Ratios and Uncertainty

A fundamental challenge for water quality trading is understanding, quantifying, and managing the uncertainty associated with the implementation of practices on-the-ground and their associated water quality benefits over time and place. This challenge is especially pronounced when trading involves agricultural nonpoint sources as credit sellers. In addition to the other aspects of the Ohio River Basin Water Quality Trading Project, EPRI is advancing a rigorous method for calculating credit trade ratios. Trade ratios account for uncertainty, location, delivery, and equivalence. Trade ratios are used to ensure that the amount of reduction resulting from the trades has the same effect as the reduction that would be required without the trade (EPA, 2012). 

The Ohio River Basin Water Quality Trading 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. The trade ratio incorporates location and delivery factors calculated with two watershed models. 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).

Point of Use Credits are calculated as follows:

Trading Ratio = (Ffield x Friver x Finstream x Fequivalence x Fsafety)


  • Edge-of-Field (Ffield) – Magnitude of TN and TP reduction at edge-of-field due to BMPs (estimated using EPA Region 5 spreadsheet model). This equals the Point of Generation Credit.
  • Edge-of-River (Friver)—Fate and transport attenuation as load reduction reaches edge-of-river (estimated with WARMF).
  • In-stream Assimilation (Finstream)—Attenuation due to in-stream processing of TN and TP load (estimated with WARMF)
  • Credit Equivalence (Fequivalence)—Considers chemical nature of load reduction (as nitrate, ammonia, organic N, etc.) relative to buyer’s need (estimated with WARMF).
  • Margin of Safety (Fsafety)—Safety factor to account for uncertainties in credit calculation (estimated with EPA Region 5 spreadsheet model and WARMF).

Point of Use Credits = Trading Ratio x Load Reduction (pounds of TN or TP).

To develop the Edge-of-Field factor, the EPA Region 5 spreadsheet model is used to calculate the load reductions as different BMPs are implemented. For the Edge-of-River, the WARMF model is used to estimate the assimilation and transformations that may occur as TN and TP transport from the edge of the farm to the edge of the river. A multi-farm implementation of the WARMF model is used for this calculation. For in-stream assimilation, the WARMF model is implemented for each HUC-4 watershed within the ORB, at a HUC-10 delineation level. The in-stream assimilation factors are determined based on a simulation of the effect of a load reduction at one point in the HUC-4 on the TN and TP concentrations at all locations downstream of the reduction. A table with the in-stream assimilations is created for each location within a given HUC-4 watershed.14 The credit equivalence factor is generated by changing the nature of the reduced load (e.g., ammonia, nitrate, etc.) at the Point of Credit Generation and determining the effect of the various forms of load reduction on the TN and TP concentrations at the point(s) of use, relative to a direct TN or TP reduction. Finally, the Margin of Safety factor is determined by running the WARMF or EPA Region 5 spreadsheet model using a Monte Carlo simulation (i.e., hundreds of runs with a range of parameter values) to determine the possible variance in model output and its effect on the attenuation coefficients.

"Attenuation Coefficients for Water Quality Trading " published in Environmental Science & Technology.View the public webcast.