EPRI researchers routinely collaborate to address complex, inter-related issues associated with water & air quality in the United States. The following EPRI projects represent work that relates to and supports the Ohio River Basin Trading Project.
- Water Quality and Watershed Protection
- Water Availability and Resource Risk Management
- Effluent Guidelines and Water Quality Management
- Global Energy and Climate Policy Costs & Benefits
- Air Quality Assessment of Ozone, Particulate Matter, Visibility, and Deposition
- Developing GHG Emissions Offsets by Reducing Nitrous Oxide Emissions in Agricultural Crop Production: Experience Validating a New GHG Offset Protocol
- EPRI Water Prism Decision Support System
EPRI and project collaborators hosted a roundtable discussion in November 2015 with representatives from the investment community in New York City. The meeting presented the example of quantified water quality credits from the Ohio River Basin Water Quality Trading Project and through a facilitated discussion, identify any missing elements to unleash the market for impact investors. Technical complexity, assurance of buyers, and risk of erodible demand from regulatory change were themes noted from the discussion. Read More (2.5 MB)
EPRI officially transferred the first voluntary, verified, and quantified stewardship credits for water nutrients in the United States on March 11, 2014. As stewardship credits, they cannot be applied toward permit compliance obligations and represent 100% uplift in watershed protection. These were the first transactions in the project and will serve as a foundation for ongoing discussions regarding the use of water quality trading to meet permit compliance obligations. Learn more about this historic trade.
Beginning with the signing of an interstate trading plan between the states of Ohio, Indiana and Kentucky in August of 2012, EPRI is executing a series of pilot trades between 2013 until 2015 to test the water quality trading project. The Trading Plan is accessible for the public and describes the rules and approach for the pilot period. Download the document: Pilot Trading Plan 1.0 for the Ohio River Basin Water Quality Trading Project. (5.3 MB)
Since 2007, the Electric Power Research Institute and a strong collaboration of power companies, wastewater utilities, farmers, state and federal agencies and environmental interests have been working to develop an interstate Water Quality Trading (WQT) framework in the Ohio River Basin (ORB). As environmental impacts come from many sources, our project is facilitating broad non-traditional collaborations to achieve a common goal of water quality improvements in the ORB.
At full scale, this innovative project will become the world's largest WQT program. It could span up to eight states and potentially create a market for 46 power plants, thousands of wastewater utilities, and approximately 230,000 farmers. It will be a large, innovative program possibly moving millions of private dollars into the farm economy to pay farmers for reducing nutrient loading. Utilizing solid scientific foundations, this project could result in a multi-industry market that will accelerate cost-effective water quality improvements and provide important ancillary ecological benefits. Following years of establishing strong project foundations, the project team plans to execute a series of pilot trades between 2013 and 2015.
If 5% of the 230,000 farmers in the ORB actively trade, it could result in new conservation practices to reduce nutrient run-off on as many as 2.2 million acres. However, prior attempts by other projects to develop thriving WQT markets involving agriculture failed because they did not engage farmers early enough in the design of the program. To lay the groundwork for a sustainable market, our collaborators have worked under an EPA Targeted Watershed Grant talking with over 230 farmers and conservation professionals around the basin to secure buy-in and identify the critical elements that ensure their participation.
Through these meetings, we have learned that farmers and conservation professionals are generally supportive of the concept of WQT and receptive to selling credits. They viewed the program as another source of funding to implement conservation practices. Although selling nutrient credits as a commodity is a new concept for agriculture, farmers understand commodity markets. However, to secure their participation in a WQT market they wanted a minimum of paperwork with simple contracts; mechanisms to avoid swings in credit prices; options for dealing with non-performance; access to technical assistance; information about how credited Best Management Practices (BMP) will affect crop yields; synergy with existing cost-share programs; use of trusted intermediaries (to aggregate credits, monitor and verify credited BMPs); and consistent and transparent rules . By following the direct advice of farmers, project collaborators are confident that the interstate trading framework that emerges from these pilot trades will work for both buyers and sellers and be a model of other areas of the country. Download EPRI Technical Update: Barriers and Solutions for Farmer Participation in the Ohio River Water Quality Trading Project.
