat.
The practical consequence is that the composition of your shortfall matters more than its size. A 4 unit shortfall in modified grassland is a different proposition from a 1.5 unit shortfall in a high distinctiveness habitat.
That in turn means the baseline survey is a commercial document. A Preliminary Ecological Appraisal and the habitat condition assessment behind it set the tiers, and an error in habitat classification can move a shortfall between tiers. Get the baseline right before anyone prices anything.
Why statutory credits are priced above market units
Three reasons, and it helps to understand them when explaining the cost to a client or a funder.
First, incentive. The whole point is to push delivery on-site or into the local market, which produces habitat where the impact occurred.
Second, risk. Government takes on the obligation to create and maintain habitat for 30 years with the proceeds, and the price has to carry the cost of that commitment plus the uncertainty attached to it.
Third, administration. The scheme has to be run, monitored and reported.
None of that makes a credit purchase unreasonable where the alternative does not exist. What it does mean is that a developer who plans for credits from the outset is paying a premium for convenience, and an officer reading the gain plan will notice.
The evidence needed to show market units were sought
This is where gain plans fail, and it is entirely avoidable with a paper trail kept from the start.
Assemble and keep:
- The on-site options tested, with drawings, and the reason each was rejected. Not a sentence: a drawing and a metric run.
- A dated search of the register of biodiversity gain sites, with the search parameters recorded.
- Written enquiries to habitat banks and land agents covering the relevant area, with the replies.
- Any quotations received, with the unit types and prices offered.
- The reason each off-site option was unavailable or unsuitable, by reference to the metric trading rules rather than to price alone.
- The residual shortfall by unit type and tier, with the metric output attached.
Price on its own is a weak reason. An off-site unit that is available but more expensive than you budgeted is still available, and an authority is entitled to say so. The defensible position is that no compliant units of the required type could be secured, evidenced by the replies.
Keep the dates tight. Enquiries made 18 months before the gain plan is submitted will be treated as stale.
Payment timing against the gain plan
The sequence catches people out, so set it out plainly for the programme.
Permission is granted with the biodiversity gain condition attached. The biodiversity gain plan is then prepared and submitted to the authority for approval, and development cannot lawfully begin until the plan is approved. Evidence of any credit purchase forms part of that plan, so the purchase happens after permission and before approval of the plan, which is before you are on site.
That means the credit cost lands at a point in the cash flow where there is no revenue, and it lands as a single payment rather than a staged one. On a phased scheme, consider whether the gain plan can be prepared and approved by phase, which spreads the obligation.
Allow time as well as money. The purchase is a transaction with government, the plan then has to be determined by the authority, and neither is instantaneous. A start on site date that assumes both happen in a fortnight is optimistic.
Budgeting a shortfall honestly
The honest approach is to model the shortfall early and price it at the statutory rate, then treat any saving from off-site units as upside.
That runs against instinct, because the statutory figure is the highest number available and nobody enjoys putting it in an appraisal. But the alternative, assuming market units will be found at a favourable price, is the assumption that produces a funding gap 18 months later when the register search comes back empty for the habitat type you need.
Three habits that help. Run the metric at concept stage rather than after the layout is fixed, because a modest change to the on-site scheme frequently removes the shortfall entirely. Get the baseline surveyed in the right season, since a survey in the wrong month can misclassify habitat. And record the assumptions in the appraisal so the figure can be revisited when the schedule is revised, rather than being buried.
The Biodiversity Net Gain Assessment is one of the report types where a competent person is legally required under the Environment Act 2021 regime, so the metric and the gain plan must come from a qualified ecologist. A drafted document can structure the narrative and set out the policy position for that ecologist to work into, and nothing more. Where retrospective correction becomes necessary the costs escalate sharply, as set out in the article on the cost of retrospective development.
For anyone costing the document side of a scheme rather than the credits themselves, the pricing page sets out the per report and Professional options.
This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
How much does a statutory biodiversity credit cost?
Government publishes a schedule of prices per credit by tier, and revises it, so check the current schedule rather than reusing a figure from an earlier appraisal. Prices are deliberately set above the expected cost of equivalent off-site units, which makes the published figure a useful ceiling for pricing a shortfall.
Why are credits more expensive than off-site units?
Because they are meant to be. The price keeps credits as the last resort in the gain hierarchy, and it also carries the cost and uncertainty of government creating and maintaining habitat for 30 years with the proceeds, plus the administration of the scheme itself.
What determines which tier applies?
The distinctiveness and type of habitat being lost, following the statutory metric. Lower distinctiveness habitats sit in lower priced tiers and higher distinctiveness habitats in more expensive ones, with watercourse and hedgerow units treated separately. So the composition of a shortfall matters more than its size.
What evidence shows that off-site units were sought?
A dated search of the register of biodiversity gain sites with the parameters recorded, written enquiries to habitat banks and land agents with their replies, the quotations received, and the reason each option was unsuitable by reference to the metric trading rules. Price alone is a weak reason.
When do I have to pay for credits?
After permission is granted and before the local planning authority approves the biodiversity gain plan, because evidence of purchase forms part of that plan and development cannot begin until it is approved. The cost therefore lands as a single payment at a point with no revenue against it.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.