A landowner's guide to nutrient neutrality

If high concentrations of nutrients (e.g. nitrogen and phosphorous), leach into watercourses, this can cause excessive algae to grow, which depletes oxygen in the water and damages aquatic life. Causes of nutrient pollution can include storm water run-off, discharge from industry, and agricultural run-off.

Taking steps to stop nutrient pollution from developments negatively impacting protected watercourses. This can include measures taken ‘on-site’ to directly prevent nutrient pollution from being generated for example:

• Installing a local sewage treatment plant.
• Setting part of the development aside for natural habitat development.

It can also be achieved ‘off-site’ by taking steps in the same protected area to reduce nutrients from other sources, for example:

• Purchasing farmland upstream from a proposed development and turning this into a wildlife area.
• Purchasing nutrient credits via a nutrient trading scheme which may be operated by a private landowner or the local authority.

Prior to development in protected areas, developers have to identify the level of mitigation required to ‘cancel out’ the nutrient pollution of a specific project (i.e. making it nutrient neutral). This is calculated as the number of nutrient credits required to offset development. A credit accounts for 1kg of total nitrogen or 1kg of total phosphate.

This can be achieved on or off-site or by purchasing statutory credits from the Government (through the Nutrient Mitigation Scheme referred to below). Landowners can provide a solution for developers looking for mitigation solutions by selling them nitrogen or phosphate credits where their land is located in the same catchment area as the proposed development.

A scheme set up by the Government in 2022 and led by Natural England (who also works with the Departments for Environmental, Food & Rural Affairs and Levelling Up, Housing, and Communities) intended to help facilitate the delivery of new homes while promoting access to green space and promoting nature recovery.

The scheme was implemented to enable developers to offset nutrient pollution by way of purchasing nutrient mitigation credits to discharge their obligations under the CHSR 2017. It is an alternative to developers undertaking nutrient mitigation at a development site or purchasing local ‘nutrient credits’.

Nutrient Mitigation Actions: A landowner can provide nutrient credits by changing the use of their land to reduce its output of nutrients. This can be achieved through a variety of means so long as an action meets Natural England’s nutrient mitigation requirements. For example, actions could include:

• Creating new wetlands – these can have two advantages for landowners, (1) they do not necessarily preclude agricultural operations on the rest of a landholding and (2) this would likely also generate biodiversity units that can be ‘stacked’ on top of nutrient credits and sold separately to developers.
• Septic tank upgrades.
• Stopping or adapting activities on land – which could include stopping or adapting farming practices that give rise to substantial nutrient impacts, such as no longer using a piece of land to intensively farm pigs (possibly using it for arable farming moving forward) or changing the use of land from arable or grazing into woodland.

The nutrient offset market is still emerging. Landowners need to keep in mind that land used to provide nutrient credits will be tied up indefinitely. Natural England’s current guidance makes clear that land used for nutrient credits must be tied up for that purpose for at least 80 to 125 years. It is thought that nutrient mitigation land actions that create more proactive interventions may be worth more.

Nutrient credits available for purchase from Natural England are currently priced at £2,300 per credit.

In some local catchments offering their schemes, nitrate credits are priced at around £3,000 plus VAT per credit, and phosphate credits at around £50,000 plus VAT per credit.

Independently, landowners may enter into a bespoke agreement under section 106 of the Town and Country Planning Act 1990 (a section 106 Agreement) or a conservation covenant with a local authority and/or developer as part of a nutrient credit purchase agreement. The agreement would ensure that their land delivering the nutrient mitigation is tied up indefinitely for that purpose (a minimum of 80 to 125 years but longer if the lifetime of the development continues). It will likely need to cover how the proposed habitat will be created and how it will be managed and monitored in the future.

Landowners may also enter into an arrangement with a habitat bank operator. The operator leases a landowner’s land and pays them a fixed fee regularly. The operators will act as a broker between a landowner and the buyer of the credits. The operator will arrange the legal agreement and deal with registering the site. Landowners will need an agreement between them and the operator that covers details like who will be responsible for which activities, when, and how they will receive payment.

The short answer is yes. However, it can be quite complex to work out which schemes can be stacked on top of each other or run alongside each other on the same land. The main principle is that a landowner cannot be paid for delivering the same environmental goods or services twice under two different schemes.

Pre-election the Government said it is:

• Investing £200 million in grants for improved slurry storage infrastructure and equipment over the agricultural transition period.
• Committing £25 million to a new nutrient management theme within the Farming Innovation Programme, to help farmers manage plant and soil nutrients.
• Consulting on modernising fertiliser product standards to support increased use of organic and recycled nutrients.
• Introducing payment premiums into environmental land management schemes in 2024. This is intended to accelerate the uptake of certain high priority options, including those that provide benefits for water quality.
• Continuing to conduct at least 4,000 risk-based inspections on farms each year – this is intended to ensure that slurry and other pollutants are being handled in a way that minimises pollution of the water environment.
• Consulting on mandating Sustainable Drainage Solutions for relevant new developments, subject to a threshold. This is intended to reduce urban run-off and so reduce pressure on storm overflows as well as flood risk.

Additionally, Defra launched an additional round of the Natural Environment Investment Readiness Fund, which closed on 16 February 2024, to help farmers address barriers to accessing private investment to help nature’s recovery – including through nutrient mitigation projects.

There are likely to be further incentives and policy changes in 2025 following the general election.

The need to achieve nutrient neutrality when undertaking development in certain areas is a positive opportunity for landowners in those catchments. The market is still developing and appears to have real potential.