UK: Nutrient neutrality in a nutshell

Why is there a problem?

Agriculture, through fertiliser and animal waste discharging into watercourses, and wastewater treatment works are the primary causes of water pollution in England. They result in excess nitrates and/or phosphates in our watercourses, causing algal blooms which in turn deplete the oxygen levels in the water, and harm animals and plants.

Is this a problem everywhere?

No – it only affects certain areas. Since 2019, Natural England has identified 74 local planning authorities (LPAs), across 27 river catchments, which have watercourses that are in an unfavourable condition within their areas. These LPAs must consider the effect that any proposed development will have on the pollution levels in these watercourses.

Why is this relevant to the planning process?

The Conservation of Habitats and Species Regulations 2017 require LPAs to assess the impact of proposed developments on certain protected sites, such as special areas of conservation and special protection areas. This assessment involves a multi-stage approach.

At the first stage, LPAs should only grant consent for plans and projects that are not likely to have a significant effect on a protected site (either alone or in combination with other plans and projects). A plan/project is considered likely to have significant effects if such effects cannot be definitively ruled out.

Where plans and projects are not screened out at the first stage, LPAs must undertake an “appropriate assessment” to identify whether the project or plan (again either alone or in combination) will have an adverse effect on the integrity of a protected site in view of conservation objectives. Consequently, Natural England has advised that planning permission should not be granted by any of the 74 LPAs it has identified unless the relevant LPA is satisfied beyond reasonable scientific doubt that the development causes no adverse water quality effects – ie the development is nutrient-neutral. However, meeting these requirements may be achievable only with mitigation.

What is nutrient neutrality?

A development is nutrient-neutral if it causes no net harm to the protected site. A “nutrient budget” is calculated for any development that will increase the population served by a wastewater system – this means that in many instances commercial development will be exempted from the nutrient neutrality requirement. On-site or off-site mitigation will then need to be provided for the duration of the development’s impact on the watercourse (usually in perpetuity) to offset this budget and demonstrate that no net harm is caused.

Why is this impacting new housing developments?

Construction sites create extra run-off compared with an undeveloped site, and new housing schemes will bring more people to an area, resulting in more wastewater and sewage, causing nutrient pollution. The government accepts that housing schemes are only a small part of the problem, but Natural England has said developers must still ensure that a development is nutrient-neutral in order for planning permission to be granted.

However, providing mitigation (for example by creating new wetlands and woodlands, retrofitting sustainable drainage systems, leaving arable land fallow or creating buffer zones along watercourses) is often impractical and unviable. There are not enough mitigation schemes available for developers to invest in, and while some LPAs (such as those in the Solent area) have created their own nitrate credit system – where they provide mitigation in exchange for developers purchasing credits – demand often outstrips supply.

Further, many commentators have expressed concerns that Natural England’s methodology for calculating the “nutrient budget” overestimates population projections, which means that developers have to provide more mitigation than should be required.

The result of this is that, as of March 2023, the Home Builders Federation (HBF) has estimated that the delivery of 150,000 homes has been delayed or cancelled as a result of the nutrient issue.

Does the issue go away once I have planning permission?

No. In CG Fry and Son Ltd v Secretary of State for Levelling Up Housing and Communities and another [2023] EWHC 1622 (Admin), the High Court recently confirmed (although this is being appealed to the Supreme Court) that an appropriate habitats regulations assessment must be undertaken before each consent for a project is granted, including reserved matters approvals and discharges of conditions – and the assessment must consider the implications of the whole project, not just the part to which the consent relates.

A developer may have been granted planning permission by an LPA before that LPA was caught by Natural England’s nutrient neutrality requirements. However, in light of this decision, if the developer has not obtained all of its post-permission approvals for the development, it may now have to undertake an appropriate assessment and provide nutrient mitigation.

This will inevitably have cost and timing implications. However, given the limited mitigation available, a scheme that was progressing may also now have to pause while a mitigation solution is found. The HBF estimates that this inertia is currently holding up the construction of 44,000 homes.

What is the government doing about this?

Natural England has established a nutrient mitigation scheme whereby it will invest millions of pounds in various mitigation projects and recover the cost of this from developers, which can purchase nitrate credits from the scheme in order to discharge their own mitigation obligations. The scheme is available to all developers, but priority is given to small and medium-sized enterprises (SME) because of the resource difficulties they can face in securing mitigation.

However, the scheme has currently only been launched in the Tees catchment, with credits costing £1,825 each and being offered in rounds every three months. The roll-out to other catchments will occur in stages so, in the meantime, the nutrient neutrality logjam will remain in those areas.

The government has also committed to setting up a local nutrient mitigation fund to provide direct grant funding to LPAs to deliver locally led nutrient mitigation schemes. To assist with this, in April 2023 the government invited LPAs to provide evidence on the impact of nutrient neutrality, views on possible solutions and costed expressions of interest for projects or strategies for the delivery of nutrient mitigation. Further calls for evidence and expressions of interest are expected in autumn 2023 and spring 2024.

Mitigation is only an interim solution. Is the government doing anything to address the root cause of nutrient pollution?

The Levelling-up and Regeneration Bill imposes an obligation on water companies in England to upgrade wastewater treatment works in vulnerable areas to the highest achievable technological levels by 2030, subject to some exceptions. It also amends the Habitats Regulations so that the baseline for any appropriate assessment should assume that the wastewater treatment works will meet the relevant pollution standards by 2030. This means that developers will need to provide additional mitigation during the period up to 2030 to offset the higher baseline pollution levels, but as pollution levels will be lower after this date, reduced mitigation will be needed thereafter.

These upgrade works are estimated to reduce:

• phosphorus and nitrogen loads by 69% and 57% respectively; and
• depending on the catchment, mitigation costs to developers by 37-95% and 46-64% for phosphate and nitrate respectively.

However, SME developers in rural areas may not benefit significantly, as small wastewater treatment works that are exempt from the upgrade requirement are often more prevalent in rural areas, and agricultural practices may be a bigger contributor to nutrient pollution.

How is the government addressing the impact of agriculture?

The government has the difficult task of balancing food security and the need to protect our watercourses. To this end, it has launched a number of schemes to support farmers in reducing and preventing nutrient pollution – including introducing environmental land management schemes to reward farmers for using sustainable practices that reduce nutrient pollution, grants to fund infrastructure and technology, and the provision of additional funding to the Environment Agency.

Are there any schemes that landowners can make use of?

Landowners within vulnerable areas can provide nitrate mitigation on their land – for example, by creating a wetland or woodland on their land or changing the land use – and then sell the nutrient credits generated from this to developers. The benefit is twofold: it reduces nutrient pollution and it provides a new income stream to landowners.

The government has also issued guidance confirming that landowners can benefit from a concept known as “stacking”. Landowners can generate nutrient credits and, in relation to the biodiversity net gain regime, biodiversity units by providing the same nature-based mitigation on the same parcel of land. They can then sell these credits and units to the same or different developers, essentially benefiting twice from the same activity.

An earlier version of this article appeared in Estates Gazette on 30 August 2023.

Authored by Caroline Stares.