Fireside chat with Dr Sophus zu Ermgassen, Postdoctoral Ecological Economist
at the University of Oxford
- Dr Sophus zu Ermgassen, Postdoctoral Ecological Economist
Back to main blog pageELJ: Sophus, thank you so much for making the time in your busy work schedule to chat with me about Biodiversity Net Gain! You were an expert contributor to the Parliamentary Office for Science and Technology POSTBrief on Biodiversity Net Gain. And you currently hold a position on Natural England’s Biodiversity Net Gain Monitoring and Evaluation expert advisory group. Could you break down ‘biodiversity net gain’ for me?
SzE: Biodiversity net gain, or ‘BNG’ for short, is a change in legislation in England: it means that new developments need to achieve a 10% net gain in biodiversity to secure planning permission using a statutory biodiversity metric - a government-mandated metric. BNG takes all the habitats that exist at the site before the development and scores them. This score provides a number for the value of the biodiversity at the site ex ante. The developer then needs to come up with a project plan with a score that is 10% higher than it was initially.
ELJ: Who comes up with the scores?
SzE: Trained ecologists will do these assessments. So the same people who were doing the Phase 1 Habitat Survey, now have to populate this excel spreadsheet. That’s all it is: a spreadsheet. The 10% net biodiversity gain forces developers to think about what the site will look like in due course. Net gain operationalises something they already had to do under the existing legislation - they already had to achieve net gains where possible, but it was open to the subjective judgments of planners and ecologists. Net gain means it's no longer as subjective.
ELJ: I regularly see your research featured in popular media outlets, like the FT and the Guardian. Congratulations on being named as one of the 100 most influential environmental professionals in the UK by newspaper the ENDS Report, and on winning the UKRI Natural Environment Research Council’s early career policy impact award in 2023. Clearly your research is a big deal! But in terms of the topics your research focuses on, what’s all the hype about? Why is biodiversity finance getting so much traction?
SzE: People are looking for ways to save the world! One of the major drivers of biodiversity loss is that our economic systems do not account for the value of nature or the role it plays in our society. One way is to recognise that biodiversity is a public good. That’s what economic theory says we should do: tax, and then spend to provide public goods. In the absence of this, there are a plethora of mechanisms that try to commodify biodiversity to create an instrument that makes it profitable to invest in. The theory therefore goes that financialisation of biodiversity is the second best option to prevent biodiversity loss, in the absence of governments treating biodiversity conservation as a public good appropriately funded through government budgets.
ELJ: What, then, would be the simplest way to commodify biodiversity for nature-positive outcomes?
SzE: The easiest way of commodifying biodiversity to make polluters pay would be through, for instance, offset or compliance markets. ‘Polluters pay’ has a nice logic to it, which means governments can impose that legislation much more easily as it makes sense to the general public. Compliance markets are by far the largest form of biodiversity finance. We’ve been doing them since the 1970s in the US - so 50 years. Estimates put those national compliance markets at generating 6-9 billion USD of investment in conservation each year. They’re relatively easy to establish and the policy rationale is stronger.
Voluntary offsets are an extension of that. Voluntary carbon markets are about the polluter paying, but without a government regulatory framework. And then there’s the rise of other forms of biodiversity finance: those that are not linked to companies' legal obligations to offset damage. This is where you have newer instruments, like debt-for-nature swaps and biodiversity credits. All of this is to try to commodify nature in some way so that its value is better reflected in economic decision-making, at least in theory.
ELJ: Of the compliance markets, which type is gaining the most traction?
SzE: Net gain in England is the widest reaching compliance market to date. Compliance markets are organised through different mechanisms around the world. This is organised under the Clean Water Act in the US. In Australia, it’s through regulating impacts to native vegetation. But in England, we’re trying a net gain that affects all development. England’s is by far the most far-reaching and ambitious biodiversity compliance market that I’ve ever come across. Let’s not forget that construction and infrastructure makes up a sizeable chunk of GDP, so it’s a fair amount of economic activity that will be regulated under these rules.
ELJ: You’re also an expert advisor to the International Advisory Panel on Biodiversity Credits. How is biodiversity net gain different from biodiversity credits?
SzE: This is a relatively technical question. There are different meanings to the word ‘credit’. In BNG practice, if you want to achieve your obligation to achieve 10% uplift (and you can't do it onsite), you can buy biodiversity units from the market. This mostly entails buying land management activities from farmers, or you can buy statutory credits from the government. Hence, these are what we call biodiversity credits in the English system. In other contexts, people refer to biodiversity credits when they’re talking about the voluntary international biodiversity credit market.
ELJ: So would you describe BNG as an offset market?
SzE: You can conceptualise BNG as an offset market, but the complication is that developers can do most of the so-called offsetting within their development - in that sense, it’s not a true offset like you see in the rest of the literature. The developer would be doing most of these land management activities anyway, because much of it is already common practice.
