A first-of-its-kind, cap-and-trade program for water quality is moving forward in the Ohio River Basin because of a $1 million Conservation Innovation Grant from the U.S. Department of Agriculture (USDA).
At full-scale, the project would become the world's largest water quality trading program, spanning up to eight states. It would potentially create credit markets for 46 power plants, thousands of wastewater facilities and other industries, and approximately 230,000 farmers.
The program - developed by the Electric Power Research Institute (EPRI) - uses a market-based approach to enable facilities facing high pollution control costs to buy reduction credits from entities with lower costs.
The goal is to achieve water quality improvements more efficiently and at lower costs.
The project is also designed to support 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.
Launched in 2009, the project is a first-of-its-kind interstate multi-credit trading program. It represents a comprehensive approach to designing and developing markets for nitrogen, phosphorus and potentially greenhouse gas reduction credits.
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.
The project anticipates pilot trades with at least three power plants or other participants and up to 50 farms implementing agricultural conservation best management practices on 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 15,000 pounds of phosphorus annually.
"The conservation practices have the potential for ecological benefits, such as improved wetlands and restored habitats, with the credit trading program offering new revenues for farmers and a potentially cost-effective alternative for power companies and other industries to meet nutrient effluent permit obligations," says Jessica Fox, senior scientist for EPRI's Water and Ecosystems Program. "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."
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.