Proposed reforms in offshore wind environmental compensation – UK and Scotland consultations

On 22 July 2025, the UK Government and the Scottish Government launched parallel consultations on the environmental compensation regime for offshore wind development, setting out significant reforms to the current regime under the Habitats Regulations.

The current compensation regime, which requires ‘like-for-like’ measures targeted at a specific impacted habitat or species, has proven challenging due to limited availability of suitable measures. The proposed reforms seek to unlock barriers to offshore wind deployment by enabling a broader range of compensatory measures, including strategic measures. 

Background and Policy Objectives

The Habitats Regulations cover the sites of greatest significance and international importance for nature, for which the UK has a special responsibility. The Regulations provide these sites with protection through the designations of Special Areas of Conservation (SACs), which provide protection to a variety of special species and habitats, and Special Protection Areas (SPAs), which provide protection for rare and vulnerable birds and their habitats. These designations give a higher level of legal protection than domestic designations, through a legal requirement to assess potential impacts on protected sites (a Habitats Regulations Assessment or HRA).

The Energy Act 2023 gave the UK and Scottish Governments legislative competence to amend the Habitats Regulations in relation to offshore wind activities, including some associated transmission infrastructure (such as offshore hybrid assets that connect in to offshore windfarms). The basis for this is the specific consenting challenges faced by offshore wind projects in navigating HRA derogation cases and securing compensation.

The 2023 Act does not extend to other forms of transmission infrastructure in the marine environment, such as point-to-point interconnectors. This means that there is a disconnect in how electricity cables associated with offshore wind and other marine offshore cables are treated. These types of development are also identified as being of critical national priority infrastructure in England through the National Policy Statements. It is hoped that, if these reforms prove successful, similar powers and reform can be extended to other forms of development to streamline their consenting process .

Devolved governments are responsible for regulations for their inshore waters within 12 nautical miles from the UK coastline, with the UK government regulating offshore waters (beyond 12 nautical miles). As such, the UK and Scottish governments are working collaboratively to ensure a consistent approach across the consenting regimes, although there are some notable differences between the consultations.

Importantly, the proposed reforms will be available to those offshore wind (and associated infrastructure) projects that have already entered the relevant planning process in England, Wales, Scotland or Northern Ireland. This includes applicants and plan promoters who are already in the planning process but are struggling to find and agree adequate environmental compensation. It also includes promoters that have a consent but are unable to discharge their relevant consent conditions through project-led compensatory measures. In these cases, the proposed measures will be able to be used once they are in force.

Enabling Wider Compensatory Measures

Under the new proposals, compensatory measures may benefit a wider Marine Protected Area (MPA) or protected site network, not just the specific feature impacted by a development. This includes measures that target similar ecological features (such as a different seabird species with comparable function) or address large-scale pressures (for example, water quality improvements or habitat restoration) that benefit multiple sites or features.

Both consultations emphasise the importance of strategic, large-scale delivery of compensatory measures. While both consultations propose this approach, the Defra consultation explicitly requires that wider compensatory measures be approved by the relevant Minister and entered into a Library of Strategic Compensatory Measures, with a strong expectation that such measures will be delivered through a Marine Recovery Fund (MRF). The Scottish framework would give developers flexibility to propose and deliver wider measures themselves, including through a potential Scottish Marine Recovery Fund, although it also seeks to develop a Scottish Portfolio of Strategic Compensatory Measures.

Compensation Hierarchy

A new three-tiered compensation hierarchy is central to both consultations, designed to ensure that the most direct and ecologically effective measures are considered first:

• Tier 1: Measures that directly benefit the impacted feature at the impacted site or elsewhere in the protected site/MPA network.
• Tier 2: Measures that benefit ecologically similar features or groups of features.
• Tier 3: Measures that benefit the protected site or MPA network more broadly, such as by addressing systemic or large-scale pressures.

Both frameworks would require developers to consider Tier 1 options first but allow movement down the hierarchy if justified – specifically, if a wider measure can be shown to deliver greater ecological benefit to the network. This hierarchy would be formalised this hierarchy in legislation and guidance, with Ministerial approval required for moving down the hierarchy.

In one divergence, the Scottish consultation proposes to exclude the MPA network within Scottish territorial waters (0-12nm) from its reform, meaning that there will not a consistent approach between compensatory measures under the Habitats Regulations and measures of equivalent environmental benefit (“MEEB”) for close-to-shore projects.  This would result in a more advantageous position for projects located beyond 12nm (which would benefit from the reforms proposed by the UK government) but will leave those Scottish projects that straddle the 12nm boundary struggling with two conflicting frameworks. 

Notably, the Scottish Government has specifically asked for views on this point – and given the expectation that future projects will need to be situated further from shore to reduce other pressures, we would strongly encourage developers to respond on this point.

Additionality and Flexibility

Both consultations seek to bring welcome clarity to the principle of “additionality” – which is the assumption that compensation must be over and above normal site management or government obligations. Existing UK guidance sets out specific criteria for determining when a measure is additional, including whether it accelerates progress towards conservation objectives or goes beyond what government is already delivering. The UK consultation proposes further guidance to clarify what can be considered additional to normal practice, address the timing of compensation and overcompensation. Scotland similarly proposes to clarify additionality in guidance and may provide further certainty in legislation.

Such additional compensatory measures could address situations where delays between an impact to a protected site and compensatory measures being in place and operational may be unavoidable, provided that robust safeguards are in place. Overcompensation (i.e. delivering more than the minimum required) may be required where there is uncertainty or a time lag in compensation effectiveness. This is particularly welcome for projects that are working to accelerated programmes, as the need to have compensation secured and functionally ‘up and running’ before development can substantially commence has proved challenging for project financing decisions.

Safeguards, Governance, and Public Register

Statutory Nature Conservation Bodies will continue to play a central advisory role in both regimes, providing input on the suitability and effectiveness of proposed measures and on the application of the compensation hierarchy. The UK consultation proposes a public compensation register to track delivery and outcomes, supporting transparency and future decision-making; Scotland supports a UK-wide register rather than a separate Scottish register.

A key difference is the treatment of Marine Irreplaceable Habitats (MIHs): the UK proposes specific safeguards, with wider compensatory measures not permitted for MIHs, and is considering a formal list of such habitats. Scotland, by contrast, does not currently intend to introduce the MIH concept, noting that it is not established in Scottish regulatory or planning practice.

Both governments propose robust governance frameworks, with the UK establishing technical advisory groups and Scotland considering a similar technical advisory group to support the selection and implementation of strategic compensation.

Next steps

These proposed reforms represent a significant shift in the approach to environmental compensation for offshore wind. Stakeholders – including those with recently consented projects that may be struggling with their current compensation obligations – are encouraged to review the proposals in detail and submit responses by 2 September to ensure the final frameworks are workable and effective.

You can find the consultations here:

• UK Government’s Consultation on Offshore Wind Environmental Compensatory Measures Reforms
• Scottish Government’s Offshore wind - strategic compensation policy: consultation

For further information or assistance with the consultation, please contact the CMS team.

Article co-authored by Anna Andrasko, Trainee Solicitor at CMS.