Nutrient neutrality: New measures to tackle development logjam

The Government has responded to calls from developers to reduce the nutrient neutrality burden, which has been hampering development in some areas of the country. These areas comprise the catchment areas of internationally important and protected watercourses, that have been deemed to be in an unfavourable condition as a result of nitrate and phosphate pollution.

We have explained this nutrient neutrality issue in our previous article Nutrient Neutrality: the basics | Michelmores, which should be read in conjunction with this article.

Upgrading of treatment works

A number of amendments have now been tabled to The Levelling Up and Regeneration Bill (see Levelling-up and Regeneration Bill publications - Parliamentary Bills - UK Parliament), which will see the onus to tackle nutrient neutrality problems switched from developers to the water companies. They will be required to upgrade wastewater treatment works, which discharge into the protected watercourses, to ensure that effluent is within acceptable limits (being not more than 10mg/l for nitrogen and 0.25mg/l for phosphorus). The deadline for upgrading is 1 April 2030.

It is anticipated that these upgrading works will be factored into any Habitats Regulation assessments, thereby reducing or eliminating, in time, the need for additional mitigation through the purchase of nutrient credits or other measures.

Nutrient Credits

Developers have, until now, been tackling this problem by striking deals with private landowners for land to be taken out of agricultural production, thereby creating a number of nitrate and phosphate credits ("Nutrient Credits"). These can then be ascribed to a development, so that nutrient neutrality is maintained.

The Government has made it clear that such private arrangements can continue and will exist alongside a new Nutrient Mitigation Scheme. The emphasis as with other environmental schemes is working together and not crowding out. Private schemes are likely to fulfil an important role in providing Nutrient Credits as the Nutrient Mitigation Scheme is established and thereafter, so as to ensure a competitive market-place.

Nutrient Mitigation Scheme

This new scheme will see DEFRA providing initial funding to establish wetlands and woodlands, which will lead to the creation of "Nutrient Mitigation Credits", accredited by Natural England. Developers will then be able to purchase these credits. That accreditation will presumably follow the same guidance and calculations already published by Natural England and being used to validate Nutrient Credits from private schemes.

The timetable for implementation looks, by Government standards, to be fairly rapid with the first mitigation sites in the Tees catchment area currently being negotiated. Natural England will invite applications for Nutrient Mitigation Credits from developers in the Tees catchment from March 2023.

Feasibility studies are being conducted in a further five catchments to identify the next tranche of mitigation sites and landowners will be approached from next month to invite them to offer land as potential sites for nutrient mitigation.

Options for developers

So where does this leave a developer with an urgent requirement for Nutrient Credits to progress a planning application? The answer is perhaps to continue with the private deal currently being negotiated. There is the obvious choice of waiting to see if Nutrient Mitigation Credits are cheaper but that may not be an option in urgent cases or considered too much of a risk given the economic headwinds already blowing.

It is worth noting that section 101 (4) of the Environment Act 2021 makes it clear that statutory credits for biodiversity net gain must be priced at such a level so that the registration of land in the biodiversity gain sites register is not discouraged. As this registration is the only way to create a private market for credits, the price of statutory credits will inevitably need to be higher than their private equivalent.

It remains to be seen whether Nutrient Mitigation Credits come with a similar price control mechanism. Regardless of that, however, developers are likely to benefit from the greater competition in the market, which will result from the increased availability of mitigation options, whether they be public or private in nature.