Download - EPA’s Water Quality Trading Policy
EPA’s Water Quality EPA’s Water Quality Trading PolicyTrading Policy
ByBy
Stephen BernathStephen Bernath
Policy AnalystPolicy Analyst
Water Quality ProgramWater Quality Program
Department of EcologyDepartment of Ecology
Contents of Presentation onContents of Presentation onEPA’s Water Quality Trading PolicyEPA’s Water Quality Trading Policy
What is water quality tradingWhat is water quality trading
Purpose of water quality trading Purpose of water quality trading policypolicy
Where might trading take placeWhere might trading take place
Why interest in tradingWhy interest in trading
Pollutants and parameters tradedPollutants and parameters traded
Baselines for tradingBaselines for trading
Contents of Presentation (con’t)Contents of Presentation (con’t)
When trading may occur & what kindWhen trading may occur & what kind
Alignment of trading w/Clean Water Alignment of trading w/Clean Water ActAct
Elements of credible trading Elements of credible trading programsprograms
EPA role and oversightEPA role and oversight
Next steps for WA exploring tradingNext steps for WA exploring trading
What is Water Quality What is Water Quality Trading?Trading?
Market-based approach that may offer a Market-based approach that may offer a quicker or less costly route to reaching quicker or less costly route to reaching clean water goals.clean water goals.– Allows a source to meet its regulatory Allows a source to meet its regulatory
obligations by using pollutant reductions obligations by using pollutant reductions created by another source with lower pollution created by another source with lower pollution control costscontrol costs
Purpose of EPA’s Trading Purpose of EPA’s Trading PolicyPolicy
Greater efficiency - achieve water quality Greater efficiency - achieve water quality goals at lower costgoals at lower cost– e.g., NPS BMPs may cost less than plant e.g., NPS BMPs may cost less than plant
upgrade or may provide City with time to upgrade or may provide City with time to obtain financing for upgradeobtain financing for upgrade
Incentives for voluntary reductions from all Incentives for voluntary reductions from all sources especially NPSsources especially NPS
NPS trading actions can result in secondary NPS trading actions can result in secondary environmental benefits such as:environmental benefits such as:– Wetland restoration & habitat Wetland restoration & habitat
enhancementsenhancements
Purpose of EPA’s Trading Policy cont’dPurpose of EPA’s Trading Policy cont’dProvides guidance to states, tribes and others Provides guidance to states, tribes and others that wish to develop trading programsthat wish to develop trading programs
Strengthens EPA’s support for trading by:Strengthens EPA’s support for trading by:– Affirming Clean Water Act authority for Affirming Clean Water Act authority for
tradingtrading– Addressing how to align trading with CWAAddressing how to align trading with CWA– Identifying features of credible trading Identifying features of credible trading
programsprograms
Highlights flexibility while emphasizing Highlights flexibility while emphasizing environmental safeguardsenvironmental safeguards
Where Might Trading Take Where Might Trading Take Place?Place?
When a watershed is facing:When a watershed is facing:– Fixed pollutant load limitsFixed pollutant load limits– Need to reduce pollutant loadings to Need to reduce pollutant loadings to
watershedswatersheds– Shared assimilative capacity, andShared assimilative capacity, and– Increasing costs to meet load limitsIncreasing costs to meet load limits
Why Might Point Sources be Why Might Point Sources be Interested in Trading?Interested in Trading?
Costs often incurred in large incrementsCosts often incurred in large increments
Need for reductions evolves in smaller Need for reductions evolves in smaller incrementsincrements
Allows for delays in technology Allows for delays in technology investments until “optimal” timeinvestments until “optimal” time
Obtains reductions at lower costObtains reductions at lower cost
Purchases the exact reduction neededPurchases the exact reduction needed
Provides incentive to create additional Provides incentive to create additional pollutant reductions for salepollutant reductions for sale
Why Might Nonpoint Sources be Why Might Nonpoint Sources be Interested in Trading?Interested in Trading?
Trading can:Trading can:– Bring cost effective reductions to Bring cost effective reductions to
market;market;– Potentially help meet estimated demand Potentially help meet estimated demand
for pollution reductions; and,for pollution reductions; and,– Provide financial resources for NPS Provide financial resources for NPS
management practices.management practices.
