Cody Stanger

Nutrient Credit
Trading– A Model
for Success
EPA Region 8 Workshop:
Nutrients & Water Quality
February 15 -17, 2011
Cody Stanger
Senior Management Consultant
Agenda
 Introduction to Nutrient Credit Trading
 Trading Benefits
 Types of Trading Programs
 Focus: Virginia’s Point-Point Program for
the Chesapeake Bay
 Trading Prerequisites
2
What is Nutrient Credit Trading?
 Localities establish on-site
compliance requirements
 Credits created with
performance better than
required
 Trading allows one source
to apply credits generated
by another source to
offset overage
Trading Baseline
Credit
Applied to
Overage
Possible
Credit
Supply
Load below
baseline
Load above
baseline
Sellers
Buyers
3
Why Consider Trading?
 Efficiency
– compliance can be less
expensive than on-site options
 Optimize investments
 Targeted Reductions
– encourage pollutant reductions in
priority locations
 Faster results
– provides incentives to exceed requirements
4
Trading in Many Forms- Works!
 Point-Point
– Virginia Nutrient Credit Exchange
– Connecticut Nitrogen Program
 Point-Nonpoint
– Lower Boise River, ID
– Great Miami River, OH
 Stormwater Credit Trading
– Initiatives in TN and TX
– NC Ecosystem Enhancement Program
5
Virginia’s Point-Point Trading Program
 Implementation response to regional
Chesapeake Bay reduction goals
 N and P wasteload allocations for all major
point sources
 Trades within 5 major watersheds
 Voluntary program enabled
through legislation
6
Virginia Nutrient Credit Exchange
 Formed and managed by municipal
and industrial dischargers
 Identify buyers and sellers of credits
 Develop price methodology, market structure,
trading policies
 Submit Compliance
Plan on behalf
of members
7
Trading Optimization Model (TOM)
Establishes framework for
credit forecasts by facility
8
Credit Ledgers Track Trades
Dual market based on
firm commitments
Revenues distributed based
on trading policies
9
Forecasted Loads Establish Compliance
Gap between collective
WLA and expected load
10
Show Me the Money $$$
 Trading offers significant savings
Annual Construction Spending with Market Volume Premium
Trading Case vs. Non-Trading Case
700
700
Estimated savings: nearly
$400 million with trading
Millions of Dollars (2006$)
600
600
500
500
400
400
Reduced impact on State’s
grant program for POTWs
300
300
200
200
100
100
0
0
2005
2010
2015
Non-Trading Volume Premium
Non-Trading Base Construction
YEAR
2020
2025
2030
Trading Volume Premium
Trading Base Construction
11
WIN-WIN-WIN for Stakeholders
 Strength in numbers
– mitigates individual risk of non-compliance
– inefficient facilities comply for less $
– credit suppliers receive revenue offset
 Ratepayers see lower bills
 Decreased impact on State funding
– project deferrals reduce premiums, draw on
grant funds
12
Successful Trading: Prerequisites
 Driver for action
 Understanding of water quality
 Nutrient reduction alternatives
 Cost-effectiveness differential
 Sufficient scale for investment
 Stakeholder-endorsed framework
13
Questions?
Cody Stanger
Senior Management Consultant
[email protected]
801-350-5211