On Tuesday, March 11, 2014, EPRI transacted the first interstate credits for water nutrients in the United States, officially launching water quality pilot trades in the Ohio River Basin. The pilot trades mark an effort to test water quality improvement strategies through the world’s largest and only interstate water quality trading program—a project that began under EPRI’s leadership in 2007.
Water quality trading is a market-based approach that could enable facilities to meet permit limits using nutrient reduction credits from farmers who implement conservation practices. Many parties, such as industrial sources, farmers, and the general public, contribute to nutrient loading, which may lead to serious ecological problems. The recent pilot trade transactions will produce cleaner watersheds, advance sustainability practices, and test more cost-effective regulatory compliance options.
EPRI’s director of the water quality trading program, Jessica Fox, stated at the program’s recent event: ““These early credit transactions will immediately improve watershed and farm health, and will serve as a foundation for ongoing discussions on the potential for water quality trading to meet regulatory compliance obligations in the future.”
Because the affected watersheds of the Ohio River Basin cross state lines, working on an interstate basis has been essential to the program’s success. In August 2012, Indiana, Kentucky and Ohio signed a first-of-its-kind interstate trading plan where the states can operate under the same rules so that a water quality credit generated in one state can be applied in another.
The 2012 interstate framework set the stage for the recent exchange of the pilot trades, which at full-scale, could include up to eight states in the Ohio River Basin. The potential for the project at full-scale is significant: credit markets could be created for 46 power plants, thousands of wastewater facilities and other industries, and approximately 230,000 farmers.
Duke Energy, Hoosier Energy, and American Electric Power are the first buyers in the program. Collectively, the companies purchased 9000 stewardship credits, agreeing to retire the associated nutrient and ecosystem benefits, rather than apply them towards possible future permit requirements. The buyers can use the credits to meet corporate sustainability goals and may also be considered for future flexible permit compliance schedules by the participating states.
Stewardship credit trades will continue through 2014 and 2015 to test critical programmatic features such as an online credit registry and live trading auction.
For more information on water quality trading, please visit http://wqt.epri.com, or view our project video below.