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Market-based approach identified as viable to compliance & water quality goals
The Gulf of Mexico has the largest dead zone in the U.S. and the second-largest in the world. It presents scientific, technical, economic and political challenges for the region. Michelle Perez, Ph.D., a senior associate with the World Resources Institute (WRI), spoke with WWD Managing Editor Elizabeth Lisican about WRI’s new study on the benefits of nutrient trading along the Mississippi River Basin.
Elisabeth Lisican: What are the key findings from your latest research on large-scale nutrient trading in the Mississippi River Basin?
Michelle Perez: WRI’s feasibility study found that nutrient trading could offer a triple-win solution for wastewater treatment plants (WWTPs), farmers, and the Gulf of Mexico. Our case study’s two wastewater utilities could save about $900 million in meeting our project’s Gulf cleanup goals, while the study’s farm sector could make $700 million in profits. Our project selected the 2007 goal of a 45% reduction in the nitrogen (N) and phosphorus (P) pollution to the Gulf from the U.S. Environmental Protection Agency Science Advisory Board as our water quality goal.
Lisican: What exactly is nutrient trading, and why is it an ideal approach to shrinking the Gulf of Mexico dead zone and helping to address local nutrient pollution problems?
Perez: Nutrient trading could help to curb the excess N and P pollution (referred to collectively as nutrient pollution) causing the Gulf dead zone by identifying the most cost-effective nutrient reductions possible to achieve specified Gulf or local water quality goals. Trading is a voluntary market-based mechanism that could help regulated facilities (e.g., WWTPs and industrial firms) find the cheapest way to satisfy nutrient pollution limits tied to the Gulf or to local water bodies.
Because all facilities are different, some will be able to install onsite technology upgrades at a lower cost than others to meet their nutrient reduction requirements. Unregulated farmers also may be able to voluntarily participate if installing conservation practices to reduce nutrient loads occurs at a lower cost than the regulated facilities’ cost. These facilities or farmers with low treatment costs can sell excess reductions, or nutrient credits, to the regulated facilities that face very costly upgrades.
Thus, nutrient trading offers a multiple-win solution: Progress is made toward achieving the trading program’s water quality goal (be it Gulf-focused, local water body focused, or focused on both scales); credit buyers spend less on credits than they would spend on costly technological upgrades; and credit sellers make money for their extra pollution reduction efforts.
Lisican: How would this approach affect WWTPs?
Perez: WWTPs may one day receive N and P reduction permits tied to water quality goals for the Gulf of Mexico or for local water bodies. They may then have the opportunity to evaluate use of trading to satisfy their compliance needs. WWTPs need to review several issues to determine whether trading is right for them for either or both N or P compliance, including: economic cost-effectiveness, avoidance of hot spot creation, legal authority, political acceptance, etc.
Lisican: What needs to happen in order to put a nutrient trading program in place on the Mississippi River Basin?
Perez: Currently there is no nutrient reduction goal for the Gulf of Mexico to serve as a policy driver for a Mississippi River Basin nutrient trading program. This goal is necessary before there can be a real demand for Mississippi River Basin nutrient trading. Until such a driver materializes, several states in the basin are developing voluntary state nutrient reduction strategies, and nutrient trading could be included in these plans to help achieve local water quality goals.