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Opportunities for Trading in Missouri
David Carani
Geosyntec Consultants
Missouri Innovative NutrientTrading Project (2013)
� Evaluate Potential for Implementing a Trading Program in Missouri
� Develop Framework for a Statewide Trading Program (Permitting)
� Conduct Simulated Trading Exercise
What is Water Quality Trading?
� Market-Based Compliance System Where One Discharger Buys or Sells Pollution Credits from Another� Point-to-Point� Point-to-Nonpoint� Not Only Nutrients
$$$
Buyer (Wastewater
Treatment Plant)
Water Quality Credits
Point-to-Nonpoint
Source Trade
Seller (Farm)
Ancillary Benefits
$$$
Buyer (Wastewater
Treatment Plant)
Water Quality Credits
Point-to-Point
Source Trade
Seller (Wastewater
Treatment Plant)
Cost-Effective Reductions
Control Practice$/lb
Phosphorus$/lb
Nitrogen
WWTF Upgrades 5 to 106 6 to 11
MS4 Retrofits -- ≈ 200
Conservation Tillage ≈ 7 ≈ 1.50
Ag. Grass Buffer ≈ 20 ≈ 1
Animal Waste/Runoff Control ≈ 31 ≈ 4
Constructed Wetlands ≈ 2 ≈ 2Sources: Chesapeake Bay, EPA 2007; WERF 2005; WRI 2009
Looking for Examples…
Looking for Examples…
Trading Programs
Procedures, Frameworks, Rules
Trading Activity
NPDESPermits
National Trading ProgressStephenson and Shabman 2011
� Despite More than 10 Years of State and Federal Agency Promotion, Demonstration Projects, and Research Nutrient Reductions Through NPS Trading has been Trivial
� > 80% of All Trades are in Long Island Sound
� Great Miami Water Quality Trading Program (“Flagship” Point-Nonpoint) Has Not Produced a Single Trade� Sustained Through Grants� Not Incorporated into NPDES Permits
Critical Program Design Factors
1) Trading marginHow Much to Trade?
2) Trading areaWith Whom to Trade?
3) Trading ratioHow Many Extra Credits to Meet the Goal?
Trading Margin: How Much to Trade?
� Margin � What are we trading from?� What are we trading to?
� 3 Potential Margins� Defines Point Source Demand
Criterion
Technology-Based
A
B
C
Without Advanced Nutrient Removal
Target CategoryTP
(mg/L)TN
(mg/L)
Without Nutrient Removal
4 20
Technology-Based 1 10
Criterion 0.1 1
Trading Area:Where to Trade?
Facility Watershed Area
Minimum 17 Ac.
Maximum 215,000 Ac.
Average 14,000 Ac.
Salt HUC 776,000 Ac.
� Watershed-Wide: To Decrease Overall Loadings
� What Happens if We Restrict Trading to Upstream-Only?� To reduce hot spots
Hot Spots
BMP
Point Source Direction of stream flow
Hot Spot
Domestic Discharges to Streams and Rivers
CLASS C
4%CLASS P
9%
"UNCLASSIFIED"
87%
� Approximately 2000 C/U Facilities � 97% < 1.0 MGD = Most Incentive to Trade
Trading Ratio:How Many More Credits?
� Delivery Ratio� Instream attenuation
� Equivalency Ratio� Different forms of same
pollutant
� Uncertainty Ratio� Issues in estimating nonpoint
loadings
� Retirement Ratio� Net improvements 2:1 Trading Ratio
Purchased
Required in
the absence
of trading
Simulation Approach
� Evaluate PS-NPS and PS-PS trading feasibility in 2 Missouri basins
� How do three factors interact to affect� Potential supply� Potential demand� Overall costs
� Identify important principles for a MO WQT program
Estimating Existing Loads
� 46 Domestic WWTPs
� 90% of PS Loading from 1/4 of WWTPs
First-Cut Feasibility Evaluation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Filter Strip Cover Crop Tillage Wetlands Filter Strip Cover Crop Tillage Wetlands
RE
PO
RT
ED
RE
MO
VA
L E
FFIC
IEN
CY
TOTAL NITROGEN TOTAL PHOSPHORUS
Estimating Nonpoint Source Credit Supply
Potential Range of Nutrient Treatment Efficiencies for Cropland BMPs� BMP removal
efficiencies
� BMP implementation rates
� Producer participation
BMP Cost Estimates
� Implementation Cost Factors� Establishment & annual maintenance costs� Opportunity costs
� Useful life
Estimating Site -Specific Treatment Upgrade Costs
$0
$50
$100
$150
$200
$250
$300
0 2 4 6 8 10
$ P
ER
PO
UN
D T
OT
AL
PH
OS
PH
OR
US
RE
MO
VE
D
DESIGN AVERGE FLOW, IN MGD
Estimated WWTP Upgrade CostsActivated Sludge Facilities
BNR
ENR
RO
CategoryTP
(mg/L)TN
(mg/L)
≈ BNR 1 8
≈ ENR 0.5 5
RO < 0.02 < 1
� 46 Facilities
� 3 Baseline Categories
� Flows from < 0.05 to 5 MGD
$10-$20
$160
Interpreting Supply and Demand Estimates
