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Introduction to Water Quality Trading. National Forum On Water Quality Trading July 22-23, 2003 Chicago, Illinois. The Cost of Cleaner Water Thirty years of progress!. In 1997, $14 billion private and $34 billion public point source control costs, annually

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Introduction to Water Quality Trading

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Introduction to Water Quality Trading

National Forum

On

Water Quality Trading

July 22-23, 2003Chicago, Illinois


The Cost of Cleaner WaterThirty years of progress!

  • In 1997, $14 billion private and $34 billion public point source control costs, annually

  • $80 billion paid - 190 million served (165 million with secondary or better waste water treatment).

  • In 1998 the estimated annual cost to develop TMDLs is about $69 million for the next 15 years

  • Annual TMDL implementation costs range from $900 million to $4.3 billion


The Challenges Ahead Different challenges call for different approaches: end-o-pipe controls to watershed management, prescriptions to partnerships and command – and – control to market-based approaches.

  • ~45 % of assessed waters don’t support designated uses; 40,000 TMDLs need to be developed.

  • Storm water runoff from unregulated “nonpoint” sources, legacy pollutants and atmospheric deposition are major sources of pollution.

  • Growth and development will place greater demands on water quality and supply.

  • Aging infrastructure.

  • The widening gap, “doing more with less”.


What is Water Quality Trading?

  • Trading is the voluntary exchange of pollutant reduction credits between sources to meet regulatory obligations or voluntary water quality goals.

  • Pollution reduction credits are created when a source reduces pollution beyond the level required.

  • Trading achieves greater efficiency by capitalizing on:

    • Economies of scale within sectors.

    • Control cost differentials across sectors.

  • “Water quality trading” is based on water quality standards and aligned with the Clean Water Act.


Why Trade?Trading offers cleaner water, quicker and cheaper

  • EPA estimated potential cost savings of $650 million to $7 billion annually from all types of trading

  • A World Resources Institute study found the cost of controlling phosphorus from point sources in Wisconsin, Michigan and Minnesota could be reduced 40% to 80% through trading with nonpoint sources.

  • Connecticut’s Nitrogen Credit Exchange is projected to result in 56 fewer capital projects and save over $200 M over 14 years.


Types of Trading

  • Point Source (PS) Trading

    • Connecticut Nitrogen Exchange

  • Point/Nonpoint Source (P/NPS) Trading

    • Cherry Creek, Colorado

    • Lower Boise River, Idaho

  • Nonpoint Source (NPS) Trading

    • Grasslands Tradable Loads Program, California

  • Intraplant (Cross-outfall) Trading

    • Iron and Steel Effluent Guidelines

  • Pretreatment Trading

    • New Jersey


Factors To Consider

  • Water quality requirements or goals (Drivers):

    • Maintaining high quality waters.

    • Restoring impaired waters.

    • Ancillary environmental benefits.

  • Watershed characteristics (Trading Area and Sources):

    • Size of the trading area.

    • Unique features (impoundments, floodplains and wetlands).

    • Type, number, mix and relative loads of sources.

  • Economic conditions (Trading Potential):

    • Control cost differentials among and between sources.

    • Development and land use changes.

  • Partnerships (Support and Implementation).


Common Elements

  • Objectives:

    • Implementing TMDLs.

    • Voluntary Pre-TMDL watershed programs.

    • Offsetting new and increased discharges to maintain high water quality.

    • Trading to achieve ancillary environmental benefits:

      • Wetland restoration to improve water quality and provide habitat.

      • Agricultural changes to improve water quality and mitigate green house gas emissions.

    • Trading for smart growth or to mitigate legacy pollutants.

  • Type of program (PS, PS/NPS, NPS).

  • Pollutant (reductions) or other parameters traded.


Common Elements (continued)

  • Eligibility:

    • Surplus reductions required to create credits.

    • Required PS or NPS controls and management practices.

    • Credit creation and duration.

  • Baselines:

    • Reductions greater than water quality based requirements.

    • Existing environmental quality.

    • Base year land uses and management practices.

  • Trading Ratios:

    • Pollutant, spatial and temporal equivalence.

    • NPS load variability and control efficiencies.

    • NPS quantification uncertainty.


Common Elements (continued)

  • Quantification protocols.

  • Mechanisms to establish NPS accountability.

  • Program evaluations, including monitoring.

  • Public participation and access to information.

  • Trading registry to track trades and evaluate compliance.


How Can Trading Be Implemented?

  • National Pollutant Discharge Elimination System (NPDES) permits.

    • General or watershed permits.

    • Alternate or variable permit limits.

    • Performance requirements in lieu of limits.

  • TMDLs and watershed plans with trading provisions.

  • Trading under state regulations.

  • Private contracts.

  • State revolving fund programs.

  • Conservation Innovation Grants.


The Formula for Success

  • Establish political support for a trading framework.

  • Build stakeholder consensus and recommendations for implementation.

  • Leverage programs and resources through partnerships at the federal, state and local level.


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