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Biodiversity Net Gain: Financial & Economic Appraisal for Major Infrastructure Projects - NE0146

Biodiversity net gain (BNG) delivers measurable improvements for biodiversity by creating or enhancing habitats in association with development. BNG is fast gaining traction at policy, planning and industry level, and the government’s 25 Year Environment Plan (25YEP) sets out the commitment to embed an environmental net gain principle for development including housing and infrastructure. In order to support the 25YEP net gain objective, there is a need to explore suitable approaches to BNG for infrastructure and to identify costs and benefits.

Many major infrastructure providers have existing commitments to achieve a biodiversity net gain outcome for some or all aspects of their activities including Network Rail and Highways England. However, unlike residential developments there is currently little or no nationally available data on the financial, social and environmental costs and benefits that any future biodiversity net gain requirement4 would entail in relation to major infrastructure projects. In particular, there is little evidence about whether there are situations and scenarios where achieving a biodiversity net gain would affect project finances. On one hand, achieving BNG is likely to require varying levels of financial input for mitigation activities and habitat creation. On the other hand a BNG requirement may provide clearer and more consistent expectations between developers and decision makers; speeding delivery and decisions, and reducing the costs associated with protracted negotiations for biodiversity mitigation. BNG would also deliver social and economic benefits through ecosystem service provision.

Developing a robust evidence base on the potential costs and benefits relating to a range of possible future biodiversity net gain scenarios (in terms of % net gain requirements) for major infrastructure projects would help inform future policy and other approaches to this sector.

Further, the project is interested in assessing the extent to which biodiversity valuation and the benefits of BNG are appropriately factored into project appraisals. Understanding this may frame potential future policy directions and the development of future appraisal guidance.

The over-arching aims of the project are to:

i. Examine the effect of BNG on total project expenditure (e.g. capital, revenue, whole life costs) as a constituent part of the Financial Case for major infrastructure projects as defined by HM Treasury Guide to Developing the Project Business Case5. This will be based around an analysis of the financial impacts and benefits arising from the application of mandatory net gain policy to major infrastructure for a range of development scenarios.

ii. Examine the effect of BNG on the Economic Case for major infrastructure projects, as defined by the HM Treasury Guide to Developing the Project Business Case. This will include an assessment on the effect of BNG on project benefit-cost ratios, by capturing the wider social and environmental benefits of net gain and any additional costs.

iii. Examine the extent to which project business cases incorporate biodiversity valuation, and which valuation methods are used to do so. The project is interested in highlighting and discussing case studies which demonstrate good practice in biodiversity valuation, and making recommendations for further research or guidance as appropriate.

The project will be split into three work packages (WP) reflecting each aim outlined above.
WP1. Project Expenditure - Net Gain scenarios
WP2. Economic Case
WP3. Biodiversity Valuation

The project was part funded between Defra, Department for Transport and Natural England, with DfT providing £30,000 and NE contributing £5000 towards the cost of the project. The rest of the cost was borne by Defra.
Project Documents
• FRP - Final Report : Final Report WSP Infrastructure   (3610k)
Time-Scale and Cost
From: 2019

To: 2020

Cost: £76,821
Contractor / Funded Organisations
W S P Ltd (WSP)
Environmental policy              
Natural Environment              
Natural Environment - Ecosystem services