A lot of the units that come from BNG come from promises of higher quality habitats in the future - you get points based on projections of habitat quality. Smaller, but higher quality, habitats in the future get more points that lower quality but larger habitats today. There are big problems with this methodology. Lots of developments do not implement the habitat uplift they say they will at the point of planning. You need good monitoring and evaluation, as well as enforcement in the case of non compliance. We don't have the systems in place for that. About a quarter of BNG units are likely to be legally unenforceable as it stands, because we don’t yet have the required governance in place.
ELJ: Okay, so this sounds different to the voluntary credit market.
SzE: Absolutely, the international voluntary credit market is something very different. It’s more analogous to the voluntary carbon market. In short, it’s about buying commodified gains in biodiversity, from which you can make claims. This is a highly contested space. What kind of claims can you make? And what can you use them for? Generally you cannot offset by using credits: you cannot simply make up for a harm elsewhere.
ELJ: I agree. What, to you, would a ‘good’ biodiversity offset policy look like? Are you able to provide a brief, high-level summary?
SzE: Sure. If we take a step back, we can see that there are two major reasons that biodiversity markets have not achieved their aims in the past: Firstly, they don't do the things they say they’ll do. The second is due to poor policy design, where - even if you do the things you say you’ll do - your actions don’t achieve the objectives (because of poor biodiversity accounting).
So a good biodiversity offset policy would need to incorporate two different sets of solutions: on the policy design side, the major problem is people getting biodiversity units/credits from doing stuff that they would have been doing anyway. So these schemes have had no additionality. We know how to get around this. The US wetland scheme does not have this problem because you can only get units from restoration: restoring habitats that wouldn't have grown back on their own. Restoration works better than protection, as the latter is hard to show additionality for.
The second solution needs to address compliance problems. Biodiversity markets have a horrific history of poor compliance. We know that the regulators who are supposed to be delivering these policies have been systematically underfunded. They can't do things like verifying compliance. And even if noncompliance is detected, regulators can't actually do anything about it. It’s pretty nefarious. However, the solution is simple. We need to set up sophisticated monitoring systems that allow regulators to be more efficient in enforcing the system. This is very much technically possible.
ELJ: If you’re a large company looking to develop a nature-positive strategy, what might that strategy include?
SzE: I'll tell you what we do in the academic community, rather than my opinion. We start out by using the best data available to estimate the biodiversity footprint of the company. The best tool for this is a biodiversity life cycle assessment (LCA). You take the data on everything the company spends money on and then model estimates of the average biodiversity impact from those activities. Then you work internally to work out how you can reduce the spending on all of that harmful stuff.
ELJ: How hard would it be for a company to reduce its impact on nature?
SzE: Not hard! For instance, there was a report on Oxford University in 2022 (called Analysis: the biodiversity footprint of the University of Oxford, and published in Nature journal) which showed that lots of that organisation’s biodiversity footprint could be reduced simply through behaviour change alone (e.g. stopping employers flying and reducing meat consumption in canteens). These measures could result in a two-thirds reduction in Oxford University’s biodiversity footprint! That’s while maintaining all the key economic activities at the university.
ELJ: I understand that through your postdoc you assist the biodiversity and scenario modelling work packages for the Agile Sprint project: Operationalising Treasury Green Book Guidance on biodiversity. Scenario modelling is a big part of Verdentum’s work. Tell me why scenario modelling is important in the context of biodiversity?
SzE: Scenarios are important because the future is unknowable. It’s therefore hard to produce useful projections of the future. Projections are based on extensions of today’s trends, and they often misidentify how history works. Underlying trends of how society functions change all the time. So scenarios are useful because you can include all of these evolving trends at once. With scenarios, you can also start the other way: this is where I want to get to, and then work backwards to work out how you can get there. I work with brilliant geospatial analysts where they create different models about what could happen in land-use change in the future and then they simulate these scenarios.
ELJ: Final question for you, Sophus: how on earth do you find the time in the day to do everything you do?! I understand you ALSO co-supervise six PhD and Masters researchers, AND you’re a co-host of an environmental podcast? Truly remarkable.
SzE: I work with amazing people! My advice would be to work with people who are better than you at everything. The best way to move fast is to celebrate and enjoy other people’s skills which are stronger - you can move things along much faster with this attitude. In my world, learning how to do very complicated analytical techniques can take me a year. But working with the person who does them very well can take a day! There's zero secret to it. Great people move things along faster. There are roles for everyone in the biodiversity space. That's a beautiful thing. To innovate within your methodology is also a way to bring the whole field forward. But in what I do, the work is interdisciplinary; it’s a problem that can only be solved by working with the best people from every field.