By Elisabeth Van Meer
The United Kingdom’s ecosystems are disappearing at a rate unmatched in modern history. Habitats are shrinking and one in six species are at risk of extinction. Scientists warn that by 2050, further damage to the ecosystem could result in as much as a 12% drop in the UK’s GDP. While the British government has committed to protecting 30% of land areas by 2030, this isn’t without cost, leaving a £5.6 billion annual finance gap in biodiversity funding. To close this gap, policymakers aimed to mobilise private financing to cover the biodiversity costs and, under the 2021 Environment Act, introduced a mechanism implemented in 2024, called Biodiversity Net Gains (BNG) requiring developers to achieve at least a 10% net increase in biodiversity. Can ecosystems be commodified without compromising their integrity? Relying on the same market forces that fueled biodiversity decline to now spearhead its recovery is either a bold innovative tool for conservation or is a dangerous gamble with the UK’s already fragile ecosystem, and requires careful examination.
To meet the biodiversity target, developers can improve habitats onsite, and if those gains are insufficient, developers can improve habitat off-site, or purchase biodiversity credits, which are measured units of habitat restorations that can be purchased from landowners who commit to restoring habitats. When developers buy biodiversity credits, they are essentially buying units of nature. These are quantified with the Defra Biodiversity Metric, calculating ecological value based on habitat type, area, distinctiveness and condition. In theory, this creates financial incentives for landowners to restore habitats while holding developers accountable for environmental impact. However, this system relies on the assumption that biodiversity is fungible, meaning that the restoration of one habitat can compensate for the destruction of another. According to guidance from the International Advisory Panel on Biodiversity Credits, this is not the case, as biodiversity is inherently local and culturally-embedded. Treating ecosystems as interchangeable assets is inherently flawed. Added to this is the challenge of measurement. Oxford ecologists found that schemes aiming to define a “unit of nature” often rely on oversimplified metrics, either aggregating indicators into a single numerical value or using binary assessments of whether an ecosystem is healthy or not. By doing so, their methods can fail to capture ecological function, species-specific changes or cultural value.
Even when well-designed, ecological restoration takes time and it is widely understood that many ecosystems will require decades, sometimes centuries, before full restoration. Yet, landowners are currently required to maintain BNG credits for 30 years. This seems like a serious commitment, however, it is often insufficient for lasting restoration. Coupled with these problems of commitment, there are also serious concerns about the current enforcement of BNG. There is no national monitoring system in place to track BNG’s long-term success. Instead, responsibility falls to local authorities, many of which lack the resources or expertise to evaluate ecological outcomes. Despite the legal obligation to deliver net gains, there is also no national database tracking outcomes and Defra has no mechanism to ensure income from biodiversity credit sales is reinvested into conservation. This leaves room for phantom gains that exist only on paper, not in soil or species count.
We spoke with Frédéric Hache, founder of Green Finance Observatory, who explained that involving markets in environmental policy is a “failure by design”. BNG embeds profit motives into conservation, placing nature at the mercy of volatility of downturns, speculation and shifting investor priorities, instead of long-term planning. By making conservation dependent on market conditions rather than ecological goals, conservation policies will have to be consistently profitable to endure, therefore making them unreliable when compared to legislation-based protections. Hache suggests that even if offsetting “worked 100% of the time”, it only “displaces environmental harm. It does not address the root causes”, such as habitat fragmentation, industrial agriculture, and fossil fuel expansion. Ultimately, “offsetting”, he says, “serves to legitimize environmental harm”. He also expresses his concern that BNG is tied by the government to its ambition of building 1.5 million new homes. Policies like these risk making biodiversity a by-product of development. Addressing housing issues through more obvious solutions, like bringing the UK’s 700,000 unoccupied homes back into use, would reduce pressures for new construction and avoid subordinating biodiversity to growth targets.
BNG is not the first policy of its kind. Market-based conservation originated in the United States with wetland mitigation banking in the 1970s, followed by similar schemes in Brazil, Australia, and the EU. Each scheme documented systemic failures, including scientific and technical complexities, flawed metrics, ecological inequivalence, governance shortcomings and implementation gaps, failing to achieve genuine restoration.
Given the minimal evidence for the viability of biodiversity markets as a primary conservation tool and the widespread criticism of their effectiveness, it’s tempting to question why such a model would appeal to any government. The harsh reality might lie in the prioritisation of political optics above environmental action. By shifting responsibility from the state to financial markets and landowners, these schemes allow governments to appear proactive on environmental issues without needing to engage in the electorally unpopular work of regulating major private sector actors. Market-based approaches align with neoliberal ideologies and business interests, attracting little resistance from party funders. By presenting conservation as a technical issue that can be solved without fundamentally changing the economic system that drives biodiversity loss, the illusion of progress is created. In essence, the UK is wasting critical time and stalling meaningful public policy reform by relying on biodiversity markets.
There are more effective, and realistic, alternatives. One logical solution is to address the problem at its source. Currently, the UK spends billions annually on subsidies that undermine biodiversity, particularly in fossil fields, agriculture, and infrastructure. Redirecting just a portion of these funds to ecological conservation could close the biodiversity funding gap more effectively than speculative private finance. This, combined with strong legislation that curbs destruction, and ecologically informed land-use planning are proven tools for protecting biodiversity. Additionally, Frederiche Hache suggests that if the UK government intends to redirect private capital, the “simplest, cheapest and fastest way” would be to implement tax incentives or favourable prudential treatments.
BNG is ambitious, and aligning development with environmental responsibility is incredibly important. However, despite being politically expedient, the current evidence available suggests BNG and biodiversity credits cannot substitute for direct, public, and systemic action. The time for incrementalism is over. If the UK government is serious about meeting its 2030 targets, it cannot rely on BNG and must abandon the illusion of green markets. Biodiversity is not for sale and its conservation cannot be reduced to market optimism. The stakes of maintaining and restoring the UK’s rich biodiversity demands a sober, evidence-based approach.
The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.
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