Chesapeake Bay Commission May 2012 Market Solutions and Restoring the Chesapeake The Economics of Nutrient Trading Chesapeake Bay Commission TriState Legislative Commission PA MD VA Legislative Partner of Chesapeake Bay Program ID: 715748
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Ann SwansonExecutive DirectorChesapeake Bay CommissionMay 2012
Market Solutions and Restoring the Chesapeake
The Economics of Nutrient TradingSlide2
Chesapeake Bay CommissionTri-State Legislative Commission
PA, MD, VALegislative Partner of Chesapeake Bay Program7 Members Each (21 total)2 Senate3 HouseGovernor or DesigneeCitizen At-Large32 years of Policy for the BaySlide3
The Chesapeake Bay is impaired
and subject to a federally imposed TMDL.Slide4
Nutrient Trading is
One Possible SolutionIn our region, 4 states have nutrient trading programsPennsylvaniaMarylandVirginiaWest VirginiaSlide5
How Can Trading Reduce Costs?Slide6
Our Approach to the TaskProject Development & Funding
Economics Analysis, Modeling and Report PreparationProject Management, Policy & Technical ExpertiseTransparency, Accuracy & ApplicabilityEconomics of Trading Advisory CouncilSlide7
Purpose of the StudyIs:
To investigate the POTENTIAL cost savingsTo estimate how potential savings are affected by different trading scenariosIs NOT: To model specific state programsTo predict future trading levelsSlide8
Summary of FindingsSlide9
Why Potential Cost Savings?Slide10
A Market Requires
Defined ProductBuyerSellerVoluntary EntryIn Reality . . .Markets Do Not Work PerfectlyPolicymakers must consider factors other than cost
A
Marketplace
Requires
Rules and Boundaries
Information
AccessSlide11
Market Restrictions
Baseline for Agriculture TMDL implementationBaseline for Significant Point Sources TMDL WLA or 2010 loadProtection of Local Water Quality Trades limited to 9M lbs N; 200,000 lbs PTrading Ratio
2:1
Transaction Costs
38%
Maintain Productive Farmland
maximum 25% retirementSlide12
Nutrient Trading ScenariosGeography
3 scenariosIn-Basin-StateIn-StateIn-BasinWatershed-wideSlide13
Nutrient Trading ScenariosSources
3 short term scenarios SigPS-Only SigPS-AgrNPS SigPS-AgrNPS-Urban1 long term scenario
Offset-OnlySlide14
Significant Point Sources (SigPS)475 municipal and industrial facilities
16 tiers of treatment based on:8, 5 or 3 mg/L N1, 0.5 or 0.1 mg/L PAnnualized costs (capital and O&M) based on EPA’s ongoing cost analysisControl Projects, Load Reductions and Annual Costs
Jane Thomas
, ian.umces.edu/
imagelibrary
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Control Projects, Load Reductions and Annual CostsAgricultural and
Urban Stormwater BMPsAnnualized unit costs ($/ac/yr)Includes land, installation and O&MSlide16
Aligning Our WorkThe Chesapeake Bay Program’s Watershed Model Phase 5.3.2
Provided Key InputsWatershed network and segmentationLand use/land coverDelivered loadsBMP nutrient removal ratesAcres of BMP implementationSlide17
Analytical Framework
9 step process to identify the least-cost solution (representing the trading outcome) Optimization model used always seeks least cost BMPs first as available within other constraints (basin, state, local water quality, etc.) Slide18
Cost-Effectiveness of Ag BMPs and Stormwater for N Removal Vary Widely
*Value ranges for dry ponds and street sweeping are above $1,000/lbUsing N as an example Slide19
The FindingsSlide20
Cost of Meeting
SigPS Load Reduction TargetsNo-Trading v. In-Basin-State TradingSlide21
Cost of Meeting SigPS Load Reduction TargetsSlide22
Cost of Meeting SigPS and Regulated Urban
Stormwater Load Reduction TargetsSlide23
Cost of Offsets for Added Capacity at Municipal SigPSLong Term Offset-Only Trading ScenariosSlide24
Summary of FindingsSlide25
Keys to a Successful Trading Program
VerificationLocal Water Quality ProtectionMeasurable and Enforceable CapSlide26
Ann SwansonExecutive DirectorChesapeake Bay Commission410-263-3420aswanson@chesbay.us
www.chesbay.usQuestions?