The United States has historically used technology-based command-and-control regulations to reduce both air and water pollution. However, in the face on ongoing budget debates and political discontent with regulating agencies, market-based initiatives have gained popularity as a tool for addressing costs associated with meeting nutrient reduction goals.
Multiple cap-and-trade programs have been developed to address air pollution, including a national market to reduce acid rain and several regional markets to control nitrogen oxides. This market-based approach to controlling pollution will now be tested on a large scale as a mechanism to improve water quality. The U.S. Department of Agriculture has awarded the Electric Power Research Institute (EPRI) a $1 million Conservation Innovation Grant to implement the Ohio River Basin Trading Project, which will be the nation’s largest water quality trading program. The project represents a comprehensive approach to designing and developing a water quality trading market. As explained by a project fact sheet, the trading program “enables facilities facing high discharge control costs to buy reductions from another facility with lower control costs. This exchange, or trade, results in the same reductions at a lower overall cost, providing more flexibility for achieving water quality standards. In this project, entities in the Ohio River Basin will have the option to control nitrogen and phosphorous discharges through a trading market.”
The Ohio River Basin Trading Project spans eight states and the voluntary credit market will be available to 46 power plants, thousands of wastewater facilities and other industries, and approximately 230,000 farmers. EPRI 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 the river basin. EPRI has worked closely with a number of collaborators and stakeholders on the project, whose incentive to participate is based on the likelihood that credit sellers will, “receive attractive financial benefits by selling credits, and that permitted dischargers will have the flexibility to cost-effectively meet their environmental permit requirements.”