What Pollutants May Be Traded – EPA What Pollutants May Be Traded – EPA Support Varies by Type of PollutantSupport Varies by Type of Pollutant
Trading of nutrients and sediment loadings Trading of nutrients and sediment loadings encouragedencouraged
Cross-pollutant trades Cross-pollutant trades supportedsupported for oxygen- for oxygen-related pollutants related pollutants where data existwhere data exist to to determine and correlate impactsdetermine and correlate impacts
For other pollutants, EPA For other pollutants, EPA recognizes potential recognizes potential benefitsbenefits but recommends but recommends more oversightmore oversight for for these tradesthese trades
For For anyany pollutant: no trading can cause a toxic pollutant: no trading can cause a toxic effect or cause/contribute to an impairmenteffect or cause/contribute to an impairment
No out-of-kind tradingNo out-of-kind trading
Trading May OccurTrading May Occur
To implement a TMDLTo implement a TMDL
To maintain water quality in To maintain water quality in unimpaired watersunimpaired watersIn impaired waters before a TMDL is In impaired waters before a TMDL is developed developed if if trading achieves progress trading achieves progress towards water quality standardstowards water quality standards
What Kinds of Trading May OccurWhat Kinds of Trading May Occur
Intra-plantIntra-plant
Pre-treatmentPre-treatment
Point-source to point-sourcePoint-source to point-source
Point-source to nonpoint-sourcePoint-source to nonpoint-source
Nonpoint to nonpointNonpoint to nonpoint
Baselines for Trading & Creating Baselines for Trading & Creating Pollution Reduction CreditsPollution Reduction Credits
Trading protects all uses of the water Trading protects all uses of the water resource including drinking water supplyresource including drinking water supplyNo violation of water quality standards No violation of water quality standards through tradingthrough tradingNo trading to meet technology-based No trading to meet technology-based requirementsrequirements
Baselines for Trading & Creating Baselines for Trading & Creating Pollution Reduction Credits (con’t)Pollution Reduction Credits (con’t)
Only pollution reductionsOnly pollution reductions beyondbeyond those those required create ‘credits’ that can be required create ‘credits’ that can be purchased by otherspurchased by others– for point sources, reductions beyond for point sources, reductions beyond
water quality based effluent limitswater quality based effluent limits– for non-point sources, dependent on for non-point sources, dependent on
current BMP expectationscurrent BMP expectationsCredits should be created before or during Credits should be created before or during the time they’re used to comply with a the time they’re used to comply with a permit limitpermit limit
Aligning Trading withAligning Trading withthe Clean Water Actthe Clean Water Act
Trading is generally reflected in NPDES Trading is generally reflected in NPDES permitspermitsFlexible permitting approaches encouragedFlexible permitting approaches encouraged– General conditions authorizing trading and General conditions authorizing trading and
applicable restrictions, conditionsapplicable restrictions, conditions– Variable permit limits that adjust up or down Variable permit limits that adjust up or down
depending on credits generated, useddepending on credits generated, used– Alternate permit limits that specify amount Alternate permit limits that specify amount
of discharge limit that may be met through of discharge limit that may be met through tradingtrading
– Watershed permits for groups of sourcesWatershed permits for groups of sources
Aligning Trading withAligning Trading withthe Clean Water Actthe Clean Water Act
NPDES permits and fact sheets should NPDES permits and fact sheets should describe baselines, limitations on tradingdescribe baselines, limitations on trading
Permit modification not needed for each Permit modification not needed for each trade if trading provisions included in trade if trading provisions included in permit and public had opportunity to permit and public had opportunity to commentcomment
Methods referenced or included in NPDES Methods referenced or included in NPDES permits continue to be used with tradingpermits continue to be used with trading
Aligning Trading withAligning Trading withthe Clean Water Actthe Clean Water Act
Protecting Designated Uses. EPA does not Protecting Designated Uses. EPA does not support trading that causes impairment of support trading that causes impairment of uses, adversely affects drinking water intake, uses, adversely affects drinking water intake, or exceeds TMDL capor exceeds TMDL cap
CWA Antibacksliding ProvisionsCWA Antibacksliding Provisions– Generally satisfied if an increased Generally satisfied if an increased
discharge is offset by purchased creditsdischarge is offset by purchased credits– Generally satisfied if point source Generally satisfied if point source
