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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

Introduction to Water Quality Trading

National Forum


Water Quality Trading

July 22-23, 2003Chicago, Illinois

the cost of cleaner water thirty years of progress
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
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
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
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
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
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
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 continued10
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
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
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.