Research and analysis

RPC opinion: impact of biodiversity gain regulations in England

Published 31 July 2026

Lead department: Department for Environment, Food and Rural Affairs

Summary of proposal: to exempt development sites below 0.2 hectares from biodiversity net gain (BNG) requirements

Submission type: impact assessment –11 June 2026

Legislation type: secondary legislation

RPC reference: RPC-DEFRA-26175-IA(1)

Date of issue: 22 July 2026

RPC opinion rating

Not fit for purpose:

• the impact assessment (IA) outlines a rationale for intervention, however fails to make an argument for government intervention
• the IA does not assess why the balance between environmental and business impacts has changed since the IA supporting the initial biodiversity net gains (BNG) proposal
• the IA provides an insufficient appraisal of the longlist options, failing to justify why options have been advanced to the shortlist using a consistent and systematic process
• the IA includes an adequate small and micro business assessment
• the IA provides a well-quantified appraisal, however fails to adequately take into account the estimated impacts, or relative merits of shortlist options to select a preferred option
• the scorecard provides a reasonable summary of expected impacts of the preferred option, though could have included detail on the components of key figures
• the IA includes a weak monitoring and evaluation plan

RPC opinion summary

Rationale: Red

The IA outlines the rationale for intervention, based on disproportionate BNG requirements for small sites. The IA however fails to build upon this to form an argument for government intervention, nor does it assess why the apparent balance between environmental and business impacts has shifted since the previous IA. The IA does not make reference to any review or evaluation exercise undertaken on the original policy to inform this intervention.

Identification of options: Red

The assessment considers a range of longlist options, however provides an insufficient appraisal of these options, failing to justify why options have been advanced to the shortlist using a consistent and systematic process. The department considers regulatory alternatives. The IA includes an adequate small and micro business assessment.

Justification for preferred way forward: Red

The IA provides a well-quantified appraisal of the shortlist options against the counterfactual and includes sensitivity analysis. However, the preferred option has a lower net present value (NPV) than another shortlisted option, relying only on a very brief narrative comparison to support this decision. This fails to adequately take into account the estimated impacts or sufficiently consider relative merits of shortlist options in a qualitative discussion.

Regulatory scorecard: Satisfactory

The scorecard provides a reasonable summary of expected impacts of the preferred option, highlighting the possible effects on overall welfare and businesses. The scorecard could have included detail on the components of key figures such as the NPV and equivalent annual net direct cost to business (EANDCB). This assessment could be improved by strengthening the assessment of the impact on the business environment.

Monitoring and evaluation: Weak

The assessment includes a weak monitoring and evaluation plan, which sets out how the department intends to use Natural England’s long-term review of BNG to assess the effects of this intervention. The plan would benefit from setting out clearer timelines, objectives and evaluation questions.

Summary of proposal

The Environment Act 2021 introduced a mandatory Biodiversity Net Gain (BNG) requirement in England for most new developments, requiring them to deliver a 10% increase in biodiversity as a condition of planning permission. BNG has been mandatory for major developments from February 2024, and for minor development (small sites) from April 2024.

One of the initial aims of BNG was to provide consistency and certainty for environmental requirements across planning. The Department for Environment, Food and Rural Affairs (Defra) suggests that some smaller developments are finding the operation of BNG is not as effective as could be, and the fixed costs associated with BNG are relatively high in some cases when compared to the impact on nature. The department is therefore intending to streamline the existing mandatory BNG framework.

The department proposes the following 6 options in their impact assessment:

• option 1: do nothing
• option 2: non-regulatory options
• option 3a: exemption for sites below 0.1 hectares
• option 3b (preferred): exemption for sites below 0.2 hectares
• option 3c: exemption for sites below 0.5 hectares
• option 4: exempt all minor developments

Rationale

Problem under consideration

The IA has set out the problem under consideration as the requirements of mandatory BNG being disproportionate for smaller development sites. This is considered across multiple areas, including the pressure being put on Local Planning Authorities (LPAs), disproportionate costs being imposed on SME developers, and the role they play in ensuring a consistent level of housebuilding. As a result, current BNG regulations are resulting in unnecessary burdens on both LPAs and developers, making it more difficult to get small developments approved despite their minimal impact on biodiversity, as well as making it more difficult for larger developments to be approved due to a backlog.

