Nitrogen Credits Commentary

Under the Habitats Regulations 2017, if a local planning authority is required to carry out a habitats “appropriate assessment” for a development, it can only grant planning permission for the development where there is no likelihood of a significant adverse effect on any European designated nature conservation site (unless certain circumstances apply). High levels of nitrates in various areas of the UK have led to concerns regarding the impact on marine ecology and, because of guidance published by Natural England, an inability on the part of house-builders to mitigate nitrate levels and achieve so called ‘nitrate neutrality’. This has led to a virtual ban on building work in those areas. This issue was initially restricted to a limited number of planning authorities, notably around the Solent, but the guidance has been extended to a larger number of areas in England.

As a result, some planning authorities have been unable to issue planning permission and housebuilders have been unable to build much needed housing, threatening to derail the government’s Levelling Up agenda and the pledge to build 300,000 homes a year.

Development may be permissible if a developer can show that a scheme is ‘nitrate neutral’ i.e. that it will not add to the current nutrient load, or may reduce it. Such mitigation could be achieved through on-site mitigation measures (such as changes to the build), off-site mitigation measures (with works undertaken by the developer off-site) or through the purchase of so called ‘Nitrate Credits’ approved by Natural England. Under these schemes developers purchase credits to offset the footprint of new homes. Such credits are then (theoretically) used to fund the creation of habitats.

Nitrate credits are generated by third party landowners utilising their land in ways which off-set nitrate – either by taking their land out of high-nitrogen uses (such as crops), or by creating new wetlands or other such areas. In order for the land to qualify and for nitrate credits to be allocated to it, the landowner will need to covenant (usually through a section 106 agreement) to keep the land in that use for a specific period of time (the Natural England guidance is 80 – 125 years). The mitigation land must be in the same water catchment area as the development which it is proposed to mitigate.

The mitigation land is then allocated credits which can be sold or auctioned to developers to offset their nitrate output. The local planning authority determining a particular planning application will need to be satisfied that the proposed mitigation scheme and the purchase of the nitrate credits by the developer mitigates the effects of the development sufficiently.

There are limits to the usefulness of nitrate credits. For example, the need for the mitigation land to be in the same water catchment area as the proposed development means that landowners with suitable land may not have a ready market to buy them. Credits may be difficult to come by in some areas, whilst there may be a surplus in others.

However, nitrate credits (similarly to carbon off-set credits and biodiversity credits) are likely to be an increasingly common way for the effects of developments to be offset and achieve nitrate neutrality. It is likely to be a more cost-effective and simplest solution for a developer than carrying out complicated off-site works or fundamentally altering their scheme.

How can we help?

Some landowners have put in place their own schemes with the support of Natural England to have nitrate credits allocated to their land.

Sharpe Pritchard’s planning and regulatory teams have been advising on this issue and can assist landowners and planning authorities in providing advice as to the impact of the Regulations on proposed development and how proposed mitigation sites can be set up and maintained. We can also draft the planning and commercial agreements necessary to set up such a scheme.

Emily Knowles is a Senior Associate, Bernadette Hillman is a Partner and Steve Gummer is a Partner at Sharpe Pritchard LLP.

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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email enquiries@sharpepritchard.co.uk