Current Water Quality Trading Program Applications in the US:

Transcription

1 Current Water Quality Trading Program Applications in the US: Where have we been and where are we going? By Mark S. Kieser And Environmental Trading Network Guest co-authors, Lloyd Christmas & Harry Dunn

2 Trading Efforts to Date Many early pilot trading programs have faded Most trades have been Point Source/Point Source (CT, NC) Most trades focus on nutrients (and temperature) Concerted efforts for PS/NPS (a few bilateral trades -- local & small; mostly Ag credit generation) (MN, OH, CO) Growing interest in urban NPS/NPS trades (OR, NC, MN, VA) Growing interest in multiple credits air/water/habitat (PA, CA, OR, FL) EPA WQT/wetlands High costs, scale issues, few Wetland Mitigation Banking/WQT overlaps Environmental Group participation Confusion over trading definitions (e.g., baselines) High transaction costs

3 Early Trading Struggles High program costs (Dillon Reservoir, CO) Time-consuming/lengthy permitting process (MN) Do-it yourselfers (Tar-Pamlico, NC) Legislative short-sightedness (Long Island Sound) Re-inventing the wheel (WI) Complex rules (MI) Lack of cost consciousness; bad TMDL (Cherry Creek, CO) High trading ratios (Chesapeake Bay policy) Lack of drivers/ hammers (Fox River, WI)

4 Ongoing Trading Program Struggles/Shortcomings Farm Bill subsidies and credit generation Definitional struggles (baselines, surpluses ) Changing budget/administrative priorities Lack of regulatory drivers N0 intrastate programs for large watersheds (Ches. Bay, MS River, CO River) Not having everyone at the table (PA) MEP definition and Storm water trading (NC, Tahoe) Competing legislation undermining demand (MD flush tax) Narrowly defined legislation (VA) Lack of trading infrastructure

5 Notable Programs in this Workshop South Nation Conservation, ON -- PS/NPS for P - Over 200 trades; updated NPS quantification; farmer verification Minnesota River, MN PS/NPS to PS/PS for P, N, other - Watershed permits driving trading, interest in trading rules Sugar Creek Alpine Cheese, OH PS/NPS for P - Bilateral trades; ag credits for PS compliance Great Miami River, OH PS/NPS for N & P -Largest U.S. program; brokerage scheme (quasi-governmental) Willamette River Basin, OR urban NPS/urban NPS - Storm water volume offsets for future CSO capacity

6 Notable Programs Boise River, ID PS/NPS for P -Standardized quantification/discounting; clearinghouse/ trading authority Kalamazoo River, MI PS/NPS for P - Ag brokering schemes, electronic registry/market-place Conestoga Basin, PA PS/NPS for P & other - Ag reverse auction approach Lower James River, VA PS/PS for N & P - Legislatively mandated Trading Association Florida - New Trading Rules - NPS caps (true cap and trade?) Long Island Sound, CT PS/PS for N - Legislatively established for municipal WWTPs Tualatin River, OR PS/NPS for temperature (C) - Bankable stream shading credits (35 miles); multiple credits

7 2004 TWG WQT Programs Location: ~ Bear River ~ UT & ID, (three 8-HUCs) Watershed Landuse: Mostly agriculture Regulatory Driver: Numerous TMDLs Commodities: TP Credit Sources: All sources Trade Types: PS/NPS Program Highlights: Integrated Watershed Information System, including a virtual trading room (electronic bulletin board)

8 ~ Cape Fear River ~ Location: NC (six 8-HUCs) Watershed Landuse: Many urban centers Regulatory Driver: Jordan Lake nutrient TMDL Commodities: TP, TN Credit Sources: MS4s, WWTPs, agriculture Trade Types: PS/MS4s, PS/PS, PS/NPS Program Highlights: Emphasis on urban stormwater sources