The assessment does well to use evidence to support the existence of this problem, such as a housebuilding report from the Competition and Markets Authority (CMA), which argues that barriers to entry are restricting the role of SME developers. The IA would be improved by discussing the limitations of this report however, which focusses on problems for SMEs, but makes no mention on the specifics of BNG requirements.

The IA is also able to show evidence of delays, with only 41% of minor planning applications being decided within the statutory time. The IA however should have used planning application and metric data to provide specific evidence to support the claim that small sites make up a large proportion of applications. The department also could have included responses to the government’s consultation on biodiversity net gain conducted in May 2025. The problem under consideration would also be improved by focussing on specific issues that have arisen since the introduction of ‘disproportionate’ BNG requirements.

Argument for intervention

The IA does not make a specific argument for government intervention, that builds upon the problem under consideration. The IA proposes to make changes to measures introduced by the Environment Act 2021, however does not discuss any reviews or evaluations of the measures and their impacts that may have occurred.

This means that no consideration has been given to the fact that the government previously believed that BNG was necessary for environmental benefits on small sites, but now no longer does so.

The IA acknowledges the environmental loss offsets the saving to business, however it is unclear why this balance between social and business impacts has changed. This is significant given the department’s own estimates for an exemption for sites up to 0.2 hectares would result in £19.14 million in benefits, versus £119.39 million of forgone environmental benefits.

The department also could have expanded upon an argument for intervention by including descriptions of the potential market or regulatory failures that may be occurring, or may result from a failure to intervene. The IA has included an economic rationale for intervention, however this should have been strengthened to support the justification for government intervention.

Objectives and theory of change

The assessment has set out five policy objectives. These are: improving the proportionality of environmental regulation, supporting SME builders, strengthening LPA capacity, maintaining biodiversity gains and ensuring the long-term stability of nature markets.

The department has provided a useful description of the reasoning behind each objective, however they would benefit from being linked them directly to the SMART framework, showing how they are specific, measurable, achievable, realistic and time-limited. The IA would have been improved by demonstrating the department’s theory of change, setting out how the proposed intervention would achieve the policy objectives. This could have been achieved using a logic model.

Identification of options

Identification of the ‘longlist’ of options

The assessment considers 6 potential interventions to form an initial longlist. These are Option 1, a counterfactual ‘do nothing’ option, Option 2, non-regulatory mitigations, Options 3a, 3b and 3c, area-based exemptions for sites below 0.1, 0.2 or 0.5 hectares, and Option 4, an exemption for all minor developments. Options 3a, 3b and 3c also include exemptions for temporary planning permissions, removing small scale self and custom build exemptions, and amending the BNG hierarchy for minor developments.

The longlist options have each been summarised qualitatively and assessed against the policy objectives, with options being progressed or rejected according to how they perform against these objectives.

The IA would have benefitted by including detail on the process behind developing the longlist of options, such as how research and other evidence have been used to form these policies.

Previous consultations and direct engagement with the industry could also have provided useful evidence. This could have been used to discuss a site-area threshold is the right instrument compared to a habitat-value or habitat-area threshold, for example.

This could have been used to exempt low value sites regardless of size and catch high value small sites regardless of area, given biodiversity value presumably depends on habitat type and condition, rather than site size.

The longlist of options would benefit from using the Green Book’s Options Framework Filter (OFF), which could help present the longlist in greater detail whilst retaining a clear and concise structure.

The IA would also benefit from clearly labelling the initial set of options as its longlist, and the options brought forward to the cost-benefit analysis as the shortlist.

Justification for the short-listed options

The assessment discounts one of the proposed longlist interventions, with the remaining five progressing to the shortlist. These are Options 1, 3a, 3b, 3c and 4, which include the size-based exemptions and exemption for all minor developments. These have been considered alongside the ‘do nothing’ baseline option.

The IA summarises the longlist options, providing a brief comment on why some options are unable to solve the problems under consideration. The Do-Nothing option fails as it does not alter the regulatory burden, continuing to leave disproportionate per-dwelling costs for small sites.

Whilst a non-regulatory option could help applicants navigate the BNG process more efficiently, this option similarly does not remove the underlying fixed-cost structure, meaning it fails to address the core problems identified. Option 4 also does not meet the department’s policy goals, as it would have a too severe ecological impact, running counter to the original aims of the Environment Act.

Despite these issues, only Option 2 does not progress to the shortlist appraisal. The wider regulatory changes under Option 3 are also discussed as part of this longlist consideration, with objectives and a brief rationale justifying the inclusion of each.

