Nov 03, 2010

PENNVEST Holds First Nutrient Credit Auction

Farmers sold credits to wastewater treatment plants for removal of nitrogen from Susquehanna River and Chesapeake Bay

The Pennsylvania Infrastructure Investment Authority (PENNVEST), working closely with the Department of Environmental Protection and representatives of the Chicago Climate Exchange, held its first auction for nutrient credits on Oct. 28 and 29. Credits representing the annual removal of 21,000 lb of nitrogen from the Susquehanna River watershed and the Chesapeake Bay over each of the next three years were sold for a price of $3.04 per credit.
"This first auction demonstrates the viability of the financial mechanism that we have developed to aid in improving the waters of the Chesapeake Bay," said Paul Marchetti, PENNVEST executive director. "This auction was a significant first step forward in our plan to foster trades in the bay watershed."
PENNVEST is implementing a new initiative to encourage the trading of nutrient credits within the Chesapeake Bay watershed to promote cost-effective solutions to the problem of nitrogen and phosphorous discharges. These nutrients encourage algae growth in the bay, which ultimately reduces oxygen levels needed by aquatic plants and animals.
There are many ways to reduce nutrient discharges, including implementing farming practices that reduce water runoff. Reducing discharges below certain levels creates nutrient credits that farmers can sell to wastewater treatment plants, which must meet certain permitted limits for these discharges. By using the credits purchased through the auction, treatment plants can, in many cases, meet required discharge levels in a much more affordable way than by building upgrades to their facilities.
PENNVEST will encourage the trading of nutrient credits by acting as a clearinghouse in the credit market. It will enter into contracts to both buy and sell credits. By participating in these transactions, PENNVEST will provide market certainty to both buyers and sellers, which, in turn, should help encourage more activity in this market. Hosting periodic auctions, such as the one held last week, will be one way in which PENNVEST will facilitate these nutrient credit trades.