More information on farmer engagement can be found on the Agriculture Advisory Committee.
To ensure a strong scientific base, the Project is using two watershed models for estimating nutrient reductions from the point of generation (credit seller) to the point of use (credit buyer). The Project is currently using: (1) the EPA Region 5 spreadsheet model for estimating nutrient reductions at the edge of the field (i.e., Point of Generation Credits); and (2) the Watershed Analysis Risk Management Framework (WARMF) model for estimating nutrient attenuation (reduction) from the edge-of-field to the point of use (i.e., Point of Use Credits). With these models, the Project is using a scientifically-based credit equation methodology that will account for location-specific nutrient attenuation factors, rather than a blanket trading ratio throughout the entire Ohio River Basin.
More information on the WARMF model can be found on the Watershed Modeling Page.
Credit Aggregation and Flow
A series of transactions are being implemented to establish water quality credits during the pilot phase of the Project . First, EPRI has entered into agreements with three state agencies (Ohio Department of Natural Resources, Kentucky Division of Conservation, and Indiana State Department of Agriculture) to initiate the downstream flow of funding. Each state is contracted to receive funds ($100,000) and each commits to removing 22,000 pounds of total nitrogen and 11,000 pounds of total phosphorous over a five-year period. Second, the state agencies have entered into agreements with the state soil and water conservation districts ("SWCDs") to move the funding to the local level (save 10% for agency overhead costs) and will arrange to periodically monitor, inspect and verify the BMPs. Third, the SWCDs will contract to farmers for approved BMPs (save 10% for SWCD overhead costs). In total, $81,000 will be moved to farmers in each state as cost-share for implementing approved BMPs.
Working with the state Departments of Agriculture, we released Conservation Project Applications (i.e. cost-share applications) in select counties in Indiana (Ripley, Switzerland, Ohio, Dearborn and Wayne counties), Ohio (Columbiana, Jefferson, Mahoning and Morgan counties), and Kentucky (Bracken, Boone and Mason counties) for farmers to apply for funding under the Project. EPRI will be funding 30 or more best management practice projects to generate nutrient credits in the three states. Pre-approved BMPS include: (1) cover crops, (2) nutrient management, (3) vegetative filter strips, (4) grass waterways, (5) livestock exclusion, (6) heavy use protection areas, and/or (7) conservation tillage. Other BMPs may be considered on a case-by-case basis. Each BMP project is limited to $10,000 of funding with no more than 75% cost-share.
EPRI will own all of the credits that are established through these transactions. As a 501(c)3 nonprofit organization, EPRI intends to make credits broadly available. The credit generation and transaction process is summarized in the figure below. More details are presented in the Pilot Trading Plan.
The Project was designed to test the necessary elements for an interstate trading program in the Ohio River Basin. The project anticipates trades with power plants or other potential participants involving up to 30 farms to implement conservation practices on up to 20,000 acres. Nutrient reductions are expected to range up to 66,000 lbs of total nitrogen and 22,000 lbs of phosphorus reductions over a five-year period. Pilot trades will resolve technical issues such as credit baselines, credit calculation methods, practice verification and certification, application of the watershed model, local and regional program administrative needs, credit tracking, contracting and outreach. This information will help inform technical guidelines for science-based approaches to measure environmental benefits from agricultural conservation and land management activities. In addition, the project will explore opportunities to generate greenhouse gas (GHG) emission reduction credits to enhance farmer income, incentivize greater conservation practice implementation and benefit buyers that need nutrient and GHG emissions offsets, resulting in greater public benefit. All of the learning from this project is transferable to other ecosystem service and environmental market efforts across the country. In addition, the project's tested approach may be a replicable model for other regional water quality trading programs.
Schedule of Pilot Trades