generates credits then discontinues, if total generates credits then discontinues, if total pollutant load not increased (extra pollutant load not increased (extra capacity)capacity)
Aligning Trading withAligning Trading withthe Clean Water Actthe Clean Water Act
AntidegradationAntidegradation– Trading should be consistent with Trading should be consistent with
water quality standards including water quality standards including antidegradation policiesantidegradation policies
EPA recommends states clarify how EPA recommends states clarify how trading can occur consistent with their trading can occur consistent with their policies (ie. new standards)policies (ie. new standards)
Nonpoint Source Issues: Nonpoint Source Issues: UncertaintyUncertainty
Uncertainty is greater for NPS pollution loads Uncertainty is greater for NPS pollution loads and reductionsand reductionsPolicy recommends adopting approaches to Policy recommends adopting approaches to estimate, compensate for uncertaintyestimate, compensate for uncertainty– Greater than 1:1 trading ratios between Greater than 1:1 trading ratios between
NPS:PSNPS:PS– Demonstrated performance values for NPS Demonstrated performance values for NPS
management practices where availablemanagement practices where available– Conservative performance estimates for Conservative performance estimates for
NPS management practicesNPS management practices– Retire a percentage of the credits createdRetire a percentage of the credits created
Nonpoint Source Issues: Nonpoint Source Issues: AccountabilityAccountability
Policy recommends states and tribes Policy recommends states and tribes establish NPS accountability establish NPS accountability mechanismsmechanisms
Flexibility to choose from several Flexibility to choose from several mechanismsmechanisms– Statutory or regulatory requirements, Statutory or regulatory requirements,
permits, private and third-party permits, private and third-party contractscontracts
Elements of CredibleElements of Credible Trading Programs Trading Programs
Legal mechanisms to facilitate tradingLegal mechanisms to facilitate trading
Clearly defined units of tradeClearly defined units of trade
Methods to quantify credits and Methods to quantify credits and address uncertaintyaddress uncertainty
Compliance and enforcement Compliance and enforcement provisionsprovisions– Accountability for all tradesAccountability for all trades– NPDES permittees always responsible for NPDES permittees always responsible for
permit limits permit limits
Elements of CredibleElements of Credible Trading Programs, cont’d Trading Programs, cont’d
Timely public access to information on Timely public access to information on tradestrades
Public participation strongly encouraged Public participation strongly encouraged in program development, in program development, implementationimplementation
Monitor progress, evaluate program, Monitor progress, evaluate program, and revise as necessaryand revise as necessary
EPA Role and OversightEPA Role and Oversight
Early consultation with EPA Early consultation with EPA encouragedencouraged
EPA oversight of trading is through EPA oversight of trading is through existing mechanisms, e.g., NPDES existing mechanisms, e.g., NPDES permit review, TMDL approval, permit review, TMDL approval, review of revisions to water quality review of revisions to water quality standardsstandards
Trading doesn’t necessarily warrant Trading doesn’t necessarily warrant more EPA oversightmore EPA oversight
Trading – What’s Next?Trading – What’s Next?
Looking for local opportunities for Looking for local opportunities for trading pilot projectstrading pilot projects
Learn from trading pilot to enable Learn from trading pilot to enable other projects around stateother projects around state
Develop state-wide trading policyDevelop state-wide trading policy
Status of Trading in WAStatus of Trading in WA
EPA paid to evaluate the liklihood of EPA paid to evaluate the liklihood of trading on the Spokane Rtrading on the Spokane REcology paid for a prelim assessment of Ecology paid for a prelim assessment of the potential to trade in Lake Whatcom the potential to trade in Lake Whatcom (EPA grant)(EPA grant)City of Centralia has explored trading of City of Centralia has explored trading of temperature in the Chehalis basintemperature in the Chehalis basinA couple of basins have explored trading A couple of basins have explored trading on nutrientson nutrients
For more informationFor more information
EPA sites:EPA sites:– www.epa.gov/owow/watershed/trading.htmwww.epa.gov/owow/watershed/trading.htm
Water Quality Trading PolicyWater Quality Trading Policy Jan. 2003 Jan. 2003Water Quality Trading Assessment Handbook Water Quality Trading Assessment Handbook Fact SheetFact SheetPress ReleasePress Release
– www.epa.gov/r10 earth/ -- look in Indexwww.epa.gov/r10 earth/ -- look in IndexLinks to state trading websitesLinks to state trading websites
WA – water quality offsets rule -WA – water quality offsets rule - http://apps.leg.wa.gov/WAC/default.aspx?cite=173-201A-450http://apps.leg.wa.gov/WAC/default.aspx?cite=173-201A-450