Water Quality Cap-and-Trade Wins USDA Funds
The Electric Power Research Institute (EPRI) will use the Conservation Innovation Grant to initiate water quality pilot trades in the Ohio River Basin, which covers parts of Illinois, Indiana, Kentucky, Maryland, Ohio, Pennsylvania, Tennessee and West Virginia.
The institute is now starting Phase II of the project, a market-based approach designed to enable facilities facing high pollution control costs to buy reduction credits from entities with lower costs. Industry participants including American Electric Power and Duke Energy are providing $400,000 in additional funds, bringing the total Phase II funding to $1.4 million.
EPRI describes the initiative, launched in 2009, as a first-of-its-kind, interstate multi-credit trading program. The institute says the project represents a comprehensive approach to designing and developing markets for nitrogen, phosphorus and potentially greenhouse gas reduction credits.
The project is also designed to support the adoption of an agricultural conservation regimen and best management practices to reduce nutrient loads in Ohio River Basin waters and improve local and regional water quality. These upstream improvements may also reduce hypoxia – the oxygen deprived zones – in the Gulf of Mexico.
EPRI expects pilot trades to take place among at least three power plants or other participants, and up to 50 farms implementing conservation best management practices on up to 20,000 acres across Ohio, Indiana, Kentucky, West Virginia, Illinois or Tennessee. Nutrient reductions are expected to range up to 45,000 pounds of nitrogen and 15,000 pounds of phosphorus a year.
At full scale, the project would become the world’s largest water quality trading program, EPRI says. It would potentially create credit markets for 46 power plants, thousands of wastewater facilities and other industries, and about 230,000 farmers.
“Using scientific research, this project could result in a multi-industry market that may accelerate water quality improvements in the Ohio River Basin and establish a model for other domestic regional trading markets,” said Jessica Fox, senior scientist for EPRI’s Water and Ecosystems Program.
EPRI will lead the research effort and be supported by American Farmland Trust; Hunton & Williams LLP; Kieser & Associates, LLC; and the University of California at Santa Barbara. The project is also receiving regional support from the Ohio Farm Bureau Federation, Miami Conservancy District, and the Ohio River Valley Water Sanitation Commission, which recently passed a resolution endorsing an interstate water quality trading program for the Ohio River Basin.
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