Natural capital and environmental net gain

A discussion paper examining how infrastructure development can contribute to protecting the country's natural environment.

Executive summary

Society and the economy depend on natural capital assets and services – including the water we drink, the air we breathe and the food we eat – to function. But natural capital has declined in recent decades. Infrastructure both contributes to and is impacted by this decline but can also help reverse it.

Infrastructure developers should consider the impact of infrastructure development on natural capital assets and take the opportunities to contribute to the environment and biodiversity as part of development. Infrastructure projects should target environmental net gain, ensuring that infrastructure developers leave the environment in measurably better state than they found it.

Infrastructure and natural capital

There is a two-way relationship between infrastructure and natural capital:

  • infrastructure can have both a positive and a negative impact on natural capital assets such as fresh water and clean air
  • infrastructure can deliver benefits for natural capital, for example through the provision of protected natural habitats and connecting corridors for species along linear infrastructure, and sustainable drainage systems for mitigating flood risk
  • changes in the environment can increase the costs of infrastructure, for example if roads and railways need to withstand higher temperatures
  • natural capital approaches can reduce the demand for infrastructure, for example natural water catchment management for flood protection.

The Commission recognises the importance of natural capital and is working on both addressing the impact of infrastructure on the environment and exploiting the opportunities to use infrastructure solutions to support and improve natural capital. One such approach is through ‘environmental net gain’, the concept of ensuring that developers leave the environment in a measurably better state compared to the pre-development baseline.

Current approaches to natural capital

The Commission has made several recommendations relating to natural capital and environmental net gain in the past. The Commission’s design principles for national infrastructure, endorsed by government in the National Infrastructure Strategy, say that projects should make active interventions to enrich our ecosystems, seeking to deliver a net biodiversity gain, and contributing to the restoration of wildlife on a large scale while protecting irreplaceable natural assets and habitats. And the recently published Rail Needs Assessment for the Midlands and the North recommended adopting an ‘environmental net gain’ approach in the government’s Integrated Rail Plan.

The government has committed to embedding environmental net gain in infrastructure in its 25 year environment plan, and the government is currently legislating for biodiversity net gain though the Environment Bill. The existing planning regimes also include some requirements for consideration of the impact of development on natural capital, and the infrastructure industry has begun to adopt some approaches that support natural capital.

However, more progress is needed to fully realise infrastructure’s role in supporting the delivery of the government’s environmental ambitions. The National Audit Office have said that there is still a long way to go before the government can be confident that it has the right framework to deliver on its aspirations in its 25 year environment plan. And the requirement for biodiversity net gain in the Environment Bill will exempt major infrastructure projects.

Environmental net gain

While infrastructure’s impact on natural capital in terms of land use are not as high as those of agriculture, for example, they still need to be considered. Delivering environmental net gain means taking steps to mitigate the high potential impact of many major infrastructure projects on natural capital.

Taking an environmental net gain approach to infrastructure has many benefits, including:

  • supporting natural capital by mitigating against climate change and flood risk, improving air and water quality, and improving quality of life
  • delivering benefits efficiently, for example both achieving an infrastructure goal and increasing resilience
  • saving time and money by avoiding the risks of costly and lengthy appeals processes due to environmental concerns
  • being a positive approach that ensures losses of high value natural capital are minimised and mitigated while also providing opportunities to enhance natural capital. This also represents a ‘least regrets’ option as biodiversity loss is hard to reverse.

The Commission supports an environmental net gain approach across all infrastructure projects, including major infrastructure projects. This means that:

  • infrastructure investors, developers, providers and operators on all infrastructure projects should leave the environment in a measurably better state compared to the pre-development baseline
  • natural capital frameworks and analysis should be used in decision making for infrastructure
  • infrastructure providers should follow the mitigation hierarchy when delivering environmental net gain by:
    • avoiding impacts as far as possible
    • minimising unavoidable impacts
    • as a last resort, compensating for unavoidable losses wherever the greatest benefits can be delivered, either locally or nationally, first considering compensating for losses within the development footprint.

However, the Commission recognises that there is further work that needs to be done and there are challenges that need to be addressed in order to support infrastructure projects to achieve this.

Natural capital principles

The Commission intends to develop a set of natural capital principles for national infrastructure, similar to its design principles, to help support infrastructure developers to establish how their projects can deliver environmental net gain.

The natural capital principles will:

  • promote and clarify the important of natural capital in infrastructure
  • provide support to infrastructure investors, developers, providers and operators on how to incorporate natural capital frameworks in infrastructure projects and best deliver environmental net gain, bringing together existing approaches where appropriate
  • be appropriate for national infrastructure, including major infrastructure projects
  • complement and expand on the existing guidance on the environment and place in the Commission’s design principles.

Next steps

Following publication of this report setting out its strategic position, the Commission will:

  • promote environmental net gain for all infrastructure projects
  • develop thinking on natural capital and the application of environmental net gain to infrastructure
  • consider natural capital where appropriate in the Commission’s future work, including the second National Infrastructure Assessment
  • develop a set of natural capital principles for infrastructure which will complement and expand on the existing design principles.
Final Report

Natural capital and environmental net gain

A discussion paper on how infrastructure projects should target environmental net gain, ensuring that developers leave the environment in a measurably better state than they found it.

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Cover of the natural capital report

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