9 ~ Passaic River ~ Location: NJ & NY (one 8-HUC, non-tidal) Watershed Landuse: 2M people live in 669 mi 2 Regulatory Driver: WQ standard (0.1 mg/l TP) Commodities: TP Credit Sources: WWTPs, MS4, agriculture Trade Types: PS/PS, PS/NPS, MS4/NPS Program Highlights: Research oriented study of other programs

10 ~ Lake Tahoe ~ Location: CA & NV Watershed Landuse: Urban, Forested & Recreational Regulatory Driver: TMDL Commodities: TP, TN, Fine Sediment Credit Sources: Urban stormwater, Streambanks Trade Types: NPS/NPS Program Highlights: Rigorous models & BMP efficiency data

11 Location: 2005 TWG WQT Programs Watershed Landuse: Regulatory Driver: Commodities: Credit Sources: Trade Types: Program Highlights: ~ Vermillion River ~ Southeastern Twin Cities, MN (one 8-HUC) Suburban & agriculture WMP: flow and thermal impact; TMDL: turbidity, fecal coliform Flow volume, riparian quality Model-identified infiltration and restoration sites Urban NPS offsets Develop a common currency for trading watershed functions

12 ~ Willamette River ~ Location: Western OR (twelve 8-HUCs) Watershed Landuse: Forest, agriculture & urban Regulatory Driver: TMDLs: temperature, mercury, and bacteria Commodities: Temperature, other Credit Sources: Public and private landowners and water rights owners Trade Types: PSs, other sources Program Highlights: Develop a temperature credit trading and banking program & create a marketplace for multiple ecosystem functions trading

13 Statewide Rules Trading Rules (Michigan) Purpose Water Quality Benefit Restrictions Eligibility Closed/Open Trading Pollutants Traded Baselines Credits Generated Discount Factors Banking Notice Requirements Registry Trading ratios Program Evaluations Compliance/Enforcement Citizen Petitions

14 Efforts to Broaden Trading in Michigan New trading infrastructure per rules State registry (regulatory tracking) Marketplace tools (connecting buyers & sellers) Ag banking schemes (credit aggregation) Brokerage opportunities (3 rd party verification)

15 MI Agricultural Trading Framework Producer TSP/Planner Planning MAEAP The Trading Process - Planning: Producer works with MAEAP process OR with a TSP/Planner to develop plan (privately or with a Farm Bill program). - Payment: Farmer receives funds to implement plan from a bank OR a private buyer (after posting on NN). - Notice: If credits formally offered for sale under MI Rules, notice is filed with MDEQ including farmer information. - Use: Credits (and notice info.) get publicly posted on state registry. Board of Trade (NN) (Market Posting) Payment Notice Notice of Generation (Site info.) Use Registry Bank/Broker (Hold/Purchases Credits)

16 Worksheets Quantification, Marketplace Communication & Tracking (electronic registry)

17

18

19

20

21 Notices of generation/use Notice of Generation Form NOG submitted electronically to MDEQ for 30-day review period. Pending Notices NOU submitted electronically to MDEQ for 30-day review period. Notice of Use Form Key: Information accessible to MDEQ only Publicly available Information MDEQ determines whether Notices are complete and posts accepted notices to registry. MDEQ Water Quality Trading Registry (database) Contains full information on Proposed Notices of Use & Generation, Completed Notices of Use & Generation Proposed NOU posted to Registry AND Electronic Bulletin Board. MDEQ Electronic Bulletin Board Public Access to limited Information on Proposed and Completed NOUs, and Completed NOGs Link between bulletin board and board of trade provided on websites Board of Trade NutrientNet Public access to calculation tools, Board of Trade, Notice of Use forms and Notice of Generation forms

22 N Delivered to Gulf of Mexico regional markets as the future of trading? Reduction of Nitrogen to Gulf of Mexico (%) Source: World Resources Institute

23 What to consider Don t force trading if market forces lacking or other alternatives are working Proceed when the local stakeholders realize benefits Be prepared for resistance when least expected Tap into other program designs and adapt Use local leadership to champion the program Don t think you that you can forecast every scenario or condition Be prepared to spend time and money DON T always believe what you read