The longlisting process would have benefitted from considering these additional changes separately before potentially combining them with an area based exemption as a result of an assessment using Critical Success Factors (CSFs).

The IA should have provided a clearer explanation of the process used to advance options to the shortlist, as no consistent criteria appears to have been used to select options.

The department briefly considers initial options against the policy objectives, however should have done more to explain the criteria behind whether options have or have not progressed to the cost-benefit analysis. This could have included a more detailed assessment against the policy objectives with a justification for why options have or have not advanced or an assessment against a set of CSFs.

Consideration of alternatives to regulation

The IA has considered non-regulatory changes as an alternative option to regulation in its longlist. The department suggests these could include improved guidance for LPAs and developers or training to assist with completing biodiversity gain plans. The IA would benefit from having a clearer set of non-regulatory alternative options to match the more defined regulatory options that make up the rest of the longlist.

The assessment has discounted these possible non-regulatory alternatives at the longlist stage. The IA provides a reasonable justification for discounting this option at the longlist stage, setting out that it has limited potential to reduce administrative pressures or reduce costs for SMEs, and so cannot solve the core proportionality problem identified. This justification is acceptable, however the IA does not provide a consistent explanation between longlist options to support advancing some options and not others.

Small and micro business assessment (SaMBA) and medium-sized business (MSB) assessment

The assessment includes a sufficient SaMBA.

The department estimates that a high proportion of BNG eligible applications are made by very small sites, however should do more to define what the department considers a small site. This could have included considering the number of sites at varying sizes, costs by size of site and how site size relates to the size of business.

As discussed in the Rationale, the SaMBA also could have been used to demonstrate that small sites make up a large proportion of BNG eligible applications using planning application and metric data. The preferred option exempts sites below 0.2 hectares, however does not provide an exemption for all small and micro businesses.

The IA briefly argues in favour of only a targeted exemption, as ecological impact is determined by the size of site rather than the size of the business, however it could do more to provide a justified reasoning for not exempting small and micro businesses.

As the proposed measures are deregulatory, the Department expects a positive impact on the small and micro businesses that would fall under the proposed exemption. This is because they would likely result in fewer compliance costs, reduce planning timelines and improved certainty.

The IA does not include a monetised estimate of the impact on small and micro businesses. The IA would benefit from doing more to justify the Department’s position that mitigations for small and micro businesses unaffected by the new exemption are not necessary.

Justification for preferred way forward

Appraisal of the shortlist options

The assessment includes a relatively brief qualitative discussion of the shortlisted options. This considers options 1, 3a, 3b, 3c and 4 separately, with a discussion considering how options would work and what the risks are. A full cost-benefit analysis setting out the monetised costs and benefits has been provided for each of the shortlist options. This assessment results in the selection of Option 3b, an exemption for sites below 0.2 hectares, as the preferred way forward.

The assessment discusses how the smaller exemption included in Option 3a would still exempt a sizeable number of applications and only result in a small loss of biodiversity ‘units’. Option 3b would go further and exempt around half of BNG eligible applications, but also forgo a moderate level of biodiversity units.

The IA contrasts these with the 0.5 hectare exemption in Option 3c, which would exempt a large majority of BNG developments, however the ecological consequences would be ‘significant’, undermining the credibility of the BNG.

Option 4 goes even further in this regard, exempting almost all BNG applications to significantly reduce administrative pressure, but with such a large environmental impact the original aims of the Environment Act would be undermined.

The IA has not used this qualitative discussion to select a preferred option, instead it has considered the monetised impacts of the shortlist options. The discussion would however be improved by more consideration of the potential advantages and risks of options 3a and 3b.

The IA includes a monetised analysis of the four options against the baseline scenario. The department has done this by estimating the scale of planning applications exempted for each option, alongside the number of biodiversity units forgone. For example, Option 3b would exempt 51% of application, and forgo 12% of biodiversity units, whereas Option 4 would exempt 88% of applications, but forgo 57% of units.

The IA should provide a more detailed explanation on how these figures were estimated. These assumptions have then been used to estimate a set of benefits including compliance cost savings for landowners and developers, administrative cost savings for developers and administrative cost savings for LPAs, contrasted with the costs of environmental benefits forgone by not meeting BNG requirements.

