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Introduction to Water Quality Trading

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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  1. Introduction to Water Quality Trading National Forum On Water Quality Trading July 22-23, 2003Chicago, Illinois

  2. 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

  3. 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”.

  4. 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.

  5. 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.

  6. 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

  7. 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).

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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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