Environmental Incentives

Tony Vessa

CE397

11-18-2003

State of the Union

• Systems that do not support Designated Use– 40% Rivers– 45% Streams– 50% Lakes

• Point Source Costs (1997)– Private $14 Billion – Public $34 Billion

Trading Objectives

• Pre-TMDL reduction incentives

• TMDL cost reductions

• Voluntary pollution reduction

• Allows potential for growth

• Long Term Environmental Benefit

• Multi-objective scenarios for mutual benefit

Trading Criteria

• WQ Maintenance• Pre-TMDL Trading• TMDL Trading• No Tech. Based

Trading• Pre-Treatment• Intra-Plant

• EPA Oversight• CWA Enforcement

– NPDES

– Public Notice

– Standard Methods

– Designated Uses

– Anti-Backsliding

– Anti-Degridation

Trading Protocol

• Legal Authority

• Units of Trade

• Definition of Credits– Duration– Trade Ratios

• Compliance and Enforcement

• Public Participation

• Program Evaluation

Trade Example 1:1 Ratio

Wayland Business Center

• Who: Office Complex on Sudbury River

• Trade: Point/Non-Point Phosphorus for Waste Water Treatment Plant

• Ratio 3:1

• How: Linked 24 faulty septic systems to complex WWTP

• Savings: $700K

Environmental Taxes

• Recovering Cost Principle– Minimize Externalities of Environmental.

Degradation– Recover Cost for cleanup, monitoring,

enforcement, health care….

• Incentive Charge– Designed to influence production

Environmental Taxes• Polluter Pay

– Recovering Cost Principle– Polluter pays per mass of pollutant– Maximize Pollution Reduction for Profit Margin

• Consumer Pay– Incentive Charge Principle– Consumer pays levy on Enviro harmful products– Minimize Production

Discussion1. What are the benefits/drawbacks of water quality

trading? 2. Is water quality trading a viable tool for water quality

improvement? 3. Should pollution credits be considered a resource? 4. What are the benefits/drawbacks of the recovering cost

environmental tax? 5. What are the benefits/drawbacks of the incentive

charge environmental tax? 6. Should industrial environmental economics be driven

by incentives or by penalties?