The IA also estimates a small familiarisation cost as stakeholders transition to the new rules. The department should justify why this cost is relatively small given the scale of apparent compliance and admin reduction for stakeholders the change is estimated to deliver.

The IA does well to summarise many of the underlying assumptions and data sources used to underpin the analysis, with the department using a ‘Willingness To Pay’ approach to estimate the environmental costs of the policy. The cost-benefit analysis usefully includes an evaluation of the effectiveness of the WTP method, acknowledging its limitations but justifying why its inclusion is appropriate in this case.

The department has used this analysis to estimate a Net Present Value of -£33m for Option 3a, -£100m for Option 3b, -£260m for Option 3c and -£554m for Option 4 (2026 prices, 2026 present value year). The department should address the apparent inconsistency between these figures and those presented on the summary pages. The IA should also justify the change from a 10-year appraisal period used in previous BNG impact assessments to a 30-year period.

Selection of the preferred option

As a result of this analysis, the department has selected Option 3b as the preferred option, despite having a lower NPV than Option 3a. The department has provided a brief justification for this, arguing 3b provides the strongest balance, with meaningful compliance costs reductions and only modest environmental impacts.

This justification should have been significantly strengthened, using and considering the scale of impacts estimated in the cost-benefit analysis to contrast options. This should have provided some context to the scale of compliance cost reductions the department was targeting with the policy, and the scale of environmental impact that was deemed tolerable. As presented, the cost-benefit analysis and justification for the preferred option sit separately, with one seemingly having very little impact on the other.

Regulatory scorecard

Part A

The scorecard has been used to provide an indication of the impact of the preferred options, with a negative impact expected on overall welfare. This includes the NPV estimates considered previously. This negative impact is based on the reductions in biodiversity outcomes being insufficiently offset by cost savings for developers.

The scorecard would be improved by providing a brief summary of the cost components for key figures such as the NPV. The department estimates the Equivalent Annualised Net Direct Cost to Business (EANDCB) as between -£29.7m (2026 prices, 2026 pv base), over a 30-year appraisal period. This is based on compliance and administrative cost savings to developers. The scorecard would be improved by the inclusion of more detail on the components of the EANDCB figure.

The department briefly considers the non monetised impacts on business, suggesting that the measures will lead to a potential for improved cash flow, but reduced certainty for nature markets. The department expects a negative impact on households, due to reduced biodiversity enhancements.

The IA only considers indirect impacts on households and so has not estimated an Equivalent Annualised Net Direct Cost to Households (EANDCH). The department does consider some non-monetised impacts on households, such potential improvements in housing availability and affordability, as well as potentially reduced local environment quality. This statement is contradictory to the previous assertion that the impact on additional housing is likely to be minimal.

The department considers the distributional effects of the scheme, discussing how the changes will likely be of more benefit to SME housebuilders and developers rather than larger ones. The impacts are also expected to be greater in areas with higher levels of small site development, in mostly urban and peri-urban areas.

Part B

The assessment considers the potential impact on the business environment for the proposed intervention, arguing the effect will be uncertain as there will be limited impacts in the aggregate. As the policy reduces regulatory burdens for businesses and is expected to have a positive business impact, the department should do more to justify this claim. The intervention is not expected to have a material impact on international considerations.

The department has summarised how the measures may impact environmental objectives, with the clear expectation they will work against them. Exempting small developments from BNG requirements reduces the potential for biodiversity enhancements that would have otherwise occurred, reducing natural capital. The department has also usefully considered the decarbonisation impacts of the intervention.

Monitoring and evaluation

The assessment includes a weak plan for monitoring and evaluation. The department has outlined how it plans to review the policy through the existing evaluation exercises undertaken by Natural England, who have committed to reviewing BNG is the long-term.

This has been briefly summarised, however the IA should include far more detail on the intended evaluation exercises set to take place from 2026 onwards, rather than relying on the previous 2023-2025 plan. This should include the department’s intended review timelines, and whether the department itself is intended on conducting a post-implementation review.

The department usefully provides a list of possible data sources and evaluates the possible limitations of these sources. This is to support monitoring of key areas such as habitat creation and enhancement as part of biodiversity outcomes, as well as planning impacts.

The monitoring and evaluation plan would be improved by setting out clearer objectives and evaluation questions. The assessment does well to consider the potential for unintended consequences and that they may require further policy adjustment, however could have assessed the possible effect of external factors on the proposed intervention.