The Legal Status of Environmental Credit Stacking. EPRI Public Webcast February 11 th, 2014

Transcription

1 The Legal Status of Environmental Credit Stacking EPRI Public Webcast February 11 th, 2014

2 Today s Speakers Jessica Fox Technical Executive Electric Power Research Institute Royal C. Gardner Professor of Law and Director Institute for Biodiversity Law and Policy Stetson University College of Law 2

3 Webcast Recording Today s webcast will be recorded. Your participation in this webcast provides your consent to the recording. Recording will be posted to 3

4 EPRI & Stetson Disclosure No portion of this webcast or associated publication constitutes legal advice, opinion, or guidance from EPRI or Stetson University. EPRI and Stetson University are not promoting any specific policy or laws. This is an academic research effort with observations and conclusions intended to inform the public. 4

5 Ecology Law Quarterly, 40(4): #1 Download in last 60 days in four SSRN categories: Environmental Economics Natural Resources Law and Policy Environmental and Natural Resources Law Environmental Law and Policy 5

6 What is Environmental Credit Stacking? 6

7 The Crux of Stacking Can you get paid twice for the same conservation action? Drive to maximize Economic Returns Concern over Ecological Validation Development of Policy 7

8 Terms, Agencies, and Policies Many markets, many agencies, many terms. Terms: Bundling Unbundling Credit stacking Payment stacking Double dipping Double counting Horizontal stacking Vertical stacking Temporal Stacking Credit Type Oversight Agency Carbon Endangered Species Wetlands Water Quality Private organizations, DOE, EPA, USDA FWS, state Departments of Fish and Game, NOAA U.S. Army Corps of Engineers, NOAA, EPA EPA, Office of Water. Some states. 8

9 Regulatory Uncertainty Thumbs Up from USDA: USDA allows for the sale of carbon, water quality, or other environmental credits associated with federal grants (EQIP, CRP, WRP). Thumbs Down from EPA & USACE: United States Army Corps of Engineers (USACE) and USEPA have issued a regulation that precludes the use of CRP or WRP monies to generate wetland credits. 9

10 Perspectives and Responsibilities Agencies: Regulatory agencies need to ensure that the credits appropriately offset impacts. This can be challenging even in one market type. When credits are stacked the question of additionality becomes even more prominent. Landowners: Shouldn t credit producers expect to be compensated for the range of environmental benefits they support? Project Managers: Even in the absence of clear direction from agencies and standard protocols, pilot projects are proceeding to test the possibilities of credit stacking. Ecosystems: Credits represent mitigation. When credits are stacked, so are the risks to the ecosystem if credits fail. 10

11 Gardner & Fox Paper: Overview Background on Markets Wetland Mitigation Banking Conservation Banking Water Quality Trading Carbon Offsets Stacking scenarios Unbundling not permitted Unbundling permitted Considerations for a Stacking Protocol Preserved/Enhanced Upland Forest -Endangered Species Habitat -Carbon Sequestration Restored Forested Wetland -Endangered Species Habitat -Improved Water Quality -Carbon Sequestration Farm: Reduced Fertilizer Use/No Till -Improved Water Quality -Carbon Sequestration Non-wetland Riparian Vegetative Buffer -Endangered Species Habitat -Improved Water Quality 11

12 Wetland Mitigation Banking Principal drivers: CWA, Corps and EPA regulations, and similar state laws and regulations Commodity (credit currency): functional or areal measure 12

13 Conservation Banking Principal drivers: ESA, FWS and NMFS guidance, and similar state laws and regulations Commodity (credit currency): areal measurement of habitat and/or numbers of breeding pairs 13

14 Water Quality Trading Principal drivers: CWA, EPA policy, and similar state provisions Commodity (credit currency): pounds of reduction 14

15 Carbon Offsets Principal drivers: state laws and regulations Commodity (credit currency): short tons or metric tons (tonnes) of carbon dioxide equivalent (tco 2 e) reductions 15

16 Stacking scenarios: Wetlands and endangered species Van Vleck Ranch Mitigation Bank (CA) Wetland and vernal pool fairy shrimp credits Source: Westervelt Ecological Services 16

17 Stacking scenarios: Wetlands and water quality Neu-Con Umbrella Wetland Mitigation and Stream Restoration Bank (NC) Wetland and nutrient offset credits Source: North Carolina State University 17

18 Stacking scenarios: Wetland functions Spellbottom Mitigation Bank (TX) Temporary Storage of Surface Water (TSSW) Maintenance of Plant and Animal Communities (MPAC) Removal and Sequestration of Elements and Compounds (RSEC) Source: Mitigation Solutions USA onbank_map.html 18

19 Stacking scenarios: multiple species (federal) Ohlone Conservation Bank (CA) 19

20 Stacking scenarios: Multiple species (federal) 20

21 Stacking scenarios: Multiple species (federal) 21

22 Stacking scenarios: Multiple species (federal and state) Lyonia Preserve (FL) Source: Volusia County Florida 22

23 Stacking scenarios: Endangered species and carbon Florida Panther Conservation Bank Panther credits and reservation of right to seek carbon credits in the future Source: The Florida Panther Conservation 23

24 Stacking scenarios: Water Quality Phosphorous and Nitrogen Maryland s (nascent) water quality trading program Chesapeake Bay Source: Fairfax County 24

25 Accounting Units & Defensible Stacking Scenario Species Wetlands Bundles of Ecosystem Values (Acres) Carbon Water Quality Defined Accounting Units (tons, pounds) Based on our analysis, the most appropriate credit stacking scenario is when the accounting units are pollutant-specific, such as pounds of nitrogen in water quality trading, and tons of CO2 equivalents in carbon markets. 25

26 Considerations for a Credit Stacking Protocol Credit stacking could provide great economic incentives for effective conservation, but only after the fundamental considerations described here are addressed. Consideration 1: Ecosystem credits that consist of a suite of functions should not be stacked and unbundled. Consideration 2: Stacking and unbundling credits should not result in habitat loss. Consideration 3: Managing the site for one credit type should not denigrate the ecological values represented by other credit types. 26

27 Considerations for a Credit Stacking Protocol Consideration 4: Regulatory agencies need the resources and capacity to confirm the ecological validity of the transactions. Consideration 5: Any stacking and unbundling of credits should be transparent. Consideration 6: Tests for additionality should be applied. 27

28 Air quality (SOx and NOx) Source: Big Bend Power Station Source: Indiana Environmental Law Report 28

29 The Bottom Line on Credit Stacking While environmental markets can be flexible to accommodate social and economic elements such as price, infrastructure, and mechanics, they need to maintain basic scientific integrity and defensibility. While the perspectives of the buyer, seller, and regulator are important in these markets, the quality of the credits needs to be ensured. Bottom Line: Do the credits appropriately mitigate the impacts that they are intended to offset? 29

30 EPRI Ohio River Basin WQT Project: March 11 th, Cincinnati Ohio This event is open to the public Register at 30

31 EPRI Credit Purchase Receipt 31

32 Questions? Jessica Fox Technical Executive EPRI Prof. Royal C. Gardner Director, Institute for Biodiversity Law and Policy Stetson University College of Law l3/papers.cfm?abstract_i d=