Simulation Results: Impact of Trading Margin
� Impacts PS Credit Demand
� A stringent margin is not cost-effective, especially for small WWTPs with high upgrade costs� Meet TBEL and trade remainder
vs. trading entire marginCriterion
Technology-Based
A
B
C
Without Advanced Nutrient Removal
10,000
100,000
1,000,000
TN TP
PO
UN
DS
PE
R Y
EA
R
Total Credit Demand
Total Credit Supply
-6
-5
-4
-3
-2
-1
0
1
2
3
4
LOG
SC
ALE
DIF
FE
RE
NC
E O
F S
UP
PLY
& D
EM
AN
D,
IN P
OU
ND
S P
ER
YE
AR
TN TPBMP Supply Greater than Point Source Demand
Point Source Demand Greater than BMP Supply
South Fork Salt River Basin
Watershed-Wide
Upstream Only
Simulation Results: Impact of Trading Area
� Trading Area Impacts NPS Credit Supply
� “Upstream-Only” Limits Trading Opportunities, Many WWTPs Want to Trade but Can’t
Simulation Results: Impact of Trading Ratios
� Science-Based Reasons for Including Some Ratios� Delivery/Location� Uncertainty� Equivalency
� Others are Less-Clear� Retirement Ratio
� Ratios Increases Cost
of Trading
� Unjustified Ratios Affect
Efficiency and Equity
Simulation Results: Area + Ratio + Margin
$24
$56
$73
$76
24
20
7
4
0
2
4
6
8
10
12
14
16
18
20
22
24
26
$20
$30
$40
$50
$60
$70
$80
Watershed 1:1 Watershed 2:1 Upstream 1:1 Upstream 2:1
NU
MB
ER
OF FA
CILIT
IES
IN T
HE
WA
TE
RS
HE
D
PA
RT
ICIP
AT
ING
IN T
RA
DIN
G
TO
TAL
AN
NU
AL
WA
TE
RS
HE
D A
BA
TE
ME
NT
CO
ST
(TR
EA
TM
EN
T C
OS
T +
TR
AD
ING
CO
ST)
IN M
ILLI
ON
S
PHOSPHORUS TRADING IN THE SPRING RIVER BASIN
BNR to CRITERIA
For Any Given Margin, Large Trading Areas and Low Trading Ratios Allow the Highest Number of Facilities to Trade
Point to Point Trading ExampleMexico Sells Credits to Smaller WWTPs
� Trading Scenario� Pt-NPt trading ratio = 2:1
� Pt-Pt trading ratio = 1:1
� Trading area = watershed
� Trading margin = existing to BNR
� Mexico Treatment Costs� BNR = $5/lb TN
� ENR = $9/lb TN
� Marginal cost = $24/lb TN
Big River Trading
� Big River Trading Drivers May be Different than Small Streams
� Gulf of Mexico May be the Driver
� Up to 80% of Nutrients are from Agriculture
� Flexibilities to Address Downstream Impacts
Targeted NPS Trading
� Nine WWTPs contribute 80% of Load� Low Upgrade Costs
� PS Trading Opportunities
� NPS Trading: Large Pool of Low-Cost BMP Credits Needed
Creating a Workable Trading Program
1) Trading Areas Should be as Large as Possible
2) Only Scientifically-Based Ratios Should be Used
3) Point-to-Point Trading is Cost-Effective in Some Situations
4) Big River Trading Drivers are Different
5) WWTPs Should be Free to Set the Top of the Margin
6) Administrative and Transaction Costs May Limit Trading
7) Liability, Monitoring, and Enforcement Require Special Consideration
8) Baselines Increase Trading Costs
Neuse River
� Nitrogen TMDL driven
� 19 members in bubble permit� Voluntary participation
� Individual NPDES limit is waived
� Informal trading between partners
� Offset payments ($11/lb) ecological enhancement program � No violations to date/never used
� Internal enforcement policy� Fines (80% escrow)
� Funds monitoring and capital improvement grants
� Flexibility – free to choose control strategies
EPRI Ohio River Basin Trading Project
� Working with Ohio, Indiana, and Kentucky
� Testing to determine if trading is economically and socially viable
� “Stewardship” credits – not for NPDES compliance
Virginia Nutrient CreditExchange Program
� Authorized by Governor in 2005
� Existing - acquire credits from other point sources
� New or Expanding must offset from:
� One or more permitted facilities in the same tributary
� Acquisition of NPS load allocations through the use of BMPs (2:1 ratio)
� Water Quality Improvement Fund
� Water Quality Improvement Fund� Provides technical and financial
assistance made available through grants provided from the fund
� Project eligibility is limited to design and installation of nutrient reduction technology at Chesapeake Bay POTWs
Thank You
Download the Report : http://www.mocorn.org/wp-content/uploads/2012/09/CIG_Nutrient-Trading-in-Missouri_Feb2013.pdf
David Carani
Geosyntec Consultants
108 E. Green Meadows Rd., Suite 9
Columbia, Missouri 65203
Phone: 573.443.4100