Nutrient Trading as an Incentive to Achieve Agricultural Baseline Compliance for the Chesapeake Bay TMDL

Transcription

1 Nutrient Trading as an Incentive to Achieve Agricultural Baseline Compliance for the Chesapeake Bay TMDL Ross Loomis, RTI International ACES 2012 RTI International is a trade name of Research Triangle Institute.

2 Nitrogen (million delivered lbs/year) Chesapeake Bay TMDL 120 Average Annual Nitrogen Delivered to the Chesapeake Bay TMDL Allocation Required Reduction

3 Nutrient Trading One potential incentive is the ability to sell nutrient credits for reductions beyond baseline requirements. Parameters Baseline Practice Creditable Practice Total Reductions 5 7 Baseline 5 5 Additional Reductions 0 2 Cost $10 $15 Price per Credit $10 $10 Profit -$10 $5 How much of agriculture s baseline reduction could be achieved through nutrient trading?

4 Analytical Framework Adapted framework to estimate potential savings from nutrient trading 2 million agricultural, 4,000 wastewater, and 18,000 urban stormwater options 4

5 Defining the Baseline Requirements Baseline requirements most often discussed in the context of sectors without required reductions E.g., Clean Development Mechanism carbon credits For the Chesapeake Bay, agricultural reductions are part of the TMDL. Baseline Requirement = 2010 TMDL Credit = Total Reduction Baseline Requirement

6 Nitrogen (million delivered lbs/year) Phosphorus (million delivered lbs/year) Required Nutrient Reductions N P N P N P Agriculture Wastewater Regulated Urban 0.0

7 Progress to Baseline Requirements 0% 20% 40% 60% 80% 100% No participation by areas with baseline requirements Full participation by areas with baseline requirements

8 Scenarios Sector Demand Wastewater (SigPS-AgrNPS) Wastewater + Regulated Urban Stormwater (SigPS-AgrNPS-Urban) Wastewater Demand High - Same nutrient reductions as without trading Low - Excess allocations available for trading, lower reduction Geographic Restrictions Within major river basins and states () Within major river basins () Agricultural Trading Ratio 1.1 to 1 2 to 1

9 Nitrogen (million delivered lbs/year) Phosphorus (million delivered lbs/year) RTI International 45 Results for, PS-Ag, 1.1 to 1, High % Agriculture Demand Sectors Agriculture Demand Sectors 4% N Contribution to Required Reduction Sold Credits Uncertainty Reserve P Remaining Baseline Requirement Purchased Credits

10 Nitrogen (million delivered lbs/year) RTI International Results Across Scenarios - Nitrogen % 2% 1% 1% 5% 7% 3% 5% 9% 10% 10% 8% 16% 18% 19% 23% PS-Ag PS-Ag-Urban PS-Ag PS-Ag-Urban Low Contribution to Required Reduction Sold Credits High Remaining Baseline Requirement Uncertainty Reserve

11 Phosphorus (million delivered lbs/year) RTI International Results Across Scenarios - Phosphorus % 1% 1% 1% 2% 2% 1% 2% 4% 4% 6% 5% 7% 6% 7% 9% PS-Ag PS-Ag-Urban PS-Ag PS-Ag-Urban Low Contribution to Required Reduction Sold Credits High Remaining Baseline Requirement Uncertainty Reserve

12 Summary Findings Nutrient trading alone could provide sufficient incentive to achieve between 1% and 23% of agriculture s baseline N requirements (1% and 9% of P) depending on trading rules. Increased demand for credits increases agriculture s baseline contribution from nutrient trading. No general predictions for the impact of geographic restrictions or trading ratios on baseline contribution from nutrient trading. Policy Implications Nutrient trading should support lower public regulatory costs or greater compliance. Implications for incentive programs depend on program structure subject of future applications of model

13 More Information Ross Loomis Senior Economist CBC Report /nutrient-trading-2012.pdf EPA Report chesapeake-bay-pilot-report.pdf

14 Distribution of Delivered Nitrogen Relative to No Trading 14

15 Distribution of Delivered Nitrogen Relative to No Trading 15

16 Distribution of Delivered Phosphorus Relative to No Trading 16

17 Distribution of Delivered Phosphorus Relative to No Trading 17